As filed with the Securities and Exchange Commission on April 30, 1999.
Registration No. 333-
---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAROLINA FIRST CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
SOUTH CAROLINA 6711 57-0824914
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number Identification No.)
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102 SOUTH MAIN STREET
GREENVILLE, SOUTH CAROLINA 29601
(864) 255-7900
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(Address, including ZIP code, and telephone number, including area code,
of registrant's principal executive offices)
WILLIAM S. HUMMERS III, EXECUTIVE VICE PRESIDENT
CAROLINA FIRST CORPORATION
102 SOUTH MAIN STREET
GREENVILLE, SOUTH CAROLINA 29601
(864) 255-7913
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
Copies to:
WILLIAM P. CRAWFORD, JR., ESQ. JOHN P. GREELEY, ESQ.
WYCHE, BURGESS, FREEMAN SMITH, MACKINNON, GREELEY,
& PARHAM, P.A. BOWDOIN & EDWARDS, P.A.
POST OFFICE BOX 728 SUITE 800
GREENVILLE, SC 29602-0728 255 SO. ORANGE AVENUE
(864) 242-8200 (TELEPHONE) ORLANDO, FL 32801
(864) 235-8900 (FACSIMILE) (407) 843-7300 (TELEPHONE)
(407) 843-2448 (FACSIMILE)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount
Title of Each Class Amount to Offering Price Aggregate of Registration
of Securities to be Registered be Registered Per Unit (1) Offering Price (1) Fee (2)
- ------------------------------ ------------- ---------------- ------------------ ---------------
Common Stock 4,229,375 $5.04 $21,301,871 $5,921.92
(par value $1.00 per share)
==============================================================================================================
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(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f). Pursuant to Rule 457(f)(2), the Proposed Maximum
Aggregate Offering Price has been determined based upon $21,301,871, which is
the book value of the Citrus Bank common stock to be received by Carolina First
Corporation in the acquisition as of March 31, 1999 (the latest practicable
date).
(2) Calculated pursuant to Rule 457(f).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CITRUS BANK
2861 South Delaney Avenue
Orlando, Florida 32806
May 10, 1999
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
of Citrus Bank to be held on Tuesday, June 15, 1999, at 5:00 p.m., local time,
at the Orlando Marriott Downtown Hotel, 400 West Livingston Street, Orlando,
Florida.
AT THE SPECIAL MEETING, YOU WILL BE ASKED TO VOTE UPON THE PROPOSED
ACQUISITION OF CITRUS BY CAROLINA FIRST CORPORATION. At the time the acquisition
becomes effective, each share of Citrus common stock will be converted into a
number of shares of Carolina First common stock that will depend upon the
average closing price of Carolina First common stock over a 30 day trading
period ending immediately prior to the closing of the acquisition. If this
average price is between $18.35 and $24.83, you will receive a number of shares
of Carolina First common stock determined by dividing $37.07 by the average
price. However, if the average price is $24.83 or more, you will receive 1.493
shares of Carolina First common stock for each share of Citrus common stock that
you own, and if the average price is $18.35 or less, you will receive 2.020
shares of Carolina First common stock for each share of Citrus common stock that
you own.
THE BOARDS OF EACH OF CITRUS AND CAROLINA FIRST HAVE APPROVED THE
ACQUISITION. THE CITRUS BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
ACQUISITION.
Enclosed with this Letter and Notice of Special Meeting of Shareholders
are a Proxy Statement/Prospectus and a Proxy for use in connection with the
Special Meeting. The Proxy Statement/Prospectus includes, among other things,
(1) a description of the terms and conditions of the proposed acquisition and
related agreements, and (2) certain financial and other information about
Carolina First and Citrus. You may also obtain information about Carolina First
from documents that it has filed with the Securities and Exchange Commission.
You are urged to review all of this information carefully, because it is
important.
The transaction may not be completed unless it is approved by holders of
at least a majority of the issued and outstanding shares of Citrus common stock.
CONSEQUENTLY, YOUR VOTE IS IMPORTANT. You can vote either in person at the
Special Meeting or by proxy. If you choose to vote by proxy, please complete,
date and sign the enclosed Proxy, and return it promptly in the enclosed return
envelope, which does not require any postage if mailed in the United States. If
you attend the Special Meeting, you may nevertheless vote your shares in person,
even if you have already returned your Proxy.
By Order of the Board of Directors,
Randy O. Burden
Chairman, President and
Chief Executive Officer
REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN AND WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD.
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CITRUS BANK
2861 South Delaney Avenue
Orlando, Florida 32806
(407) 428-9338
---------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 15, 1999
---------------------------------------------
To the Shareholders of CITRUS BANK
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Citrus
Bank, a Florida banking corporation, will be held at 5:00 p.m., local time, on
Tuesday, June 15, 1999 at the Orlando Marriott Downtown, 400 West Livingston
Street, Orlando, Florida 32801 (the "Special Meeting"), for the following
purposes, as more fully described in the accompanying Proxy
Statement/Prospectus.
1. To consider and vote upon a proposal to authorize, adopt and approve
a Reorganization Agreement (the "Agreement"), between Carolina First Corporation
and Citrus Bank. A copy of the Agreement is attached as Annex A to the
accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the
Special Meeting and at any adjournment or postponement thereof.
Only shareholders of record at the close of business on April 30, 1999
are entitled to notice of, and to vote at, the Special Meeting and at any
adjournment or postponement thereof. A shareholder who either (i) votes against
the approval of the Agreement or (ii) gives written notice to Citrus Bank, at or
prior to the Special Meeting, that he or she dissents from the Agreement, will
be entitled to payment in cash of the value of the shares held by such
shareholder. A copy of the dissenters' rights provisions is attached to the
enclosed Proxy Statement/Prospectus as Annex C.
By Order of the Board of Directors of Citrus Bank,
Randy O. Burden
Chairman, President and Chief Executive Officer
Orlando, Florida
May ____, 1999
PLEASE FILL IN, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF YOU ATTEND THE MEETING IN PERSON,
YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
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PROXY STATEMENT/PROSPECTUS
CAROLINA FIRST CORPORATION
PROSPECTUS FOR 4,229,375 SHARES OF COMMON STOCK $1.00 PAR VALUE PER SHARE
CITRUS BANK
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
This Proxy Statement/Prospectus is provided with respect to the proposed
acquisition of Citrus Bank ("Citrus") by Carolina First Corporation ("Carolina
First").
If the acquisition is consummated, Citrus will become a wholly-owned
subsidiary of Carolina First. In the acquisition, each share of Citrus common
stock will be converted into a number of shares of Carolina First common stock
that will depend upon the average closing price of Carolina First common stock
over a 30 day trading period ending immediately prior to the closing of the
acquisition. If this average price is between $18.35 and $24.83, you will
receive a number of shares of Carolina First common stock determined by dividing
$37.07 by the average price. However, if the average price is $24.83 or more,
you will receive 1.493 shares of Carolina First common stock for each share of
Citrus common stock that you own, and if the average price is $18.35 or less,
you will receive 2.020 shares of Carolina First common stock for each share of
Citrus common stock that you own. The average of the closing prices of Carolina
First common stock for the 30 day trading period ending May ___, 1999 was
$_____, which would have resulted in a conversion ratio of ______ shares of
Carolina First common stock for each share of Citrus stock.
The acquisition must be approved by the holders of at least a majority
of the issued and outstanding shares of Citrus common stock. A Special Meeting
of shareholders of Citrus is being held on June 15, 1999 in order to provide the
shareholders with an opportunity to vote on the proposed acquisition. More
specific information regarding the Special Meeting is included in this document.
Completion of the acquisition is also subject to compliance with certain other
conditions, including approval by applicable regulatory authorities.
The acquisition will be structured as a merger, in which a wholly-owned
subsidiary of Carolina First will be merged into Citrus. After the acquisition,
the surviving corporation in the merger will be Citrus, and the former Citrus
shareholders will hold Carolina First common stock. Citrus shareholders who wish
to exercise dissenters' rights with respect to this acquisition may do so by
following the procedure set forth herein. If such procedure is followed, such
shareholders will receive cash upon the surrender of the Citrus stock, instead
of receiving Carolina First common stock. Cash will be paid in lieu of
fractional shares to which a Citrus shareholder becomes entitled. The exact
terms of the acquisition are set forth in the Reorganization Agreement attached
hereto as Annex A. A discussion and description of these terms are set forth
below in this Proxy Statement/Prospectus. See "THE PROPOSED TRANSACTION" below.
PLEASE REVIEW CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE
17. IT SETS FORTH A DISCUSSION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE
CONSIDERED BY SHAREHOLDERS OF CITRUS IN EVALUATING THE ACQUISITION.
THE CITRUS BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR
OF THE PROPOSED ACQUISITION.
Carolina First's common stock is traded on the Nasdaq National Market
under the Nasdaq market symbol "CAFC." On March 17, 1999 (the last business day
prior to the announcement of the acquisition), the closing price of the Carolina
First common stock, as reported by Nasdaq, was $22.00 per share. The Citrus
common stock is not traded on any established market and has experienced very
limited trading.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE CAROLINA FIRST COMMON STOCK TO BE ISSUED IN THE
ACQUISITION, OR DETERMINED THAT THIS PROXY STATEMENT/PROSPECTUS IS EITHER
ACCURATE OR INACCURATE, OR ADEQUATE OR INADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE CAROLINA FIRST SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS AND LOAN ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR OTHER GOVERNMENTAL
AGENCY.
The date of this Proxy Statement/Prospectus is May 10, 1999.
<PAGE>
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION........................................................6
SUMMARY............................................................................................8
Purpose of this Proxy Statement/Prospectus.................................................8
Time, Place and Purpose of the Special Meeting.............................................8
Principal Parties to the Transaction.......................................................8
Carolina First......................................................................8
Citrus..............................................................................8
Basic Terms of the Transaction.............................................................8
Shareholder Vote Required and Record Date..................................................9
Recommendation of Citrus' Board of Directors...............................................9
Rights of Dissenting Shareholders..........................................................9
Differences in Shareholders' Rights after the Acquisition.................................10
Conditions to the Consummation of the Acquisition.........................................10
Circumstances under which the Transaction may be Terminated...............................10
Anticipated Effective Time of the Transaction.............................................10
Opinion of Citrus' Financial Advisor......................................................11
Certain Federal Income Tax Consequences to Citrus Shareholders............................11
Interests of Certain Affiliates of Citrus in the Transaction..............................11
Restrictions on Resales by Citrus Affiliates..............................................12
Accounting Treatment of the Transaction...................................................12
Market Prices and Dividends of Carolina First and Citrus Stock............................12
Selected Consolidated Financial Data......................................................13
Comparative Per Share Data................................................................16
RISK FACTORS......................................................................................17
Carolina First is very dependent on its senior management.................................17
Carolina First has experienced significant growth through acquisitions, which could,
in certain circumstances, adversely affect net income..............................17
Carolina First has certain antitakeover measures which could impede the takeover of
Carolina First.....................................................................17
Carolina First has experienced significant growth in commercial lending activities,
which entails special risks not associated with certain other types of loans.......18
INFORMATION CONCERNING THE SPECIAL MEETING........................................................18
Special Meeting...........................................................................18
Purpose of the Special Meeting.....................................................18
Citrus Record Date and Voting Rights...............................................18
Proxies............................................................................19
Recommendation.....................................................................19
THE PROPOSED TRANSACTION..........................................................................20
General Description of the Terms of the Reorganization Agreement..........................20
Background of and Reasons for the Reorganization Agreement................................21
Citrus Reasons.....................................................................21
Carolina First Reasons.............................................................23
Opinion of Citrus' Financial Advisor......................................................24
General............................................................................24
Valuation Methodologies............................................................25
Analysis of Terms of the Merger....................................................25
Stock Trading History..............................................................25
Comparable Transaction Analysis....................................................26
Discounted Cash Flow Analysis......................................................26
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Dividend Analysis..................................................................27
Compensation of Ewing..............................................................28
Exchange of Citrus Stock Certificates.....................................................28
CITRUS SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE THE
TRANSMITTAL FORMS.........................................................................28
Conditions to Consummation of the Acquisition.............................................29
Termination...............................................................................30
Amendment.................................................................................30
Conduct of Citrus' and Carolina First's Business Prior to the Effective Time..............30
Required Regulatory Approvals.............................................................32
Operations After the Acquisition..........................................................32
Interests of Certain Persons in the Acquisition...........................................33
Directors..........................................................................33
Indemnification; Advancement of Expenses; Directors' and Officers' Insurance.......33
Employment Agreements..............................................................33
Other Matters Related to Employees and Employee Benefit Plans......................33
Options and Warrants......................................................................33
Accounting Treatment......................................................................34
Certain Federal Income Tax Consequences...................................................34
Fractional Share Interests.........................................................34
Cash Received by Holders of Citrus Common Stock Who Dissent........................35
Restrictions on Resales by Affiliates.....................................................35
Rights of Dissenting Shareholders of Citrus...............................................36
Recommendation of the Citrus Board of Directors...........................................37
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION................................................38
INFORMATION ABOUT CAROLINA FIRST..................................................................44
General...................................................................................44
Carolina First.....................................................................44
Carolina First Bank................................................................45
Carolina First Mortgage Company....................................................45
Citizens First National Bank.......................................................45
Blue Ridge Finance Company, Inc....................................................45
Resource Processing Group, Inc.....................................................45
Carolina First Bank, F.S.B.........................................................46
Capital Adequacy..........................................................................46
Carolina First.....................................................................46
Pro Forma Regulatory Capital.......................................................46
Recent Developments.......................................................................47
March 31, 1999 Quarterly Earnings and Financial Data...............................47
Other Acquisitions.................................................................47
INFORMATION ABOUT CITRUS BANK.....................................................................48
History and Business......................................................................48
Management's Discussion and Analysis of Financial Condition and Results of Operations.....48
Earnings..................................................................................48
1998 Compared with 1997............................................................48
1997 Compared with 1996............................................................48
Net Interest Income.......................................................................48
Interest Rate Sensitivity.................................................................50
Provision for Loan Losses.................................................................51
Noninterest Income........................................................................51
Noninterest Expenses......................................................................52
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Income Tax Expense (Benefit)..............................................................52
Investment Portfolio......................................................................52
Loan Portfolio Composition................................................................54
Nonperforming Loans; Other Problem Assets.................................................55
Potential Problem Loans...................................................................55
Allowance for Loan Losses.................................................................56
Deposits..................................................................................57
Return on Equity and Assets...............................................................57
Liquidity.................................................................................58
Capital Resources.........................................................................58
Correspondent Banking.....................................................................59
Data Processing...........................................................................59
Employees.................................................................................59
Monetary Policies.........................................................................59
Supervision and Regulation................................................................59
Description of Property...................................................................62
Legal Proceedings.........................................................................63
Market for Common Stock and Dividends.....................................................63
Management and Principal Shareholders of Citrus...........................................63
COMPARATIVE RIGHTS OF SHAREHOLDERS................................................................65
Comparison of Carolina First Common Stock and Citrus Common Stock.........................65
Capitalization.....................................................................65
Voting in General..................................................................65
Dissenters' Rights.................................................................65
Mergers, Consolidations, Exchanges, Sales of Assets or Dissolution.................66
Directors..........................................................................66
Nomination of Directors............................................................66
Indemnification of Officers and Directors..........................................66
Conversion; Redemption; Sinking Fund...............................................66
Liquidation Rights.................................................................66
Dividends..........................................................................67
Amendment..........................................................................67
Anti-takeover Measures.............................................................67
Other Considerations...............................................................68
CAROLINA FIRST CAPITAL STOCK......................................................................68
Common Stock..............................................................................68
Preferred Stock...........................................................................68
Certain Matters...........................................................................69
Shareholders' Rights Agreement.....................................................69
Management Contracts...............................................................70
Board of Directors........................................................................70
Classification of Board of Directors...............................................70
Removal of Directors...............................................................71
Limitation of Director Liability...................................................71
Evaluation of Proposed Business Combinations.......................................71
Voting....................................................................................71
Voting For Directors...............................................................71
Supermajority Voting Requirements..................................................71
Control Share Acquisition/Business Combination Statutes............................72
Transfer Agent.....................................................................72
Dividend Reinvestment Plan.........................................................72
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LEGAL MATTERS.....................................................................................72
EXPERTS...........................................................................................72
OTHER MATTERS.....................................................................................73
ADDITIONAL INFORMATION AVAILABLE THROUGH THE SEC..................................................73
INCORPORATION OF CERTAIN INFORMATION FILED WITH THE SEC BY REFERENCE..............................74
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS...................................................74
RESALE MATTERS; SOURCE OF INFORMATION; CERTAIN OTHER MATTERS......................................75
INDEX TO FINANCIAL STATEMENTS....................................................................F-1
ANNEXES
Reorganization Agreement.............................................................Annex A
Opinion of Allen C. Ewing & Co.......................................................Annex B
Dissenters' Rights Statute...........................................................Annex C
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5
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
Q: WHY DO CITRUS AND CAROLINA FIRST WANT TO MERGE?
A: Citrus believes that shareholder value will be maximized and that its
customers will benefit from an affiliation with Carolina First. Carolina
First wants to expand Carolina First's presence in Citrus' service
areas.
Q: HOW WILL I BENEFIT?
A: The Citrus Board of Directors believes that Carolina First is offering a
fair price for your shares and that you will benefit by becoming a
shareholder of a bank holding company with a strong record of growth and
attractive operating strategy. The Citrus Board also believes that you
will benefit from the opportunity to hold stock in a larger, more
diversified company, the stock of which is more widely held, more
actively traded and has historically received cash dividends.
Q: WHAT WILL I RECEIVE FOR MY CITRUS SHARES?
A: You will receive shares of Carolina First common stock valued at $37.07
for each share of Citrus common stock that you currently own, subject to
certain limits on the minimum and maximum number of Carolina First
shares to be issued. The value of the Carolina First common stock will
be the average closing price for the 30 trading days immediately prior
to the closing of the transaction, subject to certain exceptions and
limitations described in greater detail herein. The average of the
closing prices of Carolina First common stock for the 30 trading days
ending ________, 1999, was $_______. Fractional shares will not be
issued. Instead, shareholders will receive cash in lieu of fractional
shares based on the fair market value of the Carolina First common
stock.
Q: WHEN DO YOU EXPECT THE TRANSACTION TO BE COMPLETED?
A: We plan to complete the transaction as soon as possible after the
special meeting, assuming the required shareholder approval is obtained.
The transaction is also subject to the approval of federal and state
banking regulatory authorities and the satisfaction of other closing
conditions. We expect the transaction to be completed in July, 1999.
Q: WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A: The special meeting will be held on Tuesday, June 15, 1999, at 5:00
p.m., local time, at the Orlando Marriott Downtown Hotel, 400 West
Livingston Street, Orlando, Florida.
Q: WHAT DO I NEED TO DO NOW?
A: After reviewing this document, indicate on your proxy card how you
want to vote, sign it and mail it in the enclosed return envelope as
soon as possible.
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Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A: If you sign and send in your proxy and do not indicate how you want to
vote, your proxy will be counted as a vote in favor of the
transaction.
Q: WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A: If you do not return your proxy card, your shares will not be voted in
favor of the transaction.
Q: CAN I VOTE MY SHARES IN PERSON?
A: Yes. You may attend the special meeting and vote your shares in
person, rather than signing and mailing your proxy card.
Q: CAN I REVOKE MY PROXY AND CHANGE MY MIND?
A: Yes. You may take back your proxy until its exercise at the special
meeting by following the directions on page 19. Then you can either
change your vote or attend the special meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares only if you instruct your broker on
how to vote. Your broker will send you directions on how you can
instruct your broker to vote. Your broker cannot vote your shares
without instructions from you.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the transaction is completed, we will send you written
instructions for exchanging your stock certificates.
Q: WHO CAN ANSWER MY QUESTIONS ABOUT THE TRANSACTION?
A: If you have more questions about the transaction, please call Randy O.
Burden, Chairman, President and Chief Executive Officer at Citrus, at
407-428-9338.
7
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SUMMARY
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
DOCUMENT. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT
TO A COMPLETE UNDERSTANDING OF THIS TRANSACTION. TO UNDERSTAND THE PROPOSED
TRANSACTION MORE FULLY, PLEASE REFER TO THE MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS DOCUMENT, INCLUDING THE DOCUMENTS ATTACHED AS ANNEXES AND THE
DOCUMENTS REFERENCED HEREIN. NOTE, IN PARTICULAR, THAT A COPY OF THE
REORGANIZATION AGREEMENT (EXCLUDING THE SCHEDULES ATTACHED THERETO) IS ATTACHED
HERETO AS ANNEX A. THE TERMS "CAROLINA FIRST" AND "CITRUS" REFER TO CAROLINA
FIRST CORPORATION AND CITRUS BANK, RESPECTIVELY, AND WITH RESPECT TO CAROLINA
FIRST, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS CONSOLIDATED SUBSIDIARIES.
PURPOSE OF THIS PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus is being sent to the Citrus shareholders
in order to provide information concerning the proposed acquisition of Citrus by
Carolina First. This document is called a "Proxy Statement/Prospectus" because
it is both (1) a proxy statement with respect to the solicitation of proxies by
the Citrus Board of Directors for the Special Meeting and (2) a prospectus with
respect to the proposed issuance by Carolina First of its common stock to the
Citrus shareholders. This Proxy Statement/Prospectus is first being mailed to
Citrus shareholders on or about May 10, 1999.
TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING
The Special Meeting will be held on June 15, 1999 at 5:00 p.m., local
time, at the Orlando Marriott Downtown Hotel, 400 West Livingston Street,
Orlando, Florida. At the Special Meeting, shareholders of Citrus will consider
and vote upon the proposed acquisition of Citrus. See "INFORMATION CONCERNING
THE SPECIAL MEETING."
PRINCIPAL PARTIES TO THE TRANSACTION
There are two principal parties to this transaction: Carolina First and
Citrus.
CAROLINA FIRST. Carolina First is a bank holding company headquartered
in Greenville, South Carolina which engages in a general banking business
through its operating subsidiaries. It was organized in 1986. At December 31,
1998, it had total consolidated assets of approximately $2.7 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."
CITRUS. Citrus is a Florida state banking corporation headquartered in
Orlando, Florida which conducts a general banking business principally in
Orange, Seminole, Osceola and Citrus Counties in Florida. At December 31, 1998,
Citrus had total assets of approximately $227.4 million. Its principal executive
offices are located at 2861 South Delaney Avenue, Orlando, Florida 32806, and
its telephone number is (407) 428-9338. See "INFORMATION ABOUT CITRUS."
BASIC TERMS OF THE TRANSACTION
Assuming the acquisition is consummated, Citrus stockholders will
receive Carolina First common shares equal to $37.07 divided by the average
closing price of Carolina First common stock over a 30 day trading period ending
immediately prior to the closing of the acquisition. However, if this average
price is $24.83 or more, you will receive 1.493 shares of Carolina First common
stock for each share of Citrus common stock, and if the average price is $18.35
or less, you will receive 2.020 shares of Carolina First common stock for each
share of Citrus common stock. Except for certain instances involving a change of
control of Carolina First, the
8
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value of the Carolina First common stock to be issued in the transaction will be
determined based on the average of the closing prices as quoted on the Nasdaq
National Market for Carolina First common stock for the 30 days in which
Carolina First common stock was traded immediately prior to the closing of the
transaction (except that the parties have agreed that fair market value shall
never be deemed to be lower than $18.35 per share or higher than $24.83 per
share). Based on the $____ average of the closing prices of Carolina First
common stock for the 30 trading days ending May ___, 1999, this would have
resulted in a conversion ratio of ______ shares of Carolina First common stock
for each share of Citrus stock. Citrus shareholders are advised to obtain
current market quotations for Carolina First common stock.
The transaction is being structured as a merger in which a wholly-owned
subsidiary of Carolina First will be merged into Citrus. After the acquisition,
the surviving corporation in the merger will be Citrus, and the former Citrus
shareholders will hold Carolina First common stock (which they will receive upon
surrender of their Citrus shares), except to the extent that dissenters' rights
are perfected.
The complete terms of the acquisition are set forth in the
Reorganization Agreement attached hereto as Annex A. A discussion and
description of these terms are set forth below in this Proxy
Statement/Prospectus. See "THE PROPOSED TRANSACTION" below.
SHAREHOLDER VOTE REQUIRED AND RECORD DATE
Only Citrus shareholders of record at the close of business on April 30,
1999 ("Record Date") will be entitled to vote at the Special Meeting. The
proposed acquisition must be approved by the affirmative vote of the holders of
at least a majority of the outstanding shares of Citrus common stock. As of the
Record Date, there were 1,862,177 shares of Citrus common stock entitled to
vote. As of the date hereof, the directors and executive officers of Citrus and
their affiliates beneficially owned 857,641 shares, or approximately 46% of
Citrus common stock. Citrus anticipates that substantially all of such shares
will be voted for the approval of the Reorganization Agreement. Upon
consummation of the proposed acquisition (and assuming a fair market value of
$25.00 per share of Carolina First common stock), the directors and executive
officers of Citrus and their affiliates will beneficially own 1,280,458 shares
of Carolina First common stock, or approximately 5.1% of the outstanding shares
of Carolina First common stock.
RECOMMENDATION OF CITRUS' BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS OF CITRUS HAS APPROVED THE PROPOSED ACQUISITION
AND BELIEVES IT TO BE IN THE BEST INTERESTS OF CITRUS AND ITS SHAREHOLDERS.
ACCORDINGLY, IT RECOMMENDS THAT CITRUS' SHAREHOLDERS VOTE FOR THE PROPOSED
ACQUISITION. SEE "THE PROPOSED TRANSACTION--RECOMMENDATION OF THE CITRUS BOARD
OF DIRECTORS."
RIGHTS OF DISSENTING SHAREHOLDERS.
Shareholders of Citrus who comply with certain statutory procedures
relating to dissenters' rights will be entitled to receive payment in cash of
the value of only those shares held by the shareholder (1) which are voted
against the approval of the Reorganization Agreement at the Special Meeting, or
(2) with respect to which the shareholder has given written notice to Citrus at
or prior to the Special Meeting that the shareholder dissents from the
Reorganization Agreement. Failure to comply strictly with certain statutory
procedures will result in the forfeiture of such rights. It is a condition to
consummation of the acquisition that dissenters' rights not have been perfected
with respect to more than 10% of Citrus' outstanding shares of common stock. See
"THE PROPOSED TRANSACTION--Rights of Dissenting Shareholders of Citrus."
9
<PAGE>
DIFFERENCES IN SHAREHOLDERS' RIGHTS AFTER THE ACQUISITION
Upon consummation of the acquisition, the former Citrus shareholders
will become shareholders of Carolina First, and their rights as shareholders
will be determined by Carolina First's Articles of Incorporation and Bylaws. The
rights of shareholders of Carolina First differ from the rights of shareholders
of Citrus in several important respects, including, among other things, with
respect to required shareholder votes on certain matters and the existence of
certain antitakeover provisions. In addition, Carolina First is a South Carolina
corporation instead of a Florida state banking corporation (like Citrus). See
"COMPARATIVE RIGHTS OF SHAREHOLDERS."
CONDITIONS TO THE CONSUMMATION OF THE ACQUISITION
Consummation of the proposed acquisition is subject to various
conditions, including receipt of the necessary regulatory approvals and the
requisite shareholder approval of Citrus. The necessary regulatory approvals
include the approval by the Federal Deposit Insurance Corporation (the "FDIC")
and the State of Florida Department of Banking and Finance. Also, certain
notices are required to be filed with the Office of the Comptroller of the
Currency (the "OCC") and the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"). These necessary applications and notices have
been filed. The parties expect that the applications will be approved. Carolina
First and Citrus may waive certain of the conditions to their respective
obligations to consummate the acquisition, other than conditions required by
law. See "THE PROPOSED TRANSACTION--Conditions to Consummation of the
Acquisition" and "THE PROPOSED TRANSACTION--Required Regulatory Approvals."
CIRCUMSTANCES UNDER WHICH THE TRANSACTION MAY BE TERMINATED
The parties' obligation to pursue the transaction may be terminated at
any time prior to the Closing Date:
(1) by mutual consent of the parties;
(2) by either Carolina First or Citrus, (a) if a permanent injunction
or other order has been issued by a court or regulatory body
which prevents the consummation of the transactions contemplated
herein, or (b) if the Citrus shareholder approval is not received
at the Special Meeting;
(3) by either Carolina First or Citrus if the other party has
breached the Reorganization Agreement and such breach constitutes
a "material adverse event;"
(4) by either Carolina First or Citrus in the event that closing
has not occurred by September 30, 1999;
(5) by Carolina First, if the average closing price of Carolina
First's Common Stock for the 30 day trading period ending on the
day before the closing date is $25.91 or higher; or
(6) by Citrus, if the average closing price of Carolina First's
Common Stock for the 30 day trading period ending on the day
before the closing date is $17.27 or lower.
ANTICIPATED EFFECTIVE TIME OF THE TRANSACTION.
The Effective Time of the acquisition will be set forth in the Articles
of Merger that are filed with the Florida Secretary of State and the OCC, as
applicable, and will occur after all conditions specified in the Reorganization
Agreement have been satisfied or waived. The Effective Time currently is
anticipated to be on or about July 1, 1999, although delays in the satisfaction
of the conditions to consummation of the acquisition
10
<PAGE>
could result in a later Effective Time. See "THE PROPOSED TRANSACTION --
Conditions to Consummation of the Acquisition."
OPINION OF CITRUS' FINANCIAL ADVISOR
Allen C. Ewing & Co. ("Ewing") has served as financial advisor to Citrus
in connection with the proposed acquisition and has rendered an opinion to the
Citrus Board of Directors that the consideration to be received by shareholders
of Citrus in the merger is fair from a financial point of view to the Citrus
shareholders. For additional information concerning Ewing and its opinion, see
"THE PROPOSED TRANSACTION--Opinion of Citrus' Financial Advisor" and the
opinion of Ewing attached as Annex B to this Proxy Statement/Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO CITRUS SHAREHOLDERS
Citrus will receive an opinion of counsel to Carolina First stating
that, subject to certain conditions, the acquisition will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(A) and Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended ("Code"). However,
this opinion of counsel is not binding on the Internal Revenue Service ("IRS").
In such opinion, counsel will opine (among other things) that if certain
conditions are met:
(1) no taxable gain or loss for federal income tax purposes will be
recognized by Citrus shareholders upon the exchange of Citrus common
stock solely for Carolina First common stock;
(2) 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
Citrus common stock; and
(3) a dissenting shareholder who receives cash in lieu of Carolina First
common stock will be taxed to the extent that the cash exceeds such
dissenting shareholder's basis in the Citrus 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 Citrus shareholder consult his or her tax
advisor concerning the federal (and any applicable state, local or other) tax
consequences of the acquisition.
INTERESTS OF CERTAIN AFFILIATES OF CITRUS IN THE TRANSACTION
In the Reorganization Agreement, for a period of at least two years
following closing, Carolina First has agreed to nominate and elect the existing
Citrus board members to the board of the surviving corporation. The
Reorganization Agreement also provides that Carolina First will indemnify Citrus
directors and executive officers against certain liabilities and will maintain
such directors' and officers' insurance for these persons after the Closing Date
as shall be obtainable for annual premiums of $25,000. In addition, Randy O.
Burden (an officer of Citrus) is expected to enter into a two year employment
contract with Carolina First after closing. Also, certain officers of Citrus are
expected to enter into one year employment contracts with Carolina First after
the closing, some of which include awards to the officers of shares under
Carolina First's restricted stock plan. At the closing, the Chief Financial
Officer of Citrus is entitled to receive a cash payment of $112,000 pursuant to
the change of control provisions of his agreement with Citrus. Carolina First
has also agreed to honor Citrus' obligations under its various existing employee
benefit plans. See "THE PROPOSED TRANSACTION--Interests of Certain Persons in
the Acquisition."
11
<PAGE>
RESTRICTIONS ON RESALES BY CITRUS AFFILIATES
Citrus has agreed that, prior to closing, it will use its best efforts
to cause certain affiliates of Citrus to deliver written agreements to Carolina
First that they will not dispose of any shares of Carolina First 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 OF THE TRANSACTION
The acquisition is expected to be accounted for as a
"pooling-of-interests" of Citrus by Carolina First under generally accepted
accounting principles. See "THE PROPOSED TRANSACTION--Accounting Treatment."
MARKET PRICES AND DIVIDENDS OF CAROLINA FIRST AND CITRUS STOCK
Carolina First common stock is traded on the Nasdaq National Market.
Carolina First currently pays a regular quarterly cash dividend of $.09 per
share. Although Carolina First currently expects to continue payment of its
regular cash dividend on the Carolina First common stock, there can be no
assurance that Carolina First's current dividend policy will continue unchanged
after closing. The declaration and payment of dividends on Carolina First common
stock is subject to legal restrictions and further depends upon business
conditions, operating results, capital and reserve requirements and the Carolina
First Board of Directors' consideration of other relevant factors.
Citrus common stock is not traded on any established market and has
experienced very limited trading. Citrus has not paid any cash dividends.
Federal and state banking regulations restrict the amount of dividends that
Citrus can pay to shareholders. See "COMPARATIVE RIGHTS OF SHAREHOLDERS --
Dividends."
The information presented in the following table reflects the last
reported sales prices for Carolina First common stock on March 17, 1999, the
last trading day prior to the public announcement of the proposed acquisition,
and on ___________, 1999. The Citrus Equivalent is the total dollar amount of
consideration to be received by holders of Citrus common stock. The actual
Conversion Ratio is subject to adjustment based on the average closing price of
Carolina First common stock over a 30-day period ending immediately prior to the
closing of the acquisition. The table also includes a historical price of
$15.00, based on the price at which Citrus sold certain of its shares in
September 1998.
Market Values Per Share
-------------------------------------------------------
Carolina First Citrus
-------------- ----------------------------
Historical Historical Equivalent
March 17, 1999 $22.00 $15.00 $37.07
________, 1999 [__________] 15.00 37.07
Citrus shareholders are advised to obtain current market quotations for
the Carolina First common stock. The market price of Carolina First common stock
at the effective time of the acquisition 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, at the time of the Special Meeting, or
on the date that Citrus shareholders receive certificates for Carolina First
common stock.
12
<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 and Citrus. This information is derived from the historical
financial statements of Carolina First and Citrus, 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
pooling-of-interests method of accounting. The selected pro forma combined
unaudited financial information showing the combined results of Carolina First
and Citrus 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>
- ------------------------------------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net interest income............... $ 43,260 $ 50,772 $ 57,070 $ 66,706 $ 89,136
Provision for loan losses......... 1,197 6,846 10,263 11,646 11,129
Noninterest income, excluding
securities transactions.......... 8,151 16,557 20,368 16,604 21,951
Securities transactions........... 75 769 973 3,011 580
Noninterest income................ 8,226 17,326 21,341 19,615 22,531
Noninterest expenses (1).......... 51,839 46,882 51,675 52,243 64,844
Net income (loss) (1)............. (1,740) 9,414 10,474 14,340 22,443
Dividends on preferred stock...... 2,433 2,752 63 -- --
Net income (loss) applicable to
common shareholders (1)........... (4,173) 6,662 10,411 14,340 22,443
BALANCE SHEET DATA (PERIOD END)
Total assets...................... $1,204,350 $1,414,922 $1,574,204 $2,156,346 $2,725,934
Securities and temporary investments 137,091 187,029 271,396 333,236 508,018
Loans, net of unearned income..... 923,068 1,062,660 1,124,775 1,602,415 1,859,138
Allowance for loan losses......... 6,002 8,661 11,290 16,211 17,509
Nonperforming assets.............. 4,722 4,868 5,880 3,767 5,204
Total earning assets.............. 1,059,455 1,249,689 1,396,171 1,935,651 2,367,156
Total deposits.................... 1,001,748 1,095,491 1,281,050 1,746,542 2,125,236
Borrowed funds.................... 106,074 186,789 145,189 139,739 155,823
Long-term debt.................... 1,162 26,347 26,442 39,119 63,081
Preferred stock................... 37,014 32,909 943 -- --
Shareholders' equity.............. 86,482 94,967 104,964 201,659 344,363
PER SHARE DATA (2)
Net income (loss) per common share:
Basic (1)...................... $ (0.59) $ 0.89 $ 0.97 $ 1.19 $ 1.21
Diluted (1).................... (0.59) 0.84 0.92 1.18 1.19
Cash dividends declared........... 0.17 0.21 0.25 0.29 0.33
Book value per common share
(period end)...................... 6.61 7.61 9.26 12.88 15.65
Common shares outstanding:
Weighted average - basic ...... 7,004,214 7,516,629 10,705,107 11,989,517 18,556,727
Weighted average - diluted..... 10,114,812 11,183,726 11,368,035 12,175,561 18,871,153
Period end..................... 7,079,866 7,820,839 11,225,568 15,659,338 22,005,391
FINANCIAL RATIOS
Return on average assets.......... (0.16)% 0.74% 0.71% 0.84% 0.95%
Return on average equity.......... (1.99) 10.43 10.56 11.62 8.34
Net interest margin............... 4.65 4.54 4.35 4.36 4.24
- ------------------------------------------------------------------------------------------------
</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 splits.
13
<PAGE>
CITRUS BANK
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net interest income............... $ 782 $ 1,330 $ 3,021 $ 5,525 $ 10,018
Provision for loan losses......... 37 320 460 462 1,595
Noninterest income, excluding
securities transactions........... 227 281 438 785 1,858
Securities transactions........... - - - - -
Noninterest income................ 227 281 438 785 1,858
Noninterest expenses.............. 741 1,458 2,141 6,344 7,134
Net income (loss)................. 146 (104) 541 (300) 2,002
Dividends on preferred stock...... - - - - -
Net income (loss) applicable to
common shareholders............... 146 (104) 541 (300) 2,002
BALANCE SHEET DATA (PERIOD END)
Total assets...................... $ 15,591 $ 46,172 $ 76,881 $145,823 $ 227,358
Securities and temporary
investments....................... 4,733 15,923 18,369 35,465 35,768
Loans, net of unearned income..... 9,226 22,823 51,859 94,140 171,048
Allowance for loan losses......... 122 326 749 1,158 2,757
Nonperforming assets.............. 164 13 - - 174
Total earning assets.............. 13,837 38,420 69,479 128,447 204,059
Total deposits.................... 13,940 38,701 68,892 132,085 208,947
Borrowed funds.................... - - - - -
Long-term debt.................... - - - - -
Preferred stock................... - - - - -
Shareholders' equity.............. 1,574 7,348 7,890 13,554 17,624
PER SHARE DATA
Net income (loss) per common share:
Basic.......................... $ 0.49 $ (0.12) $ 0.49 $ (0.22) $ 1.10
Diluted........................ 0.49 (0.12) 0.49 (0.22) 1.06
Cash dividends declared........... - - - - -
Book value per common share
(period end)...................... 5.25 6.68 7.17 7.97 9.46
Common shares outstanding:
Weighted average - basic ...... 300,000 836,986 1,100,000 1,377,818 1,826,885
Weighted average - diluted..... 300,000 836,986 1,107,350 1,377,818 1,884,514
Period end..................... 300,000 1,100,000 1,100,010 1,700,010 1,862,177
FINANCIAL RATIOS
Return on average assets.......... 0.94% (0.34)% 0.90% (0.29)% 1.05%
Return on average equity.......... 9.52 (2.33) 7.12 (2.74) 12.01
Net interest margin............... 5.78 5.09 5.47 5.98 5.81
- ------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
UNAUDITED PRO FORMA COMBINED
SELECTED FINANCIAL DATA
OF CAROLINA FIRST CORPORATION AND CITRUS BANK
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
<S> <C>
Years Ended December 31,
----------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
STATEMENT OF INCOME DATA
Net interest income............... $ 44,042 $ 52,102 $ 60,091 $ 72,231 $ 99,155
Provision for loan losses......... 1,234 7,166 10,723 12,108 12,724
Noninterest income, excluding
securities transactions........... 8,378 16,838 20,806 17,389 23,809
Securities transactions........... 75 769 973 3,011 580
Noninterest income................ 8,453 17,607 21,779 20,400 24,389
Noninterest expenses (1).......... 52,580 48,340 53,816 58,587 71,978
Net income (loss) (1)............. (1,594) 9,310 11,015 14,040 24,445
Dividends on preferred stock...... 2,433 2,752 63 - -
Net income (loss applicable to
common shareholders (1)........... (4,027) 6,558 10,952 14,040 24,445
BALANCE SHEET DATA (Period End)
Total assets...................... $1,219,941 $1,461,094 $1,651,085 $2,302,169 $2,953,292
Securities and temporary
investments....................... 141,824 202,952 289,765 368,701 543,786
Loans, net of unearned income..... 932,294 1,085,483 1,176,634 1,696,555 2,030,186
Allowance for loan losses......... 6,124 8,987 12,039 17,369 20,266
Nonperforming assets.............. 4,886 4,881 5,880 3,767 5,378
Total earning assets.............. 1,073,292 1,288,109 1,465,650 2,064,098 2,571,215
Total deposits.................... 1,015,688 1,134,192 1,349,942 1,878,627 2,334,183
Borrowed funds.................... 106,074 186,789 145,189 139,739 155,823
Long-term debt.................... 1,162 26,347 26,442 39,119 63,081
Preferred stock................... 37,014 32,909 943 - -
Shareholders' equity.............. 88,056 102,315 112,854 215,213 357,987
PER SHARE DATA (2)
Net income (loss) per common share:
Basic (1)...................... $ (0.54) $ 0.75 $ 0.89 $ 1.00 $ 1.15
Diluted (1).................... (0.54) 0.75 0.85 0.99 1.13
Cash dividends declared........... 0.16 0.17 0.22 0.25 0.29
Book value per common share
(period end)...................... 6.78 7.33 8.70 11.83 14.60
Common shares outstanding:
Weighted average - basic ...... 7,452,114 8,766,240 12,347,407 14,046,599 21,284,266
Weighted average - diluted..... 10,562,712 12,433,346 13,021,309 14,232,643 21,684,732
Period end........................ 7,527,766 9,463,139 12,867,883 18,197,453 24,785,621
FINANCIAL RATIOS (3)
Return on average assets.......... (0.15)% 0.72% 0.71% 0.78% 0.96%
Return on average equity.......... (1.79) 9.83 10.31 10.45 8.56
Net interest margin............... 4.67 4.56 4.39 4.45 4.35
- ------------------------------------------------------------------------------------------------
</TABLE>
-------------------------------------------
(1)Includes Carolina First's 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 splits.
15
<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 common stock after giving effect to the Reorganization
Agreement and (ii) certain historical and pro forma data for the Citrus common
stock. The pro forma financial data are presented using the pooling-of-interests
method of accounting, and an assumed fair market value of Carolina First common
stock of $25.00 per share, resulting in a Conversion Ratio of 1.493 shares of
Carolina First common stock for each share of Citrus common stock. The data
presented should be read in conjunction with the historical financial statements
and the related notes thereto included elsewhere herein or incorporated herein
by reference and in conjunction with the pro forma combined condensed financial
information included elsewhere herein. The data are not necessarily indicative
of actual results that would have been achieved had the Reorganization Agreement
been consummated at the beginning of the periods presented and are not
indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------------------
Fully Fully Pro
Pro Forma Citrus Pro Forma Forma
Carolina Citrus Combined Equivalent(1) Combined Combined
First Equivalent(2)
-------- ------ --------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Diluted earnings per $1.19 $1.06 $1.13 $1.69 $0.74 $1.10
common share
Cash dividends declared
per common share 0.33 - 0.29 0.43 0.25 0.37
Book value per common
share (period end) 15.65 9.46 14.60 21.80 14.19 21.19
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated by multiplying the Pro Forma Combined by the assumed Conversion
Ratio of 1.493.
(2) Calculated by multiplying the Fully Pro Forma Combined by an
assumed Conversion Ratio of 1.493.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------
Fully Fully Pro
Pro Forma Citrus Pro Forma Forma
Carolina Citrus Combined Equivalent(1) Combined Combined
First Equivalent(2)
-------- ------ --------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Diluted earnings per $1.18 $(0.22) $0.99 $1.48 $0.68 $1.02
common share
Cash dividends declared
per common share 0.29 - 0.25 0.37 0.19 0.28
Book value per common
share (period end) 12.88 7.97 11.83 17.66 11.51 17.18
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated by multiplying the Pro Forma Combined by the assumed Conversion
Ratio of 1.493.
(2) Calculated by multiplying the Fully Pro Forma Combined by an
assumed Conversion Ratio of 1.493.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------
Fully Fully Pro
Pro Forma Citrus Pro Forma Forma
Carolina Citrus Combined Equivalent(1) Combined(2) Combined
First Equivalent(3)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Diluted earnings per $0.92 $0.49 $0.85 $1.27 $0.84 $1.25
common share
Cash dividends declared
per common share 0.25 - 0.22 0.33 0.21 0.31
Book value per common
share (period end) 9.26 7.17 8.70 12.99 8.74 13.05
- ------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------
(1) Calculated by multiplying the Pro Forma Combined by an assumed Conversion
Ratio of 1.493.
(2) Includes Citizens First National Bank but does not include
Carolina First's 1998 acquisitions.
(3) Calculated by multiplying the Fully Pro Forma Combined by an assumed
Conversion Ratio of 1.493.
16
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY WHEN
EVALUATING THIS TRANSACTION AND THE VALUE OF CAROLINA FIRST COMMON STOCK TO BE
RECEIVED IN THIS TRANSACTION.
CAROLINA FIRST IS VERY DEPENDENT ON ITS SENIOR MANAGEMENT. Carolina
First is dependent upon the services of certain of the senior executive officers
of Carolina First and its subsidiaries. The loss of the services of one or more
of such individuals could have an adverse effect on Carolina First. No assurance
can be given that replacements for any of these officers could be employed if
their services were no longer available. Carolina First maintains key employee
insurance on Mack I. Whittle, Jr., Carolina First's Chief Executive Officer.
CAROLINA FIRST HAS EXPERIENCED SIGNIFICANT GROWTH THROUGH ACQUISITIONS,
WHICH COULD, IN CERTAIN CIRCUMSTANCES, ADVERSELY AFFECT NET INCOME. Carolina
First has experienced significant growth in assets as a result of acquisitions.
Moreover, Carolina First anticipates engaging in selected acquisitions of
financial institutions and assets in the future. There are certain risks
associated with Carolina First'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
and being unable to profitably deploy funds acquired in an acquisition.
Furthermore, there can be no assurance as to the extent that Carolina First can
continue to grow through acquisitions.
In the past, Carolina First 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 engages in significant
acquisitions accounted for by the purchase method of accounting in the future,
Carolina First may be required to raise additional capital in order to maintain
capital levels required by the Federal Reserve Board.
In the future, Carolina First 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. Carolina First does
not currently have any definitive understandings or agreements for any
acquisitions material to Carolina First. However, as noted above, Carolina First
anticipates that it will continue to expand by acquisition in the future.
CAROLINA FIRST HAS CERTAIN ANTITAKEOVER MEASURES WHICH COULD IMPEDE THE
TAKEOVER OF CAROLINA FIRST. Carolina First has certain antitakeover measures in
place, certain of which are listed below. Any one or more of these measures may
impede the takeover of Carolina First without the approval of Carolina First'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 common stock. See "CAROLINA FIRST CAPITAL STOCK."
The antitakeover measures include:
(1) a Shareholders' Rights Plan which, among other things, provides for
the dilution of the Carolina First common stock holdings of certain
shareholders who acquire 20% or more of the Carolina First common
stock and attempt to acquire Carolina First without the consent of
management;
(2) 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,
and
(3) 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.
17
<PAGE>
CAROLINA FIRST HAS EXPERIENCED SIGNIFICANT GROWTH IN COMMERCIAL LENDING
ACTIVITIES, WHICH ENTAILS SPECIAL RISKS NOT ASSOCIATED WITH CERTAIN OTHER TYPES
OF LOANS. Over the past several years, Carolina First 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'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's loan portfolio could decline, particularly in connection with the rapid
growth in loans Carolina First has experienced over the past several years.
INFORMATION CONCERNING THE SPECIAL MEETING
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to shareholders of
Citrus as of the Record Date in connection with the solicitation of proxies by
the Board of Directors of Citrus for use at the Special Meeting and at any
adjournments. The Special Meeting is to be held on June 15, 1999 at 5:00 p.m.,
local time, at the Orlando Marriott Downtown Hotel, 400 West Livingston Street,
Orlando, Florida. Holders of Citrus common stock are requested to complete, date
and sign the accompanying Proxy and return it promptly to Citrus in the enclosed
postage-paid envelope.
PURPOSE OF THE SPECIAL MEETING. The purpose of the Special Meeting is to
consider and take action with respect to approval of the Reorganization
Agreement. As required by Florida law, approval of the Reorganization Agreement
will require the affirmative vote of the holders of at least a majority of the
outstanding shares of Citrus common stock entitled to vote on the Reorganization
Agreement. See "--Citrus Record Date and Voting Rights." This Proxy
Statement/Prospectus, Notice of Special Meeting and the Proxy are first being
mailed to shareholders of Citrus on or about May 10, 1999.
CITRUS RECORD DATE AND VOTING RIGHTS. Only the holders of Citrus common
stock as of the Record Date are entitled to receive notice of and to vote at the
Special Meeting and at any adjournments thereof. On the Record Date, there were
1,862,177 shares of Citrus common stock outstanding, which were held by
approximately 350 holders of record. Each share of Citrus common stock
outstanding on the Record Date is entitled to one vote as to each of the matters
submitted at the Special Meeting.
A majority of the shares entitled to be voted at the Special Meeting
constitutes a quorum. If a share is represented for any purpose at the Special
Meeting by the presence of the registered owner or a person holding a valid
proxy for the registered owner, it is deemed to be present for purposes of
establishing a quorum. Therefore, valid proxies which are marked "Abstain," as
to which no vote is marked, including proxies submitted by brokers that are the
record owners of shares (so-called "broker non-votes"), will be included in
determining the number of shares present or represented at the Special Meeting.
THE ACQUISITION MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF THE HOLDERS
OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF CITRUS COMMON STOCK ELIGIBLE
TO VOTE AT THE SPECIAL MEETING. ACCORDINGLY, PROXIES MARKED "ABSTAIN" AND SHARES
THAT ARE NOT VOTED (INCLUDING BROKER NON-VOTES) WILL NOT BE VOTED TO APPROVE THE
REORGANIZATION AGREEMENT.
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On the Record Date, the directors and executive officers of Citrus and
their affiliates owned a total of 857,641 shares, or approximately 46% of
Citrus' common stock. Citrus anticipates that substantially all of such shares
will be voted for the approval of the Reorganization Agreement.
PROXIES. The accompanying Proxy is for use at the Special Meeting. A
shareholder may use this Proxy if the holder is unable to attend the Special
Meeting in person or wishes to have his or her shares voted by proxy even if the
holder does attend the Special Meeting. All shares represented by valid proxies
received pursuant to this solicitation that are not revoked before they are
exercised will be voted in the manner specified therein. If no specification is
made, the proxies will be voted FOR approval of the Reorganization Agreement.
The Board of Directors of Citrus is not aware of any other matters that may be
presented for action at the Special Meeting, but if other matters do properly
come before the Special Meeting, it is intended that shares represented by
proxies in the accompanying form will be voted by the persons named in the Proxy
in accordance with their best judgment.
If a quorum is not obtained, or if fewer shares of Citrus common stock
are voted in favor of approval of the Reorganization Agreement than the number
required for approval, it is expected that the Special Meeting will be postponed
or adjourned for the purpose of allowing additional time for obtaining
additional proxies or votes, and, at any subsequent reconvening of the 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 Special Meeting will not
automatically revoke such shareholder's proxy. The proxy may be revoked by the
record shareholder:
(1) by giving written notice to the Secretary of Citrus at any time
before it is voted,
(2) by submitting a proxy having a later date, or
(3) by such person appearing at the Special Meeting and giving notice of
revocation to the corporate officers responsible for maintaining the
list of shareholders.
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 Citrus, 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. Citrus will bear the costs
associated with the solicitation of proxies and other expenses associated with
the Special Meeting.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by Citrus, Carolina First 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 Citrus or Carolina First since the date of this Proxy
Statement/Prospectus.
RECOMMENDATION. THE CITRUS BOARD OF DIRECTORS HAS APPROVED THE
REORGANIZATION AGREEMENT AND BELIEVES THAT THE PROPOSED TRANSACTION IS FAIR TO
AND IN THE BEST INTERESTS OF CITRUS AND ITS SHAREHOLDERS. THE CITRUS BOARD OF
DIRECTORS RECOMMENDS THAT CITRUS' 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 Citizens First
National Bank ("Citizens"), a wholly-owned national bank subsidiary of Carolina
First, with and into Citrus. As a result of the acquisition, the separate
corporate existence of Citizens will cease and Citrus, as the surviving entity,
will possess all rights, franchises and interests of Citizens.
As of the effective time of the acquisition, certificates of Citrus
common stock will represent only the right to receive the requisite number of
shares of Carolina First common stock and cash for any fractional shares. The
Reorganization Agreement also provides that Carolina First may restructure the
transactions contemplated therein, provided that any such restructuring does
not:
(1) alter the type of consideration to be issued to the holders of
Citrus common stock,
(2) reduce the value of such consideration,
(3) adversely affect the intended tax-free treatment to Citrus'
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,
(4) materially impair the ability to receive the required regulatory
approvals, or
(5) materially delay the closing.
If Carolina First restructures the transaction and it results in the
merger being treated as a "purchase," as opposed to a "pooling-of-interests,"
for accounting purposes, then as a condition to closing the merger, Citrus has
the right to seek an update to the fairness opinion received from Ewing that the
consideration to be received by Citrus shareholders in the merger is fair, from
a financial point of view, to the Citrus shareholders.
Pursuant to the terms of the Reorganization Agreement, upon consummation
of the acquisition, holders of Citrus' common stock, except shares as to which
shareholders exercise dissenters' rights, will be entitled to receive shares of
Carolina First common stock equal to $37.07 divided by the average closing price
of Carolina First common stock over a 30 day trading period ending immediately
prior to the closing of the acquisition. However, if the average price is $24.83
or more, Citrus shareholders will receive 1.493 shares of Carolina First common
stock for each share of Citrus common stock, and if the average price is $18.35
or less, Citrus shareholders will receive 2.020 shares of Carolina First common
stock for each share of Citrus common stock.
The average of the closing prices will be computed using the closing
prices as quoted on the Nasdaq National Market for Carolina First common stock
for the 30 days in which Carolina First common stock is traded immediately prior
to the Closing Date, except that (1) the average will never be deemed to be
lower than $18.35 per share or higher than $24.83 per share and (2) if prior to
the effective time of the acquisition, any other person or entity has publicly
announced an intention to acquire control of Carolina First by acquisition or
otherwise or Carolina First has 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 common stock for the 30 days for which the
Carolina First common stock was traded immediately prior to such announcement or
acknowledgment will be determined and, if such average is less than the average
derived from the 30 trading days immediately prior to the Closing Date, then the
smaller average will 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.
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Because the number of shares of Carolina First common stock to be
received by Citrus shareholders will depend on the average closing price of
Carolina First common stock over a 30-day period, the exact number of shares to
be received by Citrus shareholders will not be known until the Closing Date. On
__________ , 1999, 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 common stock, as reported on the
Nasdaq National Market, was $______. Citrus shareholders should note, however,
that the market price of the Carolina First 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, among other factors, and
therefore may be worth less than, or more than, such amount as of the date they
receive their Carolina First common stock certificates. Citrus shareholders are
advised to obtain current market quotations for Carolina First common stock.
No fractional shares of Carolina First common stock will be issued as a
result of the acquisition. In lieu of the issuance of fractional shares, cash
will be paid to the holders of Citrus common stock in respect of any fractional
share that would otherwise be issuable based on the fair market value of
Carolina First common stock.
The Reorganization Agreement generally provides that Carolina First and
Citrus will each bear and pay their own costs and expenses incurred in
connection with the transactions contemplated by the Reorganization Agreement,
including fees of attorneys and accountants. The Reorganization Agreement
specifically provides that Carolina First 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 acquisition will become effective at the Effective Time, which will
be specified in the Articles of Merger that are filed with the Florida Secretary
of State or the OCC, as applicable. At the Effective Time, by operation of law,
Citrus shareholders will no longer be owners of Citrus common stock and (to the
extent that they receive Carolina First common stock as consideration) will
automatically become owners of Carolina First common stock, except to the extent
that dissenters' rights are perfected. After the Effective Time, each
outstanding certificate representing shares of Citrus common stock prior to the
Effective Time shall be deemed for all corporate purposes (other than the
payment of dividends and other distributions by Citrus to which the former
shareholders of Citrus 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
CITRUS REASONS. Citrus is headquartered in Orlando, Florida and conducts
its business through eight branch offices in Orange, Seminole, Osceola, and
Citrus Counties. In connection with its normal strategic planning process,
Citrus continuously reviews its strategic business alternatives, including
devoting attention to the continuing consolidation and increasing competition in
the banking and financial services industries in Central Florida. In recent
years, competition in the local banking and financial services industries has
intensified and required increased efforts to enhance Citrus' ability to remain
competitive in this environment.
From time to time over the past several years, the directors of Citrus
had discussions regarding the prospects of Citrus, conditions in the community
banking market in Florida, and the merger activity among financial institutions
in the state. Also during this time, Citrus had periodically received inquiries
from other parties regarding the possible interest of Citrus in pursuing a sale
transaction. None of the inquiries had resulted in Citrus entering into any
letter of intent or agreement for the sale of Citrus.
In early January, a representative of Ewing met with Randy O. Burden
(Chairman, President and Chief Executive Officer of Citrus) to discuss strategic
alternatives available to Citrus. During the discussion, the Ewing
representative indicated that he would be meeting the following day with
representatives of Carolina First and asked Mr. Burden's consent to mention
Citrus, without any commitment on Citrus' part to meet or have any discussions
with Carolina First. On January 9, 1999, the Ewing representative met with
Messrs. Mack I. Whittle,
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Jr. (President and Chief Executive Officer), William S. Hummers, III (Executive
Vice President) and William J. Moore (Executive Vice President) of Carolina
First. The discussion primarily related to Carolina First's interest in
continuing its expansion in the Florida market. The Ewing representative
mentioned Citrus as a financial institution that Carolina First might consider
as a part of its expansion strategy, and the Carolina First representatives
expressed a possible interest in exploring the alternative with Citrus
representatives. On January 11, 1999, the Ewing representative reported to Mr.
Burden on the January 9, 1999 meeting with the Carolina First representatives,
and proposed that Citrus enter into preliminary discussions with Carolina First
with respect to a possible business combination.
During the ensuing weeks, various telephone calls were held between the
Ewing representative, Mr. Burden, and Carolina First representatives. The
discussions included an exchange of information regarding the Carolina First and
Citrus organizations. On January 24, 1999, various members of the board of
directors and management of Citrus met with Carolina First representatives for
general discussion of the two institutions, their philosophies, their banking
markets and services, and the potential synergies and values that could be
realized in an acquisition of Citrus by Carolina First. On January 30, 1999,
several Citrus directors met with the Ewing representative to review the status
of the discussions with Carolina First. During the meeting, the directors
advised the Ewing representative to inform Carolina First of the range of value
that would be required for Citrus to have an interest in pursuing additional
consideration of a transaction with Carolina First. On February 1, 1999,
additional discussions were held between Carolina First representatives and
Ewing's representative regarding the terms of a possible transaction with
Citrus.
On February 3, 1999, Carolina First delivered to Citrus an initial terms
sheet regarding the parameters for a possible acquisition of Citrus by Carolina
First. Without committing to any possible sale of Citrus at that time, the
Citrus directors authorized Mr. Burden and the Citrus representatives to
continue discussions with Carolina First regarding the possible acquisition of
Citrus by Carolina First. The Citrus directors also authorized Carolina First to
commence a due diligence review of Citrus. On February 8, 1999, Citrus retained
Ewing to serve as financial advisor to Citrus.
On February 10, 1999, Carolina First commenced a due diligence review of
Citrus. Carolina First also forwarded to Citrus a copy of an agreement utilized
by Carolina First in a prior acquisition transaction so that Citrus
representatives could review terms that Carolina First anticipated would be
addressed in an acquisition transaction with Citrus. During the following week,
representatives of Carolina First and representatives of Citrus had continued
discussions regarding the terms of a proposed transaction. On February 23, 1999,
the executive officers and several other officers of Citrus visited Carolina
First for a review of the operations of Carolina First and additional
information regarding its organization. During the remainder of February and the
first several weeks of March, representatives of Carolina First and
representatives of Citrus negotiated the terms of a definitive agreement.
The Reorganization Agreement was reviewed by the Board of Directors of
Citrus at a meeting held on March 18, 1999. At this meeting, legal counsel
reviewed generally for Citrus' directors the fiduciary obligations of directors
in sales of financial institutions and commented on the Reorganization
Agreement, the agreements to be entered into between Carolina First and officers
of Citrus (SEE "Interests of Certain Persons in the Acquisition"), and other
issues. At the meeting, representatives of Ewing rendered an oral opinion that
the consideration to be received by shareholders of Citrus in the merger is
fair, from a financial point of view, to the Citrus shareholders. The Citrus
board then unanimously approved the Reorganization Agreement and the
transactions contemplated thereby. Citrus management also was authorized to
execute the Reorganization Agreement, which was signed by Carolina First and
Citrus effective March 18, 1999.
In deciding to approve the Reorganization Agreement the Board of
Directors received information and advice from the officers of Citrus, Citrus'
counsel and Ewing, including Ewing's opinion that the consideration to be
received by the shareholders of Citrus in the merger is fair from a financial
point of view to the Citrus
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shareholders. In reaching its decision the Citrus Board of Directors considered
a number of factors, including the following:
(i) The terms of the merger;
(ii) Citrus' business, operations, earnings, managerial and
technological requirements and resources, prospects and financial
condition;
(iii) Carolina First's business, operations, earnings, financial
condition and lending capacity on both a historical and
prospective basis;
(iv) The value of the consideration to be received by Citrus
shareholders relative to the book value and earnings per share of
Citrus common stock;
(v) The fact that the merger will enable Citrus shareholders to
exchange their shares of Citrus common stock (for which there is
no established public trading market) for shares of common stock
of a larger and more diversified entity, the stock of which is
more widely held and more actively traded;
(vi) That the merger will enable Citrus shareholders to hold stock in a
financial institution that has historically paid cash dividends to
its shareholders, as compared to Citrus which has not previously
paid cash dividends;
(vii) The enhanced opportunities for operating efficiencies that could
result from the acquisition, the enhanced opportunities for growth
in Citrus' market areas that the acquisition would make possible
and the respective contributions the parties would bring to a
combined institution;
(viii)The Citrus Board of Directors' belief that Carolina First would
retain valued employees of Citrus and continue to make substantial
contributions in the communities served by Citrus;
(ix) The terms of the Reorganization Agreement and the value of the
Carolina First common stock to be received by Citrus shareholders;
(x) Carolina First as an ongoing institution and its growth prospects,
asset quality, reserves for losses, capital adequacy and
profitability;
(xi) The liquidity of the Carolina First common stock;
(xii) Alternatives to the acquisition, including remaining independent
and growing internally, or remaining independent for a period of
time and then selling;
(xiii)The expectation that the acquisition will be a tax free
transaction to Citrus and its shareholders;
(xiv) Factors that may affect the market value of Carolina First common
stock in the near future and the long term;
(xv) Current and prospective economic environment, competitive
constraints and regulatory burdens facing financial institutions,
including Citrus; and
(xvi) Other information.
The Citrus Board of Directors also took into account an opinion received
from Ewing that the consideration to be received by Citrus shareholders in the
merger is fair from a financial point of view to the Citrus shareholders. The
foregoing discussion of the information and factors considered by the Citrus
Board of Directors is not intended to be exhaustive of the factors considered by
the Board. The Citrus Board of Directors did not assign any relative or specific
weights to the foregoing factors, and individual directors may have given
different weights to different factors.
The terms of the Reorganization Agreement were the result of arm's
length negotiations between representatives of Citrus and Carolina First.
CAROLINA FIRST REASONS. Carolina First has determined to continue to
expand its banking operations into Florida. After consideration of relevant
business, financial, and market factors, the Board of Directors of Carolina
First believes that the acquisition of Citrus will provide it with a favorable
means for its expansion in Florida. Carolina First believes that acquiring an
existing institution is a superior means of expanding in Citrus' markets, as
opposed to opening de novo branches, primarily because of the acquisition of
established customer
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relationships. Carolina First believes that Citrus has valuable community
relationships which it will be able to use to expand its banking operations in
Citrus' market areas. Citrus is located in Orlando, Florida, which is believed
by Carolina First to be a very desirable market with many of the same
characteristics as South Carolina. Carolina First also believes that the terms
of the proposed acquisition are fair from its point of view and from a financial
perspective.
OPINION OF CITRUS' FINANCIAL ADVISOR
GENERAL. Citrus retained Ewing as financial advisor in connection with
the merger. At the March 18, 1999 meeting of the Board of Directors of Citrus,
Ewing rendered an oral opinion to the Board of Directors of Citrus to the effect
that the consideration to be received by the shareholders of Citrus in the
merger was fair, from a financial point of view, to the shareholders of Citrus.
On March 17, 1999, the day before Ewing delivered its oral opinion to the Board
of Directors of Citrus, the closing price of Carolina First common stock was
$22.00 per share. This oral opinion was followed by a written opinion to the
same effect dated April 5, 1999. The closing price of Carolina First common
stock at April 5, 1999 was $22.00 per share. Ewing subsequently updated its
written opinion to _______, 1999. At _____________, 1999, the closing price of
Carolina First common stock was $_______ per share. THE TEXT OF EWING'S WRITTEN
OPINION IS SET FORTH IN ANNEX B TO THIS PROXY STATEMENT/PROSPECTUS AND SHOULD BE
READ IN ITS ENTIRETY BY SHAREHOLDERS OF CITRUS.
EWING'S OPINIONS ARE DIRECTED TO THE BOARD OF DIRECTORS OF CITRUS AND
ADDRESS ONLY THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE SHAREHOLDERS
OF CITRUS, OF THE CONSIDERATION TO BE RECEIVED BY THE SHAREHOLDERS OF CITRUS IN
THE MERGER, BASED ON CONDITIONS AS THEY EXIST AND CAN BE EVALUATED AS OF THE
DATE OF THE OPINION. EWING'S OPINIONS DO NOT CONSTITUTE A RECOMMENDATION TO ANY
CITRUS SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING
NOR DO EWING'S OPINIONS ADDRESS THE UNDERLYING BUSINESS DECISION TO EFFECT THE
MERGER.
The terms of the merger were determined by Citrus and Carolina First
after arms-length negotiations between the parties. Representatives of Ewing
participated in the negotiations leading to the Reorganization Agreement.
No limitations were imposed by Citrus on Ewing regarding the scope of
its investigation nor were any specific instructions given to Ewing in
connection with its fairness opinions.
In connection with its opinions, Ewing reviewed, analyzed and relied
upon information and material bearing upon the merger and the financial and
operating condition of Citrus and Carolina First, including, among other things,
the following: (i) the Reorganization Agreement; (ii) audited financial
statements for Citrus for the three years ended December 31, 1997; (iii)
unaudited financial statements for Citrus for the year ended December 31, 1998;
(iv) certain unaudited interim financial information for Citrus for various
periods for the year 1999; (v) Annual Reports to Shareholders and Annual Reports
on Form 10-K for Carolina First for the three years ended December 31, 1998;
(vi) other financial information concerning the business and operations of
Citrus furnished to Ewing by Citrus for purposes of its analysis, including
certain internal forecasts for Citrus prepared by its senior management; (vii)
information concerning the limited market for the shares of Citrus common stock;
and (viii) certain publicly available information concerning the trading of, and
the trading market for, Carolina First common stock. Ewing also held discussions
with the management of Citrus and Carolina First concerning their respective
institution's operations, financial condition, and prospects, as well as the
results of regulatory examinations.
Ewing also considered such further financial, economic, regulatory, and
other factors as it deemed relevant and appropriate under the circumstances,
including among others the following: (i) discussions with certain other banking
companies regarding their possible interest in an acquisition of Citrus; (ii)
certain publicly available information concerning the financial terms of certain
mergers and acquisitions of other financial
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institutions in Florida and the financial position and operating performance of
the institutions acquired in those transactions; and (iii) certain publicly
available information concerning the trading of, and the trading market for, the
publicly-traded common stocks of certain other financial institutions. Ewing
also took into account its assessment of general economic, market, and financial
conditions and its experience in other transactions, as well as its experience
in securities valuation and its knowledge of the banking and thrift industry
generally.
In conducting its review and arriving at its opinions, Ewing relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and Ewing did not attempt to
verify such information independently. Ewing relied upon the management of
Citrus as to the reasonableness and achievability of the financial and
operational forecasts and projections (and the assumptions and bases therefor)
provided to it and assumed that such forecasts and projections reflected the
best currently available estimates and judgments of management and that such
forecasts and projections will be realized in the amounts and in the time
periods currently estimated by management. Ewing also assumed, without
independent verification, that the aggregate allowances for loan and other
losses for Citrus and Carolina First are adequate to cover such losses. Ewing
did not make or obtain any inspections, evaluations, or appraisals of the assets
or liabilities of Citrus, Carolina First, or any subsidiaries of Carolina First,
nor did Ewing examine any individual loan, property, or securities files. Ewing
also assumed that Citrus and Carolina First have taken the necessary steps to
address Year 2000 issues and makes no assurances with respect to Year 2000
readiness for Citrus or Carolina First. Ewing was informed by Citrus, and
assumed for purposes of its opinion, that the merger will be recorded as a
pooling-of-interests under generally accepted accounting principles. Ewing also
assumed that the conditions to the merger as set forth in the Reorganization
Agreement would be satisfied and that the merger would be consummated on a
timely basis as contemplated by the Reorganization Agreement.
VALUATION METHODOLOGIES. In connection with its opinions, Ewing
performed several analyses. Set forth below is a brief summary of these
analyses, as updated in connection with Ewing's most recent written opinion.
ANALYSIS OF TERMS OF THE MERGER. Ewing calculated the imputed value of
the merger to the holders of Citrus common stock based upon the description of
the conversion of Citrus common stock contained in the Reorganization Agreement
and varying assumptions concerning the stock price of Carolina First common
stock. Under the terms of the Reorganization Agreement, each share of Citrus
common stock outstanding at the Effective Time of the merger will be converted
into a number of shares of Carolina First common stock equal to $37.07 divided
by the average closing price of Carolina First common stock over a 30 day
trading period ending immediately prior to the closing of the merger. However,
if the average closing price is $24.83 or more, Citrus shareholders will receive
1.493 shares of Carolina First common stock for each share of Citrus common
stock, and if the average closing price is $18.35 or less, Citrus shareholders
will receive 2.020 shares of Carolina First common stock for each share of
Citrus common stock. See "THE PROPOSED TRANSACTION -- General Description of the
Terms of the Reorganization Agreement."
For the purposes of its analyses, Ewing used assumed closing prices for
Carolina First common stock ranging from $16.00 to $28.00, producing an imputed
value for each share of Citrus common stock ranging from $32.32 to $41.80
("Assumed Range of Merger Value").
STOCK TRADING HISTORY. Ewing examined the recent history of trading
prices for Carolina First common stock and the relationship between movements of
those stock prices and movements in the Nasdaq Bank Index (the "Bank Index").
The Bank Index (trading symbol BANK) is composed of more than 750
over-the-counter stocks representing banks, thrifts and other banking related
companies.
This analysis showed that the price growth or (decrease) per share of
Carolina First common stock (excluding cash dividends but adjusted for stock
splits) was 13.1%, 31.3%, 10.7%, 33.2%, and 17.7% during the years ended
December 31, 1994, 1995, 1996, 1997, and 1998, respectively, and (13.1)% during
the period from December 31, 1998 to March 17, 1999. This analysis also showed
that, for the period from January 1,
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1994 through March 17, 1999, the price of Carolina First common stock increased
by a total of approximately 124%, while the Bank Index increased by a total of
approximately 163%. In considering these analyses, Ewing noted that prior
performance is not necessarily indicative of future performance.
Ewing also examined recent trading volume history for Carolina First
common stock, which trades on the Nasdaq National Market. Based upon this
analysis, Ewing concluded that an active trading market exists for Carolina
First common stock. Ewing also reviewed the prior trading history for Citrus
common stock, and concluded that no active trading market exists for Citrus
common stock. Because shares of Citrus common stock are not traded actively,
Ewing placed relatively little weight on the market price of Citrus common
stock.
COMPARABLE TRANSACTION ANALYSIS. Ewing performed an analysis of the
premiums paid in comparable acquisition transactions. For such purposes, Ewing
considered comparable transactions to be seven acquisitions announced from
January 1, 1998 to March 1, 1999, where the target institution was a bank or
bank holding company located in Florida with total assets between $100 million
and $750 million. In each of the selected transactions, Ewing analyzed the
announced purcha+se price multiple to the comparable target institution's book
value, tangible book value, trailing twelve months' earnings, total deposits,
and total assets. Ewing then compared the ranges of these multiples to the
ranges of proposed purchase price multiples for Citrus resulting from the
comparison of the Assumed Range of Merger Value to Citrus' book value, tangible
book value, trailing twelve months' earnings, total deposits, and total assets.
The analyses produced the following results: (i) price offered as a multiple of
book value for the comparable target institutions ranging from 1.70 times to
4.27 times, with a mean of 3.11 times and a median of 3.23 times, compared to a
multiple ranging from 3.41 times to 4.42 times for the Assumed Range of Merger
Value based upon Citrus' unaudited book value at December 31, 1998; (ii) price
offered as a multiple of tangible book value for the comparable target
institutions ranging from 1.70 times to 4.27 times, with a mean of 3.11 times
and a median of 3.23 times, compared to a multiple ranging from 3.41 times to
4.42 times for the Assumed Range of Merger Value based upon Citrus' unaudited
tangible book value at December 31, 1998; (iii) price offered as a multiple of
trailing twelve months' earnings for the comparable target institutions ranging
from 17.44 times to 35.14 times, with a mean of 25.70 times and a median of
25.45 times, compared to a multiple ranging from 30.07 times to 38.89 times for
the Assumed Range of Merger Value based upon Citrus' unaudited trailing twelve
months' earnings at December 31, 1998; (iv) price offered as a percentage of
total deposits for the comparable target institutions ranging from 26.10% to
38.68%, with a mean of 32.97% and a median of 33.35%, compared to 28.80% to
37.26% for the Assumed Range of Merger Value based upon Citrus' unaudited total
deposits at December 31, 1998; and (v) price offered as a percentage total
assets for the comparable target institutions ranging from 24.08% to 33.20%,
with a mean of 28.68% and a median of 29.03%, compared to 26.47% to 34.24% for
the Assumed Range of Merger Value based upon Citrus' unaudited total assets at
December 31, 1998. No target institution or transaction used as a comparison in
the analysis described above is identical to Citrus or the merger. Accordingly,
an analysis of the foregoing necessarily involves complex considerations and
judgments, as well as other factors that affect the acquisition value of the
companies being compared.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
Ewing estimated the present value of the future stream of after-tax cash flows
that Citrus might be expected to produce through 2002, under various
circumstances, based on certain internal forecasts for Citrus prepared by its
senior management. Ewing estimated the terminal value of Citrus at the end of
the period by applying various multiples of earnings (ranging from 16.0 times to
19.0 times) and then discounting the cash flow streams and terminal value using
various discount rates (ranging from 17.0% to 19.0%) chosen to reflect different
assumptions about the required rates of return of Citrus and the inherent risk
surrounding the underlying projections by the management of Citrus. This
discounted cash flow analysis indicated a reference range of $30.00 to $36.76
per share of Citrus common stock, or $26.70 to $32.71 per fully diluted share of
Citrus common stock.
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DIVIDEND ANALYSIS. Ewing analyzed the effect of the merger on the
dividends received by Citrus shareholders. Since its inception, Citrus has not
paid a cash dividend on shares of Citrus common stock. Based upon the indicated
annual cash dividends payable on Carolina First common stock at March 31, 1999,
Ewing noted that Citrus shareholders would receive $0.36 in annual cash flow for
each share of Carolina First common stock received in the merger, or an
estimated annual cash flow of a minimum of $0.537 and a maximum of $0.727 for
each share of Citrus common stock converted in the merger, assuming a minimum
exchange ratio of 1.493 and a maximum exchange ratio of 2.020, respectively.
The summary set forth above does not purport to be a complete
description of the analyses performed by Ewing. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. Ewing believes that its analyses and the summary set forth above
must be considered as a whole and that selecting portions of its analyses
without considering all analyses, or selecting part or all of the above summary
without considering all factors and analyses, would create an incomplete view of
the processes underlying the analyses reflected in Ewing's opinions. In
addition, Ewing may have given various analyses more or less weight than other
analyses and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Ewing's view of
the actual value of Citrus. The fact that any specific analysis has been
referred to in the summary above is not intended to indicate that such analysis
was given greater weight than any other analysis.
In performing its analyses, Ewing made numerous assumptions with respect
to industry performance, general business, and economic conditions and other
matters, many of which are beyond the control of Citrus and Carolina First. The
analyses performed by Ewing are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Ewing's analysis of the fairness to the shareholders of Citrus, from a financial
point of view, of the consideration to be received by the shareholders of Citrus
in the merger. The analyses do not purport to be appraisals or to reflect the
prices at which a company actually might be sold or the prices at which any
securities may trade at the present time or at any time in the future. In
addition, as described above, Ewing's opinion is just one of many factors taken
into consideration by the Board of Directors of Citrus in determining to enter
into the Reorganization Agreement.
As a part of its investment banking business, Ewing is regularly engaged
in the valuation of securities in connection with mergers and acquisitions,
underwritings, private placements, trading and market making activities, and
valuations for various other purposes. The Board of Directors of Citrus engaged
Ewing based on its experience as a financial advisor in mergers and acquisitions
of financial institutions, particularly transactions in Florida, and its general
investment banking experience in the financial services industry.
In the ordinary course of its business as a broker/dealer, Ewing may,
from time to time, purchase securities from, and sell securities to, banking and
thrift companies and as a market maker in securities may, from time to time,
have a long or short position in, and buy or sell, debt or equity securities of
banking and thrift companies for its own account and for the account of its
customers. As of the date of this Proxy Statement/Prospectus, Ewing had no such
position in the securities of Citrus or Carolina First. However, as of such
date, certain officers, directors, and affiliates of Ewing beneficially owned a
total of 51,500 shares of Citrus common stock, which were owned of record by
Ewing/Florida Bank Stock Fund, Limited Partnership ("E/FBSF"), an investment
fund organized by certain such officers, directors, and affiliates. Ewing serves
as financial advisor to E/FBSF.
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COMPENSATION OF EWING. Citrus has agreed to pay Ewing a fee, payable at
the closing of the merger, equal to 1.0% of the aggregate value of any
consideration paid by Carolina First to the shareholders of Citrus in the
merger. Citrus also has paid Ewing $7,500 for the fairness opinion issued by it
(which amount will be credited toward the 1.0% fee if the merger closes).
Further, Citrus has agreed to reimburse Ewing for reasonable out-of-pocket
expenses incurred in connection with acting as financial advisor to Citrus.
Citrus has also agreed to indemnify and hold harmless Ewing and its directors,
officers, and employees against certain liabilities, including liabilities under
the federal securities laws, in connection with its services.
EXCHANGE OF CITRUS STOCK CERTIFICATES
As soon as practicable after the Effective Time (but in no event more
than five days after the Effective Time), Carolina First or its transfer agent
(in such capacity, the "Exchange Agent") will mail, and otherwise make available
to each former record holder of shares of Citrus 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 Citrus 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.
CITRUS 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 will promptly receive
the Carolina First common stock issuable to the holder 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 will be a condition of such payment
that the Certificate will be properly endorsed or otherwise in proper form for
transfer and that the person requesting such payment will pay in advance any
transfer or other taxes or establish to the satisfaction of Carolina First that
no such tax is applicable.
Carolina First is not obligated to deliver the Carolina First common
stock to which any former holder of Citrus common stock is entitled as a result
of the acquisition 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 or Citrus.
In addition, no dividend or other distribution payable to the holders of record
of Carolina First common stock as of any time subsequent to the Effective Time
will be paid to the holder of any certificate representing shares of Citrus
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 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, will be delivered and
paid with respect to each share represented by such Certificates.
After the Effective Time, each outstanding Certificate will be deemed
for all corporate purposes (other than voting and the payment of dividends and
other distributions to which the former shareholders of Citrus 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 common
stock in exchange therefor (and cash in lieu of fractional shares) as provided
in the Reorganization Agreement.
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CONDITIONS TO CONSUMMATION OF THE ACQUISITION
The obligations of Carolina First 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:
(1) the compliance by Citrus 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 Citrus set
forth in the Reorganization Agreement (subject to certain limited
exceptions);
(2) the receipt by Carolina First of an opinion of counsel of Citrus
in form and substance reasonably satisfactory to Carolina First
and its counsel;
(3) that there shall have been no "material adverse event" (as defined
in the Reorganization Agreement) with respect to Citrus through
the Closing Date;
(4) the receipt of necessary regulatory approvals;
(5) the receipt of the necessary shareholder approval of Citrus;
(6) that immediately prior to Closing, the Citrus allowance for loan
losses meets certain requirements;
(7) the execution of the employment agreement between Carolina First
and Randy O. Burden; and
(8) that the holders of 10% or more of the Citrus common stock
outstanding at the time of the Shareholders' Meeting shall not
have dissented to the acquisition.
The obligations of Citrus 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:
(1) the compliance by Carolina First 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 set forth in the Reorganization Agreement (subject
to certain limited exceptions);
(2) the receipt by Citrus of an opinion of counsel of Carolina First
in form and substance reasonably satisfactory to Citrus and its
counsel;
(3) that there shall have been no "material adverse event" (as defined
in the Reorganization Agreement) with respect to Carolina First
through the Closing Date;
(4) the receipt of necessary regulatory approvals;
(5) the receipt of the necessary shareholder approval of Citrus;
(6) the receipt of a tax opinion from Wyche, Burgess, Freeman &
Parham, P.A., reasonably satisfactory to Citrus, opining, subject
to reasonable qualifications, that the acquisition shall, upon
compliance with reasonable conditions, qualify as a tax-free
reorganization under Section 368(a) of the Code; and
(7) the execution of the employment agreement between Carolina First
and Randy O. Burden.
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Carolina First and Citrus may, to the extent permitted by applicable
law, 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:
(1) by mutual consent of the parties;
(2) by either Carolina First or Citrus, 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 Citrus shareholder approval is not received at the
Special Meeting;
(3) by either Carolina First or Citrus if the other party (or its
subsidiaries) has failed to comply with the agreements or fulfill
the conditions contained in the Reorganization Agreement except
that any such failure of compliance or fulfillment must result in
a "material adverse event" (as defined in the Reorganization
Agreement) and the breaching party must be given notice of the
failure to comply and a reasonable period of time to cure;
(4) by either Carolina First or Citrus in the event that closing
has not occurred by September 30, 1999.
(5) by Carolina First, if the average closing price of Carolina
First's Common Stock for the 30 day trading period ending on the
day before the closing date is $25.91 or higher; or
(6) by Citrus, if the average closing price of Carolina First's Common
Stock for the 30 day trading period ending on the day before the
closing date is $17.27 or lower.
AMENDMENT
The Reorganization Agreement may be amended or supplemented in writing
by mutual agreement of Carolina First and Citrus. The Reorganization Agreement
also provides that Carolina First may restructure the transactions contemplated
therein, provided that any such restructuring does not (i) alter the type of
consideration to be issued to the holders of Citrus 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 Citrus' 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. If Carolina First restructures
the transaction and it results in the merger being treated as a "purchase," as
opposed to a "pooling-of-interests," for accounting purposes, then as a
condition to closing the merger, Citrus has the right to seek an update to the
fairness opinion received from Ewing that the consideration to be received by
Citrus shareholders in the merger is fair, from a financial point of view, to
the Citrus shareholders.
CONDUCT OF CITRUS' AND CAROLINA FIRST'S BUSINESS PRIOR TO THE EFFECTIVE TIME
Under the terms of the Reorganization Agreement, Citrus has agreed with
respect to the conduct of its business pending closing, among other things:
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(1) 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;
(2) not to amend its charter or bylaws;
(3) not to issue (except pursuant to the exercise of outstanding
options for Citrus common stock) 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;
(4) to promptly advise Carolina First of any material adverse change
in the business of Citrus;
(5) not to breach the Reorganization Agreement or cause any of the
representations of Citrus contained in the Reorganization
Agreement to become untrue;
(6) not to incur any indebtedness other than in the ordinary course of
business;
(7) except for acquisition-related expenses and current contractual
obligations, not to incur any expense in excess of $50,000;
(8) not to grant any executive officers any increase in compensation
(except in the ordinary course of business) or enter into any
employment agreement;
(9) not to engage in acquisitions, mergers or other reorganizations;
(10) 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; and
(11) except in limited instances, not impose, or permit or suffer the
imposition of any liens on any of its assets.
Under the terms of the Reorganization Agreement, Carolina First has
agreed, with respect to the conduct of its business pending closing, among other
things:
(1) to carry on its business in substantially the same manner as
heretofore conducted;
(2) not to amend its Articles of Incorporation or Bylaws in any manner
that will adversely affect the Citrus shareholders in any material
respect;
(3) to promptly advise Citrus of any material adverse change in its
business; and
(4) 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's representations in the Reorganization
Agreement to become untrue in any material respect.
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REQUIRED REGULATORY APPROVALS
The acquisition 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 Citrus as contemplated herein is subject to approval
of the FDIC pursuant to the Bank Merger Act (12 U.S.C. Sec. 1828 et seq.). The
BMA requires that the relevant regulatory agency take into consideration, among
other factors, the financial and managerial resources and future prospects of
the institutions and the convenience and needs of the communities to be served.
The BMA prohibits the FDIC from approving the acquisition (i) if such
transaction would result in a monopoly or be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize the business of banking
in any part of the United States, or (ii) if the effect of such transaction in
any section of the country may be substantially to lessen competition or to tend
to create a monopoly, or if it would in any other manner be a restraint of
trade, unless the relevant regulatory agency finds that the anticompetitive
effects of such merger are clearly outweighed by the public interest and by the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served. In addition, the FDIC must take into account the
record of performance of the existing and proposed institutions under the
Community Reinvestment Act of 1977 ("CRA") in meeting the credit needs of the
entire community, including low- and moderate-income neighborhoods, served by
such institutions. Applicable regulations also require publication of notice of
the application for approval of the acquisition and provide an opportunity for
the public to comment on the application in writing and to request a hearing.
Subject to certain exceptions, the BMA provides that no bank merger may be
consummated until the 15th day after approval, during which time the United
States Department of Justice ("DOJ") may challenge the Reorganization Agreement
on antitrust grounds. Carolina First has submitted an application to the FDIC
for approval to consummate the acquisition.
The acquisition of Citrus is also subject to the approval of the State
of Florida Department of Banking and Finance.
The parties are also required to file certain notices with the OCC,
pursuant to the Bank Holding Company Act of 1956, as amended, and the Federal
Reserve Board. Carolina First has filed these notices.
Carolina First and Citrus are not aware of any other governmental
approvals or actions that are required for consummation of the acquisition
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 acquisition.
OPERATIONS AFTER THE ACQUISITION
After consummation of the acquisition, it is expected that all of the
former Citrus banking locations will continue to be operated as branch locations
of the surviving bank (which will be called Citrus Bank) and such locations are
expected to conduct their business in generally the same manner as prior to the
acquisition. Carolina First has taken steps to address potential computer and
business risks associated with the "Year 2000 problem" as more fully described
in its Annual Report on Form 10-K for the year ended December 31, 1998, a copy
of which has been filed with the Commission.
It is generally expected that the retained Citrus officers and employees
will continue in similar positions of Carolina First Bank in an at-will
employment capacity. In general, retained Citrus officers and employees will
continue at approximately their current levels of compensation and will be
eligible for benefits available to other
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similarly situated officers and employees of other Carolina First banking
subsidiaries. After consummation of the acquisition, 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
Acquisition."
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION
DIRECTORS. In accordance with the Reorganization Agreement, Carolina
First will nominate and elect the existing Citrus directors to the Board of
Directors of Citrus (the surviving bank) for a period of two years following the
acquisition, subject to certain limited exceptions.
INDEMNIFICATION; ADVANCEMENT OF EXPENSES; DIRECTORS' AND OFFICERS'
INSURANCE. The Reorganization Agreement provides that Carolina First will
indemnify the Citrus 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 applicable law and the Citrus Articles of Incorporation and Bylaws as in
effect on the date of the Reorganization Agreement. The Reorganization Agreement
also provides that prior to closing, Citrus 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 shall
take no action to terminate prematurely such policy.
EMPLOYMENT AGREEMENTS. It is a condition to closing of the acquisition
that Randy O. Burden (Chairman, President and Chief Executive Officer of Citrus)
enter into an employment agreement with Citrus (the surviving bank). The
agreement is expected to provide for compensation substantially similar to his
present compensation amounts, and that he may not be terminated during the two
year term of the agreement except for cause. At the closing, Carolina First also
expects to enter into one-year agreements with nine officers of Citrus, pursuant
to which the nine officers will receive an aggregate of 44,204 shares of
Carolina First common stock (assuming a 30-day average closing price of $25.00)
subject to the terms of Carolina First's restricted stock plan. Also at the
closing, the Chief Financial Officer of Citrus is entitled to receive a cash
payment of $112,000 pursuant to the change of control provisions of his
agreement with Citrus.
OTHER MATTERS RELATED TO EMPLOYEES AND EMPLOYEE BENEFIT PLANS. In the
Reorganization Agreement, Carolina First and Citrus agreed to cooperate to
develop staffing plans which will result in retention of as many Citrus managers
and employees as is practical (as determined by Carolina First). Carolina First
agreed that Citrus employees will also be eligible for consideration for any
other available positions for which they are qualified at Carolina First and its
subsidiaries. Carolina First agreed that those former Citrus employees who are
employed by Carolina First or its subsidiaries immediately following the Closing
Date: (i) will be eligible, on the same basis as current Carolina First
employees, for all Carolina First Benefit Plans (as defined in the
Reorganization Agreement); and (ii) will receive past service credit for
eligibility and vesting (but not benefit accrual) purposes under Carolina First
Benefit Plans for years of service with Citrus as if such service had been with
Carolina First or its subsidiaries. Carolina First agreed that Citrus may elect
to fully vest its employees under some or all Citrus Benefit Plans prior to
consummation of the acquisition. Any Citrus Benefit Plans that are intended to
be qualified under Section 401(a) of the Code and exempt from tax under Section
501(a) of the Code will be terminated by proper action of the Board of Directors
of Citrus prior to the Effective Time. Carolina First further agreed that those
former Citrus employees who are employed by Carolina First or its subsidiaries
immediately following the Closing Date will not be subject to any pre-existing
condition exclusion under Carolina First's medical Benefit Plans.
OPTIONS AND WARRANTS. Citrus has outstanding stock options and warrants
for 231,573 shares which will fully vest immediately prior to the Closing Date.
It is anticipated that all of these options and warrants will be exercised.
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ACCOUNTING TREATMENT
Carolina First expects to account for the acquisition of Citrus as a
pooling-of-interests. For the transaction to qualify for the
pooling-of-interests method, it must satisfy certain conditions, including the
condition that substantially all (at least 90%) of the outstanding Citrus common
stock must be exchanged for Carolina First common stock. Under the
pooling-of-interests method, the assets and liabilities of Carolina First Bank
and Citrus will be combined and carried forward at their previously recorded
amounts.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material federal income tax
consequences of the acquisition, including certain consequences to holders of
the Citrus 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 Citrus 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 Citrus shareholders who acquired their
shares of Citrus' common stock pursuant to the exercise of employee stock
options or rights or otherwise as compensation. Shareholders are urged to
consult their own tax advisors as to the specific tax consequences to them of
the acquisition, including the applicability and effect of state, local and
other tax laws. The following summary does not address the state, local or
foreign tax consequences of the acquisition, if any.
Pursuant to the terms of the Reorganization Agreement, Citrus 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 acquisition occurs
in accordance with the Reorganization Agreement and conditioned on the accuracy
of certain representations made by Citrus and Carolina First, for federal income
tax purposes:
(1) The acquisition will qualify as a reorganization under the
provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Code, provided that substantially all of the assets of Citrus are
acquired in such an acquisition.
(2) No gain or loss will be recognized either to Carolina First
or Citrus as a result of the acquisition.
(3) No gain or loss will be recognized to the shareholders of Citrus
upon their receipt of shares of Carolina First common stock in the
acquisition (disregarding for this purpose any cash received for
fractional shares or in connection with the exercise of
dissenters' rights).
(4) The receipt of cash by Citrus shareholders in the acquisition 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 common stock so received by
Citrus shareholders in connection with the acquisition will be the
same as the basis in the Citrus common stock surrendered in
exchange for such Carolina First common stock as set forth above.
(6) The holding period of the Carolina First common stock received by
a Citrus shareholder will include the holding period of the shares
of Citrus surrendered therefor provided that the Citrus shares are
capital assets in the hand of the shareholder at the time of the
acquisition.
FRACTIONAL SHARE INTERESTS. A Citrus shareholder who receives cash in
lieu of a fractional share interest in Carolina First common stock will be
treated as having received the cash in redemption of the fractional share
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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 Citrus 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 common stock received,
determined as set forth above, is longer than one year.
CASH RECEIVED BY HOLDERS OF CITRUS COMMON STOCK WHO DISSENT. A
shareholder of Citrus who perfects his dissenter's rights under Florida law and
who receives payment of the value of his shares of Citrus 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 Citrus 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 Citrus 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.
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 ADVISORS WITH RESPECT TO
THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR
SITUATIONS, AS WELL AS CONSEQUENCES UNDER ANY APPLICABLE STATE, LOCAL OR FOREIGN
TAX LAWS.
RESTRICTIONS ON RESALES BY AFFILIATES
The issuance of the Carolina First shares has been registered under the
Securities Act. Accordingly, resales of the Carolina First shares by
non-affiliates of Citrus will not require registration. However, under existing
law, any person who is an "affiliate" of Citrus (as defined below) on the date
of the Special Meeting who wishes to sell Carolina First shares will be required
either to (a) register the sale of the Carolina First 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 Citrus affiliates resell their Carolina First shares
pursuant to certain of the requirements of Rule 144 under the Securities Act if
such Carolina First shares are sold within one year after receipt thereof. After
one year, if such person is not an affiliate of Carolina First and Carolina
First is current in the filing of its periodic securities law filings, a former
Citrus affiliate may freely sell the Carolina First shares without limitation.
After two years from the issuance of the Carolina First shares, if such person
is not a Carolina First affiliate at the time of sale or for at least three
months prior to such sale, such person may freely sell such Carolina First
shares without limitation, regardless of the status of Carolina First's periodic
securities law filings. Citrus has agreed that it will use its best efforts to
cause affiliates of Citrus to agree in writing that they will not sell the
Carolina First common stock to be received by them except as provided above.
Stop transfer instructions will be given by Carolina First to the Exchange Agent
with respect to the Carolina First 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 Citrus, 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, Citrus at the time of consummation of the
acquisition. In this context, an "affiliate" will generally include the
following persons: directors or executive officers, and the holders of 10% or
more of Citrus 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).
35
<PAGE>
RIGHTS OF DISSENTING SHAREHOLDERS OF CITRUS
In accordance with Section 658.44 of the Florida Banking Code, any
shareholder of Citrus who has voted against the Reorganization Agreement at the
Special Meeting or has given notice in writing at or prior to such meeting to
the presiding officer that he or she dissents from the Reorganization Agreement,
will be entitled to receive payment in cash of the value of the shares held by
such holder. On or promptly after the Effective Time, Carolina First may fix an
amount which it considers to be not more than the fair market value of the
shares of Citrus and which it will pay to the holders of dissenting shares of
Citrus and, if it fixes such amount, will offer to pay such amount to the
holders of all dissenting shares of Citrus. The owners of dissenting shares who
have accepted such offer will be entitled to receive the amount so offered for
such shares in cash upon surrendering the stock certificates representing such
shares at any time within 30 days after the Effective Time.
The value of dissenting shares of Citrus, the owners of which have not
accepted an offer for such shares made by Carolina First, will be determined as
of the Effective Time by three appraisers, one to be selected by the owners of
at least two thirds of such dissenting shares, one to be selected by the Board
of Directors of Citrus, and the third to be selected by the two so chosen. The
value agreed upon by any two of the appraisers will control and be final and
binding on all parties. If, within 90 days from the Effective Time for any
reason one or more of the appraisers is not selected, or the appraisers fail to
determine the value of such dissenting shares, the State of Florida Department
of Banking will cause an appraisal of such dissenting shares to be made which
will be final and binding on all parties. The expenses of appraisal will be paid
by Citrus. The owners of dissenting shares, the value of which is to be
determined by appraisal, will be entitled to receive the value of such shares in
cash upon surrender of the stock certificates representing such shares at any
time within 30 days after the value of such shares has been determined by
appraisal made on or after the Effective Time.
Any shareholder of Citrus who votes against the Reorganization Agreement
at the Special Meeting or who gives notice in writing at or prior to such
meeting to the presiding officer that the holder dissents, will be notified in
writing of the date of consummation of the acquisition. The failure of a
shareholder to vote against the Reorganization Agreement will not constitute a
waiver of the above-described dissenters' rights, provided that such shareholder
has given notice in writing at or prior to the Special Meeting to the presiding
officer that such shareholder dissents from the Reorganization Agreement.
The foregoing discussion only describes certain provisions of the
Florida Banking Code. Accordingly, shareholders are urged to review Section
658.44 of the Florida Banking Code in its entirety, which is included as Annex C
to this Proxy Statement/Prospectus. Any shareholder who intends to dissent from
the Reorganization Agreement should review the text of those provisions
carefully and also should consult with his or her attorney. Any shareholder who
fails to strictly follow the procedures set forth in said statute will forfeit
dissenters' rights.
Any dissenting shareholder who perfects his or her right to be paid the
value of his or her shares will recognize gain or loss, if any, for federal
income tax purposes upon the receipt of cash for such shares. The amount of gain
or loss and its character as ordinary or capital gain or loss will be determined
in accordance with applicable provisions of the Internal Revenue Code of 1986,
as amended.
The provisions of Florida law regarding dissenters' rights are technical
and complex. If you are contemplating the exercise of such rights you are urged
to consult with your legal counsel.
For a discussion of the tax consequences to a shareholder who exercises
dissenters' rights, see "THE PROPOSED TRANSACTION -- Certain Federal Income Tax
Consequences."
36
<PAGE>
RECOMMENDATION OF THE CITRUS BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF CITRUS HAS CONCLUDED THAT THE ACQUISITION IS
IN THE BEST INTERESTS OF CITRUS AND HAS AUTHORIZED CONSUMMATION THEREOF, SUBJECT
TO APPROVAL OF THE CITRUS SHAREHOLDERS, RECEIPT OF ALL REQUISITE REGULATORY
APPROVALS, AND SATISFACTION OF CERTAIN OTHER CONDITIONS. THE BOARD OF DIRECTORS
OF CITRUS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION
AGREEMENT.
37
<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 at
December 31, 1998 with the historical consolidated balance sheet of Citrus at
December 31, 1998, adjusting for the issuance of additional shares expected to
be issued in the acquisition.
The unaudited Pro Forma Combined Capitalization is based on combining
the historical consolidated capitalization of Carolina First at December 31,
1998 with the historical capitalization of Citrus at December 31, 1998,
adjusting for the issuance of additional shares expected to be issued in the
acquisition.
For 1998, 1997 and 1996, the unaudited Pro Forma Combined Condensed
Statements of Income are presented combining the historical consolidated
statements of income of Carolina First for the years ended December 31 with the
historical consolidated statements of income of Citrus for the years ended
December 31.
The acquisition is expected to be accounted for under the
pooling-of-interests method of accounting, and pro forma data are derived in
accordance with such method.
The pro forma data do not, given the operational overlap between
Carolina First and Citrus reflect any potential benefits from potential cost
savings or synergies expected to be achieved following the acquisition.
Financial information presented at December 31, 1998 and for the years
ended December 31, 1998, 1997, and 1996 also includes pro forma data for
Carolina First's April 23, 1999 acquisition of Citizens First National Bank
accounted for under the pooling-of-interests method of accounting. Financial
information presented for the years ended December 31, 1998 and 1997 also
includes pro forma data for Carolina First's 1998 acquisitions of Resource
Processing Group, Inc. ("RPGI"), First National Bank of Pickens County ("First
National"), Poinsett Financial Corporation ("Poinsett") and Colonial Bank of
South Carolina, Inc. ("Colonial"), collectively listed as "1998 Acquisitions."
The 1998 Acquisitions were accounted for using the purchase method of
accounting. See "INFORMATION ABOUT CAROLINA FIRST - 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 acquisition been consummated at the beginning of the period presented,
nor is it necessarily indicative of future results.
38
<PAGE>
UNAUDITED PRO FORMA COMBINED CAPITALIZATION
At December 31, 1998
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Fully
Carolina Pro Forma Pro Forma
First Citrus Adjustments Combined Citizens First Adjustments Combined
----- ------ ----------- -------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM DEBT
Subordinated notes................... $ 25,618 $ -- $ -- $ 25,618 $ -- $ -- $ 25,618
FHLB advances........................ 34,160 -- -- 34,160 -- -- 34,160
ESOP debt............................ 2,275 -- -- 2,275 -- -- 2,275
Mortgage debt........................ 1,028 -- -- 1,028 -- -- 1,028
-------- --------- --------- -------- -------- ----- --------
Total long-term debt.............. 63,081 -- -- 63,081 -- -- 63,081
-------- --------- --------- -------- -------- ----- --------
SHAREHOLDERS' EQUITY
Common stock......................... 22,005 7,449 (4,669)(a) 24,785 1,099 (591)(c) 25,293
Surplus.............................. 288,577 7,970 4,669 301,216 1,190 591 (c) 302,997
(a)
Retained earnings.................... 35,914 2,199 (4,000)(b) 34,113 2,524 (500)(b) 36,137
Nonvested restricted stock and guarantee (2,963) -- -- (2,963) -- -- (2,963)
of ESOP debt...................... 830 6 -- 836 3 -- 839
-------- --------- --------- -------- -------- ----- --------
Accumulated other comprehensive
income........................... 344,363 17,624 (4,000) 357,987 4,816 (500) 362,303
-------- --------- --------- -------- -------- ----- --------
Total shareholders' equity........
Total capitalization.............. $407,444 $ 17,624 $ (4,000) $421,068 $ 4,816 $(500) $425,384
======= ======== ======== ======= ======= === =======
</TABLE>
- ----------------------------------
(a) To reflect the issuance of 2,780,230 shares of Carolina First Corporation
common stock to holders of Citrus common stock based on an assumed market
price of $25.00 per share of Carolina First Corporation common stock.
(b) To record estimated merger costs, including buyouts of employment contracts,
severance pay, conversion costs and transaction costs.
(c) To reflect the issuance of 508,003 shares of Carolina First Corporation
common stock to holders of Citizens common stock based on a market price of
$23.622 per share of Carolina First Corporation common stock.
39
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
At December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Fully
Carolina Pro Forma Pro Forma
First Citrus Adjustments Combined Citizens First Adjustments Combined
----- ------ ----------- -------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks.............. $102,516 $ 13,723 $-- $116,239 $3,322 $-- $119,561
Interest-bearing bank balances....... 54,988 -- -- 54,988 -- -- 54,988
Fed funds sold and resale agreements. 5,000 23,041 -- 28,041 4,643 -- 32,684
Investment securities................ 448,030 12,727 -- 460,757 10,301 -- 471,058
Loans held for sale.................. 112,918 -- -- 112,918 -- -- 112,918
Loans held for investment............ 1,753,778 171,048 -- 1,924,826 36,745 -- 1,961,571
Less unearned income.............. (7,558) -- -- (7,558) -- -- (7,558)
Less allowance for loan losses.... (17,509) (2,757) -- ( 20,266) (374) -- (20,640)
---------- -------- -------- ---------- ------- -------- ----------
Net loans...................... 1,841,629 168,291 -- 2,009,920 36,371 -- 2,046,291
Premises and equipment............... 46,953 7,677 -- 54,630 1,073 -- 55,703
Intangible assets.................... 130,402 -- -- 130,402 -- -- 130,402
Other assets......................... 96,416 1,899 -- 98,315 1,472 -- 99,787
---------- -------- -------- ---------- ------- -------- ----------
Total assets............. $2,725,934 $227,358 $ -- $2,953,292 $ 57,182 $ -- $3,010,474
========= ======= ===== ========= ======= ===== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing............ $286,831 $45,700 $-- $332,531 $10,299 $-- $342,830
Interest-bearing............... 1,838,405 163,247 -- 2,001,652 41,586 -- 2,043,238
---------- -------- -------- ---------- ------- -------- ----------
Total deposits.............. 2,125,236 208,947 -- 2,334,183 51,885 -- 2,386,068
Borrowed funds.................... 218,904 -- -- 218,904 -- -- 218,904
Other liabilities................. 37,431 787 4,000(a) 42,218 481 500(a) 43,199
---------- -------- -------- ---------- ------- -------- ----------
Total liabilities ....... 2,381,571 209,734 4,000 2,595,305 52,366 500 2,648,171
---------- -------- -------- ---------- ------- -------- ----------
Total shareholder's equity........... 344,363 17,624 (4,000)(a) 357,987 4,816 (500)(a) 362,303
---------- -------- -------- ---------- ------- -------- ----------
Total liabilities and shareholders'
equity.................................. $2,725,934 $227,358 $ -- $2,953,292 $57,182 $ -- $3,010,474
========= ======= ===== ========= ====== ===== =========
</TABLE>
- ----------------------------------
(a) To record estimated merger costs.
40
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1998
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Fully
Pro Forma 1998 Pro Forma
Carolina First Citrus Adjustments Combined Citizens First Acquisitions Adjustments Combined
-------------- ------ ----------- -------- -------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $180,876 $ 16,184 $-- $197,060 $ 4,144 $ 12,130 $-- $213,334
Interest expense........... 91,740 6,165 -- 97,905 1,606 5,715 -- 105,226
---------- --------- ------- ---------- ------- --------- ------- ----------
Net interest income..... 89,136 10,019 -- 99,155 2,538 6,415 -- 108,108
Provision for loan losses.. 11,129 1,595 -- 12,724 10 398 -- 13,132
---------- --------- ------- ---------- ------- --------- ------- ----------
Net interest income after
provision for loan
losses............... 78,007 8,424 -- 86,431 2,528 6,017 -- 94,976
Noninterest income......... 22,531 1,858 -- 24,389 410 10,163 -- 34,962
Noninterest expenses....... 64,844 7,134 -- 71,978 2,241 19,027 1,950(a) 95,683
473(b)
14(c)
-------
Income before income taxes 35,694 3,148 -- 38,842 697 (2,847) (2,437) 34,255
Income taxes............... 13,251 1,146 -- 14,397 235 579 (10)(d) 15,201
Net income.............. $ 22,443 $ 2,002 $ -- $ 24,445 $ 462 $ (3,426) $ (2,427) $ 19,054
======== ======== ===== ======== ======= ======== ======= =======
Net income per common
share: $ 1.21 $ 1.10 $-- $ 1.15 $ 4.20 $ (0.35) $ -- $ 0.76
Basic................... 1.19 1.06 -- 1.13 4.20 (0.34) -- 0.74
Diluted.................
Average shares outstanding:
Basic................... 18,556,727 1,826,885 -- 21,284,266 109,900 9,890,295 -- 25,180,470
Diluted................. 18,871,153 1,884,514 -- 21,684,732 109,900 9,941,001 -- 25,580,936
</TABLE>
- ----------------------------------
(a) Record amortization of goodwill using the straight-line method over 25 years
and 10 years.
(b) Record amortization of core deposit intangible using the sum-of-the-year's
digit's method over 10 years.
(c) To increase depreciation expense from mark-up of premises and equipment to
an estimated market value.
(d) To show impact of taxes at 38% tax rate.
41
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1997
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Fully
Pro Forma 1998 Pro Forma
Carolina First Citrus Adjustments Combined Citizens First Acquisitions Adjustments Combined
-------------- ------ ----------- -------- -------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $135,706 $8,531 $ -- $144,237 $3,925 $18,640 $-- $166,802
Interest expense........... 69,000 3,006 -- 72,006 1,547 8,937 -- 82,490
---------- --------- ------ ---------- ------- --------- ------ ----------
Net interest income..... 66,706 5,525 -- 72,231 2,378 9,703 -- 84,312
Provision for loan losses.. 11,646 462 -- 12,108 -- 529 -- 12,637
---------- --------- ------ ---------- ------- --------- ------ ----------
Net interest income after
provision for loan
losses............... 55,060 5,063 -- 60,123 2,378 9,174 -- 71,675
Noninterest income......... 19,615 785 -- 20,400 434 21,594 -- 42,428
Noninterest expenses....... 52,243 6,344 -- 58,587 2,183 31,256 969(a) 93,380
---------- --------- ------ ---------- ------- --------- 342(b) ----------
43(c)
--------
Income before income taxes 22,432 (496) -- 21,936 629 (488) (1,354) 20,723
Income taxes............... 8,092 (196) -- 7,896 157 (354) (147)(d) 7,552
---------- --------- ------ ---------- ------- --------- ------ ----------
Net income.............. $14,340 $(300) $ -- $14,040 $472 $(134) $(1,207) $13,171
========== ========= ======= ========== ======= ========= ======== ==========
Net income per common
share:
Basic................... $1.19 $(0.22) $ -- $1.00 $4.29 $(0.02) $-- $0.69
Diluted................. 1.18 (0.22) -- 0.99 4.29 (0.01) -- 0.68
Average shares outstanding:
Basic................... 11,989,517 1,377,818 -- 14,046,599 109,900 9,793,188 -- 19,175,547
Diluted................. 12,175,561 1,377,818 -- 14,232,643 109,900 9,809,699 -- 19,361,591
</TABLE>
- ----------------------------------
(a) Record amortization of goodwill using the straight-line method over 25 years
and 10 years.
(b) Record amortization of core deposit intangible using the sum-of-the-year's
digit's method over 10 years.
(c) To increase depreciation expense from mark-up of premises and equipment to
an estimated market value.
(d) To show impact of taxes at 38% tax rate.
42
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1996
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Fully
Pro Forma Pro Forma
Carolina First Citrus Adjustments Combined Citizens First Adjustments Combined
-------------- ------ ----------- -------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $116,872 $4,744 $-- $121,616 $3,600 $-- $125,216
Interest expense........... 59,802 1,723 -- 61,525 1,252 -- 62,777
---------- --------- ------ ---------- ------- ------- ----------
Net interest income..... 57,070 3,021 -- 60,091 2,348 -- 62,439
Provision for loan losses.. 10,263 460 -- 10,723 79 -- 10,802
---------- --------- ------ ---------- ------- ------- ----------
Net interest income after
provision for loan
losses............... 46,807 2,561 -- 49,368 2,269 -- 51,637
Noninterest income......... 21,341 438 -- 21,779 480 -- 22,259
Noninterest expenses....... 51,675 2,141 -- 53,816 2,190 -- 56,006
---------- --------- ------ ---------- ------- ------- ----------
Income before income taxes 16,473 858 -- 17,331 559 -- 17,890
Income taxes............... 5,999 317 -- 6,316 196 -- 6,512
---------- --------- ------ ---------- ------- ------- ----------
Net income.............. $ 10,474 $ 541 $ -- $ 11,015 $ 363 $ -- $ 11,378
========== ========= ======= ========== ======= ====== ==========
Net income per common share:
Basic................... $ 0.97 $ 0.49 $-- $ 0.89 $ 3.30 $-- $ 0.89
Diluted................. 0.92 0.49 -- 0.85 3.30 -- 0.84
Average shares outstanding:
Basic................... 10,705,107 1,100,000 -- 12,347,407 109,900 -- 12,855,410
Diluted................. 11,368,035 1,107,350 -- 13,021,309 109,900 -- 13,529,312
</TABLE>
43
<PAGE>
INFORMATION ABOUT CAROLINA FIRST
GENERAL
CAROLINA FIRST. Carolina First is a bank holding company headquartered
in Greenville, South Carolina which engages in a general banking business
through its six 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) Carolina First Bank,
F.S.B., a federal savings bank, (4) Blue Ridge Finance Company, Inc., an
automobile finance company headquartered in Greenville, South Carolina, (5)
Resource Processing Group, Inc., a credit card origination and servicing company
headquartered in Columbia, South Carolina, and (6) Citizens First National Bank,
headquartered in Crescent City, Florida. Through its subsidiaries, Carolina
First 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 also has bank technology investments which
include two public companies: (1) an 18% ownership interest in Affinity
Technology Group, Inc. and (2) a 9.4% ownership interest in Net.B@nk, Inc.
Carolina First, which commenced operations in December 1986, currently
conducts business in 73 locations in South Carolina and 4 locations in northern
Florida. Carolina First is one of the largest independent South
Carolina-headquartered financial institutions. At December 31, 1998, it had
total assets of approximately $2.7 billion, total loans of approximately $1.9
billion, total deposits of approximately $2.1 billion and approximately $344
million in shareholders' equity.
Carolina First 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'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's loan and deposit growth.
Carolina First 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'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 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's market areas are located in the four
largest Metropolitan Statistical Areas of the state. Carolina First also has
branch locations in other counties in South Carolina.
Carolina First 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 following:
44
<PAGE>
Institution Date
-------------------------------------------------------- ----
First Federal Savings and Loan Association of Georgetown 1990
12 branch locations of Republic National Bank 1993
Midlands National Bank 1995
Aiken County National Bank 1995
First Southeast Financial Corporation 1997
Lowcountry Savings Bank 1997
First National Bank of Pickens County 1998
Poinsett Financial Corporation 1998
Colonial Bank of South Carolina, Inc. 1998
Citizens First National Bank 1999
Approximately half of Carolina First's total deposits have been generated
through acquisitions. Carolina First anticipates that it will continue to expand
in the future and is frequently in discussions regarding possible acquisitions.
See "--Recent Developments."
Carolina First is a legal entity separate and distinct from its
subsidiary bank and non-banking subsidiaries. Accordingly, the right of Carolina
First, and thus the right of Carolina First'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 in its capacity as a creditor may be
recognized. The principal source of Carolina First'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.
It currently engages in a general banking business through 66 locations, which
are located throughout South Carolina. It began its operations in December 1986
and at December 31, 1998 had total assets of approximately $2.6 billion, total
loans of approximately $1.8 billion and total deposits of approximately $2.1
billion. Its deposits are insured by the Federal Deposit Insurance Corporation
("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 December 31, 1998, Carolina First
Mortgage Company was servicing or subservicing approximately 23,224 loans having
an aggregate principal balance of approximately $2.0 billion.
CITIZENS FIRST NATIONAL BANK. Citizens First National Bank is a national
banking association which conducts a general banking business principally in
Putnam County, Florida. It is headquartered in Crescent City, Florida. At
December 31, 1998, Citizens had total assets of approximately $57.2 million.
BLUE RIDGE FINANCE COMPANY, INC. On December 29, 1995, Carolina First
acquired Blue Ridge Finance Company, Inc., an automobile finance company
headquartered in Greenville, South Carolina. Blue Ridge operates from one
location and, at December 31, 1998, had approximately $18.3 million in total
assets. Blue Ridge is engaged primarily in indirect automobile lending.
RESOURCE PROCESSING GROUP, INC. On June 1, 1998, Carolina First 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 December 31, 1998, was servicing
approximately $130 million in credit card receivables.
45
<PAGE>
CAROLINA FIRST BANK, F.S.B. Carolina First Bank, F.S.B. is a federal
savings bank and a wholly-owned subsidiary of Carolina First. It currently
engages in a thrift business through three locations, which are located in
Greenville and York counties in South Carolina. At December 31, 1998, Carolina
First Bank, F.S.B. had total assets of approximately $108.7 million, total loans
of approximately $60.4 million and total deposits of approximately $77.5
million. Its deposits are insured by the FDIC.
CAPITAL ADEQUACY
CAROLINA FIRST. 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 December 31, 1998, Carolina
First was in compliance with both the risk-based capital guidelines and the
minimum leverage capital ratio.
PRO FORMA REGULATORY CAPITAL. The following table sets forth Carolina
First regulatory capital position at December 31, 1998, on a historical basis as
well as a pro forma basis assuming consummation of the acquisition. See "PRO
FORMA COMBINED CONDENSED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
At December 31, 1998
-----------------------------------------------
Historical Pro Forma
--------------------- --------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Shareholders' Equity.................... $ 344,363 12.63% $ 357,987 12.12%
=========== ===== =========== =====
Regulatory Capital
Tier 1 risk-based:
Actual................................ $ 214,557 10.66% $ 232,786 10.57%
Required*............................. 80,505 4.00 88,096 4.00
----------- ----- ------ -----
Excess................................ $ 134,052 6.66% $ 144,690 6.57%
=========== ===== ========== =====
Total risk-based:
Actual................................ $ 259,258 12.88% $ 279,494 12.69%
Required*............................. 161,011 8.00 176,193 8.00
------- ----- ---------- -----
Excess................................ $ 98,247 4.88% $ 103,301 4.69%
=========== ===== ========== =====
Leverage:
Actual................................ $ 214,557 8.26% $ 232,786 8.24%
Required*............................. 103,962 4.00 113,056 4.00
----------- ----- ---------- -----
Excess................................ $ 110,595 4.26% $ 119,730 4.24%
========== ===== ========== =====
Total risk-based assets................. $ 2,012,633 $ 2,202,407
========== ==========
Total assets............................ $ 2,725,934 $ 2,953,292
========== ==========
- ---------------------------------------
</TABLE>
* For capital adequacy purposes.
46
<PAGE>
RECENT DEVELOPMENTS
MARCH 31, 1999 QUARTERLY EARNINGS AND FINANCIAL DATA. On April 20, 1999,
Carolina First announced its earnings and other financial data at and for the
quarter ended March 31, 1999. For this quarter, Carolina First's net income
totaled $6.3 million, or $0.29 per diluted share, compared with net income for
the quarter ended March 31, 1998 of $4.7 million, or $0.28 per diluted share.
During the quarter, Carolina First realized a $15.5 million gain related to
selling and transferring shares of Net.B@nk, Inc. stock in Net.B@nk, Inc.'s
secondary public offering and the disposition of a bank technology investment.
The gain from the sale of Net.B@nk, Inc. stock was largely offset by the funding
of a charitable foundation. At March 31, 1999, Carolina First's total assets,
loans, deposits and shareholders' equity were approximately $2.7 billion, $1.9
billion, $2.1 billion and $349 million, respectively. At March 31, 1999,
Carolina First's ratio of nonperforming assets to loans and other real estate
owned was 0.26%.
OTHER ACQUISITIONS. Carolina First 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's acquisition
strategy is flexible in that it does not require Carolina First 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'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's
acquisitions may be made by the exchange of stock, through cash purchases, or
with other consideration. Carolina First does not currently have any definitive
understandings or agreements for any acquisitions material to Carolina First.
However, Carolina First anticipates that it will continue to expand by
acquisition in the future.
47
<PAGE>
INFORMATION ABOUT CITRUS BANK
HISTORY AND BUSINESS
Citrus Bank, a Florida state chartered bank, was organized in 1987 as
First Sterling Bank of Osceola County for the purpose of conducting a general
banking business in Kissimmee, Florida and surrounding areas. Effective April
28, 1995, the Bank was recapitalized, the composition of its board of directors
and executive officers was changed to include substantially all of the current
directors and officers of Citrus, its name was changed to Citrus Bank and its
main office relocated to Orlando, Florida. Between 1995 and 1998 Citrus opened
five additional branches, as well as an eighth branch in January of 1999. At
December 31, 1998, Citrus had total assets of $227.4 million, total deposits of
$208.9 million and shareholders' equity of $17.6 million. Citrus is regulated by
the State of Florida Department of Banking and its deposits are insured up to
applicable limits under the Bank Insurance Fund of the FDIC.
Consequently, the FDIC also regulates Citrus.
Citrus' principal business consists of accepting deposits from the
general public through a variety of deposit programs and originating commercial,
consumer and mortgage loans.
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 Citrus, and should be read in conjunction
with the financial statements and related notes contained elsewhere herein.
EARNINGS PERFORMANCE
1998 COMPARED WITH 1997. Citrus experienced record earnings of
$2,001,613 or $1.10 per share, for the year ended December 31, 1998. This
compared to a loss of $299,940, or $.22 per share, for the year ended December
31, 1997. This was an increase of $2,301,553, or $1.32 per share. The return on
average equity improved from (2.74%) in 1997 to 12.01% in 1998, while return on
average assets improved from (.29%) in 1997 to 1.05% in 1998.
1997 COMPARED WITH 1996. Citrus incurred a net loss of $299,940 for
1997, which represented $.22 per share. This compared to net income of $541,290
or $.49 per share for the year ended December 31, 1996.
This was a 155% decrease of $841,230, or $.71 per share.
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 Citrus' earnings. The level of interest rates,
volume and mix of interest earning assets and interest-bearing liabilities and
the relative funding of these assets affect net interest income.
For the year ended December 31, 1998, net interest income increased $4.5
million or 81.3% to $10.0 million when compared to the year ended December 31,
1997. This increase was attributable to an increase in interest income,
partially offset by an increase in interest expense on deposits. Interest and
fees on loans increased $7.1 million or 98.7% from $7.1 million in 1997 to $14.2
million in 1998 due to an increase in the average balances of loans outstanding,
slightly offset by a decrease in the average yield on loans from 10.55% in 1997
to 10.47% for 1998. Interest on investments decreased $29,000 or 8.1% from
$358,000 in 1997 to $329,000 for 1998 due to a decrease in the average balances
of investments and a decline in the average yield earned on those investments.
Interest on Federal Funds sold increased $632,000 or 61.4% from $1,030,000 in
1997 to $1,662,000 for the year ended December 31, 1998, due to an increase in
average balances outstanding,
48
<PAGE>
offset somewhat by a modest decline in average yields earned on funds sold.
Interest expense increased $3.2 million or 105.1% from $3.0 million in 1997 to
$6.2 million for 1998 due to an increase in average balances of deposits
outstanding, coupled with a slight increase in the average rate paid for those
deposits. The net interest margin declined from 5.98% in 1997 to 5.81% in 1998.
Net interest income increased $2.5 million or 82.9% from $3.0 million in
1996 to $5.5 million in 1997. Interest and fees on loans increased $3.5 million
or 94.3% from $3.6 million in 1996 to $7.1 million in 1997 due to an increase in
the average balance of loans outstanding as well as an increase in their overall
effective yield from 10.32% in 1996 to 10.55% in 1997. Interest on investments
increased $166,000 or 86.5% from $192,000 in 1996 to $358,000 in 1997 due
primarily to an increase in average balances of investments. Interest on Federal
Funds sold increased $154,000 or 17.6% from $876,000 in 1996 to $1,030,000 in
1997 due to an increase in average balances outstanding. Interest expense
increased $1.3 million or 74.5% from $1.7 million in 1996 to $3.0 million in
1997 due to an increase in average balances of deposits outstanding. The net
interest margin increased from 5.47% in 1996 to 5.98% in 1997.
The following table provides an analysis of the effective yields and
rates on the categories of interest earning assets and interest-bearing
liabilities for the years ended December 31, 1998 and 1997.
COMPARATIVE AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1998
------------------------------ ----------------------------
Average Income/ Yield/ Average Income/ Yield/
Balances Expense Rate Balances Expense Rate
-------- ------- ------ ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets
Loans (including fees) $ 67,713 $ 7,143 10.55% $ 135,500 $ 14,193 10.47%
Securities 5,943 358 6.02 5,841 329 5.63
Federal funds sold 18,781 1,030 5.48 31,042 1,662 5.35
--------- -------- --------- --------
Total earnings assets 92,437 8,531 9.23 172,383 16,184 9.39
-------- --------
Non-earning assets
Cash and due from banks 6,089 10,134
Property and equipment 3,379 5,598
Other 1,156 1,802
---------- ---------
Total assets $ 103,061 $ 189,917
========= =========
LIABILITIES
Interest-bearing liabilities
Demand and savings deposits $ 36,797 1,159 3.15% $ 71,244 2,573 3.61%
Time deposits $100,000 and
greater 15,163 1,058 6.98 33,297 1,753 5.26
Time deposits under $100,000 19,640 789 4.02 32,903 1,839 5.59
--------- --------- --------- --------
Total interest bearing
liabilities 71,600 3,006 4.20 137,444 6,165 4.49
-------- --------
Noninterest-bearing liabilities
Noninterest-bearing deposits 20,275 35,326
Other liabilities 232 474
---------- ---------
Total liabilities 92,107 173,244
Stockholders' equity 10,954 16,673
--------- ----------
Total liabilities and
stockholders' equity $ 103,061 $ 189,917
========= =========
Net interest income and
net yield on earning assets (1) $ 5,525 5.98% $ 10,019 5.81%
========= ==========
Interest rate spread (2) 5.03% 4.90%
</TABLE>
- ------------------------------------------
(1) Net interest income divided by total average earning assets.
(2) Total interest earning assets yield minus total interest bearing liabilities
rate.
49
<PAGE>
The following table 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. The rate/volume variances for each category has been allocated on a
consistent basis between rate and volume variances based on the percentage of
rate or volume variances to the sum of the two absolute variances.
VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 Compared to 1996 1998 Compared to 1997
----------------------------------- -------------------------------
Amount Amount Amount Amount
Caused By Caused By Caused By Caused By
Total Change in Change in Total Change in Change in
Change Volume Rate Change Volume Rate
------ --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans (including fees) $ 3,467 $ 3,385 $ 82 $ 7,050 $ 7,100 $ (50)
Securities 166 165 1 (29) (6) (23)
Federal funds sold 154 130 24 632 656 (24)
------- ------- ----- ------- ------- ------
Total interest income 3,787 3,680 107 7,653 7,750 (97)
------- ------- ----- ------- ------- ------
Interest-bearing liabilities
Demand and savings deposits 359 398 (39) 1,414 1,223 191
Time deposits >$100,000 771 627 144 695 874 (179)
Time deposits <=$100,000 153 246 (93) 1,050 665 385
------- ------- ----- ------- ------- ------
Total interest expense 1,283 1,271 12 3,159 2,762 397
------- ------- ----- ------- ------- ------
Net interest income $ 2,504 $ 2,409 $ 95 $ 4,494 $ 4,988 $ (494)
======= ======= ===== ======= ======= ======
</TABLE>
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 reviews interest rate risk exposure
quarterly and the expected interest rate environment so that adjustments in
interest rate sensitivity can be timely made.
The following table indicates that, as of December 31, 1998, on a
cumulative basis through twelve months, rate sensitive assets exceeded rate
sensitive liabilities, resulting in an asset sensitive position of $6,210,000.
When interest sensitive assets exceed interest sensitive liabilities for a
specific repricing "horizon", a positive interest sensitivity gap results (as is
the case at December 31, 1998, with respect to the one year time horizon). The
gap is negative when interest sensitive liabilities exceed interest sensitive
assets. For a bank with a positive gap, rising interest rates would be expected
to have a positive effect on net interest income and declining rates would be
expected to have the opposite effect.
The table below reflects the balances of interest earning assets and
interest-bearing liabilities at the earlier of their repricing or maturity
dates. Scheduled payment amounts on 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
50
<PAGE>
period. However, Citrus 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.
INTEREST RATE SENSITIVITY AS OF DECEMBER 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Within 4-12 Over 1-5 Over 5
3 months months years years Total
-------- ------ ----- ----- -----
ASSETS
Earning assets
Loans (including fees) $128,464 $ 7,586 $ 30,915 $ 1,326 $168,291
Securities -- -- 12,728 -- 12,728
Federal funds sold 23,041 -- -- -- 23,041
-------- -------- -------- -------- --------
Total earning assets 151,505 7,586 43,643 1,326 204,060
Non-earning assets
Cash and due from banks -- -- -- 13,723 13,723
Property and equipment -- -- -- 7,677 7,677
Other -- -- -- 1,898 1,898
-------- -------- -------- -------- --------
Total assets $151,505 $ 7,586 $ 43,643 $ 24,624 $227,358
======== ======== ======== ======== ========
LIABILITIES
Interest-bearing liabilities
Demand and savings deposits $ 91,476 $ -- $ -- $ -- $ 91,476
Time deposits <=$100,000 4,124 21,385 6,765 281 32,555
Time deposits >$100,000 14,398 21,498 3,321 -- 39,217
-------- -------- -------- -------- --------
Total interest bearing liabilities 109,998 42,883 10,086 281 163,248
Noninterest-bearing deposits -- -- -- 45,700 45,700
Other liabilities -- -- -- 786 786
-------- -------- -------- -------- --------
Total liabilities 109,998 42,883 10,086 46,767 209,734
Stockholders' equity -- -- -- 17,624 17,624
-------- -------- -------- -------- --------
Total liabilities and stockholders'
equity $109,998 $ 42,883 $ 10,086 $ 64,391 $227,358
======== ======== ======== ======== ========
Interest sensitive gap $ 41,507 $(35,297) $ 33,557 $(39,767) $ --
Cumulative interest sensitivity gap $ 41,507 $ 6,210 $ 39,767 $ -- $ --
</TABLE>
PROVISION FOR LOAN LOSSES
For the year ended December 31, 1998, the provision for loan losses
totaled $1.6 million. This provision for loan losses reflects management's
assessment of the risk inherent in the loan portfolio considering the growth in
the amount and composition of the portfolio.
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. The provision for loan losses was $462,000 for the year
ended December 31, 1997. See "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.
NONINTEREST INCOME
Noninterest income increased $1.1 million or 136.7% from $785,000 in
1997 to $1,858,000 in 1998. Service charges on deposit accounts increased
$207,000, or 41.0% from $505,000 in 1997 to $712,000 in 1998. This increase was
due to an increase in the fees charged for various deposit services as well as
the significant increase in the number of deposit accounts and their balances.
During 1998, Citrus also recovered $440,000 on
51
<PAGE>
a $2.6 million operational loss incurred in 1997. This recovery is included in
noninterest income. During 1998, mortgage origination commissions increased
$250,000 to $273,000. The increase was due to Citrus starting the mortgage
origination department late during the 1997 calendar year. Other noninterest
income increased by $176,000, or 68.5% to $433,000. This increase was primarily
due to $143,000 of gains from the sale of the portion of certain loans
guaranteed by the U.S. Small Business Administration.
Noninterest income increased $347,000 or 79.2% from $438,000 in 1996 to
$785,000 in 1997 due primarily to an increase of $174,000 in service charges on
deposit accounts.
NONINTEREST EXPENSES
Noninterest expenses increased $790,000 or 12.5% from $6.3 million for
1997 to $7.1 million for 1998. Salaries and employee benefit expense increased
$2.2 million in 1998, or 95.4%, to $4.5 million due to an increase in the number
of personnel Citrus needed to staff its new offices and support its overall
growth. Occupancy and equipment expenses increased 65.3%, or $343,000, to
$868,000 for 1998. This increase was due to the growth in the number of Citrus'
branches and other facilities.
Noninterest expenses increased $4.2 million, or 200%, from $2.1 million
in 1996 to $6.3 million in 1997. The primary reason for the increase is a $2.6
million operational loss caused by a kiting scheme by one of Citrus' deposit
customers. Salaries and employee benefit expenses increased $1.1 million or
82.4%, to $2.3 million. As in 1998, the 1997 increase was due to a larger number
of employees needed to staff Citrus' branches and operations.
INCOME TAX EXPENSE (BENEFIT)
Income tax expense increased $1.3 million from a benefit of $196,000 in
1997 to an expense of $1.1 million in 1998, due to the substantial increase in
income before tax expense. The effective combined federal and state income tax
rate on income before income taxes was approximately 37% for 1998. During 1997,
Citrus recorded a tax benefit of $196,000 because of its pretax loss of
$496,000.
INVESTMENT PORTFOLIO
At December 31, 1998, securities comprised approximately 5.6% of Citrus'
assets. The following table summarizes the amortized cost and fair value of
securities held by Citrus at each of the dates indicated. Available-for-sale
securities are carried at estimated fair value and held-to-maturity investment
securities are carried at amortized cost.
52
<PAGE>
INVESTMENT PORTFOLIO
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
December 31,
--------------------------------------------------------------------------
1998 1997
--------------------------------- ----------------------------------
Net Net
Unrealized Unrealized
Amortized Holding Fair Amortized Holding Fair
Cost Gain (Loss) Value Cost Gain (Loss) Value
--------- ----------- ----- --------- ----------- -----
Available for sale:
U.S. Treasury $ -- $ -- $ -- $ -- $ -- $ --
obligations 9,988 9 9,997 -- -- --
U.S. Agency obligations -- -- -- -- -- --
Mortgage-backed obligations -- -- -- -- -- --
--------- ----------- ------- --------- ----------- -------
Municipal obligations $ 9,988 $ 9 $ 9,997 $ -- $ -- $ --
========= =========== ======= ========= =========== =======
Total available for sale
Held to Maturity:
U.S. Treasury obligations
U.S. Agency obligations $ -- $ -- $ -- $ 1,997 $ 1 $ 1,998
Mortgage-backed obligations 250 -- 250 -- -- --
Municipal obligations 2,480 18 2,498 4,030 (5) 4,025
-- -- -- -- -- --
--------- ----------- ------- --------- ----------- -------
Total held to maturity $ 2,730 $ 18 $ 2,748 $ 6,027 $ (4) $ 6,023
========= =========== ======= ========= =========== =======
</TABLE>
SECURITIES PORTFOLIO MATURITIES AND YIELDS
(Dollars in thousands)
December 31, 1998
-----------------------------------------
Amortized Fair
Cost Value Yield (%)
--------- ------ ---------
Available for sale:
U.S. Agency obligations
1 to 5 years $9,988 $9,997 5.56%
------ ------
Total
1 to 5 years $9,988 $9,997 5.56%
====== ======
Held to maturity:
U.S. Agency obligations
1 to 5 years $ 250 $ 250 5.75%
Mortgage-backed securities
1 to 5 years 2,480 2,498 6.04%
------ ------
Total
1 to 5 years $2,730 $2,748 6.01%
====== ======
53
<PAGE>
LOAN PORTFOLIO COMPOSITION
Management believes the loan portfolio is adequately diversified,
although a loan concentration does exist regarding loans collateralized by real
estate. Loans collateralized by real estate totaled approximately $109.2 million
at December 31, 1998, which amounted to 64% of total loans outstanding. These
loans have been made to borrowers operating in a variety of businesses. No
foreign loans existed as of December 31, 1998.
The amount of loans outstanding at December 31, 1998 and 1997 are shown
in the following table according to type of loan (dollars in thousands):
December 31,
-------------------
1998 1997
-------------------
Real estate $109,237 $ 50,800
Commercial 54,218 37,153
Consumer and Personal 7,593 6,187
-------- --------
Total $171,048 $ 94,140
======== ========
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
or other assets. Unsecured business loans are generally short-term with emphasis
on repayment strengths and low debt to worth ratios. During 1998, total
commercial loans increased $17.0 million, or 45.9% to $54.2 million. 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.
Loans collateralized by mortgages on real estate comprised approximately
63.9% and 54.0% of Citrus' loan portfolio at the end of 1998 and 1997,
respectively. Real estate loans include first and second mortgages on single
family homes, with some multifamily loans. Loan-to-value ratios for these
instruments are generally limited to 85%. Real estate loans also include loans
for financing the development and construction of 1-4 family dwellings and some,
nonresidential real estate. Usually, loan-to-value ratios are limited to 85% and
permanent financing commitments are required prior to the advancement of loan
proceeds.
Real estate loans also include nonresidential loans collateralized 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
operation or liquidation of the real estate serving as a secondary source of
repayment.
The repayment of loans in the loan portfolio as they mature is a source
of liquidity for Citrus. The following table sets forth the maturity of Citrus'
loan portfolio within specified intervals as of December 31, 1998 (dollars in
thousands):
54
<PAGE>
Due in 1 Due after Due
Year or Less 1 to 5 Years After 5 Years Total
------------ ------------ ------------- -----
(Type of Loan)
Real Estate $ 78,616 $ 29,648 $ 973 $109,237
Commercial 46,507 7,711 -- 54,218
Installment 3,245 4,329 19 7,593
-------- -------- -------- --------
Total $128,368 $ 41,688 $ 992 $171,048
======== ======== ======== ========
As of December 31, 1998, loans due after one year totaling $16.6 million
had predetermined interest rates and $26.4 million had floating or adjustable
interest rates.
NONPERFORMING LOANS; OTHER PROBLEM ASSETS
NON-ACCRUAL LOANS AND PAST DUE LOANS
(Dollars in thousands)
December 31,
---------------
1998 1997
---------------
Non-accrual loans $ 117 $ --
Loans contractually past due 90 days or more
on which interest is still being accrued 57 --
Other real estate owned -- --
---------------
Total nonperforming assets $ 174 $ --
====== ======
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. Non-accrual loans amounted to 0.07% of total loans at December 31,
1998. There were no nonaccrual loans at December 31, 1997.
When the collectibility 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.
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 $3,844,000 at December 31, 1998. There were no loans
identified as potential problem loans at December 31, 1997. These amounts do not
represent management's estimate of potential losses since a large proportion of
these loans are collateralized by various types of collateral.
55
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by direct charges to
operating expenses. Losses on loans are charged against the allowance in the
period in which management has determined that it is likely such loans have
become uncollectible. Recoveries of previously charged off loans are credited to
the allowance. The following table 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)
Year Ended December 31,
-----------------------
1998 1997
---- ----
Balance at beginning of period $ 1,157 $ 749
------- -------
Charge-offs:
Real estate -- --
Installment 1 --
Commercial -- 57
------- -------
1 57
------- -------
Recoveries:
Real estate -- --
Installment -- 1
Commercial 5 2
------- -------
5 3
------- -------
Net charge-offs (4) 54
Provision charged to expense 1,596 463
------- -------
Balance at end of period $ 2,757 $ 1,158
======= =======
Net charge-offs to average loans (0.003)% 0.080%
======= =======
In periodically reviewing the adequacy of the allowance for loan losses,
management takes into consideration historical loan losses experienced by
Citrus, 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 problem
loans. After charging off all known losses, management maintains the allowance
for loan losses at a level adequate to cover its estimate of possible future
loan losses inherent in the loan portfolio.
In calculating the amount required in the allowance for loan losses,
management applies a consistent methodology that is updated quarterly. 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. 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 Citrus 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, it recognizes that
various categories have different degrees of risk and this is factored into
overall assessment.
56
<PAGE>
DEPOSITS
The average amounts and percentage of total deposits held by Citrus for
the years ended December 31, 1998 and 1997 are summarized below:
AVERAGE DEPOSITS
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Year Ended December 31,
--------------------------------------------
1998 1997
---------------------- --------------------
Amount % Amount %
-------- ----- -------- -----
Noninterest-bearing demand $ 33,326 19.52% $ 20,275 22.07%
Interest-bearing demand and savings 71,244 41.71% 36,797 40.05%
Time deposits $100,000 and greater 33,297 19.50% 15,163 16.50%
Time deposits under $100,000 32,903 19.27% 19,640 21.38%
---------- ------ ---------- ------
Total $ 170,770 100.00% $ 91,875 100.00%
========== ====== ========== ======
</TABLE>
The majority of time certificates of deposits of $100,000 and over are
acquired from customers within Citrus' service area in the ordinary course of
business and are perceived by management as core deposits. However, their
retention can be expected to be heavily influenced by rates offered, and
therefore they have the characteristics of shorter-term purchased funds. The
maturities of time certificates of deposits in amounts of $100,000 or more at
December 31, 1998 are summarized below:
MATURITIES OF CERTIFICATES OF DEPOSITS
IN AMOUNTS OF $100,000 OR MORE:
(Dollars in thousands) December 31,
1998
-----------
3 months or less $ 14,398
3-6 months 5,272
6-12 months 12,501
Over 12 months 7,046
-----------
$ 39,217
===========
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),
equity assets ratio (average equity divided by average total assets) and the
dividend payout ratio (dividends declared per share divided by net income per
share) for each period indicated.
RETURN ON EQUITY AND ASSETS
For the Years Ended
December 31,
----------------------
1998 1997
------ -------
Return on average equity 12.01% (2.74)%
Return on average assets 1.05% (0.29)%
Average equity to average assets 8.78% 10.63%
Dividend payout ratio n/a n/a
57
<PAGE>
LIQUIDITY
Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of additional
liabilities. Adequate liquidity is necessary to meet the requirements of
customers for loans and deposit withdrawals in the most timely and economical
manner. Some liquidity is ensured by maintaining assets which may be immediately
converted into cash at minimal cost (amounts due from banks and Federal funds
sold). However, the most manageable sources of liquidity are composed of
liabilities, with the primary focus on liquidity management being on the ability
to obtain deposits within Citrus' service area. Core deposits (excluding time
deposits of $100,000 or more) provide a relatively stable funding base, and were
equal to $169.7 million, or 74.7%, of total assets at December 31, 1998 compared
with $101.4 million, or 69.5%, at the end of fiscal 1997. Asset liquidity is
provided from several sources, including amounts due from banks and federal
funds sold, and funds from maturing loans. As of December 31, 1998, Citrus also
had available, unused, short-term lines of credit to purchase up to $14 million
of federal funds from unrelated correspondent institutions. Management believes
that Citrus' overall liquidity sources are adequate to meet its operating needs.
CAPITAL RESOURCES
The equity capital of Citrus increased by $4.0 million in 1998, the
result of retaining the Bank's earnings of $2.0 million and the proceeds from
sales of common stock totaling $2.0 million. During 1997, Citrus sold common
stock for $6.0 million and incurred a net loss of $.3 million. As a result,
equity increased $5.7 million. No dividends have been paid by Citrus during its
history.
Citrus 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 Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), 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. See " --Supervision and Regulation."
Citrus' December 31, 1998 capital ratios are presented in the following
table, compared with the "well capitalized" and minimum ratios under the FDIC
regulatory definitions and guidelines:
Total Capital Tier 1 Leverage
------------- ------ --------
Minimum requirement 8.00 % 4.00 % 4.00%
Well capitalized 10.00 % 6.00 % 5.00%
requirement 10.84 % 9.59 % 7.73%
Actual
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
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-
58
<PAGE>
average growth in assets, loans and deposits. Also general increases in the
prices of goods and services will result in increased operating expenses.
CORRESPONDENT BANKING
Correspondent banking involves the providing of services by one bank to
another bank which does not provide that service for itself from an economic or
practical standpoint. Citrus uses correspondent services offered by larger
banks, including check collections, purchase of Federal funds, security
safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations and sales of loans to or participations with
correspondent banks and other secondary lenders.
DATA PROCESSING
Citrus obtains data processing services from a third party service
provider. The services provided include an automated general ledger, customer
information files deposit control and accounting and commercial and installment
lending data processing.
EMPLOYEES
At December 31, 1998, Citrus employed 108 persons on a full-time basis,
and 6 persons on a part-time basis.
MONETARY POLICIES
The results of operations of Citrus 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 Citrus.
SUPERVISION AND REGULATION
Citrus operates in a highly regulated environment, and its business
activities are governed by statute, regulation and administrative policies. The
business activities of Citrus are supervised by a number of regulatory agencies,
including the State of Florida Department of Banking and Finance, and the FDIC.
Citrus was organized as a state chartered bank under the laws of the
State of Florida. Its deposits are insured to $100,000 per account by the FDIC,
subject to aggregation rules. Citrus is subject to supervision and periodic
examination by the State of Florida Department of Banking and Finance and the
FDIC, which oversee substantially all aspects of Citrus' operations, including
security devices and procedures, loan and securities policies, adequacy of
capitalization and loss reserves, loan portfolio evaluation, payment of
dividends, location of branch offices and facilities, reserves against deposits,
maintenance of required books and records, and adequacy of staff training to
carry on safe lending and deposit gathering practices.
The Change in Bank Control Act provides that the FDIC must be notified
in writing in advance if any person or persons acting in concert propose to
acquire 25% or more of Citrus' voting stock. In addition, if any person or
persons acting in concert propose to acquire 10% or more of Citrus' voting
stock, such person or persons will be presumed to have acquired control of
Citrus (subject to rebuttal) if (i) Citrus has issued any class
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<PAGE>
of securities subject to the registration requirements of Section 12 of the
Securities Exchange Act of 1934, or (ii) immediately after the transaction, no
other person will own a greater proportion of the class of voting securities.
Approval of the FDIC and the State of Florida Department of Banking is required
before any change in control of Citrus may be effectuated.
In addition to a variety of generally applicable state and federal laws
governing businesses and employers, such as the Equal Employment Opportunity Act
prohibiting employment discrimination, and the Occupational Safety and Health
Act governing employee working conditions, Citrus is subject to a variety of
special federal statutes and regulations applicable only to financial
institutions. These include (i) the Truth in Lending Act and Federal Reserve
Regulation Z, which require disclosure of the terms of consumer finance
transactions and regulate certain credit card practices, (ii) the Equal Credit
Opportunity Act and Federal Reserve Regulation B, which prohibit discrimination
in the evaluation and extension of credit, (iii) the Home Mortgage Disclosure
Act and Federal Reserve Regulation C, which are intended to provide information
to enable the public and public officials to determine if a financial
institution is fulfilling its obligation to help meet the housing needs of the
community it serves, (iv) the Electronic Funds Transfer Act and Federal Reserve
Regulation E, which provide for consumer rights and safeguards in electronic
funds transfer systems, (v) the Community Reinvestment Act and regulations
applicable thereto, which require financial institutions to meet their
obligation to provide for the total credit needs of the communities they serve,
including their assets in loans to low and moderate income borrowers, (vi) the
Fair Debt Collection Practices Act, which governs practices which may be used by
associations and other credit grantors to eliminate abusive debt collection
practices, (vii) the Fair Credit Reporting Act, which governs the collection and
use of credit information by credit reporting agencies to insure the
confidentiality, accuracy, relevancy, and proper utilization of consumer credit
information, (viii) the Right to Financial Privacy Act, which imposes a duty to
maintain the confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial records,
(ix) the Bank Secrecy Act, which requires banks to file a report with the
Internal Revenue Service of each deposit, withdrawal, exchange of currency or
other payment or transfer, by, through, or to Citrus which involves a
transaction in currency of more than $10,000, and (x) the Financial Institutions
Regulatory and Interest Rate Control Act of 1978 and Federal Reserve Regulation
O, which place restrictions on extensions of credit to executive officers,
directors and principal shareholders of Citrus.
State banks are subject to restrictions under federal law in dealing
with affiliates. For instance, extensions of credit to an affiliate, investment
in the securities of an affiliate and the purchase of assets from an affiliate
are limited to no more than 10% of Citrus' capital stock and surplus to any
single affiliate and 20% to all affiliates.
In Florida, a bank may establish branch offices throughout the state by
means of merger with an existing bank or by opening branches de novo. In this
proposed acquisition, Carolina First, a bank holding company, is acquiring
Citrus pursuant to a merger in which Citizens, a national bank, will be merged
with and into Citrus, a Florida state bank, with Citrus as the surviving
corporation.
In August, 1989, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA") was enacted. FIRREA gives banking agencies
more potent enforcement mechanisms. The authority of a banking agency to issue a
cease-and-desist order now specifically includes the power to order affirmative
action to correct any harm resulting from a violation or practice. The
non-exhaustive list of actions that may be ordered includes restitution,
reimbursement, indemnification or guaranty against loss if violation or practice
showed a reckless disregard for the law, applicable regulations or a prior
banking agency order. Other specific actions which may be ordered include
restricting the growth of the institutions, disposing of any loan or assets,
rescinding contracts, hiring qualified officers or employees, or "other action
as the banking agency determines to be appropriate." Moreover, the power to
issue a cease-and-desist order includes "the authority to place limitations on
the activities or functions of an insured depository institution or any
institution-affiliated party."
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<PAGE>
FIRREA also expanded the enforcement powers of bank regulatory agencies,
including the expansion of the FDIC's power to act as a conservator and receiver
for troubled financial institutions. The FDIC may appoint itself conservator or
receiver for an insured depository institution for any of the following reasons:
the institution is insolvent in that the assets of the institution are less than
its obligations to creditors and others; a substantial dissipation of the assets
or earnings has occurred due to any violation of law or regulation of any unsafe
or unsound practice; the institution is in an unsafe or unsound position to
transact business including substantially insufficient capital or otherwise; the
institution has willfully violated a cease-and-desist order that has become
final; the institution conceals or withholds its books or records from banking
regulators; it is unlikely that the institution will be able to meet depositors'
demands or pay its obligations in the normal course of business; the institution
has or is likely to incur losses that will deplete all or substantially all of
its capital and there is no reasonable prospect for the capital to be
replenished without federal assistance; or there exists one or more violations
of laws, rules or regulations or an unsafe or unsound practice or condition that
is likely to cause insolvency or substantially dissipate the assets or earnings
or is likely to weaken the bank's condition or seriously prejudice the
depositors' interests. The FDIC as conservator or receiver may take over the
assets of and operate the institution with all of the powers of its management,
may conduct all business of the institution, and perform all of the functions of
the institution in its own name. The FDIC may take action to put the institution
in a sound and solvent condition and dispose of it as a going concern, or it may
liquidate it and proceed to realize upon its assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (as
amended, "FDICIA"), which was enacted on December 19, 1991, provided for a
number of reforms relating to the safety and soundness of the deposit insurance
system, supervision of domestic and foreign depository institutions and
improvement of accounting standards. One aspect of FDICIA involves the
development of a regulatory monitoring system requiring "prompt corrective
action" on the part of banking regulators with regard to certain classes of
undercapitalized institutions. While FDICIA did not change any of the minimum
capital requirements, it directed each of the federal banking agencies to issue
regulations putting the monitoring plan into effect. FDICIA created five
"capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in FDICIA and which are used to determine
the severity of corrective action the appropriate regulator may take in the
event an institution reaches a given level of undercapitalization. For example,
an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulator will
monitor the institution's compliance. Before a capital restoration plan will be
approved, an entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of 5% of the institution's total assets or the amount
which is necessary to bring the institution into compliance with all capital
standards. In addition, "undercapitalized" institutions will be restricted from
paying management fees, dividends and other capital distributions, will be
subject to certain asset growth restrictions and will be required to obtain
prior approval from the appropriate regulator to open new branches or expand
into new lines of business. As an institution drops to lower capital levels, the
extent of action to be taken by the appropriate regulator increases, restricting
the types of transactions in which the institution may engage and ultimately
providing for the appointment of a receiver for certain institutions deemed to
be critically undercapitalized.
FDICIA also provides that banks have to meet new safety and soundness
standards adopted by the regulators. Regulators are charged with promulgating
regulations defining operational and managerial standards relating to internal
controls, loan documentation, credit underwriting, interest rate exposure, asset
growth, director and officer compensation, asset quality, earnings and stock
valuation.
Both the capital standards and the safety and soundness standards, which
FDICIA implemented, are designed to bolster and protect the deposit insurance
fund. The BIF funding provisions under FDICIA could
61
<PAGE>
result in a significant increase in the assessment rate on deposits over the
next 15 years. No assurance can be given at this time as to what the level of
premiums will be over this 15 year period.
In response to the directive issued by FDICIA, the regulators issued
regulations, which, among other things, prescribe the capital thresholds for
each of the five capital categories established by FDICIA. The following table
reflects the capital thresholds:
<TABLE>
<CAPTION>
<S> <C> <C>
Total Risk-based Tier 1 Risk-based Tier 1 Leverage
Capital Ratio Capital Ratio Ratio
---------------- ----------------- ---------------
Well capitalized (1) >= 10% >= 6% >= 5%
Adequately capitalized (1) >= 8% >= 4% >= 4% (2)
Undercapitalized (3) < 8% < 4% < 4% (3)
Significantly undercapitalized(4) < 6% < 3% < 3% (5)
Critically undercapitalized -- -- <= 2%
</TABLE>
- --------------
(1) An institution must meet all three minimums.
(2) 3% for composite CAMELS 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) <3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(4) An institution falls into this category if it is below the specified capital
level for any of the three capital measures.
(5) Ratio of tangible equity to total assets.
With respect to the compliance with federal, state and local provisions
relating to the protection of the environment, Citrus does not believe that such
compliance has any substantial or material effect upon the capital expenditures,
earnings or competitive position of Citrus.
The scope of regulation and permissible activities of Citrus is subject to
change by future federal and state legislation.
DESCRIPTION OF PROPERTY
Citrus' main branch is located in a 2,900 square foot leased office space
in a 10-story office building in Downtown Orlando, Florida on Orange Avenue. The
branch contains three offices, three teller stations, a vault, break and storage
rooms. It has no drive-through windows, but has one walk-up window.
Citrus owns a branch office located on approximately three-quarters of an
acre of land on Delaney Street in south Orlando, Florida. The branch office is a
single story building containing approximately 3,800 square feet. The branch
consists of five teller stations, three offices, three drive-up lanes and a
vault.
Citrus owns a branch office located on approximately one-half of an acre
of land on Orange Avenue in Winter Park, Florida. The branch office is a single
story building containing approximately 1,000 square feet. The branch consists
of two teller stations, two offices, and three drive-up lanes.
Citrus owns a branch office located on approximately one and one-third
acre of land on State Road 434 in Longwood, Florida. The branch office is a
single story building containing approximately 1,800 square feet. The branch
consists of 3 teller stations, two offices, two drive-up lanes and a vault.
Citrus owns a branch office located on approximately one acre of land on
Buenaventura Boulevard in Kissimmee, Florida. The branch office is a single
story building containing approximately 5,400 square feet. The branch consists
of four teller stations, three offices, a conference room, two drive-up lanes
and a vault.
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<PAGE>
Citrus owns a branch office located on approximately one acre of land on
U.S. Highway 19 in Crystal River Florida. The branch office is a single story
building containing approximately 3,800 square feet. The branch consists of four
teller stations, three offices, a conference room, four drive-up lanes and a
vault.
Citrus leases a branch office located in approximately 1,800 square feet
of a shopping center on U.S. Highway 192 in Kissimmee, Florida. The branch
office consists of three teller stations, two offices, and one drive-up lane.
Citrus owns a branch office located on approximately one acre of land on
Kirkman Road in Orlando, Florida. The branch office is a single story building
containing approximately 3,700 square feet. The branch consists of five teller
stations, two offices, a conference room, four drive-up lanes and a vault.
Citrus owns a 9,000 square foot building which houses its executive and
administrative offices, its loan and deposit operations functions, bookkeeping
department and board room. The office is located adjacent to the Delaney Avenue
branch.
Citrus owns no other real estate.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Citrus is a party
of which any of its properties is subject, nor are there material pending legal
proceedings known to Citrus in which any director, officer or affiliate or
Citrus or any holder of 5% or more of Citrus' outstanding stock, or any
associate of any for the foregoing, is party or has an interest adverse to
Citrus.
MARKET FOR COMMON STOCK AND DIVIDENDS
There is very limited trading in the Citrus common stock. There is no
established trading market for the shares of Citrus common stock. Accordingly,
such stock is not a NASDAQ quoted stock, nor is it quoted by the National
Quotation Bureau, Inc., nor are there any market makers. During the past year,
management is aware of no trading except for Citrus' sale of common shares at
$15.00 per share in September of 1998.
As of December 31, 1998, there were approximately 350 holders of record of
Citrus' common stock.
Citrus has paid no cash dividends since its inception. Federal and state
banking regulations restrict the amount of dividends that Citrus can pay to
shareholders. Generally, the approval of the State of Florida Department of
Banking and Finance is required prior to paying dividends in excess of Citrus'
earnings retained in the current year plus retained net profits for the
preceding two years.
MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF CITRUS
The following table sets forth (i) as of the Record Date, the number and percent
of total outstanding shares of Citrus common stock beneficially owned by all
directors and executive officers of Citrus individually and by all directors and
executive officers of Citrus as a group, and (ii) pro forma upon consummation of
the acquisition, the number and percent of total outstanding shares of Carolina
First Corporation common stock beneficially owned by such persons individually
and as a group (assuming that Carolina First common stock's fair market value is
$21.50 and a conversion ratio of 1.71).
63
<PAGE>
MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF CITRUS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Pro Forma After Acquisition
----------------------------------------
Number of Citrus Number of Carolina
Name and address of Shares Percent First Corporation Shares Percent
5% Beneficial Owner Beneficially Owned of Class Beneficially Owned of Class
------------------- ------------------ -------- ------------------------ --------
Directors/Executive Officers
----------------------------
Randy O. Burden 168,469 (1) 8.92% 251,524 1.0%
1611 S. Summerlin Avenue
Orlando, FL 32806
Frank W. Crider 54,634 (2) 2.93% 81,569 *
Thomas B. Drage, Jr. 12,427 (3) 0.67% 18,554 *
Edward J. Gerrits, II 15,000 (4) 0.80% 22,395 *
Allen Keith Holcomb, Jr. 53,017 (5) 2.84% 79,154 *
Douglas P. Hooker 179,461 (6) 9.61% 267,935 1.1%
9245 Sloane Street
Orlando, FL 32827
Charles B. Lowe, Jr. 93,586 (7) 4.95% 139,724 *
Patrick C. Mathes, III 85,686 (8) 4.59% 127,929 *
Michael L. McClanahan 34,878 (9) 1.86% 52,073 *
M. Rodney Metz 40,200 2.16% 60,019 *
Cecil D. Moore 116,737 (10) 6.25% 174,288 *
667 Lake Harbor Circle
Orlando, FL 32802
J. Mark Whitehead 45,698 (11) 2.45% 68,227 *
All Executive Officers and
Directors as a Group (17 1,013,141 54.08% 1,512,620 6.0%
persons)
Other 5% Shareholders
Quintus Irving Roberts 105,000 5.64% 156,765 *
Route 1, Box 2900
Palatka, FL 32177
</TABLE>
- ------------------
* Less than one percent (1%)
(1) Includes 123,014 shares owned jointly with his spouse, 2,439 shares held by
his IRA, 516 shares held by his spouse's IRA, 15,000 shares held by his son
as Trustee, and 27,500 shares represented by stock options.
(2) Includes 52,334 shares held jointly with his spouse and 2,300 shares held
for his grandchildren as to which shares he holds voting control.
(3) Includes 11,733 shares held jointly with his spouse and 694 shares
represented by stock options.
(4) Includes 5,000 shares held jointly with his spouse and 10,000 shares
represented by stock options.
(5) Includes 13,714 shares held as Trustee, 845 shares held jointly with his
spouse, 29,070 shares held by his spouse as Trustee, and 1,388 shares
represented by stock options.
(6) Includes 170,559 shares held jointly with his spouse and 5,552 shares
represented by stock options.
(7) Includes 1,424 shares held by his IRA, 3,662 shares held as custodian for
his children and 27,500 shares represented by stock options.
(8) Includes 28,865 shares held by his IRA, 2,130 shares held by his spouse's
IRA and 2,732 shares represented by stock options.
(9) Includes 2,011 shares held by his IRA and 15,000 shares represented by
stock options.
(10) Includes 2,074 shares held by his IRA, 100,000 shares held jointly with his
spouse and son, 8,000 shares held jointly with his spouse, 731 shares held
by his spouse's IRA and 5,552 shares represented by stock options.
(11) Includes 2,082 shares represented by stock options.
64
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time, all of the outstanding shares of Citrus common stock
will be converted into Carolina First common stock. Accordingly, shareholders of
Citrus will become shareholders of Carolina First, and their rights as Carolina
First shareholders will be determined by South Carolina law and Carolina First's
Articles of Incorporation and Bylaws. The rights of Carolina First shareholders
differ from the rights of Citrus' shareholders with respect to certain important
matters, including the required shareholder votes as to mergers, consolidations,
exchanges, sales of assets or dissolution, removal of directors and amendments
to the articles of incorporation, classification of the board of directors,
cumulative voting rights, nomination of directors, and statutory and other
restrictions on certain business combinations and control share acquisitions.
A comparison of the respective rights of Citrus shareholders and Carolina
First shareholders with respect to these matters is set forth immediately below.
A description of the Carolina First common stock is set forth below under
"CAROLINA FIRST CAPITAL STOCK."
COMPARISON OF CAROLINA FIRST COMMON STOCK AND CITRUS COMMON STOCK
The rights of Carolina First shareholders are governed by Carolina First's
Articles of Incorporation and Bylaws and the applicable provisions of the South
Carolina Business Corporation Act of 1988, as amended (the "SCBCA"). By
contrast, the rights of Citrus shareholders are governed by Citrus' Articles of
Incorporation and Bylaws and by applicable provisions of the Florida Financial
Institutions Codes ("FFIC") and the Florida Business Corporation Act
(collectively, the "Florida Acts"). If the holders of Citrus common stock
approve the acquisition and it is subsequently consummated, holders of Citrus
common stock will become holders of Carolina First common stock. Although it is
impracticable to note all the differences between the SCBCA and the Florida Acts
generally, and all of the differences between the applicable governing documents
of Carolina First and Citrus, the following is intended to be a summary of
certain significant differences between the rights of holders of Carolina First
common stock and Citrus common stock. This comparison of the rights of holders
of Citrus common stock and Carolina First common stock is based on the current
terms of the governing documents of the respective companies and on the current
provisions of state and federal law and is qualified in its entirety thereby.
CAPITALIZATION. The authorized capital stock of Citrus consists of
5,000,000 shares of Citrus common stock, par value $4.00 per share. As of the
Record Date, Citrus had 1,862,177 shares of common stock outstanding. The
authorized capital stock of Carolina First consists of 100,000,000 shares of
Carolina First common stock, par value $1.00 per share, and 10,000,000 shares of
"blank check" preferred stock. As of April 29, 1999, Carolina First had
21,988,974 shares of common stock outstanding and no shares of preferred stock
outstanding.
VOTING IN GENERAL. In general, holders of both Citrus common stock and
Carolina First common stock are entitled to one vote per share and to the same
and identical voting rights as other holders of such common stock. Holders of
Carolina First common stock and Citrus common stock are not entitled to cumulate
votes under any circumstances.
DISSENTERS' RIGHTS. Citrus' shareholders have the right, in cases of merger
or consolidation, to be paid the fair value of their shares under applicable
dissenters' rights provisions of the FFIC. Because Carolina First common stock
is traded on the Nasdaq National Market, its shareholders do not have similar
rights.
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<PAGE>
MERGERS, CONSOLIDATIONS, EXCHANGES, SALES OF ASSETS OR DISSOLUTION. A vote
of at least a majority of the outstanding shares of Citrus common stock is
required to approve any merger, consolidation, exchange, sale of substantially
all of the assets of, or dissolution of Citrus. Carolina First's Articles of
Incorporation require the affirmative vote of holders of at least 80% of the
outstanding stock of Carolina First entitled to vote for approval before
Carolina First may (a) merge or consolidate with any other corporation, (b) sell
or exchange all or a substantial part of its assets to or with any other
corporation, or (c) issue or deliver any stock or other securities in exchange
or payment for any properties or assets of any other corporation, or securities
issued by any other corporation, or in a merger of any subsidiary of Carolina
First with or into any other corporation (the foregoing being hereinafter
referred to as a "business combination"). This 80% supermajority is reduced to
66.67% if such business combination was approved and recommended without
condition by the affirmative vote of at least 80% of the directors.
DIRECTORS. The Articles of Incorporation and Bylaws of Citrus provide for a
Board of Directors having not less than five members. A majority of the full
Citrus Board of Directors may increase the number of directors by not more than
two, and may appoint persons to fill the resulting vacancies, at any time during
the year following an annual meeting in which such action has been approved by
the Citrus shareholders. Generally, vacancies on the Board of Directors may be
filled by the majority of the remaining directors. Carolina First's Articles of
Incorporation provide that the number of directors shall be set by the Board of
Directors or the shareholders. However, the Board of Directors cannot change the
size of the Board by more than 30% without shareholder approval. Vacancies may
be filled by existing directors. The Carolina First Board of Directors currently
has twelve members. In accordance with Carolina First's Articles of
Incorporation, whenever the Board consists of nine or more persons, the Board
shall be divided into three classes of directors (with each class having as
close to an equal number as possible). The members of each class are elected for
staggered three-year terms.
NOMINATION OF DIRECTORS. The Articles of Incorporation and Bylaws of Citrus
do not specify any particular mechanism for the nomination of directors.
Carolina First's Articles of Incorporation provide that, in addition to the
Board of Directors, 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 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.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The SCBCA and the Florida Acts,
and the governing documents of both Carolina First and Citrus, generally provide
that the parties have the power to indemnify any director, officer or employee,
his or her heirs, executors or administrators, and agents for expenses,
judgments, decrees and any liability incurred in actions to which the director,
officer or employee is a party, or potential party, by reason of the performance
of his official duties, assuming he conducted himself in good faith and
reasonably believed his conduct in his official capacity to be in the parties'
best interest. Such indemnification provisions do not apply in instances where
such person acted in bad faith or engaged in conduct against the interest of
Citrus or Carolina First.
CONVERSION; REDEMPTION; SINKING FUND. Neither Carolina First common stock
nor Citrus common stock is convertible, redeemable or entitled to any sinking
fund.
LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or
winding-up of the affairs of Citrus, holders of outstanding shares of Citrus
common stock are entitled to share, in proportion to their respective interests,
in Citrus' assets and funds remaining after payment, or provision for payment,
of all debts and other liabilities of Citrus. In the event of the liquidation,
dissolution or winding-up of the affairs of Carolina First, holders of Carolina
First common stock are entitled to share, pro rata, in Carolina First's assets
and funds
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remaining after payment, or provision for payment, of all debts and other
liabilities of Carolina First, and after payment of all amounts due to holders
of Preferred Stock upon liquidation.
DIVIDENDS. Holders of Citrus common stock and Carolina First common stock
are entitled to receive such dividends as the respective Board of Directors may
declare out of funds legally available therefor.
AMENDMENT. Citrus' Articles of Incorporation may be amended by the
affirmative vote of the holders of a majority of the outstanding shares of
Citrus common stock. Carolina First's Articles of Incorporation generally may be
amended only upon the approval of holders of two-thirds of the outstanding
shares entitled to vote, and with respect to the items listed below, such
two-thirds requirement is increased to 80%:
(1) supermajority voting requirements to approve certain mergers, sales or
exchanges of assets or stock exchanges (See "--Shareholder Voting in
Certain Business Combinations");
(2) provisions regarding the Board of Directors' powers to evaluate
proposals for business combinations;
(3) provision of notice requirements for shareholder nominations of
directors;
(4) supermajority voting requirements for removal of directors without
cause;
(5) provision of staggered terms for three classes of directors; and
(6) supermajority voting provisions for dissolution of Carolina First.
If 80% of the directors approve amendments pertaining to the Articles of
Incorporation listed above, then only the affirmative vote of shareholders
holding two-thirds of the outstanding shares entitled to vote is needed to
approve the amendments.
ANTI-TAKEOVER MEASURES. Citrus has not implemented any material
anti-takeover measures. By contrast, Carolina First has implemented a number of
provisions which have the effect of impeding a takeover of Carolina First that
is not favored by Carolina First management. Furthermore, South Carolina law has
business combination and control share acquisition statutes which may serve to
impede takeovers not favored by management.
The South Carolina control share statute provides that upon the acquisition
by a person of certain threshold percentages of stock (20%, 33% and 50%), a
shareholders' meeting must be held in order to determine whether or not to
confer voting rights upon such acquiring person's shares. An affirmative vote of
holders of a majority of all of the company's outstanding stock (excluding
shares held by the acquiring person, company officers and company employees who
are also directors of the company) is required to confer voting rights upon such
acquiring person's shares.
The South Carolina business combinations statute provides that a 10% or
greater shareholder of a resident domestic corporation cannot engage in a
"business combination" (as defined in the statute) with such corporation for a
period of two years following the date on which the 10% shareholder became such,
unless the business combination or the acquisition of shares is approved by a
majority of the disinterested members of such corporation's board of directors
before the 10% shareholder's share acquisition date. This statute further
provides that at no time (even after the two-year period subsequent to such
share acquisition date) may the 10% shareholder engage in a business combination
with the relevant corporation unless certain approvals of the board of directors
or disinterested shareholders are obtained or unless the consideration given in
the combination meets certain minimum standards set forth in the statute.
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The Florida Acts include a control share statute and a business
combinations statute similar to that under South Carolina law.
OTHER CONSIDERATIONS. Shares of common stock of Citrus, being stock of a
Florida state bank, may be treated differently from shares of Carolina First for
state and local tax purposes. Citrus shareholders should consult their tax
advisors with respect to relevant differences in Citrus common stock and
Carolina First common stock.
Carolina First may purchase, hold and dispose of its own shares subject
only to restrictions on distributions by a corporation which prohibit any
distribution which would render a company insolvent.
CAROLINA FIRST CAPITAL STOCK
COMMON STOCK
Carolina First has 100,000,000 shares of common stock authorized, of which
21,988,974 shares were outstanding as of April 29, 1999. The holders of the
Carolina First 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 is dividends from its
subsidiaries. Carolina First's subsidiaries are subject to certain legal
restrictions on the amount of dividends they are permitted to pay. See
"INFORMATION ABOUT CAROLINA FIRST." All outstanding shares of Carolina First
common stock are fully paid and nonassessable. No holder of Carolina First
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 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 common stock are
entitled to one vote per share.
PREFERRED STOCK
Carolina First has 10,000,000 shares of "blank check" preferred stock
authorized ("Preferred Stock"), none of which is outstanding. Carolina First'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'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, the dividend rate and whether dividends shall be
cumulative or participating or possess other special rights, the voting rights,
Carolina First'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 to impede the ability of third parties who
attempt to acquire control of Carolina First without the cooperation of Carolina
First's Board of Directors.
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CERTAIN MATTERS
SHAREHOLDERS' RIGHTS AGREEMENT. In 1993, the Carolina First 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 common
stock outstanding on November 23, 1993 and each share to be issued by Carolina
First thereafter. Each Right entitles the registered holder to purchase from
Carolina First one-half share of Carolina First 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 common stock and a "Distribution Date" will occur upon the
earlier of (i) the close of business on the 10th calendar day after the Share
Acquisition Date (as defined below), or (ii) the close of business on the 10th
business day after the date of (x) the commencement, by any person, other than
an "exempt person", of, or (y) the first public announcement of the intention of
any person (other than an exempt person) to commence, a tender or exchange offer
if, upon consummation thereof, such person would be an Acquiring Person (defined
as a person or group which has acquired beneficial ownership of 20% or more of
the outstanding shares of the Carolina First 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 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
common stock will also constitute the transfer of the Rights associated with the
Carolina First 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 as described
below. As soon as practicable after the Distribution Date, rights certificates
will be mailed to holders of record of Carolina First 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 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 common stock, (ii) Carolina First 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 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 common stock (or in certain circumstances, cash, property, or
other securities of Carolina First) 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
is acquired in a merger or other business combination transaction, or (ii) 50%
or more of Carolina First'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 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 common stock per Right, subject to
adjustment as provided in the Rights Agreement.
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The exercise price payable, and the number of shares of Carolina First
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 common stock, (ii) if holders of the
Carolina First common stock are granted certain rights or warrants to subscribe
for Carolina First common stock or securities convertible into Carolina First
common stock at less than the current market price of the Carolina First common
stock, or (iii) upon the distribution to holders of the Carolina First common
stock of evidence of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
The Rights may be redeemed in whole, but not in part, at a price of $.001
per Right (payable in cash, Carolina First 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 two-thirds
of such Disinterested Directors. After the redemption period has expired,
Carolina First'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 common stock in a
transaction or series of transactions not involving Carolina First 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 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 two-thirds 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's public
filings with the Securities and Exchange Commission.
MANAGEMENT CONTRACTS. Carolina First 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 provisions regarding compensation, confidentiality,
termination and noncompetition.
BOARD OF DIRECTORS.
CLASSIFICATION OF BOARD OF DIRECTORS. Carolina First's Board of Directors
currently consists of twelve persons. In accordance with its Articles of
Incorporation, whenever the Board consists of nine or more persons, the Board
shall be divided into three classes of directors (with each class having as
close to an equal number of directors as possible). The members of each class
are elected for staggered three-year terms. The staggering of Board terms has
the effect of making it more difficult to replace current Directors than would
otherwise be the case. Accordingly, unless the shareholders vote to remove one
or more Directors as described below, it would take three annual meetings for
shareholders to change the members of the entire Board of Directors. Carolina
First'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 at
least 30 days but not more than 60 days prior to the annual meeting of
shareholders at which
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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's Articles of Incorporation require
the affirmative vote of the holders of not less than 80% of the then outstanding
voting securities of Carolina First to remove any Director or the entire Board
of Directors without cause. Directors may be removed for cause as provided under
South Carolina law.
LIMITATION OF DIRECTOR LIABILITY. The members of the Board of Directors of
Carolina First are exempt under Carolina First's Articles of Incorporation from
personal monetary liability to the extent permitted by Section 33-2-102(e) of
the SCBCA. This statutory provision provides that a director of the corporation
shall not be personally liable to the corporation or any of its shareholders for
monetary damages for breach of fiduciary duty as a director, provided that this
provision shall not be deemed to eliminate or limit the liability of a director
(i) for any breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involved
gross negligence, intentional misconduct, or a knowing violation of law, (iii)
imposed under Section 33-8-330 of the SCBCA (improper distribution to
shareholder), or (iv) for any transaction from which the director derived an
improper personal benefit.
EVALUATION OF PROPOSED BUSINESS COMBINATIONS. Carolina First's Articles of
Incorporation provide that the Board of Directors, when evaluating any proposed
business combination with Carolina First, 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, and on its subsidiaries, the communities
and geographical areas in which Carolina First and its subsidiaries operate or
are located, and on any of the businesses and properties of Carolina First 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's outstanding shares, but also in
relation to the then current value of Carolina First in a freely-negotiated
transaction and in relation to the Board of Directors' estimate of the future
value of Carolina First (including the unrealized value of its properties and
assets) as an independent going concern.
VOTING.
VOTING FOR DIRECTORS. Carolina First's Articles of Incorporation provide
that shareholders may not cumulate votes for the election of directors.
Accordingly, holders of more than 50% of the shares voting at the election of
directors can elect all of the directors if they choose to do so and, in such
event, the holders of the remaining shares (less than 50%) voting are not able
to elect any board members. In cases where there are more nominees for Directors
than positions available, the nominees receiving the largest number of votes are
elected.
SUPERMAJORITY VOTING REQUIREMENTS. Carolina First's Articles of
Incorporation require the affirmative vote of holders of at least 80% of the
outstanding stock of Carolina First entitled to vote for approval before
Carolina First may (i) merge or consolidate with any other corporation, (ii)
sell or exchange all or a substantial part of its assets to or with any other
corporation, or (iii) issue or deliver any stock or other securities of its
issue in exchange or payment for any properties or assets of any other
corporation, or securities issued by any other corporation, or in a merger of
any subsidiary of Carolina First 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
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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 entitled to vote on such business
combination. The 80% supermajority provision is not applicable to any
transaction solely between Carolina First and another corporation, 50% or more
of the voting stock of which is owned by Carolina First. Under present South
Carolina law, a merger or the sale of substantially all the assets requires the
approval of holders of two-thirds of the outstanding shares entitled to vote.
The amendment of the foregoing business combination provisions requires the
approval of holders of 80% of the outstanding shares entitled to vote. The
foregoing supermajority voting provision could impede the ability of third
parties who attempt to acquire control of Carolina First without the cooperation
of Carolina First'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 common stock is
Reliance Trust Company, Atlanta, Georgia.
DIVIDEND REINVESTMENT PLAN. Carolina First has in place a dividend
reinvestment plan with respect to the Carolina First common stock. As set forth
in the plan, holders of such shares may elect to receive Carolina First 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 common stock
through optional cash payments.
LEGAL MATTERS
Certain legal matters in connection with the Reorganization Agreement,
including the validity of the Carolina First shares offered hereby, will be
passed upon for Carolina First by Wyche, Burgess, Freeman & Parham, P.A.,
Greenville, South Carolina. Wyche, Burgess, Freeman & Parham, P.A. is also
rendering a tax opinion to Citrus regarding the Reorganization Agreement. As of
March 31, 1999, members and attorneys of Wyche, Burgess, Freeman & Parham, P.A.
beneficially owned a total of approximately 35,300 shares of Carolina First
common stock.
Certain legal matters in connection with the Reorganization Agreement will
be passed upon for Citrus by Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.,
Orlando, Florida. As of the date of this Proxy Statement/Prospectus, members of
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A. beneficially owned 5,000
shares of Citrus common stock.
EXPERTS
The financial statements of Citrus as of December 31, 1998 and for the year
then ended included in this prospectus and in the registration statement have
been audited by Osburn, Henning and Company, independent auditors, and the
financial statements of Citrus as of December 31, 1997 and for the years ended
December 31, 1997 and December 31, 1996, included in this prospectus and in the
registration statement have been audited by Brewer, Beemer, Kuehnhackl & Koon,
P.A., independent auditors, as stated in their respective
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reports appearing herein and elsewhere in the registration statement, and are
included in reliance upon the reports of such firms given their authority as
experts in accounting and auditing.
The consolidated financial statements of Carolina First as of December 31,
1998 and 1997 and for each of the years in the three year period ended December
31, 1998 have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
OTHER MATTERS
The Board of Directors of Citrus is not aware of any other matters which
may be presented for action at the Special Meeting, but if other matters do
properly come before the meeting, it is intended that the shares of Citrus
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.
ADDITIONAL INFORMATION AVAILABLE THROUGH THE SEC
Carolina First is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). Pursuant to the
provisions of the Exchange Act, Carolina First 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) that file electronically with the Commission.
Carolina First 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 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, Citrus and the Carolina First 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 has been supplied by
Carolina First, and all information contained or incorporated by reference in
this Proxy Statement/Prospectus with respect to Citrus has been supplied by
Citrus.
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INCORPORATION OF CERTAIN INFORMATION FILED WITH THE SEC BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WITH
RESPECT TO CAROLINA FIRST WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
COPIES OF ANY SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH A DOCUMENT UNLESS SUCH
EXHIBIT IS SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS 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 JUNE 8, 1999.
The following documents filed with the Commission by Carolina First
pursuant to Section 13(a) or 15(d) of the Exchange Act are incorporated herein
by reference:
(1) Carolina First's Annual Report on Form 10-K for the year ended
December 31, 1998;
(2) Carolina First's Current Reports on Form 8-K dated February 17, 1999
and March 18, 1999; and
(3) The description of the Carolina First common stock which is
contained in Carolina First's Form 8-A filed with the Commission on
or about October 20, 1986, including any amendment or report filed
for the purpose of updating such description.
All documents filed by Carolina First pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the Special
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the respective dates of filing
of such documents. Any statement contained herein or in a document incorporated
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently-filed document which also is incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this Proxy Statement/Prospectus which are not
historical in nature are intended to be, and are hereby identified as
"forward-looking statements" for purposes of the safe harbor provided by Section
21E of the Exchange Act. In addition, certain statements in future filings by
Carolina First with the Securities and Exchange Commission, in press releases
and in oral and written statements made by or with the approval of Carolina
First which are not statements of historical fact constitute forward-looking
statements within the meaning of the Exchange Act. Carolina First cautions
readers that forward-looking statements, including without limitation, those
relating to Carolina First's future business prospects, plans, objectives,
future economic performance, revenues, working capital, liquidity, capital
needs, interest costs, income or loss, income or loss per share, dividends and
other financial items are subject to certain risks and uncertainties that could
cause actual results to differ materially from those indicated in the
forward-looking statements due to several important factors herein identified,
among others, and other risks and factors identified from time to time in
Carolina First's reports filed with the Securities and Exchange Commission.
The risks and uncertainties that may affect the operations, performance,
development and results of Carolina First's business include, but are not
limited to, the following: risks from changes in economic, monetary policy and
industry conditions; changes in interest rates; inflation; risks inherent in
making loans
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including repayment risks and value of collateral; fluctuations in consumer
spending; the demand for Carolina First's products and services; dependence on
senior management; technological changes; ability to increase market share and
control expenses; acquisitions; changes in accounting policies and practices;
costs and effects of litigation; recently-enacted or proposed legislation; and
year 2000 readiness.
Such forward-looking statements speak only as of the date on which such
statements are made, and Carolina First undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
RESALE MATTERS; SOURCE OF INFORMATION; CERTAIN OTHER MATTERS
This Proxy Statement/Prospectus does not cover any resales of the
Carolina First common stock offered hereby to be received by shareholders deemed
to be "affiliates" of Carolina First or Citrus upon consummation of the
acquisition. 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 not deemed to be "affiliates" of Carolina First
or Citrus.
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 or Citrus.
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 or Citrus since such date.
75
<PAGE>
CITRUS BANK
TABLE OF CONTENTS
Page
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS REPORT F-l
INDEPENDENT AUDITOR'S REPORT F-2
FINANCIAL STATEMENTS:
Balance Sheets F-3
Statements of Operations F-4
Statements of Shareholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders
Citrus Bank
Orlando, Florida
We have audited the accompanying balance sheet of Citrus Bank as of
December 31, 1998, and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements of Citrus Bank as of December 31, 1997 and 1996, and for each of the
two years then ended, were audited by other auditors whose report dated March
27, 1998 expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements referred to above present
fairly, in all material respects, the financial position of Citrus Bank as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
March 23, 1999 /s/ Osburn, Henning and Company
Orlando, Florida
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Citrus Bank
We have audited the accompanying balance sheet of Citrus Bank as of December 31,
1997, and the related statements of operations, changes in stockholders' equity
and cash flows for the years ended December 31, 1997 and 1996. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial statements referred to above present fairly, in all
material respects, the financial position of Citrus Bank as of December 31,
1997, and the results of its operations and cash flows for the years ended
December 31, 1997 and 1996 in conformity with generally accepted accounting
principles.
/s/ BREWER, BEEMER, KUEHNHACKL & KOON, P.A.
BREWER, BEEMER, KUEHNHACKL & KOON, P.A.
Orlando, Florida
March 27, 1998
F-2
<PAGE>
CITRUS BANK
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
December 31,
1998 1997
---- ----
ASSETS
Cash and due from banks $ 13,723,001 $ 10,559,323
Federal funds sold 23,041,000 29,438,000
Investment securities available-for-sale 9,997,105 -
Investment securities held-to-maturity 2,730,381 6,026,722
Loans, net 168,291,217 92,981,802
Premises and equipment, net 7,676,867 4,822,854
Accrued interest receivable and other assets 1,898,203 1,993,999
------------ ------------
TOTAL ASSETS $227,357,774 $145,822,700
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
- -----------
Deposits:
Demand:
Noninterest bearing $ 45,699,737 $ 32,791,814
Interest bearing 86,564,584 38,202,048
Savings 4,910,607 4,024,750
Time 71,772,540 57,066,882
------------ ------------
Total Deposits 208,947,468 132,085,494
Accrued interest payable and other liabilities 786,396 183,254
------------ ------------
Total Liabilities 209,733,864 132,268,748
------------ ------------
Commitments and Contingent Liabilities - Note 10
- --------------------------------------
Shareholders' Equity
- --------------------
Common stock, par value $4.00; 2,000,000 shares
authorized; 1,862,177 and 1,700,010 shares
issued and outstanding, respectively 7,448,708 6,800,040
Capital in excess of par value 7,969,914 6,556,077
Retained earnings 2,199,448 197,835
Accumulated other comprehensive income 5,840 -
------------ ------------
Total Shareholders' Equity 17,623,910 13,553,952
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $227,357,774 $145,822,700
============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
CITRUS BANK
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C>
Year Ended December 31,
1998 1997 1996
---- ---- ----
Interest Income:
Loans $14,193,139 $ 7,142,544 $ 3,675,583
Investment securities 328,958 358,479 191,980
Federal funds sold 1,661,967 1,030,154 876,449
----------- ----------- -----------
Total Interest Income 16,184,064 8,531,177 4,744,012
Interest Expense on Deposits 6,165,420 3,006,310 1,722,757
----------- ----------- -----------
Net Interest Income 10,018,644 5,524,867 3,021,255
Provision for Loan Losses 1,595,423 462,438 459,703
----------- ----------- -----------
Net Interest Income After
Provision For Loan Losses 8,423,221 5,062,429 2,561,552
----------- ----------- -----------
Noninterest Income:
Service charges 712,425 504,626 330,527
Operational loss recovery 440,000 -- --
Mortgage origination commissions 273,185 22,706 --
Other 432,635 257,531 107,512
----------- ----------- -----------
Total Noninterest Income 1,858,245 784,863 438,039
----------- ----------- -----------
Noninterest Expense:
Salaries and employee benefits 4,543,269 2,324,521 1,275,257
Occupancy and equipment 868,044 525,315 335,106
Operational loss -- 2,648,567 --
Proof and data processing costs 364,634 208,184 --
Other 1,357,916 636,952 530,603
----------- ----------- -----------
Total Noninterest Expense 7,133,863 6,343,539 2,140,966
----------- ----------- -----------
Income (Loss) Before Income Taxes 3,147,603 (496,247) 858,625
Income tax expense (benefit) 1,145,990 (196,307) 317,335
----------- ----------- -----------
Net Income (Loss) $ 2,001,613 $ (299,940) $ 541,290
=========== =========== ===========
Net Income (Loss) Per Share:
Basic $ 1.10 $ (.22) $ .49
=========== =========== ===========
Diluted $ 1.06 $ (.22) $ .49
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
CITRUS BANK
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Capital in Other Total
Common Excess of Retained Comprehensive Shareholders'
Stock Par Value Earnings Income Equity
----------- ----------- ----------- ----------- -----------
BALANCE,
DECEMBER 31, 1995 $ 4,400,000 $ 2,991,708 $ (43,515) $ -- $ 7,348,193
Issuance of 10 shares of
stock at $5.30 per share 40 13 -- -- 53
Comprehensive Income:
Net income -- -- 541,290 -- 541,290
----------- ----------- ----------- ----------- -----------
BALANCE,
DECEMBER 31, 1996 4,400,040 2,991,721 497,775 -- 7,889,536
Issuance of 600,000 shares of
stock at $10 per share, net of
$35,644 in issuance costs 2,400,000 3,564,356 -- -- 5,964,356
Comprehensive Income:
Net loss -- -- (299,940) (299,940)
----------- ----------- ----------- ----------- -----------
BALANCE,
DECEMBER 31, 1997 6,800,040 6,556,077 197,835 -- 13,553,952
Issuance of 148,000 shares of
stock at $12.50 per share 592,000 1,258,000 -- -- 1,850,000
Issuance of 14,167 shares of
stock at $15.00 per share 56,668 155,837 -- -- 212,505
Comprehensive Income:
Net income -- -- 2,001,613 -- 2,001,613
Other comprehensive
income, net of income tax:
Change in unrealized
gain (loss) on securities
available for sale -- -- -- 5,840 5,840
-----------
Total Comprehensive Income -- -- -- -- 2,007,453
----------- ----------- ----------- ----------- -----------
BALANCE,
DECEMBER 31, 1998 $ 7,448,708 $ 7,969,914 $ 2,199,448 $ 5,840 $17,623,910
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
CITRUS BANK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,001,613 $ (299,940) $ 541,290
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating activities:
Provision for loan losses 1,595,423 462,438 459,703
Depreciation, amortization and accretion 360,140 120,214 91,827
Deferred income tax provision (benefit) 351,257 (1,039,899) (123,660)
Increase in accrued interest receivable and other assets (259,061) (160,833)
Increase (decrease) in accrued interest payable
and other liabilities 603,142 83,664 23,606
------------ ------------ ------------
Net Cash Provided By (Used For)
Operating Activities 4,652,514 (1,008,032) 784,721
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of held-to-maturity securities (1,250,000) (6,024,319) (6,093,916)
Purchases of available-for-sale securities (9,987,666) -- --
Proceeds from maturity or call of held-to-maturity
securities 4,527,712 5,100,000 1,100,000
Net (increase) decrease in federal funds sold 6,397,000 (16,161,000) 2,548,000
Net increase in loans (76,904,838) (42,334,010) (29,073,539)
Purchases of premises and equipment,
net of minor retirements (3,195,523) (2,778,166) (1,301,462)
------------ ------------ ------------
Net Cash Used For Investing Activities (80,413,315) (62,197,495) (32,820,917)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in noninterest bearing deposits 12,907,923 17,493,807 7,376,760
Net increase in interest bearing deposits 63,954,051 45,699,983 22,814,277
Proceeds from issuance of common stock 2,062,505 5,964,356 --
Proceeds from exercise of stock purchase warrants -- -- 53
------------ ------------ ------------
Net Cash Provided By Financing Activities 78,924,479 69,158,146 30,191,090
------------ ------------ ------------
Net Increase (Decrease) in Cash and Due From Banks 3,163,678 5,952,619 (1,845,106)
Cash and Due From Banks at Beginning of year 10,559,323 4,606,704 6,451,810
------------ ------------ ------------
Cash and Due From Banks at End of Year $ 13,723,001 $ 10,559,323 $ 4,606,704
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
Citrus Bank (the "Bank") is a state chartered bank organized to offer a full
range of banking services to individual and corporate customers through its
offices in Orlando, Winter Park, Longwood, Crystal River and Kissimmee,
Florida. The Bank is subject to competition from other financial institutions
and operates under the principal supervision and regulation of the Federal
Deposit Insurance Corporation and the Comptroller of the State of Florida.
Consequently, the Bank undergoes periodic examination by those regulatory
authorities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the significant accounting policies and
practices followed by the Bank, which conform with generally accepted
accounting principles and prevailing practices within the banking industry.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheets and affect income and
expense for the periods presented. Actual results could differ significantly
from those estimates. Material estimates particularly susceptible to
significant change in the near term relate to the determination of the
allowance for loan losses and the evaluation of the carrying amount of real
estate acquired through foreclosure or in satisfaction of loans. In
connection with the determination of the allowance for loan losses and other
real estate owned, management generally obtains independent appraisal of the
value of significant properties.
The Bank has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income" (SFAS 130). SFAS 130 requires the reporting
of comprehensive income in addition to net income. Comprehensive income is
comprised of net income and items of "other comprehensive income". The Bank's
only item of other comprehensive income is the unrealized gain or loss
associated with its available-for-sale investment securities portfolio.
In accordance with SFAS 130, the Bank has presented the accompanying
financial statements to reflect the application of SFAS 130 for 1997 and
1996, as well as for the current year.
Investment Securities
The Bank classifies as available-for-sale those investment securities
that may be sold prior to maturity in connection with changes in market
interest rates, liquidity needs or other reasons. Securities in the
available-for-sale portfolio are reflected at their aggregate fair
value, with unrealized holding gains or losses, net of related income
tax effects, included in other comprehensive income. As of December 31,
1997 and 1996, the Bank held no securities classified as
available-for-sale.
F-7
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment Securities (Continued)
Those investment securities for which the Bank has the positive intent
and ability to hold until their maturity have been classified as
held-to-maturity securities. These securities are carried on an
amortized cost basis.
Amortization of premiums and accretion of discounts are recognized in
interest income as yield adjustments, in a manner which approximates the
interest method. Realized gains and losses on disposition are recorded
in noninterest income on the trade date, based on the net proceeds from,
and adjusted carrying amount of the security sold, using the specific
identification method.
Loans and Allowance for Loan Losses
Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or payoff are reported at the
principal amount outstanding, net of any charge-offs, the allowance for
loan losses and unamortized deferred loan origination fees and costs.
Interest income is recognized on a level yield basis.
The allowance for loan losses is established through a provision for
loan losses charged to operations. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely. Subsequent recoveries are
added to the reserve.
The allowance is an amount that management believes will be adequate to
absorb possible losses inherent in existing loans and loan commitments,
based on evaluations of collectibility and prior loss experience.
Management evaluates the adequacy of the reserve quarterly, or more
frequently if considered necessary. The evaluations take into
consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, loan concentrations,
specific problem loans and commitments, current and anticipated
economic conditions that may affect the borrower's ability to repay and
the estimated or appraised value of any underlying collateral.
F-8
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans and Allowance for Loan Losses (Continued)
Interest income on loans is accrued based upon the principal amount
outstanding. Loans on which the accrual of interest has been
discontinued are designated as nonaccrual or impaired loans. Accrual of
interest on loans is discontinued when either reasonable doubt exists
as to the full, timely collection of interest or principal or when a
loan becomes contractually past due by ninety days or more with respect
to principal or interest. All interest previously accrued but not
collected is reversed against current period income if, in the judgment
of management, it is not considered fully collectible. Income on such
loans is then recognized only to the extent cash is received and where
the future collection of principal is probable. Accruals are resumed on
loans only when they are brought fully current with respect to
principal and interest and when, in the judgment of management, the
loan is estimated to be fully collectible as to both principal and
interest.
Loan origination fees and certain direct loan origination costs are
deferred and the net amount amortized to interest income as a yield
adjustment over the contractual life of the related loan.
The Bank has adopted the provisions of Statement of Financial
Accounting Standards No. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF
A LOAN ("SFAS 114"), as amended by Statement of Financial Accounting
Standards No. 118, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN--
INCOME RECOGNITION AND DISCLOSURES ("SFAS 118"). A loan is considered
to be impaired when, based on current information and events,
management believes it probable that the Bank will be unable to collect
all amounts due (both principal and interest), according to the
contractual terms of the loan agreement. SFAS 114 and 118 require that
impaired loans within the scope of the statements be measured based on
the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the underlying
collateral if the loan is collateral dependent. Interest income on
impaired loans is recognized only to the extent cash is received and
where the future collection of principal is probable.
F-9
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Premises and Equipment
Premises and equipment are stated at cost less accumulated amortization
and depreciation. Improvements to leased property are amortized over
the shorter of the estimated useful lives of the improvements or the
life of the lease. It is the policy of the Bank to provide depreciation
based on the estimated useful life of the individual assets, calculated
using the straight-line method. Estimated useful lives range as
follows:
Years
Furniture and equipment 5-10
Bank buildings and improvements 10-40
Income Taxes
The Bank uses the liability method of accounting for deferred income
taxes. Consequently, income tax expense or benefit includes Federal and
state income taxes currently payable or receivable, and those deferred
because of temporary differences between the financial statement and tax
bases of assets and liabilities. Temporary differences which give rise
to significant deferred tax assets and liabilities relate to loans and
the allowance for loan losses, fixed assets and the operating loss
discussed in Note 9.
Net Income (Loss) Per Share
The Bank has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS 128") to compute basic earnings per
share and diluted earnings per share as shown on the accompanying
statements of operations. Basic earnings per share is computed by
dividing net income or loss by the weighted average number of shares of
common stock outstanding during the period. Diluted earnings per share
includes the effect of unexercised stock options and warrants using the
treasury stock method, except in instances where inclusion of options
and warrants would be antidilutive. The treasury stock method assumes
that common stock was purchased at the average market price during the
period. For the years ended December 31, 1998, 1997 and 1996, the
reconciliation of the denominators of the basic and diluted per-share
computations was as follows:
1998 1997 1996
--------- --------- ---------
Weighted average common shares 1,826,885 1,377,818 1,100,000
Weighted average stock options 57,629 -- 7,350
--------- --------- ---------
1,884,514 1,377,818 1,107,350
========= ========= =========
F-10
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Management of the Bank periodically revises its classification of
certain items within the financial statements in order to provide a more
meaningful presentation of the Bank's financial position, results of
operations and cash flows. Where revised presentation has been adopted
in the 1998 financial statements, the corresponding 1997 balances have
been reclassified to enhance comparability between periods.
NOTE 3 - INVESTMENT SECURITIES
The amortized cost of investment securities as shown in the accompanying
balance sheets and their approximate fair values at December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ------------ ------------
1998 - Available-for-sale:
U. S. Government and
agency securities $ 9,987,666 $ 9,439 $ - $ 9,997,105
=========== ========== ============ ============
1998 - Held-to-maturity:
U. S. Government and
agency securities $ 2,730,381 $ 18,051 $ - $ 2,748,432
=========== ========== ============ ============
1997 - Held-to-maturity:
U. S. Government and
agency securities $ 6,026,722 $ 1,029 $ 4,303 $ 6,023,448
=========== =========== ============ ============
</TABLE>
At December 31, 1998, investment securities with a carrying amount and market
value of approximately $2,730,381 and $2,748,432, respectively, were pledged
to secure public deposits or for other purposes required or permitted by law.
F-11
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
Scheduled maturities of debt securities at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Available-For-Sale Held to Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due from one to five years $ 9,987,666 $ 9,997,105 $ 2,730,381 $ 2,748,432
------------ ----------- ----------- -----------
$ 9,987,666 $ 9,997,105 $ 2,730,381 $ 2,748,432
============ =========== =========== ===========
</TABLE>
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties.
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES
Major categories of loans included in the loan portfolio are as follows:
1998 1997
------------- -------------
Real estate loans $ 109,236,851 $ 50,799,610
Commercial and industrial 54,218,512 37,153,333
Consumer and personal 7,592,933 6,186,636
------------- -------------
171,048,276 94,139,579
Less allowance for loan losses (2,757,079) (1,157,777)
------------- -------------
$ 168,291,217 $ 92,981,802
============= =============
The above amounts are presented net of unearned income and net deferred loan
origination fees and costs, which in the aggregate totaled $505,577 and
$378,489 at December 31, 1998 and 1997, respectively.
While the loan portfolio is diversified among the various categories
presented above, the Bank's lending activities are intentionally restricted
to borrowers located primarily within central Florida. Consequently, the
ability of the Bank's borrowers to honor their contractual obligation to
repay is significantly influenced by the general economic conditions of this
area.
F-12
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A credit risk concentration results when the Bank has a significant credit
exposure to an individual or a group engaged in similar activities or having
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or
other conditions. At December 31, 1998, no concentration of loans within any
portfolio category to any group of borrowers engaged in similar activities or
in a similar business exceeded 10% of total loans, except that as of such
date loans collateralized by mortgages on real estate represented 64% of the
loan portfolio and were to borrowers in varying activities and businesses.
An analysis of the changes in the allowance for loan losses for the years
ended December 31, 1998, 1997 and 1996 follows:
Years Ended December 31,
------------------------
1998 1997 1996
----------- ----------- -----------
Balance at beginning of year $ 1,157,777 $ 749,229 $ 326,477
Provision charged to operations 1,595,423 462,438 459,703
Charge-offs (1,371) (57,076) (12,045)
Recoveries 5,250 3,186 414
Allowance related to loans sold -- -- (25,320)
----------- ----------- -----------
Balance At End Of Year $ 2,757,079 $ 1,157,777 $ 749,229
=========== =========== ===========
As discussed in Note 2, the Bank has adopted the provisions of SFAS 114 and
118 related to impaired loans. As of December 31, 1998, impaired loans
totaled approximately $117,000. Reserves established associated with impaired
loans totaled approximately $18,000. For the year ended December 31, 1998,
the recorded investment in impaired loans averaged approximately $70,000.
During 1997 and at December 31, 1997, the Bank had no impaired loans. There
was no interest income recognized on impaired loans during 1998, 1997 or
1996.
F-13
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
December 31,
1998 1997
---- ----
Land $ 1,685,082 $ 1,975,312
Buildings and improvements 2,656,789 1,199,612
Leasehold improvements 111,084 122,070
Furniture and equipment 2,064,372 937,368
Construction in progress 1,945,573 1,033,013
----------- -----------
8,462,900 5,267,375
Less accumulated depreciation (786,033) (444,521)
----------- -----------
$ 7,676,867 $ 4,822,854
=========== ===========
Depreciation and amortization expense related to premises and equipment
totaled $341,513, $130,662 and $91,720 for the years ended December 31, 1998,
1997 and 1996, respectively.
NOTE 6 - DEPOSITS
Included in deposits are time deposits issued in amounts of $100,000 or more
totaling $39,217,158 and $30,710,531 at December 31, 1998 and 1997,
respectively. Interest paid on deposits totaled approximately $6,154,000 in
1998, and $2,924,000 in 1997. At December 31, 1998, scheduled maturities of
time deposits are as follows:
Year Ending
December 31, Amount
------------ ------
1999 $61,515,268
2000 8,901,796
2001 781,306
2002 402,895
2003 and thereafter 171,275
-----------
$71,772,540
===========
F-14
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - INCOME TAXES
The components of income tax expense (benefit) included in the accompanying
statements of operations consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
Current expense:
Federal $ 739,151 $ 720,428 $ 381,414
State 55,582 123,164 59,581
Deferred expense (benefit) 351,257 (1,039,899) (123,660)
----------- ----------- -----------
Net income tax (benefit) expense $ 1,145,990 $ (196,307) $ 317,335
=========== =========== ===========
Deferred tax assets and liabilities consist of the following:
December 31,
------------
1998 1997
---- ----
Gross deferred tax assets:
Operating loss $ -- $ 987,000
Allowance for loan losses 1,000,000 340,187
----------- -----------
1,000,000 1,327,187
----------- -----------
Gross deferred tax liabilities:
Basis difference of premises and equipment (94,000) (69,930)
Unrealized gain on available-for-sale securities (3,600) --
----------- -----------
(97,600) (69,930)
----------- -----------
Net deferred tax asset $ 902,400 $ 1,257,257
=========== ===========
</TABLE>
The difference between income taxes computed using the federal statutory rate
of 34% and as recorded is attributable principally to Florida's state
corporate income tax of 5.5% adjusted for certain credits.
Income taxes paid totaled approximately $885,000, $872,000 and $91,000 in
1998, 1997 and 1996, respectively.
F-15
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - SHAREHOLDERS' EQUITY
Stock Options
In 1995, the Bank adopted an Officers' and Employees' Stock Option Plan
which allows for the grant to key employees of options to purchase a
specified number of shares of stock. There are a total of 247,500 option
shares authorized for this plan. Under the Plan, fifty percent of the
options are exercisable after three years from the date of grant and an
additional twenty-five percent are exercisable over each of the two
succeeding years. In addition, all outstanding options will become
exercisable upon a change in control of the Bank. At December 31, 1998,
18,500 options were exercisable at an exercise price of $7.50 per share.
The following table summarizes stock option activity for the Officers' and
Employees' Stock Option Plan for the years ended December 31, 1998, 1997
and 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
--------------------- ------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Number Price Number Price Number Price
------- --------- ------ -------- ------ --------
Outstanding beginning of year 117,000 $ 8.71 54,500 $ 7.50 46,000 $ 7.50
Granted during the year 71,000 13.26 77,000 9.33 10,000 7.50
Canceled during year (2,500) 7.50 (14,500) 7.50 (1,500) 7.50
Exercised during year -- -- -- -- -- --
------- --------- ------ -------- ------ --------
Outstanding end of year 185,500 10.36 117,000 8.71 54,500 7.50
======= ======= ======
</TABLE>
The determination of fair value of the options was based on a standard
option pricing model using management's estimate of the likelihood of
exercise, the expected duration of the options, and considering minimal
volatility.
As permitted by SFAS 123, management has elected to disclose rather than
recognize the compensatory impact of these options. Accordingly, no cost
has been charged to earnings during any of the three years ended December
31, 1998. Moreover, the pro forma effect on net income of options granted
would not be material in any of these years. At December 31, 1998,
outstanding options had exercise prices ranging from $7.50 to $15.00. The
weighted average remaining contractual life is 8.9 years.
During 1997, the Bank adopted a Directors' Stock Option Plan which allows
for the grant to certain Bank directors of options to purchase a specified
number of shares of stock. There are a total of 20,000 option shares
authorized. Fifty percent of the options are exercisable after three years
from the date of grant and an additional twenty-five percent are
exercisable over each of the two succeeding years. In addition, all
outstanding options will become exercisable upon a change in control of the
Bank. At December 31, 1998, no options were exercisable.
F-16
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Options (Continued)
The following table summarizes stock option activity for the Directors'
Stock Option Plan for the years ended December 31, 1998 and 1997:
Average
Shares Option Price
------ ------------
Option shares granted in 1997 18,000 $7.50
------
Option shares outstanding, December 31, 1997 18,000 7.50
Option shares granted in 1998 - -
------
Option shares outstanding, December 31, 1998 18,000 7.50
======
Stock Purchase Warrants
During 1995, the Bank issued stock purchase warrants which represent the
right to purchase 24,000 shares of the Bank's common stock for $5.30 per
share and expire on April 30, 2000. During 1996, additional warrants to
purchase 1,583 shares of the Bank's common stock were issued and warrants
to purchase 10 shares were exercised. No warrants were issued or exercised
in 1997 or 1998 and, as a result, there are 25,573 warrants outstanding at
December 31, 1998 and 1997.
NOTE 9 - OPERATIONAL LOSS AND CAPITAL INFUSION
In February, 1998, the Bank incurred a loss relating to the return by another
bank of checks comprising earlier deposits into a Citrus Bank customer
account. Because the uncollected deposits were made available to, and used
by, the Bank's customer, the Bank incurred a loss in connection with the
matter of approximately $2,649,000. Management is continuing to pursue
recovery of the Bank's loss. During 1998, $440,000 was recovered and is
included in non-interest income on the accompanying 1998 statement of
operations.
The pattern of making deposits for which no underlying economic substance
existed was established by the customer and sustained over a period of time
that began prior to December 31, 1997. Statement on Auditing Standards No. 1,
"SUBSEQUENT EVENTS," requires that events transpiring after the balance sheet
date that provide evidence about conditions that existed as of the balance
sheet date be given retroactive adjustment into the prior period's financial
statements. Consequently, the loss of $2,649,000 was included in noninterest
expense - operational loss in the accompanying statement of operations for
the year ended December 31, 1997.
F-17
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - OPERATIONAL LOSS AND CAPITAL INFUSION (CONTINUED)
In order to offset the negative effect of the loss described above on the
capital position of the Bank, certain officers and directors of the Bank
purchased 148,000 shares of common stock on February 27, 1998. The shares
were sold by the Bank at a price of $12.50 per share, resulting in total
proceeds of $1,850,000. The sale of stock and proceeds therefrom are
considered 1998 transactions and, accordingly, have been reflected in the
1998 statement of shareholders' equity.
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES
Financial Instruments With Off-Balance Sheet Risk
In the normal course of business the Bank is party to financial instruments
not reflected in the accompanying financial statements. These financial
instruments consist of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
<S> <C>
December 31,
------------
1998 1997
---- ----
Unfunded loan commitments and available lines of credit $66,146,000 $61,323,000
Standby letters of credit 2,092,000 2,385,000
</TABLE>
These financial instruments are recorded in the financial statements when
they are funded or related fees are incurred or received. The Bank's
exposure to credit loss in the event of nonperformance by the other party
to these financial instruments is represented by the contractual amount of
those instruments. The credit and collateral policies in extending these
commitments are essentially the same as those required by the Bank for the
financial instruments which are included in the accompanying balance
sheets.
The Bank evaluates each borrower's creditworthiness on a case-by-case
basis. The amount of collateral obtained by the Bank, if any, is based upon
management's credit evaluation of the borrower. Such collateral may include
real estate, receivables, inventory, vehicles and equipment or other types
of assets.
Since the Bank's loan commitments often expire without being drawn upon,
the total amount of these commitments does not necessarily represent a
required future use of the Bank's cash or cash equivalents.
F-18
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Lease Commitments
The Bank leases certain office premises and equipment under noncancelable
operating leases. These leases contain varying renewal options and require
the Bank to pay real estate taxes, insurance and other costs.
Aggregate remaining minimum rental commitments at December 31, 1998 under
noncancelable operating leases are summarized as follows:
Year Ending Gross
December 31, Rentals
------------ -------
1999 $117,000
2000 111,000
2001 116,000
2002 105,000
2003 13,000
Rental expense included in operations for all leases for the years ended
December 31, 1998, 1997 and 1996 approximated $188,000, $155,000 and
$95,000, respectively.
Legal Matters
The Bank is party to litigation arising in the normal course of business.
Management, after consultation with legal counsel, does not believe that
the resolution of any such matters will have a material effect on the
Bank's financial position or results of operations.
NOTE 11 - SALARY SAVINGS PLAN
During 1995, the Bank adopted a salary savings plan [401(k)] which covers
substantially all employees age twenty-one or over who have completed one
year of service. Eligible employees may elect to contribute a portion of
their earnings to the plan. Matching contributions are made by the Bank to
the plan on a discretionary basis. The Bank's contributions to the salary
savings plan totaled approximately $42,000, $22,000 and $11,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.
F-19
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 - RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has made loans to stockholders
and directors of the Bank and to entities in which they hold a financial
interest. Such loans were made on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unaffiliated customers. In the
opinion of management, these loans do not involve more than normal credit
risk or possess other unfavorable features. The aggregate dollar amount of
these loans totaled approximately $8,338,000 and $3,058,000 at December 31,
1998 and 1997, respectively. As of December 31, 1998 and 1997, these
individuals and entities had approximately $11,114,000 and $4,672,000 of
funds on deposit with the Bank.
NOTE 13 - REGULATORY MATTERS
Effective December 19, 1992, as required by the FDIC Improvement Act of 1991,
the federal regulatory agencies of banks and bank holding companies adopted
standards for determining a financial institution's capital category for
purposes of regulatory enforcement. A financial institution will be
classified according to the lowest category in which any of its three
separate capital ratios (computed as defined in the standards) falls. Failure
to meet the minimum capital requirements can initiate mandatory - and
possible additional discretionary - actions by the regulators that, if
undertaken, could have a direct material effect on the Bank's financial
statements and operations. The capital categories as established by the
regulatory agencies, as well as the capital ratios of the Bank, at December
31, 1998, are as follows:
<TABLE>
<CAPTION>
Total Tier I
Risk Based Risk Based Leverage
Capital Ratio Ratio Ratio
------------- ---------- --------
<S> <C> <C> <C>
Well capitalized (minimum ratios) 10% 6% 5%
Adequately capitalized (minimum ratios) 8% 4% 4%
Undercapitalized (less than) 8% 4% 4%
Significantly undercapitalized (less than) 6% 3% 3%
Citrus Bank 10.84% 9.59% 7.73%
</TABLE>
At December 31, 1997, the Bank had a total risk based capital ratio of
13.91%, a tier I risk based ratio of 12.81%, and a leverage ratio of 10.11%.
F-20
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - REGULATORY MATTERS (CONTINUED)
Florida Banking Statutes limit the amount of dividends that may be paid by
the Bank without prior approval of the Bank's regulatory agency. Retained
earnings of the Bank which may be paid as dividends without prior approval
totaled approximately $2,138,000 and $137,000 at December 31, 1998 and 1997,
respectively, subject to the minimum capital requirements described above.
The Bank is required to maintain reserve balances with the Federal Reserve
Bank based on a specified percentage of deposits. The amount of required
reserves to be maintained on hand or at the Federal Reserve Bank totaled
$190,000 at December 31, 1998.
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURE ABOUT FAIR
VALUES OF FINANCIAL INSTRUMENTS (SFAS 107), requires that the Bank disclose
estimated fair values of financial instruments for which it is practicable to
estimate that value. Fair value estimates, methods and assumptions are set
forth below.
Cash and Due From Banks and Federal Funds Sold
For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Investment Securities
The fair value of investments is estimated based on bid prices published in
financial newspapers or bid quotations received from securities dealers.
These fair values are presented in Note 3.
Loans
The fair value of fixed rate performing loans is estimated by discounting
the future cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings and for the same remaining
maturities. The carrying amount of adjustable rate performing loans is a
reasonable estimate of fair value. Loans held for sale are carried at an
amount equal to their contractual sale price.
F-21
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Loans (Continued)
The following table presents information for loans at December 31, 1998 and
1997:
1998 1997
----------------------- -----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
(In Thousands)
Adjustable $122,814 $122,814 $ 74,496 $ 74,496
Fixed 48,234 48,339 19,643 19,667
-------- -------- -------- --------
$171,048 $171,153 $ 94,139 $ 94,163
======== ======== ======== ========
Deposit Liabilities
The fair value of deposits with no stated maturity, such as demand, NOW,
money market and savings is equal to the amount payable on demand as of
December 31, 1998. The fair value of time deposits is based on the
discounted value of contractual cash flows. The discount rate is estimated
using the rates currently offered for deposits of similar remaining
maturities.
The following table presents information for deposits at December 31, 1998
and 1997:
1998 1997
----------------------- ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
(In Thousands)
Noninterest-
bearing
demand $ 45,699 $ 45,699 $ 32,792 $ 32,792
Interest-
bearing:
Demand 86,565 86,565 38,202 38,202
Savings 4,910 4,910 4,025 4,025
Time 71,773 71,926 57,066 57,233
-------- -------- -------- --------
$208,947 $209,100 $132,085 $132,252
======== ======== ======== ========
The fair value estimates above do not include the benefit that results from
the low-cost funding provided by the deposit liabilities compared to the
cost of borrowing funds in the market.
F-22
<PAGE>
CITRUS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed rate loan commitments, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of financial guarantees written and letters of credit
is based on fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the obligations with
the counterparties.
Limitations
The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial instrument.
Because no market exists for a significant portion of the Bank's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics
of various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
In addition, the fair value estimates are based on existing on- and
off-balance sheet financial instruments without attempting to estimate the
value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. Other
significant assets and liabilities that are not considered financial assets
or liabilities include core deposit intangibles, deferred tax assets,
property, plant and equipment, and goodwill. In addition, the tax
ramifications related to the realization of the unrealized gains and losses
on investment securities can have a significant effect on fair value
estimates and have not been considered in the estimates.
NOTE 15 - PENDING SALE OF BANK
Subsequent to December 31, 1998, the Board of Directors of the Bank entered
into an agreement with an out of state bank under which, subject to various
shareholder and regulatory approvals, the Bank will be acquired in a stock
for stock exchange. As planned, the transaction will be accounted for as a
pooling of interests.
F-23
<PAGE>
ANNEX A TO PROXY STATEMENT PROSPECTUS
REORGANIZATION AGREEMENT
BY AND BETWEEN
CAROLINA FIRST CORPORATION
AND
CITRUS BANK
DATED AS OF MARCH 18, 1999
<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. CFB.....................................................................6
1.5. CFC.....................................................................6
1.6. CFC Benefit Plans.......................................................6
1.7. CFC Common Stock........................................................6
1.8. Citrus..................................................................6
1.9. Citrus Benefit Plans....................................................6
1.10. Citrus Common Stock.....................................................6
1.11. Closing; Closing Date...................................................6
1.12. Code....................................................................6
1.13. Confidential Information................................................6
1.14. Derivatives Contract....................................................7
1.15. ERISA...................................................................7
1.16. Effective Time..........................................................7
1.17. Exchange Act............................................................7
1.18. FDIC....................................................................7
1.19. Federal Reserve.........................................................7
1.20. Florida State Board.....................................................7
1.21. GAAP....................................................................7
1.22. Subsidiary Bank.........................................................7
1.23. IRS.....................................................................7
1.24. Knowledge...............................................................7
1.25. Lien....................................................................7
1.26. Material Adverse Event; Material Adverse Effect.........................7
1.27. Merger..................................................................7
1.28. OCC.....................................................................7
1.29. OTS.....................................................................7
1.30. PBGC....................................................................7
1.31. Person..................................................................7
1.32. Plan of Merger..........................................................7
1.33. Proxy Statement.........................................................8
1.34. Registration Statement..................................................8
1.35. Regulations.............................................................8
1.36. Regulatory Approvals....................................................8
1.37. Regulatory Authority....................................................8
1.38. Reorganization Agreement................................................8
1.39. Rights..................................................................8
1.40. SEC.....................................................................8
1.41. Securities Act..........................................................8
1.42. Shareholder Approval....................................................8
1.43. Shareholders' Meeting...................................................8
SECTION II. THE MERGER..............................................................8
2.1. Merger..................................................................8
2.2. The Closing.............................................................8
2.3. Consideration for the Merger............................................8
2.4. Subsidiary Bank; Shareholder Approval; Registration Statement...........8
2.5. Cooperation; Regulatory Filings.........................................9
2.6. Tax Treatment...........................................................9
2.7. Reservation of Right to Revise Transaction..............................9
2.8. Accounting Treatment....................................................9
SECTION III. REPRESENTATIONS AND WARRANTIES OF CITRUS...............................9
3.1. Organization, Good Standing and Conduct of Business....................10
3.2. Subsidiaries...........................................................10
3.3. Corporate Authority....................................................10
2
<PAGE>
3.4. Binding Effect.........................................................10
3.5. Capitalization of Citrus...............................................10
3.6. Compliance with Laws; Absence of Defaults..............................10
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................................................11
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..............................................12
3.19. Employee Benefit Plans and Contracts...................................13
3.20. Allowance for Loan Losses..............................................14
3.21. Environmental Matters..................................................14
3.22. Citrus Information.....................................................14
3.23. Asset Classification...................................................15
3.24. Derivatives Contracts, Etc.............................................15
3.25. Labor Matters..........................................................15
3.26. Securities Reports.....................................................15
3.27. Ownership of CFC Common Stock..........................................15
3.28. 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..............................17
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 and Regulatory Agreements...................................17
4.12. Reports................................................................18
4.13. CFC Information........................................................18
4.14. Securities Reports.....................................................18
4.15. Due Diligence..........................................................18
4.16. Derivatives Contracts, Etc.............................................18
4.17. Y2K....................................................................18
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING....................................18
5.1. Conduct of Citrus Pending Closing......................................18
5.2. Conduct of CFC Pending Closing.........................................19
SECTION VI. COVENANTS OF THE PARTIES...............................................20
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............................................21
6.6. [Reserved]..............................................................21
6.7. Tax Treatment..........................................................21
6.8. Expenses...............................................................21
6.9. Material Events........................................................21
6.10. Public Announcements...................................................21
6.11. Updating of Schedules..................................................21
3
<PAGE>
6.12. Certain Policies of Citrus.............................................21
6.13. Employee Matters.......................................................21
6.14. Directors..............................................................22
6.15. Agreements with Citrus Officer.........................................22
6.16. Prohibited Actions.....................................................22
6.17. Name...................................................................22
SECTION VII. CONDITIONS TO CFC'S OBLIGATIONS TO CLOSE.............................22
7.1. Performance of Acts and Representations by Citrus......................22
7.2. Opinion of Counsel for Citrus..........................................23
7.3. Conduct of Business....................................................23
7.4. Consents...............................................................23
7.5. Certificates...........................................................23
7.6. Shareholder Approval...................................................23
7.7. Securities Laws........................................................23
7.8. Employment Agreement....................................................23
7.9. Limit on Dissent.......................................................23
7.10. Pooling-of-Interests..................................................24
7.11. Provision for Loan Losses..............................................24
SECTION VIII. CONDITIONS TO THE OBLIGATION OF CITRUS TO CLOSE.......................24
8.1. Performance of Acts and Representations by CFC.........................24
8.2. Opinion of Counsel for CFC.............................................24
8.3. Conduct of Business....................................................24
8.4. Consents...............................................................24
8.5. Certificates...........................................................25
8.6. Tax Opinion............................................................25
8.7. Shareholder Approval...................................................25
8.8. Securities Laws........................................................25
8.9. Employment Agreement....................................................25
8.10. Fairness Opinion.......................................................25
SECTION IX. TERMINATION...........................................................25
9.1. Termination............................................................25
SECTION X. INDEMNIFICATION........................................................25
10.1. Information for Application and Statements............................25
10.2. Indemnification of Officers and Directors.............................26
10.3. Insurance.............................................................26
10.4. Attorneys Fees.........................................................27
SECTION XI. MISCELLANEOUS.........................................................27
11.1. Reliance...............................................................27
11.2. Entire Agreement......................................................27
11.3. Binding Agreement.....................................................27
11.4. Notices...............................................................27
11.5. Counterparts..........................................................27
11.6. Headings..............................................................28
11.7. Law Governing.........................................................28
11.8. Amendment.............................................................28
11.9. Waiver................................................................28
</TABLE>
APPENDICES
Appendix A Plan of Merger
4
<PAGE>
This REORGANIZATION AGREEMENT is entered into as of this 18th day of
March, 1999 by and between Carolina First Corporation ("CFC"), a corporation
organized and existing under the laws of the State of South Carolina and Citrus
Bank ("Citrus"), a state banking corporation organized and existing under the
laws of the State of Florida.
RECITALS
A. Citrus is a state banking corporation headquartered in Orlando,
Florida.
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 CFC acquire Citrus through the merger
of a banking subsidiary of CFC with and into Citrus, upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, CFC and Citrus
hereby agree as follows:
SECTION I. DEFINITIONS
1.1. ARTICLES OF MERGER. The Articles of Merger to be executed by
Subsidiary Bank and Citrus in a form appropriate for filing with the appropriate
Regulatory Authorities and/or state agencies or offices 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 and
understandings that provide benefits of economic value to any present or former
employee, or current or former beneficiary, dependent or assignee of any such
employee or former employee.
1.3. CERCLA. The Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. 9601 ET SEQ.
1.4. CFB. Carolina First Bank, a South Carolina corporation and a
wholly-owned subsidiary of CFC.
1.5. CFC. Carolina First Corporation, a bank holding company
headquartered in Greenville, South Carolina.
1.6. CFC BENEFIT PLANS. All Benefit Plans, and all other material fringe
benefit plans or programs, sponsored or maintained by CFC or under which it may
be obligated.
1.7. CFC COMMON STOCK. The common stock, par value $1.00 per share, of
CFC.
1.8. CITRUS. Citrus Bank, a state banking corporation organized and
existing under the laws of the State of Florida.
1.9. CITRUS BENEFIT PLANS. All Benefit Plans, and all other material
fringe benefit plans or programs, sponsored or maintained by Citrus or under
which Citrus may be obligated.
1.10. CITRUS COMMON STOCK. The common stock, par value $4.00 per share,
of Citrus.
1.11. CLOSING; CLOSING DATE. The terms "Closing" and "Closing Date"
shall have the meanings ascribed to them in Section 2.2 hereof.
1.12. CODE. The Internal Revenue Code of 1986, as amended, including, if
the context permits, the applicable regulations promulgated pursuant thereto.
1.13. CONFIDENTIAL INFORMATION. The term "Confidential Information"
shall mean all information of any kind concerning a party hereto that is
furnished by such party or on its behalf pursuant to Section 6.1 hereof as a
result of the transactions contemplated herein, except information (i)
ascertainable or obtained from public or published information, (ii) received
from a third party not known to the recipient of Confidential Information to be
under an 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.
1.14. DERIVATIVES 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).
1.15. ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
1.16. 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
5
<PAGE>
notify Citrus 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.
1.17. EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
1.18. FDIC. The Federal Deposit Insurance Corporation.
1.19. FEDERAL RESERVE. The Board of Governors of the Federal Reserve
System.
1.20. FLORIDA STATE BOARD. The Florida State Department of Banking and
Finance.
1.21. GAAP. Generally accepted accounting principles consistently
applied.
1.22. SUBSIDIARY BANK. A banking subsidiary of CFC, whether now existing
or hereafter organized, which shall be used for purposes of effecting the Merger
and other transactions contemplated herein.
1.23. IRS. The Internal Revenue Service.
1.24. 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 the board of
directors of the entity making the representation or warranty from other
Persons).
1.25. 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.
1.26. MATERIAL ADVERSE EVENT; MATERIAL ADVERSE EFFECT. This shall mean
an event, effect, occurrence or circumstance which, alone or when taken with
other breaches, events, effects, occurrences or circumstances existing
concurrently therewith (including without limitation, any breach of a
representation or warranty contained herein by such party) (i) has or is
reasonably expected to have a material adverse effect on the properties,
financial condition, results of operations, or business of such party and its
subsidiaries, taken as a whole, or (ii) would materially prevent such party's,
or any affiliated party's, ability to perform its obligations under this
Reorganization Agreement or the consummation of any of the transactions
contemplated hereby; provided, however, that in determining whether a Material
Adverse Effect or Material Adverse Event has occurred, there shall be excluded
any effect the cause of which is (A) any change in banking, tax and similar laws
of general applicability or interpretations thereof by courts or governmental
authorities, (B) any change in GAAP or regulatory accounting requirements
applicable to the parties hereto, (C) any action or omission of Citrus or CFC or
a subsidiary thereof taken with the prior written consent of CFC or Citrus, as
applicable, in contemplation of the transaction contemplated herein, (D) the
actions contemplated by Section 6.12 or Section 7.11, or (E) any changes in
general economic conditions affecting financial institutions generally,
including but not limited to changes in interest rates.
1.27. MERGER. The Merger of Subsidiary Bank with and into Citrus, all as
provided herein.
1.28. OCC. Office of the Comptroller of the Currency.
1.29. OTS. Office of Thrift Supervision.
1.30. PBGC. The Pension Benefit Guaranty Corporation.
1.31. 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.
1.32. PLAN OF MERGER. The Plan of Merger attached to this Reorganization
Agreement as Appendix A.
1.33. PROXY STATEMENT. The joint proxy statement/prospectus included in
the Registration Statement which shall be furnished to the Citrus shareholders
in connection with the Shareholders' Meeting and the matters contemplated
thereby.
1.34. 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 Citrus shareholders in connection with the Merger.
1.35. REGULATIONS. The regulations issued by the IRS under the Code.
1.36. REGULATORY APPROVALS. The orders, approvals, or exemptions of the
FDIC, Federal Reserve, the OCC, the Florida State Board, or any other Regulatory
Authority approving the Merger and the transactions contemplated herein.
1.37. 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 OCC,
the Florida State Board and the FDIC) and any other Federal or state bank,
thrift or other
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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.
1.38. REORGANIZATION AGREEMENT. This Reorganization Agreement, including
all schedules, appendices and exhibits attached hereto.
1.39. 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 of, any of its capital stock or ownership
interests therein.
1.40. SEC. The Securities and Exchange Commission.
1.41. SECURITIES ACT. The Securities Act of 1933, as amended.
1.42. SHAREHOLDER APPROVAL. The approval of the Merger by the requisite
vote of the shareholders of Citrus at the Shareholders' Meeting, all in
accordance with this Reorganization Agreement and the Plan of Merger.
1.43. SHAREHOLDERS' MEETING. The meeting of Citrus shareholders at which
the Merger will be voted upon.
SECTION II. THE MERGER
2.1. MERGER. Subject to the terms and conditions of this Reorganization
Agreement, including the Plan of Merger, Subsidiary Bank shall merge with and
into Citrus (the "Merger"), the separate existence of Subsidiary Bank shall
cease, and Citrus shall survive and the name of the surviving corporation shall
be "Citrus Bank." The parties agree that the Merger will be effected pursuant to
the terms set forth in the Plan of Merger, the terms of which are incorporated
herein.
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 September 30, 1999,
either party hereto shall have the right to terminate this Reorganization
Agreement so long as the failure to Close is not the result of a breach of this
Reorganization Agreement by the party seeking to effect such termination.
2.3. CONSIDERATION FOR THE MERGER. The manner of converting the shares
of Citrus into shares of CFC shall be as set forth in the Plan of Merger.
2.4. SUBSIDIARY BANK; SHAREHOLDER APPROVAL; REGISTRATION STATEMENT. CFC
agrees to cause Subsidiary Bank to be in existence (if not already formed) such
that the Merger may be consummated in a timely manner and to vote all shares of
Subsidiary Bank in favor of this Reorganization Agreement and the Merger. Citrus
shall call its Shareholders' Meeting in accordance with the applicable
provisions of Florida law for the purpose of considering and voting on this
Reorganization Agreement and the transactions contemplated hereby. The
Shareholders' Meeting shall be held as soon as practicable. The board of
directors of Citrus shall recommend (subject to compliance with their legal and
fiduciary duties, as advised by counsel) to its shareholders and use its best
efforts to obtain their approval of this Reorganization Agreement and the
Merger. CFC shall file the Registration Statement with the SEC and shall pay the
required filing fees. The parties will use their respective best efforts and
cooperate with each other to obtain promptly the effectiveness of the
Registration Statement. CFC shall also take any reasonable action required to be
taken under applicable blue sky laws in connection with the issuance of CFC
Common Stock in the Merger. CFC and Citrus shall jointly prepare the Proxy
Statement, which shall be reasonably acceptable to all parties. The Proxy
Statement shall be mailed to the Citrus 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. Citrus 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 Citrus shall cooperate, and
shall cause each of their subsidiaries to cooperate, in the preparation and
submission by CFC and Citrus, 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 OCC, the appropriate
Regulatory Authorities of South Carolina and Florida, the shareholders of
Citrus, 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
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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
obtaining the Regulatory Approvals. The parties shall provide each other with
copies of all correspondence and responses sent to and from Regulatory
Authorities with respect to the Merger.
2.6. TAX TREATMENT. CFC and Citrus 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 Citrus (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 Citrus 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 Citrus'
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.
2.8. ACCOUNTING TREATMENT. The parties presently intend that the Merger
shall be accounted for as a "pooling-of-interests" (although CFC, in its sole
discretion, has the right to cause the Merger to be accounted for as a
"purchase"). If the Merger is accounted for as a "pooling-of-interests," CFC
shall publish as soon as reasonably practicable financial results covering the
first complete month of combined operations of CFC and Citrus after the
effective date of the Merger (all as contemplated within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies). The parties
acknowledge that the publishing of such financial statements within 11 business
days after the end of the fiscal month shall be deemed to be timely.
SECTION III. REPRESENTATIONS AND WARRANTIES OF CITRUS
Citrus hereby represents and warrants to CFC the following matters on
and as of the date of this Reorgani zation 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 had a Material Adverse Effect.
3.1. ORGANIZATION, GOOD STANDING AND CONDUCT OF BUSINESS. Citrus is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Florida, 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 Citrus makes such licensing or
qualification necessary.
3.2. SUBSIDIARIES. Citrus neither owns nor controls 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 Citrus. Other than the Shareholder Approval, no further corporate
acts or proceedings on the part of Citrus are required or necessary to authorize
this Reorganization Agreement or the Merger.
3.4. BINDING EFFECT. Subject to receipt of the Shareholder Approval
and the Regulatory Approvals, when executed, this Reorganization Agreement will
constitute valid and legally binding obligations of Citrus, enforceable against
Citrus 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 Citrus in accordance with the provisions hereof, shall be duly
authorized, executed and delivered by Citrus and enforceable against Citrus in
accordance with its terms, subject to the exceptions in the previous sentence.
3.5. CAPITALIZATION OF CITRUS. The authorized capital stock of Citrus
consists solely of 2,000,000 authorized shares of common stock ($4.00 par
value), of which 1,862,177 shares are issued and outstanding as of the date
hereof. All of the issued and outstanding shares of Citrus are validly issued
and fully paid and nonassessable.
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Except as set forth on Schedule 3.5, there are no outstanding Rights to purchase
shares of any class of capital stock of Citrus, or outstanding agreements
pursuant to which Citrus is or may become obligated to issue any shares of its
capital stock. None of the shares of the Citrus Common Stock is subject to any
restrictions as to the transfer thereof, except as set forth in Citrus' 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) Citrus is not in
default under, or in violation of, any provision of its Articles of
Incorporation or Bylaws. Citrus is not in default under, or in violation of, any
material agreement to which Citrus is a party.
(b) Except as disclosed on Schedule 3.6, Citrus is not in violation of
any applicable law, rule or regulation. Citrus 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 Citrus 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 Citrus, as applicable, (ii) threatening to revoke any
Authorization, (iii) requiring or threatening to require Citrus, or indicating
that Citrus 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 Citrus, or (iv)
directing, restricting or limiting, or threatening to direct, restrict or limit
in any manner the operations of Citrus (any such notification, communication,
memorandum, agreement or order described in this sentence herein referred to as
a "Regulatory Agreement").
(c) Citrus is "well capitalized" as defined in applicable FDIC
regulations and is not in "troubled condition" as defined therein, and 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.
(d) Citrus is not aware of any reason why the Regulatory Approvals will
not be obtained within the time period set forth in Section 2.2.
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 Citrus 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 Citrus, or (iv)
violate any provisions of Citrus' Articles of Incorporation or Bylaws. To the
best of Citrus' knowledge, no other party to any material agreement to which
Citrus is a party is in default thereunder or in breach of any provision
thereof. To the best of Citrus' 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. Citrus has obtained all certificates of
authority, licenses, permits, franchises, registrations of foreign ownership or
other regulatory approvals in every jurisdiction necessary for the continuing
conduct of its business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no such certificate,
license, permit, franchise, registration or other approval is about to expire or
lapse, has been threatened to be revoked or has otherwise become restricted by
its terms which would, upon such expiration, lapse, revocation or restriction,
have a Material Adverse Effect. Further, there is no reasonable basis for any
such expiration, lapse, revocation, threat of revocation or restriction. Except
for any necessary Regulatory Approvals, no consent, approval, Authorization,
registration, or filing with or by any governmental authority, foreign or
domestic, is required on the part of Citrus in connection with the execution and
delivery of this Reorganization Agreement or the consummation by Citrus of the
transactions contemplated hereby. Except for the Regulatory Approvals, Citrus is
not required to procure the approval of any Person in order to prevent the
termination of any right, privilege, license or contract of Citrus as a result
of this Reorganization Agreement.
3.9. FINANCIAL STATEMENTS. The financial statements of Citrus at and
for each of the twelve months ended December 31, 1996 (audited), 1997 (audited)
and 1998 (unaudited) (the "Citrus 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 Citrus at the
dates indicated and the results of its operations for each of the periods
indicated. The books and records of Citrus 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 Citrus.
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3.10. TAX RETURNS. Citrus files its income tax returns and maintains
its tax books and records on the basis of a taxable year ending December 31.
Citrus has duly filed all tax reports and returns required to be filed by any
Federal, state and local taxing authorities (including, without limitation,
those due in respect of its properties, income, franchises, licenses, sales,
payrolls, and trusts established by Citrus) through the date hereof, and Citrus
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. Citrus 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.
Citrus 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. Citrus does not know of, 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 Citrus which,
if determined adversely, would result in the assertion of any deficiency. All
tax information reported by Citrus to Federal and state authorities and other
Persons has been accurately and timely reported, except such as will not have a
Material Adverse Effect.
3.11. UNDISCLOSED LIABILITIES. Except for the liabilities which are
disclosed in the Citrus Financial Statements or as set forth on Schedule 3.11,
Citrus 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, 1998, there has been no (i) Material Adverse Event with
respect to Citrus, or (ii) any incurrence by or subjection of Citrus to any
obligation or liability (whether fixed, accrued or contingent) or commitment
material to Citrus 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 Citrus Financial Statements at and for
the periods subsequent to December 31, 1998.
3.12. PROPERTIES, ENCUMBRANCES. Citrus 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 Citrus, including whether
such locations are owned or leased and a statement of when such locations were
first occupied by Citrus. All buildings and all fixtures, equipment, and other
property and assets which are material to its business are held by Citrus 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 Citrus, or
to its knowledge affecting Citrus, 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 Citrus knows of no basis for any of
the foregoing. There is no order, writ, memorandum, agreement, injunction, or
decree of any court, domestic or foreign, or any Federal or state agency
affecting Citrus specifically or to which Citrus is subject. Schedule 3.13 also
sets forth each pending claim against Citrus related to the Occupational Safety
and Health Act, each claim related to Citrus pending before the Wage/Hour
Division of the Department of Labor, each claim against Citrus relating to
conciliation agreements or complaints by the Office of Federal Contract
Compliance Programs, charges filed with the Equal Employment Opportunity
Commission with respect to Citrus and charges filed with the Department of Labor
alleging violations of the Family Medical Leave Act by Citrus, regardless of
whether such matters are expected to have a Material Adverse Effect.
3.14. REPORTS. Citrus has duly made all reports and filings required
to be made pursuant to applicable law.
3.15. BROKERS. Except for its agreement with Allen C. Ewing & Co. (a
copy of which has been provided to CFC), Citrus 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 Citrus after the date hereof and a
summary of the terms and conditions pertaining thereto. At least 20 business
days prior to the Closing Date, Citrus 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 is a list of the
policies of fire, liability, life and other types of insurance held by Citrus,
setting forth with respect to each such policy, the policy number, name of the
insured party, type of insurance, insurance company, annual premium, expiration
date, deductible amount, if any,
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and amount of coverage. Citrus 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 Citrus taking into
account the availability and cost of such coverage. To the extent permissible
pursuant to such policies, all such policies shall remain in full force and
effect for a period of at least 90 days following the Closing Date. There is no
reason known to Citrus that any such policy would 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 Citrus which requires an
aggregate payment by Citrus after the date hereof of more than $50,000, and any
other contract or commitment that in the opinion of Citrus management Materially
Adversely Effects the business of Citrus. Except for the contracts and
commitments described in this Reorganization Agreement or as set forth on
Schedule 3.18, Citrus 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
its banking business;
2. Any employment contract or arrangement, whether oral or
written, with any officer, consultant, director or employee which is not
terminable on 30 days' notice without penalty or liability to make any
payment thereunder for more than 30 days after such termination;
3. Any plan or contract or other arrangement, oral or written,
providing for insurance for any officer or employee or members of their
families;
4. Any plan or contract or other arrangement, oral or written,
providing for bonuses, pensions, options, deferred compensation,
retirement payments, profit-sharing or other benefits for employees;
5. Any contract or agreement with any labor union;
6. Any contract or agreement with customers for the sale of
products or the furnishing of services, or any sales agency, broker,
distribution or similar contract, except contracts made in the ordinary
course of business;
7. Any instrument or arrangement evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase money obligation, guaranty, conditional
sale, lease-purchase, or otherwise (other than banking items being
processed in the ordinary course of business);
8. Any joint venture contract or arrangement or any other
agreement involving a sharing of profits;
9. Any license agreement in which Citrus is the licensor or
licensee; and
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 Citrus,
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 Citrus Benefit Plans. Citrus has delivered to CFC (i)
accurate and complete copies of all Citrus 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 Citrus Benefit Plans, (iii) accurate and
complete copies of the most recent financial statements and actuarial reports
with respect to all Citrus 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 Citrus 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 Citrus Benefit
Plan maintained or intended to be maintained under Section 401(a) of the Code.
Any Citrus Benefit Plan providing benefits that are funded through a policy of
insurance is indicated by the word "insured" placed by the listing of the Citrus
Benefit Plan on Schedule 3.19.
(b) All Citrus 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 Citrus 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 Citrus Benefit Plans that
could subject Citrus to any material penalty or tax imposed under the Code or
ERISA.
(c) Except as set forth on Schedule 3.19, any Citrus 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
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to be so qualified, and such determination is current, remains in effect and has
not been revoked. 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 Citrus Benefit Plan.
(d) Citrus adequately reserved for all liabilities accrued prior to the
Effective Time under Citrus' nonqualified retirement or deferred compensation
plans.
(e) Except as set forth on Schedule 3.19, Citrus has no current or
contingent obligation to contribute to any multiemployer plan (as defined in
Section 3(37) of ERISA). Citrus has no liability with respect to any employee
benefit plan (as defined in Section 3(3) of ERISA) other than with respect to
the Citrus Benefit Plans.
(f) There are no pending or threatened claims by or on behalf of any
Citrus Benefit Plan, or by or on behalf of any individual participants or
beneficiaries of any Citrus Benefit Plan, alleging any breach of fiduciary duty
on the part of Citrus or any of its 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 Citrus
Benefit Plans are not the subject of any investigation, audit or action by the
IRS, the Department of Labor or the PBGC. Citrus has made all required
contributions under the Citrus Benefit Plans, including the payment of any
premiums payable to the PBGC and other insurance premiums. There is no
underfunding liability for any Citrus Benefit Plan that is subject to the
funding requirements of Section 412 of the Code.
(g) Citrus does not maintain any defined benefit plan, and neither has
incurred, nor 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 Citrus Benefit Plan has been
subject to a reportable event for which notice would be required to be filed
with the PBGC, and no proceeding by the PBGC to terminate any Citrus Benefit
Plan has been instituted or threatened.
(h) With respect to any Citrus 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 Citrus 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
"Citrus Allowance") shown on the Citrus Call Report dated as of December 31,
1998 and provided to the Florida State Board, as of such date has been
determined, in the opinion of management of Citrus in accordance with GAAP, to
be adequate to provide for losses relating to or inherent in the loan portfolios
of Citrus.
3.21. ENVIRONMENTAL MATTERS. Citrus is in material compliance with all
local, state and Federal environmen tal 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. Citrus has not, nor to the best of Citrus' 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 Citrus (including, without limitation, the buildings or structures
thereon) (the "Real Property"). Citrus has not, nor to the best of Citrus'
knowledge have other parties, installed, used, or disposed of any asbestos or
asbestos-containing material on, in or under any of the Real Property. Citrus
has not, nor to the best of Citrus' knowledge have other parties, installed or
used underground storage tanks in or under any of the Real Property. Citrus 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 Citrus. Any exceptions to the foregoing are set forth on
Schedule 3.21.
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3.22. CITRUS INFORMATION. The written information with respect to
Citrus and its officers, directors, and affiliates which shall have been
supplied by Citrus (or any of its accountants, counsel or other authorized
representa tives) specifically for use in soliciting the 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 Citrus or on the date of
the 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 and other assets of Citrus that have been classified
by it as of December 31, 1998 (the "Asset Classification"); and no amounts of
loans, extensions of credit or other assets that have been classified as of
December 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
Citrus prior to December 31, 1998.
3.24. DERIVATIVES CONTRACTS, ETC. Citrus 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 Citrus assets pledged as security for each such instrument.
3.25. LABOR MATTERS. No material work stoppage involving Citrus is
pending or, to the best knowledge of Citrus, threatened. Citrus is not involved
in, or, to the best knowledge of Citrus' management, threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding which
might reasonably be expected to have a Material Adverse Effect. Employees of
Citrus are not represented by any labor union, and, to the best knowledge of
Citrus' management, no labor union is attempting to organize employees of
Citrus.
3.26. SECURITIES REPORTS. During the last two (2) years, Citrus has
filed on a timely basis all securities-related reports, registrations, and
statements, together with any amendments, required by applicable Regulatory
Authorities, all of which, as of their respective dates, were in compliance in
all material respects with the applicable rules and regulations.
3.27. OWNERSHIP OF CFC COMMON STOCK. No shares of CFC Common Stock are
beneficially owned (as defined in Rule 13d-3 under the Exchange Act) by Citrus.
3.28. RESALE OF CFC COMMON STOCK. Citrus 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 Citrus Common Stock outstanding as of the Effective
Time. For purposes of this representation, shares of Citrus 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 Citrus and then
disposed of by shareholders of Citrus.
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC
CFC hereby represents and warrants to Citrus 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 Citrus, such breach or inaccuracy must
have had 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 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. At Closing, Subsidiary Bank will (i) be a direct
subsidiary of CFC, duly organized, validly existing and in good standing under
the laws of
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its jurisdiction of incorporation, and (ii) have 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 then being conducted and to consummate the
transactions contemplated herein.
4.2. SUBSIDIARIES. (a) Other than CFB, Carolina First Bank, F.S.B.,
Carolina First Mortgage Company, Resource Processing Group, Inc., and Blue Ridge
Finance Company, Inc. (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. Except in connection with the pending
acquisition of Citizens First National Bank, 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, commit ments, 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, or has the right to acquire, in excess of
5% of the common stock of (i) Affinity Technology Group, Inc., a Delaware
corporation headquartered in Columbia, South Carolina and (ii) Net.B@nk, Inc., a
Georgia corporation and savings and loan holding company headquartered in
Atlanta, Georgia. None of the Subsidiaries either owns or controls five percent
(5%) or more of the outstanding equity securities, either directly or
indirectly, of any Person, except that (i) CFB owns 100% of Carolina First
Securities, Inc., over 99% of Carolina First Mortgage Loan Trust and residual
interests in two trusts created in connection with the securitization of loans,
(ii) Blue Ridge Finance Company, Inc. owns 100% of CF Investment Company, and
(iii) CF Investments, Inc. (a SBIC) owns equity interests in other entities
ranging from nominal amounts up to 50% of such other entities' outstanding
equity.
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 the 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 per share), of which approximately 22,025,025 shares were issued and
outstanding as of the date hereof and (ii) 10,000,000 shares of preferred stock,
none of which is outstanding. All of the issued and outstanding shares of CFC
are validly issued and fully paid and nonassessable. Except for (i) stock or
options to purchase shares of CFC Common Stock granted under director or
employee benefit plans 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.
The CFC 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, (iii) have been properly registered for trading on the Nasdaq
National Market, and (iv) will be entitled to all benefits accorded other shares
of CFC Common Stock under the Rights Plan.
4.6. COMPLIANCE WITH LAWS; ABSENCE OF DEFAULTS. (a) 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
material agreement to which CFC is a party. CFC is not in violation of any
applicable law, rule or regulation the effect of which would have a Material
Adverse Effect on CFC or its business operations or prospects.
(b) CFC is not aware of any reason why the Regulatory Approvals will not
be obtained within the time period set forth in Section 2.2.
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
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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 financial statements of CFC at and for
each of the fiscal years ended December 31, 1996 (audited), 1997 (audited) and
1998 (unaudited) (the "CFC Financial Statements") all of which have been
provided to Citrus, 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, 1998, there has been no (i) Material Adverse Event with
respect to 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, 1998.
4.11. LITIGATION AND REGULATORY AGREEMENTS. Except as set forth on
Schedule 4.11, there are no claims, actions, suits or proceedings pending or
threatened against or, to its knowledge, affecting CFC at law or in equity,
before or by any Federal, state, municipal, administrative or other court,
governmental department, commission, board, or agency, an adverse determination
of which could have a Material Adverse Effect, 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
affecting 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) agreements between CFC and the Federal Reserve,
and CFC and the OTS regarding CFC's ownership interest in Net.B@nk, Inc.
4.12. REPORTS. CFC has duly made all reports and filings required to be
made pursuant to applicable law.
4.13. 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 representa tives)
specifically for use in soliciting the 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 Citrus or on the date of the
Shareholders' Meeting, or in the case of the Registration Statement, at the time
it becomes effective, contain any untrue statement of a material fact, or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.14. SECURITIES REPORTS. During 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. All reports and registration
statements filed by CFC under the Securities Act and the Exchange Act did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a
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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.
4.15. DUE DILIGENCE. All information provided by CFC in connection with
the due diligence investigation by Citrus 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 Citrus all material
information regarding CFC.
4.16. DERIVATIVES CONTRACTS, ETC. CFC 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 or referenced in the footnotes to the CFC
Financial Statements 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 4.16, including a list, as applicable, of any CFC assets pledged as
security for each such instrument.
4.17. Y2K. The computer based systems of CFC and its material
subsidiaries will be "Millennium Compliant" on or before September 30, 1999. The
term "Millennium Compliant" means:
(i) CFC and its material subsidiaries' functions, calculations,
and other computing processes will perform in a consistent manner regardless of
the date in time performed and regardless of the date input, whether before, on,
or after January 1, 2000.
(ii) CFC and its material subsidiaries' software will accept,
calculate, compare, sort, extract, sequence, and otherwise process date inputs
and date values, and return and display date values in a consistent manner
regardless of the dates used, whether before, on, or after January 1, 2000.
(iii) CFC and its material subsidiaries' software will function
without interruptions caused by the date in time on which the processes are
actually performed or by the date input to the software, whether before, on, or
after January 1, 2000.
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING
5.1. CONDUCT OF CITRUS PENDING CLOSING. During the period commencing on
the date hereof and continuing until the Closing Date, Citrus 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) Citrus 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, will 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 Citrus. Citrus shall not purchase or otherwise acquire or
enter into a contract to acquire servicing or subservicing rights with
respect to loans not originated by Citrus without the written consent of
CFC, which consent shall not be unreasonably withheld.
(b) Citrus will not amend its Articles of Incorporation or Bylaws
as in effect on the date hereof, except as may be required by applicable
law or regulation.
(c) Citrus 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 (except for the issuance of common stock in
connection with the exercise or conversion of Rights set forth in
Schedule 3.5, in accordance with the terms thereof as they currently
exist); 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) Citrus will promptly advise CFC in writing of any change in
the business of Citrus which has, or may reasonably be expected to have,
a Material Adverse Effect.
(e) Citrus will not take, agree to take, or knowingly permit to
be taken (except as may be required by applicable law or regulation) any
action or do or knowingly permit to be done anything in the
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conduct of the business of Citrus, 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 Citrus
contained herein to be or become untrue in any material respect.
(f) Citrus will not incur any indebtedness for borrowed money,
issue or sell any debt securities, or assume or otherwise become liable,
whether directly, contingently or otherwise, for the obligation of any
other party, other than in the ordinary course of business.
(g) Except for expenses attendant to the Merger and current
contractual obligations, Citrus will not 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) Citrus will not grant any executive officers any increase in
compensation (except in the ordinary course of business in accordance
with past practice and only upon prior notice to 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) Citrus will not acquire or agree to acquire by merging or
consolidating with, purchasing substantially all of the assets of or
otherwise, any business or any corporation, partnership, association or
other business organization or division thereof.
(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, Citrus shall not (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) Citrus shall not impose, or permit or suffer the imposition
of any Liens (except in the ordinary course of business) on any of its
assets, other than Liens on such assets that, individually or in the
aggregate, are not material to the business, properties or operations of
Citrus.
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 Citrus 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 would adversely affect
the Citrus shareholders in any material respect.
(c) CFC will promptly advise Citrus orally and in writing of any
change in its business which is or may reasonably be expected to be
materially adverse to CFC.
(d) CFC will not take, agree to take, or knowingly permit to be
taken any action or do or knowingly permit to be done anything in the
conduct of its business or otherwise, which would be contrary to or in
breach of any of the terms or provisions of this Reorganization
Agreement, or which would cause any of the representations of CFC
contained herein to be or become untrue in any material respect.
SECTION VI. COVENANTS OF THE PARTIES
6.1. ACCESS TO PROPERTIES AND RECORDS. Between the date of this
Reorganization Agreement and the Closing Date, the parties will provide to each
other and to their respective accountants, counsel and other authorized
representatives reasonable access, during reasonable business hours and upon
reasonable notice, to their respective premises, properties, contracts,
commitments, books, records and other information and will cause their
respective officers to furnish to the other party and its authorized
representatives such financial, technical and operating data and other
information pertaining to their respective businesses, as the parties shall from
time to time reasonably request.
6.2. CONFIDENTIALITY. Each party will and will cause its employees and
agents to hold in strict confidence, unless disclosure is compelled by judicial
or administrative process, or in the opinion of its counsel, by other
requirements of law, all Confidential Information and will not disclose the same
to any Person. The party gaining access to such Confidential Information shall
exercise the same degree of care with respect thereto that any such 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
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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.
6.3. COOPERATION. Each party shall use its respective, reasonable best
efforts to take any and all necessary or appropriate actions, and to use its
reasonable best efforts to cause its officers, directors, employees, agents, and
representatives to use their reasonable best efforts and to take all steps in
good faith within their power, to cause to be fulfilled those of the conditions
precedent to its obligations to consummate the 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. AFFILIATES' LETTERS. Citrus 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 Citrus, "affiliates" of Citrus for purposes of Rule 145
of the General Rules and Regulations under the Securities Act. Citrus 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 Citrus 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. [RESERVED]
6.7. TAX TREATMENT. Citrus 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.
6.8. EXPENSES. Except to the extent expressly provided otherwise
herein, the parties shall pay their own fees and expenses (including legal and
accounting fees) incurred in connection with the Merger.
6.9. 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 VII or Section VIII 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.
6.10. PUBLIC ANNOUNCEMENTS. At all times until after the Closing Date,
neither Citrus nor CFC shall issue or permit any of its respective subsidiaries,
affiliates, officers, directors or employees to issue any press release or other
information to the press with respect to this Reorganization Agreement, without
the express prior consent of the other party, except as may be required by law
or the policies of the Nasdaq Stock Market. The parties shall cooperate to
prepare a joint press release with respect to the transactions contemplated
herein.
6.11. UPDATING OF SCHEDULES. Citrus 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 Citrus or CFC contained herein or any right of
Citrus or CFC to terminate this Reorganization Agreement. Citrus 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 CITRUS. Citrus shall, consistent with GAAP
and regulatory accounting principles, use its best efforts to record any
accounting adjustments required to conform its 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 Citrus shall not be obligated to record any such accounting
adjustments pursuant to this Section (i) unless and until Citrus 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 Citrus and the authority to
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establish and implement its business policies shall continue to reside solely in
Citrus' officers and board of directors, and the election of Citrus directors
shall be solely the prerogative of Citrus shareholders.
6.13. EMPLOYEE MATTERS. (a) CFC and Citrus agree to cooperate and use
reasonable efforts to develop staffing plans which will result in the retention
of as many Citrus managers and employees as is practical (as determined by CFC).
CFC agrees that Citrus employees shall also be eligible for consideration for
any other available positions for which they are qualified at CFC and its
subsidiaries. CFC agrees that those former Citrus employees who are employed by
CFC or its subsidiaries immediately following the Closing Date: (i) will be
eligible to participate in CFC Benefit Plans; and (ii) will receive past service
credit for eligibility and vesting (but not benefit accrual) purposes under CFC
qualified retirement plans for years of service with Citrus. CFC agrees that
Citrus may elect to fully vest its employees under some or all Citrus Benefit
Plans prior to consummation of the Merger. Any Citrus Benefit Plans that are
intended to be qualified under Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code will be terminated by proper action of the
Board of Directors of Citrus prior to the Effective Time. From and after the
Effective Time, CFC agrees to provide credit for service as required by the
Health Insurance Portability and Accountability Act of 1996, as amended, for
purposes of determining any preexisting condition exclusion that may apply to an
employee of Citrus who becomes covered by a medical plan sponsored by CFC.
(b) Except as set forth on Schedule 3.19, as of the Closing Date, Citrus
shall have 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.
(c) CFC agrees to cause Citrus (after the Closing) to allow existing
Citrus officers to participate in incentive compensation programs to the same
extent as similarly situated officers of Carolina First Bank; provided, however,
that this provision shall not be construed to alter any at-will employment
arrangements.
6.14. DIRECTORS. (a) Upon closing and for a period of at least two
years, CFC will nominate and elect the existing Citrus board members to serve on
the board of directors of Citrus; provided that such obligation will terminate
as to any individual who fails to act in accordance with any fiduciary duties
imposed pursuant to applicable law. Such persons shall receive directors' fees
in accordance with the fee structure and policies generally applicable to
directors of CFC subsidiaries. In the event that the transaction is restructured
in accordance with Section 2.7 and Citrus is merged into CFB, the obligations
under this Section will be satisfied if these individuals are named as advisory
board members of CFC's Florida operations and they otherwise receive director
compensation fees in accordance with the fee structure and policies generally
applicable to directors of CFB.
(b) Upon closing and for a period of at least two years, CFC will
nominate as part of management's slate for its Board of Directors, a resident of
Florida, who shall be reasonably acceptable to the Citrus Board of Directors.
6.15. AGREEMENTS WITH CITRUS OFFICER. Upon closing, CFC shall cause
Citrus to enter into an employment agreement with Randy O. Burden in
substantially the form set forth on Schedule 6.15 (the "Employment Agreement").
6.16. 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 Citrus directors
under applicable law), during the period from the date of this Reorganization
Agreement to the Effective Time, Citrus shall (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 Citrus.
(b) Except as expressly provided in this Reorganization Agreement, as
agreed to by Citrus 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.
6.17. NAME. CFC agrees to cause Citrus Bank to utilize the name "Citrus
Bank" following Closing.
SECTION VII. CONDITIONS TO CFC'S OBLIGATIONS TO CLOSE
The obligations of CFC to consummate the transactions contemplated in
this Reorganization Agreement are subject to the satisfaction of the following
conditions at or before the Closing Date:
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7.1. PERFORMANCE OF ACTS AND REPRESENTATIONS BY CITRUS. Each of the
acts and undertakings of Citrus 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
Citrus 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 CITRUS. Citrus 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) Citrus is duly organized, validly existing and
in good standing under the laws of the State of Florida; (ii) the consummation
of the transactions contemplated by this Reorganization Agreement will not (A)
violate any provision of Citrus' Articles of Incorporation or Bylaws, as
applicable, (B) violate any provision of, result in the termination of, or
result in the acceleration of any obligation under, any agreement listed on
Schedule 3.18 or any order, arbitration award, judgment or decree known to
counsel to which Citrus 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 Citrus is subject; (iii) all of the shares of Citrus
Common Stock are validly authorized and issued, fully paid and non-assessable;
(iv) Citrus 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
Citrus for the consummation of the Merger have been made; (vi) Citrus has full
corporate power and authority to enter into this Reorganization Agreement, and
this Reorganization Agreement has been duly authorized, executed and delivered
by Citrus and constitutes a valid and legally binding obligation of Citrus
enforceable against Citrus 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
Citrus or other parties which would have a Material Adverse Effect on Citrus'
business or properties or its ability to make the representations and warranties
and perform the obligations set forth herein, and (viii) Citrus has perfected
security interest in the collateral referenced in that certain Settlement
Agreement and Stipulation For Entry of Final Judgment entered into as of March
31, 1998 between Citrus and Orange Co. South Auto Auctions, among other parties,
and based on counsel's review of public filings, such security interest is prior
to all other security interests which may be perfected by filing.
7.3. CONDUCT OF BUSINESS. There shall have been no Material Adverse
Event with respect to Citrus 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 requirement 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. CERTIFICATES. CFC shall have been furnished with such
certificates of officers of Citrus, in form and substance reasonably
satisfactory to CFC, dated as of the Closing Date, certifying to such matters as
CFC may reasonably request, including but not limited to the fulfillment of the
conditions specified in this Section VII.
7.6. SHAREHOLDER APPROVAL. The Shareholder Approval shall have been
obtained.
7.7. SECURITIES LAWS. The Registration Statement shall have been
declared effective. No order suspending the sale of the shares of CFC Common
Stock in any jurisdiction shall have been issued, and no proceedings for that
purpose shall have been instituted.
7.8. EMPLOYMENT AGREEMENT. The Employment Agreement shall have been
executed.
7.9. LIMIT ON DISSENT. The holders of 10% or more of the Citrus Common
Stock outstanding at the time of the Shareholders' Meeting shall not have
dissented to the Merger by demanding payment for fair value of their shares in
the manner provided by applicable law.
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7.10. POOLING-OF-INTERESTS. CFC shall have received reasonable
assurance from KPMG Peat Marwick LLP that the Merger will qualify for
pooling-of-interests accounting treatment under general accepted accounting
practices.
7.11. PROVISION FOR LOAN LOSSES. Citrus shall have made a provision
for loan losses of at least $750,000 in the first quarter of 1999, which
provision shall be in addition to the provision for loan losses that otherwise
would have been made by Citrus during such quarter.
SECTION VIII. CONDITIONS TO THE OBLIGATION OF CITRUS TO CLOSE
The obligation of Citrus 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 Citrus with
an opinion of its counsel, dated as of the Closing Date, and in form and
substance reasonably satisfactory to Citrus and its counsel, to the effect that,
except as disclosed herein: (i) CFC and Subsidiary Bank are duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation; (ii) the consummation of the transactions
contemplated by this Reorganization Agreement will not (A) violate any provision
of CFC's or Subsidiary Bank's Articles of Incorporation, Bylaws or other charter
documents, (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 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,
and Subsidiary Bank has the legal right and power, and all authorizations and
approvals required by law, to enter into the Plan of Merger, and to consummate
the transactions contemplated therein; (v) all filings and registrations with,
and notifications to, all Federal and state authorities required on the part of
CFC and Subsidiary Bank 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 Citrus, 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 Citrus, renders the
consummation of this transaction unduly burdensome (excluding conditions or
requirements that are typically imposed in transactions of the type contemplated
herein).
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8.5. CERTIFICATES. Citrus shall have been furnished with such
certificates of officers of CFC, in form and substance reasonably satisfactory
to Citrus, dated as of the Closing Date, certifying to such matters as Citrus
may reasonably request, including but not limited to the fulfillment of the
conditions specified in this Section VIII.
8.6. TAX OPINION. Citrus shall have received from Wyche, Burgess,
Freeman & Parham, P.A. a tax opinion, reasonably satisfactory to Citrus,
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. SHAREHOLDER APPROVAL. The Shareholder Approval shall have been
obtained.
8.8. SECURITIES LAWS. The Registration Statement shall have been
declared effective. No order suspending the sale of the shares of CFC Common
Stock in any jurisdiction shall have been issued, and no proceedings for that
purpose shall have been instituted.
8.9. EMPLOYMENT AGREEMENT. The Employment Agreement shall have been
executed.
8.10. FAIRNESS OPINION. Citrus shall have received a fairness opinion
from an investment banker acceptable to Citrus in all reasonable respects (and
dated within five business days of the mailing date of the Proxy Statement) to
the effect that the Merger is fair, from a financial point of view, to the
Citrus shareholders (it being acknowledged that if the Merger is treated as a
"purchase" for accounting purposes, that such fairness opinion shall be updated
to consider such fact when setting forth its opinion).
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 Citrus, at that party's option, (A) if a
permanent injunction or other order (including any order denying any
required regulatory consent or approval) shall have been issued by any
Federal or state court of competent jurisdiction in the United States or
by any United States Federal or state governmental or regulatory body,
which order prevents the consummation of the transactions contemplated
herein, or (B) if the Shareholder Approval is not received at the
Shareholders' Meeting;
(c) by either CFC or Citrus if the other party (or any of its
subsidiaries) has failed to comply with the agreements or fulfill the
conditions contained herein, provided, however, that any such failure of
compliance or fulfillment must result in a Material Adverse Event and
the breaching party must be given notice of the failure to comply and a
reasonable period of time to cure;
(d) by either CFC or Citrus as set forth in Section 2.2 hereof;
(e) by CFC if the Fair Market Value of the CFC Common Stock on
the day before the Closing Date is $25.91 or higher; or
(f) by Citrus if the Fair Market Value of the CFC Common Stock on
the day before the Closing Date is $17.27 or lower.
SECTION X. INDEMNIFICATION
10.1. INFORMATION FOR APPLICATION AND STATEMENTS. Each of CFC and Citrus
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 Citrus so
representing and warranting will indemnify and hold harmless the other, each of
its directors and officers, who controls the other within the meaning of the
Securities Act, from and against any and all losses, claims, damages, expenses
or liabilities to which any of them may become subject under applicable laws and
rules and regulations thereunder and will reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any actions whether or not resulting in liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any such application or statement or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing by the
representing and warranting party expressly for use therein. Each of CFC and
Citrus 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
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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 Citrus
(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 Citrus to the fullest extent to
which such indemnification is permitted under applicable law and the Articles of
Incorporation and Bylaws of Citrus in effect on the date hereof (except that
this provision shall not be construed so as to cause CFC or Citrus to violate
applicable law). Except for expenses associated with claims described in the
immediately succeeding sentence and except for, in particular, expenses
associated with any claims or threatened or actual litigation between
Indemnitees and CFC, CFC, upon request of such Indemnitees, shall advance
expenses in connection with such indemnification, provided that such advancement
need be made if and only to the extent that such advancement would have been
proper under applicable law. Notwithstanding anything to the contrary herein,
this indemnification shall not extend to claims against an Indemnitee by CFC.
The provisions of this Section X shall survive the closing and shall be
enforceable directly by each officer and director of Citrus benefited by this
Section X.
(b) Any Indemnitee wishing to claim indemnification under this Section
X, upon learning of such claims or liabilities, shall promptly notify CFC
thereof; provided, that the failure so to notify shall not affect the
obligations of CFC hereunder unless such failure materially increases CFC's
liability hereunder. In the event of any litigation giving rise to a claim
hereunder, (i) CFC shall have the right to assume the defense thereof, if it so
elects, and CFC shall pay all reasonable fees and expenses of counsel for the
Indemnitees promptly as statements therefor are received; provided, however,
that CFC shall be obligated pursuant to this Section to pay for only one firm of
counsel for all Indemnitees in any jurisdiction for any single action, suit or
proceeding or any group of actions, suits or proceedings arising out of or
related to a common body of facts, (ii) the Indemnitees shall cooperate in the
defense of any such matter, (iii) CFC shall not be liable for any settlement
effected without its prior written consent and (iv) CFC shall have no obligation
hereunder in the event a Federal banking agency or a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of an Indemnitee in the
manner contemplated hereby is prohibited by applicable law.
10.3. INSURANCE. Citrus and CFC shall use their reasonable best efforts
to maintain Citrus' existing directors' and officers' liability insurance policy
(or a policy, similar to Citrus' existing policy, providing comparable coverage
on terms no less favorable) past the Closing Date covering persons who are
currently covered by such insurance; provided that CFC or Citrus shall not make
a premium payment in respect of such policy (or replacement policy) which
exceeds $25,000 and provided further that Citrus and CFC shall obtain the
maximum amount of such coverage as can be obtained by paying a premium of
$25,000. CFC shall take no action to terminate prematurely such policy.
10.4. ATTORNEYS FEES. In the event of litigation between CFC and an
Indemnitee regarding this Section X, the prevailing party in such litigation
shall be entitled to recover from the losing party all reasonable attorneys fees
and costs incurred in connection with such litigation; provided, however, that
this Section 10.4 shall be applicable only to those Indemnitees who execute and
deliver to CFC before Closing an undertaking whereby they expressly agree to be
obligated to reimburse CFC if applicable under this Section 10.4.
SECTION XI. MISCELLANEOUS
11.1. RELIANCE. Notwithstanding any investigation made by or on behalf
of the parties, whether before or after the Closing Date, the parties shall be
entitled to rely upon the representations and warranties given or made by the
other party(ies) herein.
11.2. ENTIRE AGREEMENT. This Reorganization Agreement, including any
schedules, exhibits, lists and other documents referred to herein which form a
part hereof, contains the entire agreement of the parties with respect to the
subject matter contained herein and there are no agreements, warranties,
covenants or undertakings other than those expressly set forth herein.
11.3. BINDING AGREEMENT. This Reorganization Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Agreement shall not be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto.
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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: 864-242-8324
For Citrus: Randy O. Burden
Citrus Bank
2861 South Delaney Avenue
Orlando, Florida 32806
Fax: 407-428-9234
Copies to: John P. Greeley
Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
255 South Orange Ave., Suite 800
Orlando, Florida 32801
Fax: 407-843-2448
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.
END OF PAGE
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IN WITNESS WHEREOF, this Reorganization Agreement has been duly entered
as of the date first written above.
WITNESS:
<TABLE>
<CAPTION>
<S> <C>
CAROLINA FIRST CORPORATION
/s/ By: /s/ William S. Hummers III
- ----------------------------- -----------------------------------------------------
William S. Hummers III, Executive Vice President
/s/
- -----------------------------
CITRUS BANK
/s/ By: /s/ Randy O. Burden
- ----------------------------- -----------------------------------------------------
Randy O. Burden
/s/ Chairman
- ----------------------------- -----------------------------------------------------
SCHEDULES (Omitted)
Schedule 3.5: Capitalization Exceptions
Schedule 3.6: Violations
Schedule 3.11: Material Liabilities or Obligations Not Disclosed in Citrus 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 Citrus; Other Material Contracts
Schedule 3.19: Citrus Employee Benefit and Welfare Plans
Schedule 3.21 Exceptions to Citrus' Environmental Representations
Schedule 3.23: Classified Assets
Schedule 3.24: Derivatives Contracts, Etc.
Schedule 4.5: Exceptions to CFC Capitalization Representations
Schedule 4.6: Violations
Schedule 4.10: CFC Tax Matters
Schedule 4.11: Material Liabilities or Obligations Not Disclosed in the CFC Financial Statements
Schedule 4.12: Litigation
Schedule 4.14: CFC Employee Benefit and Welfare Plans
Schedule 4.16: Derivatives Contracts, Etc.
Schedule 6.15: Employment Agreements
</TABLE>
25
<PAGE>
APPENDIX A
PLAN OF MERGER OF [SUBSIDIARY BANK]
WITH AND INTO CITRUS BANK
Pursuant to this Plan of Merger (the "Plan of Merger"), [Subsidiary
Bank], ("Subsidiary Bank"), a wholly-owned banking subsidiary of CFC, shall be
merged with and into Citrus Bank ("Citrus"), a Florida state banking corporation
headquartered in Orlando, Florida,
ARTICLE I. DEFINITIONS
The capitalized terms set forth below shall have the indicated meanings.
Defined terms used herein, and not otherwise defined herein, shall have the
meanings ascribed to such terms in the Reorganization Agreement.
1.1. "Articles of Merger" shall mean the Articles of Merger to be
executed by Subsidiary Bank and Citrus in a form appropriate for filing with the
with the appropriate Regulatory Authorities and/or state agencies or offices
relating to the effective consummation of the Merger.
1.2. "CFC" shall mean the Carolina First Corporation, a South Carolina
corporation headquartered in Greenville, South Carolina.
1.3. "CFC Common Stock" shall mean the common stock, par value $1.00 per
share, of CFC.
1.4. "Citrus" shall mean Citrus Bank, a Florida state banking
corporation headquartered in Orlando, Florida.
1.5. "Citrus Common Stock" shall mean the common stock, par value $4.00
per share, of Citrus.
1.6. "Conversion Ratio" shall mean the number of shares of CFC Common
Stock issuable in exchange for one share of Citrus Common Stock, as calculated
pursuant to Section 3.1 hereof.
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 Citrus 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 30 days in
which CFC Common Stock was traded immediately prior to the Closing Date;
provided, however, that the Fair Market Value shall never be deemed to be lower
than $18.35 per share or higher than $24.83 per share; provided, further, that
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 30
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 the average determined pursuant to the first clause and first proviso of
this sentence, then the smaller average shall be the Fair Market Value.
1.9. "Subsidiary Bank" shall mean [a wholly-owned banking subsidiary of
CFC].
1.10. "Merger" shall mean the merger of Subsidiary Bank with and into
Citrus, as more particularly set forth herein and in the Reorganization
Agreement.
1.11. "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).
1.12. "Reorganization Agreement" shall mean the Reorganization Agreement
between CFC and Citrus dated as of the date hereof, to which this Plan of Merger
is attached as Appendix A.
1.13. "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
<PAGE>
existence or market valuation, or in lieu and place, of any of its capital stock
or ownership interests therein.
1.14. "Shareholder Approvals" shall mean, as the context may require,
the duly authorized written consent of CFC to the Merger; and the approval of
the Merger by the requisite vote of the shareholders of Citrus at the
Shareholders' Meeting.
1.15. "Shareholders' Meeting" shall mean the meeting of the shareholders
of Citrus at which the Merger shall be voted upon.
1.16. "Surviving Corporation" shall mean Citrus after consummation of
the Merger.
ARTICLE II. THE MERGER
2.1. LOCATIONS OF CONSTITUENT PARTIES. The names and specific locations
of offices, branches and trust offices of each of the constituent banks party to
the Merger are as follows:
<TABLE>
<CAPTION>
<S> <C>
Name Address of Main Office Address of Other Offices
- ----------------- --------------------------------------- ------------------------
Citrus Bank 2861 S. Delaney Ave., Orlando, FL 32806
------------------------
------------------------
------------------------
</TABLE>
[Subsidiary Bank] [address]
2.2. MERGER. At the Effective Time, subject to the terms and conditions
of the Reorganization Agreement and this Plan of Merger, Subsidiary Bank shall
merge with and into Citrus, the separate existence of Subsidiary Bank shall
cease, and Citrus (the "Surviving Corporation") shall survive and the name of
the Surviving Corporation shall be "Citrus Bank." By virtue of the Merger and
without any action on the part of the holders thereof, each of the shares of
Citrus Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive the Merger Consideration
referenced in Article III below. Each of the shares of Subsidiary Bank capital
stock outstanding immediately prior to the Effective Time shall be canceled.
2.3. 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 Florida Secretary of State and the OCC, as applicable.
2.4. CAPITALIZATION. The capital stock of the Surviving Corporation
shall be 2,000,000 shares of common stock, $4.00 par value per share, 100 shares
of which shall be issued to CFC. No other class of shares shall be authorized or
issued. The retained earnings of the Surviving Corporation, which was
approximately $_______ as of March 31, 1999, shall remain unchanged as a result
of the Merger.
2.5. ARTICLES OF INCORPORATION. The Articles of Incorporation of Citrus
as in effect at the Effective Time shall be and remain the articles of
incorporation of the Surviving Corporation. A copy of the Articles of
Incorporation is attached hereto as Schedule A to this Plan of Merger.
2.6. BYLAWS. The Bylaws of Citrus, 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.
2.7. PROPERTIES AND LIABILITIES OF CITRUS AND SUBSIDIARY BANK;
MANAGEMENT. At the Effective Time, the separate existence and corporate
organization of Subsidiary Bank shall cease, and Citrus 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 Subsidiary Bank without further act or deed.
2.8. RESULTING BANK OFFICES. The name and specific location of the
proposed main office and each existing and proposed branch office and trust
service office of the Surviving Corporation is as set forth above in Section 2.1
for Citrus.
2.9. EXECUTIVE OFFICERS. The names and positions of the executive
officers of the Surviving
<PAGE>
Corporation are as follows:
Name Position
2.10. DIRECTORS. The names and addresses of the directors of the
Surviving Corporation are as follows:
Name Address
2.11. TRUST POWERS. The Surviving Corporation shall have trust powers
to the extent permitted by applicable law.
ARTICLE III. MERGER CONSIDERATION
3.1. MERGER CONSIDERATION. In connection with the Merger, each share
of Citrus 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 shares of CFC Common Stock
having a Fair Market Value equal to $37.07 (such ratio being hereinafter
referred to as the "Conversion Ratio").
3.2. CITRUS COMMON STOCK. Upon consummation of the Merger, Citrus
shall issue 100 shares of its Common Stock to CFC, which shares shall constitute
all outstanding capital stock of Citrus.
3.3. AUTHORIZED OR TREASURY SHARES. Any and all shares of Citrus
Common Stock held as treasury shares by Citrus 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
Citrus Common Stock in respect of any fractional share that would otherwise be
issuable based on the Fair Market Value.
3.5. 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 Conversion 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 Citrus Common Stock.
3.6. TRANSFERS. At the Effective Time, the stock transfer books of
Citrus shall be closed and no transfer of Citrus 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 Citrus 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.
3.7. DISSENTERS RIGHTS. All shares of Citrus shall be converted into
shares of CFC Common Stock as provided herein. Shares that otherwise would have
been issued to Citrus shareholders, but for the exercise and perfection of
dissenters rights, shall not be issued.
ARTICLE IV. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. ISSUANCE OF CFC CERTIFICATES; CASH FOR FRACTIONAL SHARES. As soon
as practicable after
<PAGE>
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 Citrus 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 Citrus Common Stock ("Certificates")
for payment therefor. Upon receipt of such notice and transmittal form, each
holder of Certificates at the Effective Time shall surrender the Certificate or
Certificates to the Exchange Agent, and shall promptly upon surrender receive in
exchange therefor the Merger Consideration provided in Article III 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
Citrus 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.
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 Citrus Common Stock is entitled as a
result of the Merger until such holder surrenders his or her Certificate or
Certificates representing the shares of Citrus 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 Citrus. 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 Citrus Common Stock issued and outstanding at the Effective Time until
such holder surrenders such Certificate for exchange as provided in Section 3.1
above. However, upon surrender of the Citrus 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 CITRUS SHAREHOLDERS. After the Effective
Time, each outstanding Certificate representing shares of Citrus 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 Citrus 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. Rights to purchase Citrus Common Stock set forth on
Schedule 3.5 to the Reorganization Agreement shall be converted into the right
to purchase CFC Common Stock based on the Conversion Ratio (i.e, a number of
shares of CFC Common Stock equal to the number of shares of Citrus Common Stock
subject to the Right multiplied by the Conversion Ratio, and with an exercise
price equal to the quotient obtained by dividing the stated exercise price of
the Right by the Conversion Ratio), subject in all cases to the exercise,
termination and other provisions of agreements associated with such Rights.
ARTICLE VI. MISCELLANEOUS
<PAGE>
6.1. CONDITIONS PRECEDENT. 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 to the
Reorganization Agreement upon the approval of the board of directors of both of
the parties thereto; provided, however, that this Plan of Merger may not be
amended after the Shareholders' Meeting except in accordance with applicable
law.
6.4. APPROVALS. This Plan of Merger is subject to approval by the
Florida Department of Banking and Finance and the approval of holders of at
least a majority of the outstanding voting stock of Citrus and two-thirds of the
outstanding voting stock of [Subsidiary Bank].
ATTACHMENTS:
SCHEDULE A: ARTICLES OF INCORPORATION
<PAGE>
ANNEX B
April 5, 1999
The Board of Directors
Citrus Bank
2861 South Delaney Avenue
Orlando, Florida 32806
Members of the Board:
Citrus Bank ("Citrus") and Carolina First Corporation ("CFC"), have
entered into a definitive Reorganization Agreement dated as of March 18, 1999
(the "Agreement") providing for Citrus to be acquired by CFC pursuant to the
merger of a wholly-owned banking subsidiary of CFC ("CFC Subsidiary") with and
into Citrus. The Agreement provides, among other things, that each share of
outstanding common stock, par value $4.00 per share, of Citrus ("Citrus Common
Stock"), including any shares issued upon the exercise of Citrus stock options
prior to the Effective Time of the Merger (as defined in the Agreement), will be
converted in the Merger into such number of shares of common stock, par value
$1.00 per share, of CFC ("CFC Common Stock") having a Fair Market Value (as
defined in the Agreement) equal to $37.07 (such ratio referred to as the
"Conversion Ratio").
The Agreement also provides that, for the purpose of calculating the
Conversion Ratio, the Fair Market Value per share of CFC Common Stock shall
never be deemed to be lower than $18.35 or higher than $24.83. Reference should
be made to the Agreement for a more complete description of the terms and
conditions of the Merger.
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the shareholders of Citrus, of the
consideration to be received by the shareholders of Citrus in the Merger.
Allen C. Ewing & Co. is a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. As part of its investment banking business, Allen C. Ewing & Co.
is regularly engaged in the valuation of securities of banking and thrift
companies in connection with mergers and acquisitions, underwritings, private
placements, trading and market making activities, and valuations for various
other purposes.
Allen C. Ewing & Co. was engaged by Citrus on February 9, 1999 as the
financial advisor to Citrus in connection with the Merger and will receive
compensation from Citrus upon
<PAGE>
The Board of Directors
Citrus Bank
Page 2
April 5, 1999
consummation of the Merger. In the ordinary course of its business as a
broker-dealer, Allen C. Ewing & Co. may, from time to time, purchase securities
from, and sell securities to, banking and thrift companies and, as a market
maker in securities, may from time to time have a long or short position in, and
buy or sell, debt or equity securities of banking and thrift companies for its
own account and for the accounts of its customers. Allen C. Ewing & Co. has no
such position in the securities of Citrus or CFC as of the date of this opinion.
However, as of such date, certain officers, directors, and affiliates of Allen
C. Ewing & Co. beneficially own a total of 51,500 shares of Citrus Common Stock,
owned of record by Ewing/Florida Bank Stock Fund, Limited Partnership
("E/FBSF"), an investment fund organized by certain such officers, directors,
and affiliates. Allen C. Ewing & Co. serves as financial advisor to E/FBSF.
In arriving at the opinion expressed in this letter, we have reviewed,
analyzed, and relied upon information and material bearing upon the Merger and
the financial and operating condition of Citrus and CFC, including, among other
things, the following: (i) the Agreement; (ii) audited financial statements for
Citrus for the three years ended December 31, 1997; (iii) certain unaudited
financial information for Citrus for the year ended December 31, 1998 and for
various periods during the year 1999; (iv) Annual Reports to Shareholders and
Annual Reports on Form 10-K for CFC for the three years ended December 31, 1998;
(v) other financial information concerning the business and operations of Citrus
furnished to us by Citrus for purposes of our analysis, including certain
internal forecasts for Citrus prepared by its senior management; (vi)
information concerning the limited market for the shares of Citrus Common Stock;
and (vii) certain publicly available information concerning the trading of, and
the trading market for, CFC Common Stock. We have also held discussions with the
management of Citrus and CFC concerning their respective operations, financial
condition, and prospects, as well as the results of regulatory examinations.
We have also considered such further financial, economic, regulatory,
and other factors as we have deemed relevant and appropriate under the
circumstances, including among others the following: (i) discussions with
certain other banking companies regarding possible interest in an acquisition of
Citrus; (ii) certain publicly available information concerning the financial
terms of certain mergers and acquisitions of other financial institutions in
Florida and the financial position and operating performance of the institutions
acquired in those transactions; and (iii) certain publicly available information
concerning the trading of, and the trading market for, the publicly-traded
common stocks of certain other financial institutions. We have also taken into
account our assessment of general economic, market, and financial conditions and
our experience in other transactions, as well as our experience in securities
valuation and our knowledge of the banking and thrift industry generally.
<PAGE>
The Board of Directors
Citrus Bank
Page 3
April 5, 1999
In conducting our review and arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available, including that referred to
above, and we have not attempted independently to verify such information. We
have relied upon the management of Citrus as to the reasonableness and
achievability of the financial and operational forecasts and projections (and
the assumptions and basis therefor) provided to us, and we have assumed that
such forecasts and projections reflect the best currently available estimates
and judgments of management and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by
management. We have also assumed, without independent verification, that the
allowances for loan and other losses of Citrus and CFC are adequate to cover any
such losses. We have not made or obtained any inspections, evaluations, or
appraisals of any of the assets or liabilities of Citrus, CFC Subsidiary, or
CFC, nor have we examined any individual loan, property, or securities files.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by the shareholders of Citrus in the Merger, as
described in the Agreement, is fair, from a financial point of view, to the
shareholders of Citrus. This opinion is necessarily based upon conditions as
they exist and can be evaluated on the date of this letter and the information
made available to us through such date.
Very truly yours,
ALLEN C. EWING & CO.
By:/s/ Brian C. Beach
---------------------
Brian C. Beach
Senior Vice President
<PAGE>
ANNEX C
TITLE XXXVIII BANKS AND BANKING
CHAPTER 658 BANKS AND TRUST COMPANIES
658.44 Approval by stockholders; rights of dissenters; preemptive rights.
(1) The department shall not issue a certificate of merger to a resulting state
bank or trust company unless the plan of merger and merger agreement, as adopted
by a majority of the entire board of directors of each constituent bank or trust
company, and as approved by each appropriate federal regulatory agency and by
the department, has been approved:
(a) By the stockholders of each constituent national bank as provided
by, and in accordance with the procedures required by, the laws of the
United States applicable thereto, and
(b) After notice as hereinafter provided, by the affirmative vote or
written consent of the holders of at least a majority of the shares
entitled to vote thereon of each constituent state bank or state trust
company, unless any class of shares of any constituent state bank or
state trust company is entitled to vote thereon as a class, in which
event as to such constituent state bank or state trust company the plan
of merger and merger agreement shall be approved by the stockholders
upon receiving the affirmative vote or written consent of the holders of
a majority of the shares of each class of shares entitled to vote
thereon as a class and of the total shares entitled to vote thereon.
Such vote of stockholders of a constituent state bank or state trust
company shall be at an annual or special meeting of stockholders or by
written consent of the stockholders without a meeting as provided in
s. 607.0704.
Approval by the stockholders of a constituent bank or trust company of a plan of
merger and merger agreement shall constitute the adoption by the stockholders of
the articles of incorporation of the resulting state bank or state trust company
as set forth in the plan of merger and merger agreement.
(2) Written notice of the meeting of, or proposed written consent action by, the
stockholders of each constituent state bank or state trust company shall be
given to each stockholder of record, whether or not entitled to vote, and
whether the meeting is an annual or a special meeting or whether the vote is to
be by written consent pursuant to s. 607.0704, and the notice shall state that
the purpose or one of the purposes of the meeting, or of the proposed action by
the stockholders without a meeting, is to consider the proposed plan of merger
and merger agreement. Except to the extent provided otherwise with respect to
stockholders of a resulting bank or trust company pursuant to subsection (7),
the notice shall also state that dissenting stockholders will be entitled to
payment in cash of the value of only those shares held by the stockholders:
(a) Which at a meeting of the stockholders are voted against the
approval of the plan of merger and merger agreement;
(b) As to which, if the proposed action is to be by written consent of
stockholders pursuant to s. 607.0704, such written consent is not given
by the holder thereof; or
C-1
<PAGE>
(c) With respect to which the holder thereof has given written notice to
the constituent state bank or trust company, at or prior to the meeting
of the stockholders or on or prior to the date specified for action by
the stockholders without a meeting pursuant to s. 607.0704 in the notice
of such proposed action, that the stockholder dissents from the plan of
merger and merger agreement.
Hereinafter in this section, the term "dissenting shares" means and includes
only those shares, which may be all or less than all the shares of any class
owned by a stockholder, described in paragraphs (a), (b), and (c).
(3) On or promptly after the effective date of the merger, the resulting state
bank or trust company, or a bank holding company which, as set out in the plan
of merger or merger agreement, is offering shares rights, obligations, or other
securities or property in exchange for shares of the constituent banks or trust
companies, may fix an amount which it considers to be not more than the fair
market value of the shares of a constituent bank or trust company and which it
will pay to the holders of dissenting shares of that constituent bank or trust
company and, if it fixes such amount, shall offer to pay such amount to the
holders of all dissenting shares of that constituent bank or trust company. The
amount payable pursuant to any such offer which is accepted by the holders of
dissenting shares, and the amount payable to the holders of dissenting shares
pursuant to an appraisal, shall constitute a debt of the resulting state bank or
state trust company.
(4) The owners of dissenting shares who have accepted an offer made pursuant to
subsection (3) shall be entitled to receive the amount so offered for such
shares in cash upon surrendering the stock certificates representing such shares
at any time within 30 days after the effective date of the merger, and the
owners of dissenting shares, the value of which is to be determined by
appraisal, shall be entitled to receive the value of such shares in cash upon
surrender of the stock certificates representing such shares at any time within
30 days after the value of such shares has been determined by appraisal made on
or after the effective date of the merger.
(5) The value of dissenting shares of each constituent state bank or state trust
company, the owners of which have not accepted an offer for such shares made
pursuant to subsection (3), shall be determined as of the effective date of the
merger by three appraisers, one to be selected by the owners of at least
two-thirds of such dissenting shares, one to be selected by the board of
directors of the resulting state bank, and the third to be selected by the two
so chosen. The value agreed upon by any two of the appraisers shall control and
be final and binding on all parties. If, within 90 days from the effective date
of the merger, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such
dissenting shares, the department shall cause an appraisal of such dissenting
shares to be made which will be final and binding on all parties. The expenses
of appraisal shall be paid by the resulting state bank or trust company.
(6) Upon the effective date of the merger, all the shares of stock of every
class of each constituent bank or trust company, whether or not surrendered by
the holders thereof, shall be void and deemed to be canceled, and no voting or
other rights of any kind shall pertain thereto or to the holders thereof except
only such rights as may be expressly provided in the plan of merger and merger
agreement or expressly provided by law.
(7) The provisions of subsection (6) and, unless agreed by all the constituent
banks and trust companies and expressly provided in the plan of merger and
merger agreement, subsections (3), (4), and (5) are not applicable to a
resulting bank or trust company or to the shares or holders of shares of a
resulting bank or trust company the cash, shares, rights, obligations, or other
securities or property of which, in whole or in part, is provided in the plan of
merger or merger agreement to be exchanged for the shares of the other
constituent banks or trust companies.
C-2
<PAGE>
(8) The stock, rights, obligations, and other securities of a resulting bank or
trust company may be issued as provided by the terms of the plan of merger and
merger agreement, free from any preemptive rights of the holders of any of the
shares of stock or of any of the rights, obligations, or other securities of
such resulting bank or trust company or of any of the constituent banks or trust
companies.
(9) After approval of the plan of merger and merger agreement by the
stockholders as provided in subsection (1), there shall be filed with the
department, within 30 days after the time limit in s. 658.43(5), a fully
executed counterpart of the plan of merger and merger agreement as so approved
if it differs in any respect from any fully executed counterpart thereof
theretofore filed with the department, and copies of the resolutions approving
the same by the stockholders of each constituent bank or trust company,
certified by the president, or chief executive officer if other than the
president, and the cashier or corporate secretary of each constituent bank or
trust company, respectively, with the corporate seal impressed thereon.
C-3
<PAGE>
PART-II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Chapter 8, Article 5 of Title 33 of the 1976 Code
of Laws of South Carolina, as amended, which provides for indemnification of
officers and directors of South Carolina corporations in certain instances in
connection with legal proceedings involving any such persons because of being or
having been an officer or director. Carolina First's Bylaws provide that the
Corporation shall indemnify any individual made a party to a proceeding because
he is or was a Director of the Corporation against liability incurred in the
proceeding to the fullest extent permitted by law, and that the Corporation
shall pay for or reimburse the reasonable expenses incurred by a Director who is
a party to a proceeding in advance of final disposition of the proceeding to the
fullest extent permitted by law. Carolina First has entered into indemnification
agreements with each of its Directors, which make the above-referenced Bylaws
provisions the basis of a contract between Carolina First and each director.
Chapter 8, Article 5 of Title 33 of the 1976 Code of Laws of South
Carolina, as amended, also permits a corporation to purchase and maintain
insurance on behalf of a person who is or was an officer or director of the
corporation. Carolina First maintains directors' and officers' liability
insurance.
Reference is made to Chapter 2 of Title 33 of the 1976 Code of Laws of
South Carolina, as amended, respecting the limitation in a corporation's
articles of incorporation of the personal liability of a director for breach of
the director's fiduciary duty. Reference is made to Carolina First's Articles of
Amendment filed with the South Carolina Secretary of State on April 18, 1989
which state: "A director of the corporation shall not be personally liable to
the corporation or any of its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision shall not be deemed
to eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve gross negligence, intentional
misconduct, or a knowing violation of laws, (iii) imposed under Section 33-8-330
of the South Carolina Business Corporation Act of 1988 (improper distribution to
shareholder), or (iv) for any transaction from which the director derived an
improper personal benefit."
ITEM 21: EXHIBITS
(A) LISTING OF EXHIBITS
Exhibit
2.1 -- Agreement and Plan of Reorganization entered into as of March 18,
1999 by and between Carolina First and Citrus: Included as Annex A to
the Proxy Statement/Prospectus.
3.1 -- Articles of Incorporation: Incorporated by reference to Exhibit 3.1
of Carolina First's Registration Statement on Form S-4, Commission File
No. 33-57389.
3.2 -- Articles of Amendment dated June 1, 1997. Incorporated by reference
to Exhibit 3.2 of Carolina First's Registration Statement on Form S-4
filed on July 30, 1997, Commission File No. 333-32459.
3.3 -- Amended and Restated Bylaws of Carolina First, as amended and
restated as of December 18, 1996: Incorporated by reference to Exhibit
3.1 of Carolina First's Current Report on Form 8-K dated December 18,
1996, Commission File No. 0-15083.
1
<PAGE>
4.1 -- Specimen Carolina First Common Stock certificate: Incorporated by
reference to Exhibit 4.1 of Carolina First's Registration Statement on
Form S-1, Commission File No. 33-7470.
4.2.1-- Articles of Incorporation: Included as Exhibits 3.1 and 3.2.
4.2.2-- Bylaws: Included as Exhibit 3.3.
4.3 -- Carolina First Amended and Restated Common Stock Dividend Reinvestment
Plan: Incorporated by reference to the Prospectus in Carolina First's
Registration Statement on Form S-3, Commission File No. 333-06975.
4.6 -- Amended and Restated Shareholder Rights Agreement: Incorporated by
reference to Exhibit 4.1 of Carolina First's Current Report on Form 8-K
dated December 18, 1996, Commission File No. 0-15083.
4.7 -- Form of Indenture between Carolina First and First American Trust
Company, N.A., as trustee: Incorporated by reference to Exhibit 4.11 of
Carolina First's Registration Statement on Form S-3, Commission File
No. 22-58879.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality
of shares of Carolina First.
8.1 -- See "THE PROPOSED TRANSACTION -- Certain Federal Income Tax
Consequences" for discussion regarding tax matters.
11.1 -- Computation of Per Share Earnings: Incorporated by reference to
Exhibit 11.1 of Carolina First's Annual Report on Form 10-K for the
year ended December 31, 1998, Commission File No. 0-15083.
12.1 -- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends: Incorporated by reference to
Exhibit 12.1 of Carolina First's Annual Report on Form 10-K for the
year ended December 31, 1998, Commission File No. 0-15083.
13.1 -- 1998 Annual Report to Shareholders of Carolina First. Incorporated by
reference to Exhibit 13.1 of Carolina First's Annual Report on Form
10-K for the year ended December 31, 1998, Commission File No. 0-15083.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank, Carolina First
Mortgage Company, Resource Processing Group, Inc., CF Investment
Company and Blue Ridge Finance Company, Inc., all of which are South
Carolina corporations.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Osburn, Henning and Company.
23.3 -- Consent of Brewer, Beemer, Kuehnhackl & Koon, P.A.
23.4 -- Consent of Allen C. Ewing & Co.
23.5 -- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in
Exhibit 5.1.
24.1 -- The Power of Attorney: Contained on the signature page of the initial
filing of this Registration Statement.
27.1 -- Financial Data Schedule: Incorporated by reference to Exhibit 10.18
of Carolina First's Annual Report on Form 10-K for the year ended
December 31, 1998, Commission File No. 0-15083.
99.1 -- Form of Proxy
(b) Certain additional financial statements. Not applicable.
(c) The information required by this paragraph is included as an Annex to
the Proxy Statement/Prospectus.
2
<PAGE>
ITEM 22: UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change in such information in the
registration statement: PROVIDED, HOWEVER, that paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the registration
statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
3
<PAGE>
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greenville, State of
South Carolina, on April 21 , 1999.
Carolina First Corporation
By: /s/ William S. Hummers III
---------------------------------------------------
William S. Hummers III, Executive Vice President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mack I. Whittle, Jr. and William S. Hummers III,
and each of them, as true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all annexes thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated:
<TABLE>
<CAPTION>
<S> <C>
Signature Title Date
/s/ William R. Timmons, Jr. Chairman of the Board April 21, 1999
- ----------------------------------
William R. Timmons, Jr.
/s/ Mack I. Whittle, Jr. President, Chief Executive Officer April 21, 1999
- ---------------------------------- and Director (Principal Executive Officer)
Mack I. Whittle, Jr.
/s/ William S. Hummers III Executive Vice President, Director April 21, 1999
- -------------------------------- (Principal Accounting and Financial Officer)
William S. Hummers III
/s/ M. Dexter Hagy Director April 21, 1999
- ----------------------------------
M. Dexter Hagy
Director April ___, 1999
- ----------------------------------
Eugene E. Stone IV
Director April ___, 1999
- ----------------------------------
H. Earle Russell, Jr.
/s/ Judd B. Farr Director April 21, 1999
- ----------------------------------
Judd B. Farr
/s/ Charles B. Schooler Director April 21, 1999
- ----------------------------------
Charles B. Schooler
5
<PAGE>
/s/ Elizabeth P. Stall Director April 21, 1999
- ----------------------------------
Elizabeth P. Stall
/s/ David C. Wakefield III Director April 21, 1999
- ----------------------------------
David C. Wakefield III
/s/ Vernon E. Merchant, Jr. Director April 21, 1999
- ----------------------------------
Vernon E. Merchant, Jr.
/s/ C. Claymon Grimes, Jr. Director April 21, 1999
- ----------------------------------
C. Claymon Grimes, Jr.
</TABLE>
6
<PAGE>
EXHIBIT INDEX
Exhibit
2.1 -- Agreement and Plan of Reorganization entered into as of March 18,
1999 by and between Carolina First and Citrus: Included as Annex A to
the Proxy Statement/Prospectus.
3.1 -- Articles of Incorporation: Incorporated by reference to Exhibit 3.1
of Carolina First's Registration Statement on Form S-4, Commission File
No. 33-57389.
3.2 -- Articles of Amendment dated June 1, 1997. Incorporated by reference
to Exhibit 3.2 of Carolina First's Registration Statement on Form S-4
filed on July 30, 1997, Commission File No. 333-32459.
3.3 -- Amended and Restated Bylaws of Carolina First, as amended and
restated as of December 18, 1996: Incorporated by reference to Exhibit
3.1 of Carolina First's Current Report on Form 8-K dated December 18,
1996, Commission File No. 0-15083.
4.1 -- Specimen Carolina First Common Stock certificate: Incorporated by
reference to Exhibit 4.1 of Carolina First's Registration Statement on
Form S-1, Commission File No. 33-7470.
4.2.1-- Articles of Incorporation: Included as Exhibits 3.1 and 3.2.
4.2.2-- Bylaws: Included as Exhibit 3.3.
4.3 -- Carolina First Amended and Restated Common Stock Dividend Reinvestment
Plan: Incorporated by reference to the Prospectus in Carolina First's
Registration Statement on Form S-3, Commission File No. 333-06975.
4.6 -- Amended and Restated Shareholder Rights Agreement: Incorporated by
reference to Exhibit 4.1 of Carolina First's Current Report on Form 8-K
dated December 18, 1996, Commission File No. 0-15083.
4.7 -- Form of Indenture between Carolina First and First American Trust
Company, N.A., as trustee: Incorporated by reference to Exhibit 4.11 of
Carolina First's Registration Statement on Form S-3, Commission File
No. 22-58879.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality
of shares of Carolina First.
8.1 -- See "THE PROPOSED TRANSACTION -- Certain Federal Income Tax
Consequences" for discussion regarding tax matters.
11.1 -- Computation of Per Share Earnings: Incorporated by reference to
Exhibit 11.1 of Carolina First's Annual Report on Form 10-K for the
year ended December 31, 1998, Commission File No. 0-15083.
12.1 -- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends: Incorporated by reference to
Exhibit 12.1 of Carolina First's Annual Report on Form 10-K for the
year ended December 31, 1998, Commission File No. 0-15083.
13.1 -- 1998 Annual Report to Shareholders of Carolina First. Incorporated by
reference to Exhibit 13.1 of Carolina First's Annual Report on Form
10-K for the year ended December 31, 1998, Commission File No. 0-15083.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank, Carolina First
Mortgage Company, Resource Processing Group, Inc., CF Investment
Company and Blue Ridge Finance Company, Inc., all of which are South
Carolina corporations.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Osburn, Henning and Company.
23.3 -- Consent of Brewer, Beemer, Kuehnhackl & Koon, P.A.
23.4 -- Consent of Allen C. Ewing & Co.
23.5 -- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibit
5.1.
24.1 -- The Power of Attorney: Contained on the signature page of the initial
filing of this Registration Statement.
27.1 -- Financial Data Schedule: Incorporated by reference to Exhibit 10.18
of Carolina First's Annual Report on Form 10-K for the year ended
December 31, 1998, Commission File No. 0-15083.
99.1 -- Form of Proxy
7
EXHIBIT 5.1
APRIL 30, 1999
[WYCHE, BURGESS, FREEMAN & PARHAM, P.A. LETTERHEAD]
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Citrus Bank
2861 South Delaney Avenue
Orlando, Florida 32806
RE: Registration Statement on Form S-4 with respect to 4,229,375 shares
of Carolina First Common Stock
Gentlemen/Ladies:
The opinions set forth herein are rendered with respect to the 4,229,375 shares,
$1.00 par value per share, of the Common Stock (the "Common Stock") of Carolina
First Corporation, a South Carolina corporation (the "Company"), which may be
issued by the Company in connection with its acquisition of Citrus Bank
("Citrus"), all as set forth in that certain Reorganization Agreement entered
into as of March 18, 1999 by and between the Company and Citrus. The Common
Stock is being registered with the Securities and Exchange Commission by the
Company's Registration Statement on Form S-4 (the "Registration Statement")
filed on or about April 30, 1999, pursuant to the Securities Act of 1933, as
amended.
We have examined the Company's Articles of Incorporation, as amended, and the
Company's Bylaws, as amended, and reviewed the records of the Company's
corporate proceedings. We have made such investigation of law as we have deemed
necessary in order to enable us to render this opinion. With respect to matters
of fact, we have relied upon information provided to us by the Company and no
further investigation. With respect to all examined documents, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to authentic originals of all documents
submitted to us as certified, conformed or photostatic copies and the accuracy
and completeness of the information contained therein.
Based on and subject to the foregoing and subject to the comments, limitations
and qualifications set forth below, we are of the opinion that the shares of
Common Stock to be sold pursuant to the Registration Statement will, when issued
to the Citrus shareholders in accordance with the Reorganization Agreement, be
legally and validly issued and fully paid and non-assessable.
The foregoing opinion is limited to matters governed by the laws of the State of
South Carolina in force on the date of this letter. We express no opinion with
regard to any matter which may be (or purports to be) governed by the laws of
any other state or jurisdiction. In addition, we express no opinion with respect
to any matter arising under or governed by the South Carolina Uniform Securities
Act, as amended, any law respecting disclosure, or any law respecting any
environmental matter.
This opinion is rendered as of the date of this letter and applies only to the
matters specifically covered by this opinion, and we disclaim any continuing
responsibility for matters occurring after the date of this letter.
8
<PAGE>
Except as noted below, this opinion is rendered solely for your benefit in
connection with the Registration Statement and may not be relied upon, quoted or
used by any other person or entity or for any other purpose without our prior
written consent.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Yours truly,
Wyche, Burgess, Freeman & Parham, P.A.
By:/s/ Wyche, Burgess, Freeman & Parham, P.A.
------------------------------------------
9
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Carolina First Corporation
We consent to the use of our report dated January 22, 1999 included in Carolina
First's Annual Report on Form 10-K for the ended December 31, 1998, incorporated
herein by reference and to the reference to our firm under the heading "Experts"
in the Proxy Statement/Prospectus for the acquisition of Citrus Bank.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Greenville, South Carolina
April 30, 1999
10
Exhibit 23.2
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We consent to the use in this Registration Statement of Carolina First
Corporation on Form S-4 of our report dated March 23, 1999 of our audit of the
financial statements of Citrus Bank as of December 31, 1998 and for the year
then ended appearing in the Proxy Statement/Prospectus which is a part of this
Registration Statement, and to the reference to our firm under the heading
"Experts" in such Proxy Statement/Prospectus.
/s/Osburn, Henning and Company
OSBURN, HENNING AND COMPANY
Orlando, Florida
April 29, 1999
11
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Carolina First
Corporation on Form S-4 of our report dated March 27, 1998, relating to the
balance sheet of Citrus Bank as of December 31, 1997 and the related statements
of operations, stockholders' equity and cash flows for the years ended December
31, 1997 and 1996, appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/Brewer, Beemer, Kuehnhackl & Koon, P.A.
BREWER, BEEMER, KUEHNHACKL & KOON, P.A.
Orlando, Florida
April 30, 1999
12
Exhibit 23.4
CONSENT OF ALLEN C. EWING & CO.
Carolina First Corporation
Greenville, South Carolina
We hereby consent to the inclusion of the discussion concerning our letter,
delivered to the Board of Directors of Citrus Bank, under the caption "THE
PROPOSED TRANSACTION -- Opinion of Citrus' Financial Advisor" in the Proxy
Statement/Prospectus constituting part of the Registration Statement on Form S-4
of Carolina First Corporation. We also consent to references to such letter and
our firm in the Proxy Statement/Prospectus, and to the inclusion of such letter
as Annex B to the Proxy Statement/Prospectus.
ALLEN C. EWING & CO.
By: /s/Brian C. Beach
-----------------
Brian C. Beach
Senior Vice President
Jacksonville, Florida
April 27, 1999
13
EXHIBIT 99.1
P
R
O CITRUS BANK
X This Proxy is Solicited on Behalf of the Board of Directors
Y
Special Meeting, June 15, 1999
The undersigned shareholder of Citrus Bank, hereby revoking all previous
proxies, hereby appoints ________ and ___________ and either of them, the
attorney or attorneys and proxy or proxies of the undersigned, with full power
of substitution, to attend the Special Meeting of Shareholders of Citrus Bank to
be held June 15, 1999, at 5:00 p.m., local time, at the Orlando Marriott
Downtown, 400 West Livingston Street, Orlando, Florida and at any adjournments
thereof, and to vote all shares of Citrus Bank that the undersigned shall be
entitled to vote at such meeting. Said proxies are instructed to vote on the
matters set forth in the Proxy Statement/Prospectus as specified below.
1. To approve the Reorganization Agreement dated as of March 18, 1999,
providing for the merger of Citizens First National Bank, a
wholly-owned subsidiary of Carolina First Corporation, with and
into Citrus Bank and, in connection therewith, the conversion of
shares of common stock of Citrus Bank into shares of common stock
of Carolina First Corporation, subject to the terms and conditions
of the Reorganization Agreement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the proxy holders are authorized to vote upon
such other business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY SIGNED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL
NUMBER 1 AS SPECIFIED ABOVE.
Please sign exactly as name appears on stock certificate. When signing as
attorney, administrator, trustee, guardian or agent, please indicate the
capacity in which you are acting. If stock is held jointly, signature should
appear for both names. If more than one trustee, all should sign. If stock is
held by a corporation, please sign in full corporate name by authorized officer
and give title of office. This Proxy may be revoked any time prior to its
exercise.
Dated:______________________, 1999
- --------------------------------------------
Print Name (and title if appropriate)
- --------------------------------------------
Signature
- --------------------------------------------
Print Name (and title if appropriate)
- --------------------------------------------
Signature
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
