<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1998
REGISTRATION NO. 333-44013
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CENTURA BANKS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6712 56-1688522
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
134 NORTH CHURCH STREET
ROCKY MOUNT, NORTH CAROLINA 27804
(919) 977-4400
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
<TABLE>
<S> <C> <C>
MICHAEL S. COLO, ESQ. GEORGE S. KING, JR., ESQ.
POYNER & SPRUILL, L.L.P. SINKLER & BOYD, P.A.
130 SOUTH FRANKLIN STREET WITH COPY TO: 1426 MAIN STREET, SUITE 1200
ROCKY MOUNT, NORTH CAROLINA 27804 COLUMBIA, SOUTH CAROLINA 29201-2834
(919) 446-2341 (803) 779-3080
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the merger (the "Merger") and the bank merger (the
"Bank Merger") described in this Registration Statement become 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. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<PAGE>
THIS REGISTRATION STATEMENT COVERS ADDITIONAL SHARES OF THE COMMON STOCK OF THE
REGISTRANT WHICH MAY BE ISSUED TO PREVENT DILUTION RESULTING FROM A STOCK SPLIT,
STOCK DIVIDEND OR SIMILAR TRANSACTION INVOLVING THE COMMON STOCK OF THE
REGISTRANT, PURSUANT TO RULE 416.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
<PAGE>
PROSPECTUS
CENTURA BANKS, INC.
AN ESTIMATED 793,335 SHARES
COMMON STOCK, NO PAR VALUE
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS OF
PEE DEE BANKSHARES, INC.
AND
PEE DEE STATE BANK
This Prospectus of Centura Banks, Inc., a bank holding company organized and
existing under the laws of the State of North Carolina ("Centura"), relates to
up to 793,335 shares of common stock, no par value, of Centura ("Centura
Stock"), which are issuable to the stockholders of Pee Dee Bankshares, Inc. a
corporation organized and existing under the laws of the State of South Carolina
("Bankshares"), and the stockholders of Pee Dee State Bank (except Bankshares),
a bank corporation organized and existing under the laws of the State of South
Carolina ("Pee Dee Bank"), upon consummation of the proposed mergers described
herein by which Bankshares will merge with and into Centura (the "Merger") and
Pee Dee Bank will merge with and into Centura Bank (the "Bank Merger"), a
wholly-owned subsidiary of Centura ("Centura Bank"), pursuant to the terms of
the Agreement and Plan of Reorganization, dated as of December 30, 1997 (the
"Agreement"), by and among Bankshares and Centura. The full text of the
Agreement is attached as Appendix A hereto.
At the effective time of the Merger and the Bank Merger (the "Effective Time"),
each issued and outstanding share of common stock, $1.00 par value per share, of
Bankshares ("Bankshares Stock") will be converted into and exchanged for a
number of shares of Centura Stock determined by (i) dividing $40,000,000 by the
average daily closing price of Centura Stock, as reported on the New York Stock
Exchange - Composite Transactions List (as reported by the Wall Street Journal
or, if not reported thereby, another authoritative source chosen by Centura),
for the 10 trading days prior to the day immediately prior to the Closing Date
(as defined in the Agreement) (the "Average Share Price"); (ii) multiplying the
quotient thereof by .95726984 (the percentage of Pee Dee Bank Stock owned by
Bankshares); and (iii) dividing the product thereof by 56,133 (the number of
outstanding shares of Bankshares Stock); provided, however, that if the Average
Share Price is greater than $69.32 but equal to or less than $75.63, the Average
Share Price shall be deemed to be $69.32; and provided further, however, that if
the Average Share Price is less than $50.42 or more than $75.63, either party
may elect to terminate the Agreement. See "DESCRIPTION OF THE MERGER --
General."
At the Effective Time, each issued and outstanding share of common stock, $5.00
par value per share, of Pee Dee Bank ("Pee Dee Bank Stock"), except those owned
by Bankshares, will be converted into and exchanged for a number of shares of
Centura Stock determined by dividing (i) $40,000,000 by the Average Share Price
(as defined above), and (ii) the quotient thereof by 63,000 (the number of
outstanding shares of Pee Dee Bank Stock); provided, however, that if the
Average Share Price is greater than $69.32 but equal to or less than $75.63, the
Average Share Price shall be deemed to be $69.32; and provided further, however,
that if the Average Share Price is less than $50.42 or more than $75.63, either
party may elect to terminate the Agreement. See "DESCRIPTION OF THE MERGER --
General."
Assuming an Average Share Price of $69.32 (the maximum given that the closing
price of Centura Stock on January 16, 1998 was $69.4375), each share of
Bankshares Stock would convert to 9.84051 shares of Centura Stock and each share
of Pee Dee Bank Stock (except those owned by Bankshares) would convert to
9.15927 shares of Centura Stock.
This Prospectus also serves as the Proxy Statement of Bankshares and Pee Dee
Bank, and is being furnished to the stockholders of Bankshares and Pee Dee Bank
in connection with the solicitation of proxies by the Boards of Directors of
Bankshares and Pee Dee Bank for use at the special meetings of stockholders
(collectively, including any adjournments or postponements thereof, the "Special
Meeting"), to be held on March 3, 1998, to consider and vote upon the
Agreement. This Proxy Statement/Prospectus ("Proxy Statement") and related
materials enclosed herewith are being mailed to stockholders of Bankshares and
Pee Dee Bank on or about January 27, 1998.
<PAGE>
Each holder of shares of Bankshares Stock or Pee Dee Bank Stock has the right
to dissent from the Merger and Bank Merger, respectively, and to demand
appraisal and payment of the fair value of such holder's shares of Bankshares
Stock or Pee Dee Bank Stock if the Agreement is approved and the Merger and the
Bank Merger are consummated. The right of any such stockholder to such rights
and remedies is contingent upon strict compliance with the requirements set
forth in Chapter 13 of Title 33 of the South Carolina Code (the "South Carolina
Code"), the full text of which is attached as Appendix B hereto. A stockholder
of Bankshares or Pee Dee Bank who wishes to dissent from the Merger or the Bank
Merger, respectively, (i) must give Bankshares or Pee Dee Bank, as the case may
be, written notice of his intent to demand payment for his shares if the Merger
or the Bank Merger is effectuated, which notice must be actually received by
Bankshares or Pee Dee Bank, as the case may be, before the vote is taken at the
Special Meeting, and (ii) must not vote any shares of Bankshares Stock or Pee
Dee Bank Stock in favor of the Merger or the Bank Merger.
See "DESCRIPTION OF THE MERGER -- Dissenters' Rights."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY. THE SECURITIES ARE NOT OBLIGATIONS OF NOR ARE THE
SECURITIES GUARANTEED BY CENTURA BANK OR CENTURA BANKS, INC. THE
SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL INVESTED.
The date of this Proxy Statement is January 27, 1998.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE CERTAIN DOCUMENTS RELATED TO
CENTURA WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
ARE AVAILABLE, WITHOUT CHARGE, UPON REQUEST FROM STEVEN J. GOLDSTEIN, CHIEF
FINANCIAL OFFICER, CENTURA BANKS, INC., 134 NORTH CHURCH STREET, ROCKY MOUNT,
NORTH CAROLINA 27804 (TELEPHONE (919) 977-8356). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY 25, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
AVAILABLE INFORMATION.................................................................................................. 2
DOCUMENTS INCORPORATED BY REFERENCE.................................................................................... 2
SUMMARY................................................................................................................ 4
The Parties............................................................................................................ 4
Meeting of Stockholders................................................................................................ 4
The Merger and the Bank Merger......................................................................................... 5
Comparative Market Prices of Common Stock and Dividends................................................................ 9
Comparative Per Share Data............................................................................................. 9
Selected Consolidated Financial Data................................................................................... 11
SPECIAL MEETING OF BANKSHARES AND PEE DEE BANK STOCKHOLDERS............................................................ 12
Date, Place, Time, and Purpose......................................................................................... 12
Record Dates, Voting Rights, Required Votes,
and Revocability of Proxies.......................................................................................... 12
Solicitation of Proxies................................................................................................ 13
Recommendation......................................................................................................... 13
DESCRIPTION OF THE MERGER AND THE BANK MERGER.......................................................................... 13
General................................................................................................................ 13
Background of and Reasons for the Merger and the Bank Merger .......................................................... 14
Opinion of Financial Advisor........................................................................................... 17
Effective Time of the Merger and the Bank Merger....................................................................... 21
Distribution of Centura Stock Certificates............................................................................. 22
Conditions to Consummation of the Merger and the Bank Merger........................................................... 22
Regulatory Approvals................................................................................................... 23
Waiver, Amendment, and Termination..................................................................................... 23
Dissenters' Rights..................................................................................................... 24
Conduct of Business Pending the Merger and the Bank Merger............................................................. 26
Stock Option Agreement................................................................................................. 27
Management and Operations After the Merger and the Bank Merger......................................................... 27
Interests of Certain Persons in the Merger and the Bank Merger......................................................... 27
Certain Federal Income Tax Consequences................................................................................ 28
Accounting Treatment................................................................................................... 29
Expenses and Fees...................................................................................................... 29
Resales of Centura Stock............................................................................................... 30
EFFECT OF THE MERGER AND THE BANK MERGER
ON RIGHTS OF STOCKHOLDERS............................................................................................ 31
Anti-Takeover Provisions Generally..................................................................................... 31
Authorized Capital Stock............................................................................................... 31
Amendment of Articles of Incorporation and Bylaws...................................................................... 32
Classified Board of Directors and Absence of Cumulative Voting......................................................... 33
Removal of Directors................................................................................................... 33
Limitations on Director Liability...................................................................................... 34
Indemnification........................................................................................................ 34
Special Meeting of Stockholders........................................................................................ 35
Constituency and Stockholder Provisions................................................................................ 36
Actions by Stockholders Without a Meeting.............................................................................. 36
Stockholder Nominations and Proposals.................................................................................. 36
Fair Price Provisions.................................................................................................. 36
Business Combinations.................................................................................................. 37
Dissenters' Rights of Appraisal........................................................................................ 38
Stockholders' Rights to Examine Books and Records...................................................................... 39
Dividends.............................................................................................................. 39
i
<PAGE>
PAGE
INFORMATION ABOUT BANKSHARES AND PEE DEE BANK.......................................................................... 40
General................................................................................................................ 40
Management's Discussion and Analysis of Financial Condition and Results of
Operations for Pee Dee Bankshares, Inc. ............................................................................. 40
Security Ownership of Management....................................................................................... 40
Market Price for Common Stock and Dividends............................................................................ 40
INFORMATION ABOUT CENTURA.............................................................................................. 41
General................................................................................................................ 41
Recent Developments ................................................................................................... 41
Potential Acquisitions................................................................................................. 41
CERTAIN REGULATORY CONSIDERATIONS...................................................................................... 43
General................................................................................................................ 43
Community Reinvestment................................................................................................. 44
Payment of Dividends................................................................................................... 44
Capital Adequacy....................................................................................................... 45
Support of Subsidiary Banks............................................................................................ 46
Prompt Corrective Action............................................................................................... 46
Safety and Soundness Standards......................................................................................... 47
Depositor Preference................................................................................................... 47
DESCRIPTION OF CENTURA CAPITAL STOCK................................................................................... 48
OTHER MATTERS.......................................................................................................... 49
EXPERTS................................................................................................................ 49
OPINIONS............................................................................................................... 49
SHAREHOLDER PROPOSALS.................................................................................................. 49
INDEX TO FINANCIAL STATEMENTS.......................................................................................... F-1
APPENDICES:
Appendix A: Agreement and Plan of Reorganization....................................................................... A-1
Appendix B: Chapter 13 of Title 33 of the South Carolina Code.......................................................... B-1
Appendix C: Opinion of The Carson Medlin Company....................................................................... C-1
Appendix D: Additional Financial Information........................................................................... D-1
</TABLE>
ii
<PAGE>
AVAILABLE INFORMATION
Centura is subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, in accordance therewith, is
required to file reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy and information statements, and other information can be
obtained, at prescribed rates, from the SEC by addressing written requests for
such copies to the Public Reference Section at the SEC at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
and information statements, and other information can be inspected at the public
reference facilities referred to above and at the regional offices of the SEC at
7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Certain of such
reports, proxy and information statements, and other information are also
available from the SEC over the Internet at http://www.sec.gov. The shares of
Centura Stock are listed on the New York Stock Exchange (the "NYSE"), and
reports, proxy and information statements, and other information concerning
Centura also may be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
This Proxy Statement constitutes part of the Registration Statement on Form S-4
of Centura (including any exhibits and amendments thereto, the "Registration
Statement") filed with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the securities offered hereby. This Proxy
Statement does not include all of the information in the Registration Statement,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. For further information about Centura and the securities
offered hereby, reference is made to the Registration Statement. The
Registration Statement may be inspected and copied, at prescribed rates, at the
SEC's public reference facilities at the addresses set forth above.
All information contained in this Proxy Statement or incorporated herein by
reference with respect to Centura was supplied by Centura and all information
contained in this Proxy Statement or incorporated herein by reference with
respect to Bankshares or Pee Dee Bank was supplied by Bankshares or Pee Dee
Bank.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
PROXY STATEMENT IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES BEING OFFERED
PURSUANT TO THIS PROXY STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CENTURA OR
BANKSHARES OR PEE DEE BANK OR THE INFORMATION SET FORTH OR INCORPORATED BY
REFERENCE HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Centura pursuant to the
Exchange Act are hereby incorporated by reference herein:
(a) Centura's Annual Report on Form 10-K for the year ended
December 31, 1996, (provided that any information included or
incorporated by reference in response to Items 402(a)(8),
(i), (k), or (l) of Regulation S-K of the SEC shall not be
deemed to be incorporated herein and is not part of the
Registration Statement);
(b) Centura's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997, June 30, 1997, and
September 30, 1997;
(c) Centura's Current Reports on Form 8-K dated January 6,
April 3, May 21, July 7, July 15, August 18, October 6, and
November 20, 1997, and January 7, 1998;
(d) Centura's Proxy Statement for the 1997 Annual Meeting of
Shareholders; and
(e) The description of Centura Stock contained in Centura's
Registration Statement on Form 8-A filed October 9, 1990,
under the Exchange Act and any other amendment or report
filed for the purpose of updating such description.
2
<PAGE>
All documents filed by Centura 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 are
incorporated herein by reference and shall be deemed a part hereof from the
respective dates such documents are filed. Any statement contained in this Proxy
Statement or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF CENTURA AND
CENTURA BANK FOLLOWING THE CONSUMMATION OF THE MERGER AND THE BANK MERGER. THESE
FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT
MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
(I) EXPECTED COST SAVINGS FROM THE MERGER AND THE BANK MERGER CANNOT BE
REALIZED; (II) DEPOSIT ATTRITION, CUSTOMER LOSS, OR REVENUE LOSS FOLLOWING THE
MERGER AND THE BANK MERGER IS GREATER THAN EXPECTED; (III) COMPETITIVE PRESSURE
IN THE BANKING INDUSTRY INCREASES SIGNIFICANTLY; (IV) COSTS OR DIFFICULTIES
RELATED TO THE INTEGRATION OF THE BUSINESS OF BANKSHARES INTO CENTURA ARE
GREATER THAN EXPECTED; (V) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCES
MARGINS; (VI) GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE
LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS, A DETERIORATION
IN CREDIT QUALITY; (VII) CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (VIII)
CHANGES OCCUR IN BUSINESS CONDITIONS AND INFLATION; AND (IX) CHANGES OCCUR IN
THE SECURITIES MARKETS. THE FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN THIS
PROXY STATEMENT HAVE NOT BEEN EXAMINED OR COMPILED BY THE INDEPENDENT PUBLIC
ACCOUNTANTS OF CENTURA, NOR HAVE SUCH ACCOUNTANTS APPLIED ANY PROCEDURES
THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN OPINION OR ANY OTHER
FORM OF ASSURANCE ON THEM. FURTHER INFORMATION ON OTHER FACTORS THAT COULD
AFFECT THE FINANCIAL RESULTS OF CENTURA AFTER THE MERGER AND THE BANK MERGER IS
INCLUDED IN THE SEC FILINGS INCORPORATED BY REFERENCE HEREIN.
3
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS PROXY
STATEMENT AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THIS SUMMARY IS
NOT INTENDED TO BE A COMPLETE DESCRIPTION OF THE MATTERS COVERED IN THIS PROXY
STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT.
STOCKHOLDERS ARE URGED TO READ CAREFULLY THE ENTIRE PROXY STATEMENT, INCLUDING
THE APPENDICES. AS USED IN THIS PROXY STATEMENT, THE TERMS "CENTURA",
"BANKSHARES" AND "PEE DEE BANK" REFER TO THOSE ENTITIES, RESPECTIVELY, AND,
WHERE THE CONTEXT REQUIRES, TO CENTURA AND ITS SUBSIDIARIES.
THE PARTIES
BANKSHARES AND PEE DEE BANK. Bankshares, a South Carolina corporation, is a bank
holding company registered with the federal Reserve under the BHC Act.
Bankshares owns 95.73% of the issued and outstanding shares of the capital stock
of Pee Dee Bank. Pee Dee Bank, a South Carolina state bank, offers a broad range
of banking and banking-related services through six (6) banking offices in South
Carolina, three of which are in Florence and one of which is in each of Dillon,
Sumter and Timmonsville. As of September 30, 1997, Bankshares had total
consolidated assets of approximately $133 million, total consolidated
liabilities of approximately $119 million, and total consolidated stockholders'
equity of approximately $13 million. At September 30, 1997, Pee Dee Bank had
total assets of approximately $134 million, total deposits of approximately $113
million, and total stockholders' equity of approximately $14 million.
The principal executive offices of Bankshares and Pee Dee Bank are located at
110 West Main Street, Timmonsville, South Carolina 29161, and its telephone
number at such address is (803) 665-6400. Certain information about Bankshares
and Pee Dee Bank is set forth under "INFORMATION ABOUT BANKSHARES AND PEE DEE
BANK."
CENTURA. Centura, a North Carolina corporation, is a bank holding company
registered with the Federal Reserve under the BHC Act. Centura owns all of the
outstanding shares of Centura Bank, a North Carolina bank corporation. Centura,
through Centura Bank and its subsidiaries, offers a full range of financial
services through 192 offices located in 113 communities throughout North
Carolina and in the Tidewater area of Virginia and through a variety of
alternative delivery channels. As of December 31, 1997, Centura had total
consolidated assets of approximately $7.1 billion, total consolidated
liabilities of approximately $6.6 billion, and total consolidated stockholders'
equity of approximately $538.3 million.
The principal executive offices of Centura and Centura Bank are located at 134
North Church Street, Rocky Mount, North Carolina 27804, and its telephone number
at such address is (919) 977-4400. Additional information with respect to
Centura and its subsidiaries is included in documents incorporated by reference
in this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS INCORPORATED BY
REFERENCE" and "INFORMATION ABOUT CENTURA."
MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to the holders of Bankshares Stock and
Pee Dee Bank Stock in connection with the solicitation by Bankshares' and Pee
Dee Bank's Boards of Directors of proxies for use at the Special Meeting at
which the Bankshares and Pee Dee Bank stockholders will be asked to vote upon
(i) a proposal to approve the Agreement, and (ii) such other business as may
properly come before the meeting. The Special Meeting will be held at the
offices of Pee Dee Bank, 110 West Main Street, Timmonsville, South Carolina, at
4:00 P.M. local time, on Tuesday, March 3, 1998. See "SPECIAL MEETING
OF BANKSHARES AND PEE DEE BANK STOCKHOLDERS -- Date, Place, Time, and Purpose."
Bankshares' and Pee Dee Bank's Boards of Directors have fixed the close of
business on January 15, 1998, as the record date for determination of the
Bankshares and Pee Dee Bank stockholders entitled to notice of and to vote at
the Special Meeting (collectively, the "Record Date"). Only holders of record of
shares of Bankshares Stock and Pee Dee Bank Stock on the Record Date will be
entitled to notice of and to vote at the Special Meeting. Each share of
Bankshares Stock and Pee Dee Bank Stock is entitled to one vote. Stockholders
who execute proxies retain the right to revoke them at any time prior to being
voted at the Special Meeting. On the Record Date, there were 56,133 shares of
Bankshares Stock issued and outstanding, and 63,000 shares of Pee Dee Bank Stock
issued and outstanding. See "SPECIAL MEETING OF BANKSHARES AND PEE DEE BANK
STOCKHOLDERS -- Record Dates, Voting Rights, Required Votes, and Revocability of
Proxies."
4
<PAGE>
Approval of the Agreement requires the affirmative vote of two-thirds of the
votes entitled to be cast at the Special Meeting by the holders of the issued
and outstanding shares of each of Bankshares Stock and Pee Dee Bank Stock. As of
the Record Date, (i) directors and executive officers of Bankshares and their
affiliates were entitled to vote 41,006 shares, or approximately 73.1%, of
the outstanding shares of Bankshares Stock, and (ii) Bankshares, its directors,
executive officers and their affiliates, were entitled to vote 61,343
shares, or approximately 97.4%, of the outstanding shares of Pee Dee Bank Stock.
It is anticipated that the directors and executive officers of Bankshares, and
their affiliates, will vote their shares of Bankshares Stock and Pee Dee Bank
Stock in favor of the proposal to approve the Agreement. In addition,
Bankshares' directors intend to authorize management of Bankshares to vote the
Pee Dee Bank Stock owned by Bankshares in favor of the proposal to approve the
Agreement. Accordingly, since the directors and executive officers of
Bankshares, and their affiliates, own 73.1% of the outstanding Bankshares Stock
and Bankshares and its directors, executive officers and affiliates own 97.4% of
the outstanding shares of Pee Dee Bank Stock, such votes will result in the
approval of the Agreement by the shareholders of Bankshares and Pee Dee Bank.
See "SPECIAL MEETING OF BANKSHARES AND PEE DEE BANK STOCKHOLDERS -- Record
Dates, Voting Rights, Required Votes, and Revocability of Proxies."
THE MERGER AND THE BANK MERGER
GENERAL. The Agreement provides for the acquisition of Bankshares by Centura
pursuant to the merger of Bankshares with and into Centura, and the acquisition
of Pee Dee Bank by Centura Bank pursuant to the merger of Pee Dee Bank with and
into Centura Bank. At the Effective Time, each issued and outstanding share of
Bankshares Stock will be converted into and exchanged for a number of shares of
Centura Stock determined by (i) dividing $40,000,000 by the Average Share Price;
(ii) multiplying the quotient thereof by .95726984 (the percentage of Pee Dee
Bank Stock owned by Bankshares); and (iii) dividing the product thereof by
56,133 (the number of outstanding shares of Bankshares Stock); provided,
however, that if the Average Share Price is greater than $69.32 but equal to or
less than $75.63, the Average Share Price shall be deemed to be $69.32; and
provided further, however, that if the Average Share Price is less than $50.42
or more than $75.63, either party may elect to terminate the Agreement. See
"DESCRIPTION OF THE MERGER AND THE BANK MERGER -- General."
At the Effective Time, each issued and outstanding share of Pee Dee Bank Stock,
except those owned by Bankshares, will be converted into and exchanged for a
number of shares of Centura Stock determined by dividing (i) $40,000,000 by the
Average Share Price, and (ii) the quotient thereof by 63,000 (the number of
outstanding shares of Pee Dee Bank Stock); provided, however, that if the
Average Share Price is greater than $69.32 but equal to or less than $75.63, the
Average Share Price shall be deemed to be $69.32; and provided further, however,
that if the Average Share Price is less than $50.42 or more than $75.63, either
party may elect to terminate the Agreement. See "DESCRIPTION OF THE MERGER AND
THE BANK MERGER -- General."
Assuming an Average Share Price of $69.32 (the maximum given that the closing
price of Centura Stock on January 16, 1998 was $69.4375), each share of
Bankshares Stock would convert to 9.84051 shares of Centura Stock and each share
of Pee Dee Bank Stock (except those owned by Bankshares) would convert to
9.15927 shares of Centura Stock.
No fractional shares of Centura Stock will be issued. Rather, cash (without
interest) will be paid in lieu of any fractional share interest to which any
Bankshares or Pee Dee Bank stockholder would be entitled upon consummation of
the Merger and the Bank Merger, in an amount equal to such fractional part of a
share of Centura Stock multiplied by the Average Share Price or $69.32,
whichever is less. See "DESCRIPTION OF THE MERGER AND THE BANK MERGER --
General."
Centura's Board has approved the repurchase in the open market of shares of
Centura Stock equal in number to up to 9.9% of the shares of Centura Stock to be
issued in the Merger and the Bank Merger. Under rules promulgated by the SEC
under the Exchange Act, Centura will not be permitted to purchase shares of
Centura Stock in the open market during the period commencing two business days
prior to the mailing of this Proxy Statement and ending on the date of the
Special Meeting.
As of the Record Date, Bankshares had 56,133 shares of Bankshares Stock issued
and outstanding, and Pee Dee Bank had 63,000 shares of Pee Dee Bank Stock issued
and outstanding, 60,308 of which were owned by Bankshares and 1,035 of which
were owned by directors and executive officers of Bankshares and their
affiliates. Assuming an Average Share Price of $69.32, it is anticipated
that upon consummation of the Merger and the Bank Merger, Centura would issue
approximately 577,033 shares of Centura Stock. Accordingly, Centura would
then have issued and outstanding approximately 26,439,408 shares of Centura
Stock based on the number of shares of Centura Stock issued and outstanding on
December 31, 1997, and excluding the effect of any shares which may be issued or
repurchased by Centura after December 31, 1997.
5
<PAGE>
REASONS FOR THE MERGER AND BANK MERGER AND RECOMMENDATION OF THE BOARDS OF
DIRECTORS OF BANKSHARES AND PEE DEE BANK. The Boards of Directors of Bankshares
and Pee Dee Bank believe that the Agreement and the Merger and the Bank Merger
contemplated thereby are in the best interests of Bankshares, Pee Dee Bank, and
their respective stockholders. THE BANKSHARES AND PEE DEE BANK DIRECTORS
UNANIMOUSLY RECOMMEND THAT BANKSHARES AND PEE DEE BANK STOCKHOLDERS VOTE FOR
APPROVAL OF THE AGREEMENT AND THE BANKSHARES DIRECTORS INTEND TO AUTHORIZE THE
PEE DEE BANK STOCK OWNED BY BANKSHARES TO BE VOTED FOR APPROVAL OF THE
AGREEMENT. SUCH A VOTE BY BANKSHARES WILL APPROVE THE BANK MERGER. The Boards of
Directors of Bankshares and Pee Dee Bank believe that the Merger and the Bank
Merger will result in a company with expanded opportunities for profitable
growth and that the combined resources and capital of Bankshares and Centura
will provide an enhanced ability to compete in the changing and competitive
financial services industry. See "DESCRIPTION OF THE MERGER AND THE BANK MERGER
- -- Background of and Reasons for the Merger and the Bank Merger."
In unanimously approving the Agreement, Bankshares' and Pee Dee Bank's directors
considered, among other things, Bankshares', Pee Dee Bank's, and Centura's
respective financial conditions, the financial terms and the income tax
consequences of the Merger and the Bank Merger, the likelihood of the Merger and
the Bank Merger being approved by regulatory authorities without undue
conditions or delay, legal advice concerning the proposed Merger and the Bank
Merger, the views of The Carson Medlin Company, Raleigh, North Carolina ("Carson
Medlin") as to the fairness of the consideration, from a financial point of
view, to be received by the stockholders of Bankshares and Pee Dee Bank, and in
general the fairness of the terms of the Merger and the Bank Merger to
Bankshares and Pee Dee Bank stockholders. See "DESCRIPTION OF THE MERGER AND THE
BANK MERGER-- Background of and Reasons for the Merger and the Bank Merger."
OPINION OF FINANCIAL ADVISOR. Carson Medlin has rendered an opinion to
Bankshares that, based on and subject to the procedures, matters, and
limitations described in its opinion and such other matters as it considered
relevant, as of the date of its opinion, the consideration to be received by the
stockholders of Bankshares and Pee Dee Bank is fair, from a financial point of
view. The opinion of Carson Medlin, dated as of January 8, 1998, is attached as
Appendix C to this Proxy Statement. Bankshares and Pee Dee Bank stockholders are
urged to read the opinion in its entirety for a description of the procedures
followed, matters considered, and limitations on the reviews undertaken in
connection therewith. See "DESCRIPTION OF THE MERGER -- Opinion of Financial
Advisor."
EFFECTIVE TIME. Subject to the conditions to the obligations of the parties to
effect the Merger, the Effective Time will occur on the date and at the time
that the Articles of Merger and Articles of Bank Merger become effective with
the North Carolina and South Carolina Secretaries of State. Unless otherwise
agreed upon by Bankshares and Centura and subject to the conditions to the
obligations of the parties to effect the Merger and the Bank Merger, the
Effective Time will occur not later than 30 days after the expiration of all
applicable waiting periods required by any regulatory authority for the Merger
and the Bank Merger. However, the Effective Time is expected to occur as soon as
possible after the expiration of all applicable waiting periods. See
"DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Effective Time of the Merger
and the Bank Merger", " -- Conditions to Consummation of the Merger and the Bank
Merger," and " -- Waiver, Amendment, and Termination."
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that the other conditions precedent to the Merger
and the Bank Merger can or will be satisfied. Bankshares and Centura anticipate
that all conditions to the consummation of the Merger and the Bank Merger will
be satisfied so that the Merger and the Bank Merger can be consummated during
the first quarter of 1998. However, delays in the consummation of the Merger and
the Bank Merger could occur.
EXCHANGE OF STOCK CERTIFICATES. Promptly after the Effective Time, Centura will
cause Registrar and Transfer Company, Cranford, New Jersey, acting in its
capacity as exchange agent for Centura (the "Exchange Agent"), to mail to each
holder of record of a certificate or certificates (collectively, the
"Certificates") which, immediately prior to the Effective Time, represented
outstanding shares of Bankshares Stock or Pee Dee Bank Stock, a letter of
transmittal and instructions for use in effecting the surrender and cancellation
of the Certificates in exchange for certificates representing shares of Centura
Stock. Cash will be paid to the holders of Bankshares Stock and Pee Dee Bank
Stock in lieu of the issuance of any fractional shares of Centura Stock. In no
event will the holder of any surrendered Certificate(s) be entitled to receive
interest on any cash to be paid to such holder, and in no event will Bankshares,
Pee Dee Bank, Centura, or the Exchange Agent be liable to any holder of
Bankshares Stock or Pee Dee Bank Stock for any Centura Stock or dividends
thereon or cash delivered in good faith to a
6
<PAGE>
public official pursuant to any applicable abandoned property, escheat, or
similar law.
REGULATORY APPROVALS AND OTHER CONDITIONS. The Merger and the Bank Merger are
subject to approval by the Federal Reserve, the North Carolina Commissioner of
Banks (the "Commissioner") and the South Carolina State Board of Financial
Institutions (the "South Carolina Board"). Applications have been filed with
each of these agencies for the requisite approvals, and the Commissioner's
approval has been received. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY
APPROVALS WILL BE OBTAINED OR AS TO THE TIMING OF ANY SUCH APPROVAL. THERE ALSO
CAN BE NO ASSURANCE THAT ANY SUCH APPROVAL WILL NOT IMPOSE CONDITIONS THAT ARE
DEEMED BY BANKSHARES OR CENTURA TO MATERIALLY ADVERSELY IMPACT THE ECONOMIC OR
BUSINESS ASSUMPTIONS OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
Consummation of the Merger and the Bank Merger is subject to various other
conditions, including receipt of the required approval of Bankshares and Pee Dee
Bank stockholders, receipt of opinions of counsel as to the tax-free nature of
certain aspects of the Merger and the Bank Merger, and certain other conditions.
See "DESCRIPTION OF THE MERGER AND THE BANK MERGER-- Conditions to Consummation
of the Merger and the Bank Merger" and Regulatory Approvals."
WAIVER, AMENDMENT, AND TERMINATION. The Agreement may be terminated and the
Merger and the Bank Merger abandoned at any time prior to the Effective Time by
mutual action of the Boards of Directors of Bankshares and Centura, or by the
action of the Board of Directors of either company under certain circumstances,
including (i) if the Average Share Price is less than $50.42 or more than
$75.63, (ii) if the Merger and Bank Merger are not consummated by June 30, 1998,
or (iii) in certain circumstances, by either of the parties in the event that
the other party defaults in the performance of its representations, warranties,
and agreements contained in the Agreement. If for any reason the Merger and the
Bank Merger are not consummated, Bankshares and Pee Dee Bank shall continue to
operate as a corporation and bank under their present management. To the extent
permitted by law, the Agreement may be amended upon the written agreement of
Centura and Bankshares without the approval of stockholders; provided, however,
that the provisions of the Agreement relating to the manner or basis in which
shares of Centura Stock will be exchanged for Bankshares Stock and Pee Dee Bank
Stock may not be amended after the Special Meeting without the requisite
approval of the holders of the issued and outstanding shares of Bankshares Stock
and Pee Dee Bank Stock entitled to vote thereon. See "DESCRIPTION OF THE MERGER
AND THE BANK MERGER -- General" and " -- Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS. Pursuant to Chapter 13 of Title 33 of the South Carolina
Code, the holders of Bankshares Stock and Pee Dee Bank Stock have dissenters'
rights with respect to the Merger and the Bank Merger. Any Bankshares or Pee Dee
Bank stockholder who does not vote in favor of the proposal to approve the
Agreement and the Merger and the Bank Merger contemplated thereby and who
complies with certain requirements of the applicable provisions of the Code may
have the right to an appraisal and payment for such person's shares of
Bankshares Stock and/or Pee Dee Bank Stock.
TO PERFECT DISSENTERS' RIGHTS OF APPRAISAL, A HOLDER OF BANKSHARES STOCK OR PEE
DEE BANK STOCK MUST STRICTLY COMPLY WITH THE APPLICABLE STATUTORY PROVISIONS, A
COPY OF WHICH PROVISIONS IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX B. A
STOCKHOLDER OF BANKSHARES OR PEE DEE BANK WHO WISHES TO DISSENT FROM THE MERGER
OR THE BANK MERGER (I) MUST GIVE BANKSHARES OR PEE DEE BANK, AS THE CASE MAY BE,
WRITTEN NOTICE OF HIS INTENT TO DEMAND PAYMENT FOR HIS SHARES IF THE MERGER OR
BANK MERGER IS EFFECTUATED, WHICH NOTICE MUST BE ACTUALLY RECEIVED BY BANKSHARES
OR PEE DEE BANK, AS THE CASE MAY BE, BEFORE THE VOTE IS TAKEN AT THE SPECIAL
MEETING, AND (II) MUST NOT VOTE ANY SHARES OF BANKSHARES OR PEE DEE BANK STOCK
IN FAVOR OF THE MERGER OR THE BANK MERGER, AS THE CASE MAY BE. ANY HOLDER OF
BANKSHARES STOCK OR PEE DEE BANK STOCK WHO RETURNS A SIGNED PROXY BUT WHO FAILS
TO PROVIDE VOTING INSTRUCTIONS WITH RESPECT TO THE PROPOSAL TO APPROVE THE
AGREEMENT WILL BE DEEMED TO HAVE VOTED IN FAVOR OF SUCH PROPOSAL AND WILL NOT BE
ENTITLED TO ASSERT DISSENTERS' RIGHTS OF APPRAISAL. A VOTE AGAINST THE MERGER OR
THE BANK MERGER WILL NOT SATISFY THE NOTICE REQUIREMENTS OF SOUTH CAROLINA LAW.
See "DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Dissenters' Rights."
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND THE BANK MERGER. Certain members
of Bankshares' management and Board of Directors have interests in the Merger
and the Bank Merger in addition to their interests as stockholders of Bankshares
and Pee Dee Bank generally. Those interests relate to, among other things, an
employment agreement to be executed between the President of Bankshares and
Centura and provisions in the Agreement regarding eligibility for certain
Centura employee benefits. See "DESCRIPTION OF THE MERGER AND THE BANK MERGER --
Interests of Certain Persons in the
7
<PAGE>
Merger and the Bank Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. It is intended that the Merger and the
Bank Merger will be treated as a reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"). Consummation
of the Merger and the Bank Merger is conditioned upon receipt by Bankshares of
an opinion of Sinkler & Boyd. P.A., counsel to Bankshares and Pee Dee Bank,
substantially to this effect. Accordingly, no gain or loss will be recognized by
Bankshares or Pee Dee Bank stockholders upon the exchange of such stockholder's
Bankshares Stock and Pee Dee Bank Stock solely for shares of Centura Stock.
Subject to the provisions and limitations of Section 302(a) of the Code, gain or
loss will be recognized with respect to cash received in lieu of fractional
shares. Gain recognition, if any, will not be in excess of the amount of cash
received. TAX CONSEQUENCES OF THE MERGER FOR INDIVIDUAL TAXPAYERS CAN VARY,
HOWEVER, AND ALL BANKSHARES AND PEE DEE BANK STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF THE MERGER ON THEM UNDER
FEDERAL, STATE, LOCAL, AND FOREIGN TAX LAWS. Consummation of the Merger and the
Bank Merger also is conditioned upon receipt by Centura of an opinion of Poyner
& Spruill, L.L.P., counsel to Centura, to the effect that no gain or loss will
be recognized by Centura as a result of the issuance of shares of Centura Stock
in connection with the Merger and Bank Merger. For a further discussion of the
federal income tax consequences of the Merger and the Bank Merger, see
"DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Certain Federal Income Tax
Consequences."
ACCOUNTING TREATMENT. It is intended that the Merger will be accounted for as
pooling-of-interests for accounting and financial reporting purposes and
consummation of the Merger is conditioned upon assurances from J.W. Hunt and
Company, LLP, and KPMG Peat Marwick LLP, independent public accountants for
Bankshares and Centura, respectively, as to such accounting treatment. See
"DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Accounting Treatment."
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS. At the Effective Time, Bankshares
stockholders and Pee Dee Bank stockholders, whose rights are governed by
Bankshares' and Pee Dee Bank's Articles of Incorporation and Bylaws,
respectively, will automatically become Centura stockholders, and their rights
as Centura stockholders will be determined by Centura's Restated Articles of
Incorporation and Bylaws.
The rights of Centura stockholders differ from the rights of Bankshares
stockholders and Pee Dee Bank stockholders in certain important respects, some
of which constitute additional anti-takeover provisions provided for in
Centura's governing documents. See "EFFECT OF THE MERGER AND THE BANK MERGER
ON RIGHTS OF STOCKHOLDERS."
CONDUCT OF BUSINESS PENDING THE MERGER. Each party has agreed in the Agreement
to, among other things, operate its business only in the ordinary course and to
take no action that would adversely affect its ability to perform its covenants
and agreements under the Agreement. In addition, Bankshares has agreed not to
take certain actions relating to the operation of Pee Dee Bank pending
consummation of the Merger and the Bank Merger, except as otherwise permitted by
the Agreement. See "DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Conduct of
Business Pending the Merger and the Bank Merger," for a description of these
limitations on the conduct of Pee Dee Bank's business.
STOCK OPTION AGREEMENT. Simultaneously with the execution of the Agreement,
Centura and Bankshares also entered into a Stock Option Agreement pursuant to
which Bankshares granted Centura an irrevocable option (the "Bankshares Option")
to purchase up to 11,170 shares, subject to adjustment, of Bankshares Stock at a
price equal to the book value of Bankshares Stock on December 30, 1997. The
adjustments to the number of shares subject to the Bankshares Option generally
are intended to ensure that such shares will equal approximately 19.9% of the
shares of Bankshares Stock outstanding at the time of the execution of the
Bankshares Option, before giving effect to any issuance of Bankshares Stock
pursuant to exercise of the Bankshares Option. The Bankshares Option will expire
upon the earlier of the closing date of the transaction contemplated by the
Agreement or upon the termination of the Agreement in accordance with the terms
of the Agreement. See "DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Stock
Option Agreement."
RECENT OPERATING RESULTS. On January 7, 1998, Centura released its financial
summary of operating results for the year ended December 31, 1997. For
additional information, refer to Centura's press release, dated January 7, 1998,
included as an exhibit to Centura's Current Report on Form 8-K, dated January 7,
1998, which is incorporated herein by reference. See "INFORMATION ABOUT CENTURA
- -- "Recent Developments" and "Documents Incorporated by Reference."
8
<PAGE>
COMPARATIVE MARKET PRICES OF COMMON STOCK AND DIVIDENDS
Shares of Centura Stock are traded on the NYSE under the symbol "CBC." There is
not an active trading market for the shares of Bankshares Stock and Pee Dee Bank
Stock, and trades involving Bankshares Stock and Pee Dee Bank Stock have been
infrequent and made primarily on the basis of private negotiations. Neither
Bankshares Stock nor Pee Dee Stock is traded on any exchange or on the NASDAQ
National Market System and no market makers in either stock are known to
management of Bankshares. In addition, management of Bankshares is not aware of
any transactions in which Bankshares Stock or Pee Dee Stock was traded during
the last two years. Accordingly, no per share information is available.
The following table sets forth the reported closing prices per share for Centura
Stock on December 29, 1997, the last full business day preceding the execution
of the Agreement, and on January 16, 1998, the latest practical date prior to
the mailing of this Proxy Statement. No per share prices were available for
Bankshares Stock at either date; accordingly, equivalent per share information
is not available.
MARKET PRICE PER SHARE AT: CENTURA STOCK
December 29, 1997 ................................... $67.4375
January 16, 1998..................................... $69.4375
There can be no assurance as to what the market price of the Centura Stock will
be if and when the Merger and the Bank Merger are consummated.
The holders of Centura Stock are entitled to receive dividends when and if
declared by the Board of Directors out of funds legally available therefor.
Although Centura currently intends to continue to pay quarterly cash dividends
on the Centura Stock, there can be no assurance that Centura's dividend policy
will remain unchanged after completion of the Merger and the Bank Merger. The
declaration and payment of dividends thereafter will depend upon business
conditions, operating results, capital and reserve requirements, and the Board
of Directors' consideration of other relevant factors. The Agreement prohibits
Bankshares from paying dividends on Bankshares Stock during the pendency of the
Merger and the Bank Merger other than pursuant to its prior practice with regard
to dividends.
Centura is a legal entity separate and distinct from its subsidiaries and its
revenues depend in significant part on the payment of dividends from Centura
Bank. Centura Bank and Pee Dee Bank are subject to certain legal restrictions on
the amount of dividends they are permitted to pay. See "CERTAIN REGULATORY
CONSIDERATIONS -- Payment of Dividends."
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating to
income, cash dividends, and book value on (i) an historical basis for Centura
and Bankshares; (ii) a pro forma combined basis per share of Centura Stock,
giving effect to the Merger; and (iii) a pro forma equivalent basis per share of
Bankshares Stock, giving effect to the Merger. The Centura and Bankshares pro
forma combined information and the Bankshares pro forma equivalent information
give effect to the Merger on a pooling-of-interests accounting basis and reflect
the exchange of Centura Stock for Bankshares Stock and Pee Dee Bank Stock as
defined in the Agreement assuming an Average Stock Price of $69.32 (as
described under "DESCRIPTION OF THE MERGER AND THE BANK MERGER -- General").
Also see "DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Accounting
Treatment." The pro forma data are presented for information purposes only and
are not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger been consummated at
the dates or during the periods indicated, nor are they necessarily indicative
of future results of operations or combined financial position.
9
<PAGE>
The information shown below should be read in conjunction with, and is qualified
in its entirety by, the historical consolidated financial statements of Centura
and Bankshares, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE," "SELECTED CONSOLIDATED FINANCIAL DATA", "INFORMATION
ABOUT CENTURA", and "INFORMATION ABOUT BANKSHARES AND PEE DEE BANK."
<TABLE>
<CAPTION>
Nine Months Year Ended December 31,
Ended
September 30, 1997 1996 1995 1994
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE(5)
Centura Historical
Basic $ 2.31 $ 2.66 $ 2.50 $ 2.23
Diluted 2.26 2.60 2.45 2.19
Bankshares Historical 23.54 28.18 21.41 18.63
Centura and Bankshares Pro Forma Combined (1)
Basic 2.31 2.66 2.49 2.22
Diluted 2.26 2.60 2.44 2.18
Bankshares Pro Forma Equivalent (2)
Basic 23.75 27.35 25.60 22.83
Diluted 23.23 26.73 25.09 22.52
CASH DIVIDENDS DECLARED PER COMMON SHARE
Centura Historical $ 0.79 $ 1.00 $ 0.85 $ 0.74
Bankshares Historical 9.00 6.60 4.50 2.15
Centura and Bankshares Pro Forma
Combined (4) 0.79 1.00 0.85 0.74
Bankshares Pro Forma Equivalent (3) 8.12 10.28 8.74 7.61
BOOK VALUE PER COMMON SHARE
Centura Historical $ 20.45 $ 18.51 $ 17.19 $ 14.95
Bankshares Historical 238.97 224.36 202.98 184.76
Centura and Bankshares Pro Forma
Combined (1) 20.51 18.59 17.25 15.02
Bankshares Pro Forma Equivalent (2) 210.84 191.14 177.37 154.44
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the pro forma combined information of Centura and Bankshares as
if the Merger were accounted for as a pooling-of-interests. Pro forma
shares include Centura shares expected to be issued for both Bankshares
Stock and for Pee Dee Bank Stock.*
(2) Represents the pro forma combined information multiplied by a Multiple.*
(3) Represents historical dividends declared per share by Centura multiplied by
a Multiple.*
(4) Represents historical dividends declared per share by Centura as it is
assumed that Centura will not change its dividend policy as a result of the
Merger and Bank Merger.
(5) On December 15, 1997, Centura and Bankshares adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share" ("SFAS No. 128"). As
required by SFAS No. 128, the earnings per share calculations for all
periods presented have been restated to reflect the adoption of SFAS
No. 128.
* The Multiple is calculated to be the relationship of (i) the total number
of shares of Centura Stock to be issued pursuant to the terms of the
Agreement assuming an Average Stock Price of $69.32 (as described under
"DESCRIPTION OF THE MERGER AND THE BANK MERGER--General") divided by
(ii) the number of outstanding Bankshares Stock for each period presented.
The foregoing pro forma combined and equivalent per share data reflects the
issuance of shares of Centura Stock pursuant to the terms of the Agreement (as
described under "DESCRIPTION OF THE MERGER AND BANK MERGER--General"). The pro
forma combined and equivalent data would change if the Average Stock Price was
not $69.32 (more fully described under "DESCRIPTION OF THE MERGER AND THE
BANK MERGER--General").
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical consolidated financial
information for Centura and Bankshares. Centura's financial information for the
nine months ended September 30, 1997 and 1996 has been derived from Centura's
unaudited consolidated financial statements, including the related notes
thereto, included in Centura's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, incorporated by reference. All other Centura financial
information has been derived from the audited consolidated financial statements
of Centura, including the related notes thereto, and from other data included in
Centura's 1996 Annual Report on Form 10-K, incorporated by reference, and should
be read in conjunction therewith. See "DOCUMENTS INCORPORATED BY REFERENCE."
Bankshare's financial information for the nine months ended September 30, 1997
and 1996 has been derived from Bankshares' unaudited consolidated financial
statements including the related notes thereto, included herein. All other
financial information has been derived from the audited consolidated financial
statements of Bankshares, including the related notes thereto, included herein.
CENTURA BANKS, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------- ------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share)
Interest income............................. $377,953 $346,665 $469,760 $417,635 $324,950 $282,819 $274,442
Interest expense............................ 181,143 162,665 219,676 192,990 123,657 112,306 124,296
-------- -------- -------- -------- -------- -------- --------
Net interest income......................... 196,810 184,000 250,084 224,645 201,293 170,513 150,146
Provision for loan losses................... 9,569 6,850 9,596 7,904 7,220 9,151 17,293
Noninterest income.......................... 83,104 73,544 100,847 80,110 63,756 66,642 56,706
Noninterest expense......................... 179,197 172,121 233,981 195,777 170,207 157,040 139,459
Income taxes................................ 31,594 28,957 39,203 36,421 31,849 26,688 16,593
-------- -------- -------- -------- -------- -------- --------
Net income.................................. $ 59,554 $ 49,616 $ 68,151 $ 64,653 $ 55,773 $ 44,276 $ 33,507
======== ======== ======== ======== ======== ======== ========
Net interest income, taxable equivalent..... $202,632 $188,371 $256,109 $229,827 $207,033 $176,610 $156,419
======== ======== ======== ======== ======== ======== ========
Cash dividends paid......................... $20,373 $17,739 $ 24,001 $ 18,731 $ 15,874 $ 12,833 $ 10,012
======= ======= ======== ======== ======== ======== ========
PER COMMON SHARE
Net income - basic..........................$ 2.31 $ 1.94 $ 2.66 $ 2.50 $ 2.23 $ 1.92 $ 1.59
Net income - diluted........................ 2.26 1.90 2.60 2.45 2.19 1.90 1.56
Cash dividends.............................. 0.79 0.75 1.00 0.85 0.74 0.69 0.63
Book value.................................. 20.45 18.04 18.51 17.19 14.95 14.09 12.22
SELECTED AVERAGE BALANCES
(millions)
Assets...................................... $ 6,461 $ 5,875 $ 5,956 $ 5,178 $ 4,478 $ 3,937 $ 3,475
Earning assets.............................. 5,934 5,412 5,485 4,754 4,118 3,614 3,170
Loans....................................... 4,224 3,958 4,014 3,638 3,005 2,650 2,385
Investment securities....................... 1,679 1,418 1,436 1,083 1,083 905 708
Core deposits............................... 4,420 4,012 4,102 3,646 3,445 3,058 2,721
Total deposits.............................. 4,784 4,432 4,505 4,036 3,718 3,334 2,977
Total liabilities........................... 5,958 5,428 5,502 4,753 4,118 3,636 3,220
Shareholders' equity........................ 503 447 454 425 360 301 255
SELECTED PERIOD-END BALANCES
(millions)
Assets...................................... $ 6,891 $ 6,231 $ 6,294 $ 5,785 $ 4,658 $ 4,518 $ 3,647
Earning assets.............................. 6,227 5,708 5,720 5,274 4,230 4,091 3,280
Loans....................................... 4,511 4,206 4,109 3,898 3,244 2,834 2,472
Investment securities....................... 1,693 1,478 1,578 1,329 966 1,201 731
Core deposits............................... 4,799 4,364 4,387 3,948 3,428 3,538 2,837
Total deposits.............................. 5,210 4,728 4,733 4,444 3,736 3,854 3,115
Total liabilities........................... 6,362 5,763 5,819 5,342 4,289 4,167 3,381
Shareholders' equity........................ 529 468 475 443 369 351 266
SELECTED RATIOS
Return on average assets.................... 1.23% 1.13% 1.14% 1.25% 1.25% 1.12% 0.96%
Return on average equity.................... 15.83 14.81 15.02 15.22 15.48 14.73 13.16
Average equity to average assets............ 7.79 7.62 7.62 8.21 8.04 7.64 7.32
Dividend payout ratio....................... 34.21 35.75 35.22 28.97 28.46 28.98 29.88
</TABLE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share)
Interest income.................................. $ 8,834 $ 7,638 $ 10,465 $ 8,659 $ 7,024 $ 6,600 $ 6,527
Interest expense................................. 3,342 2,898 3,975 3,284 2,031 1,974 2,339
-------- -------- -------- -------- -------- -------- --------
Net interest income.............................. 5,492 4,740 6,490 5,375 4,993 4,626 4,188
Provision for loan losses........................ 450 300 620 330 283 290 409
Noninterest income............................... 1,433 1,265 1,685 1,438 1,324 1,438 1,551
Noninterest expense.............................. 4,279 3,665 5,007 4,605 4,409 4,163 4,064
Income taxes..................................... 818 764 895 623 532 502 356
Minority Interest................................ 59 61 79 60 53 56 47
------ -------- ------- -------- -------- -------- ---------
Net income....................................... $ 1,319 $ 1,215 $ 1,574 $ 1,195 $ 1,040 $ 1,053 $ 863
======== ======== ======== ======== ======== ======== ========
Net interest income, taxable equivalent $ 5,570 $ 4,823 $ 6,599 $ 5,477 $ 5,100 $ 4,763 $ 4,328
======== ======== ======== ======== ======== ======== ========
Cash dividends................................... $ 503 $ 369 $ 369 $ 251 $ 119 $ 57 $ 16
======= ======= ======== ======== ======== ======== ========
PER COMMON SHARE
Net income - basic............................... $ 23.54 $ 21.75 $ 28.18 $ 21.41 $ 18.70 $ 18.97 $ 15.86
Net income - diluted............................. 23.54 21.75 28.18 21.41 18.70 18.97 15.86
Cash dividends paid.............................. 9.00 6.60 6.60 4.50 2.15 1.03 0.29
Book value....................................... 238.97 217.86 224.36 202.98 184.76 169.94 151.28
SELECTED AVERAGE BALANCES
(thousands)
Assets........................................... $127,817 $111,035 $111,762 $ 93,517 $ 82,343 $ 76,565 $ 71,486
Cash............................................. 4,205 4,533 4,458 4,430 4,193 3,604 3,261
Loans............................................ 83,697 71,846 72,787 62,348 52,226 46,447 44,564
Investment securities............................ 28,489 26,020 25,896 20,535 20,403 20,664 17,788
Demand Deposits.................................. 20,796 19,167 18,958 17,446 16,172 14,627 13,253
Total deposits................................... 108,252 93.275 93,754 78,003 68,793 64,192 59,895
Total liabilities................................ 114,245 98,703 99.252 82,161 71,963 67,174 63,079
Shareholders' equity............................. 12,974 11,752 11,933 10,823 9,876 8,912 7,860
SELECTED PERIOD-END BALANCES
(thousands)
Assets........................................... $133,097 $121,083 $122,537 $100,986 $ 86,048 $78,638 $ 74,492
Earning assets................................... 124,555 112,479 113,841 92,901 78,465 71,219 68,252
Loans............................................ 88,896 76,615 78,498 67,076 57,620 46,832 46,062
Investment securities............................ 27,909 29,314 29,068 22,725 18,345 22,462 18,865
Demand Deposits.................................. 21,984 20,025 19,608 18,308 16,583 15,761 13,493
Total deposits................................... 113,372 102,173 103,132 84,376 71,630 65,955 62,428
Total liabilities................................ 119,086 108,306 109,404 89,100 75,222 68,704 65,644
Shareholders' equity............................. 13,414 12,171 12,534 11,332 10,315 9,436 8,389
SELECTED RATIOS
Return on average assets......................... 1.38% 1.45% 1.41% 1.28% 1.26% 1.38% 1.21%
Return on average equity......................... 13.56 13.78 13.19 11.04 10.53 11.81 10.98
Average equity to average assets 13.53 14.11 10.68 11.57 11.99 11.64 11.00
Dividend payout ratio............................ 38.14 30.37 23.44 21.00 11.44 5.41 1.85
</TABLE>
<PAGE>
PEE DEE STATE BANK
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share)
Interest income.................................. $ 8,834 $ 7,638 $ 10,465 $ 8,659 $ 7,024 $ 6,600 $ 6,527
Interest expense................................. 3,342 2,898 3,975 3,284 2,031 1,974 2,339
-------- -------- -------- -------- ----- -------- --------
Net interest income.............................. 5,492 4,740 6,490 5,375 4,993 4,626 4,188
Provision for loan losses........................ 450 300 620 330 283 290 409
Noninterest income............................... 1,433 1,265 1,685 1,438 1,324 1,438 1,551
Noninterest expense.............................. 4,279 3,664 5,004 4,605 4,409 4,162 4,064
Income taxes..................................... 818 764 895 623 532 502 356
Net income....................................... $ 1,378 $ 1,277 $ 1,656 $ 1,255 $ 1,093 $ 1,110 $ 910
======== ======== ======== ======== ======== ======== ========
Net interest income, taxable equivalent $ 5,570 $ 4,823 $ 6,599 $ 5,477 $ 5,100 $ 4,763 $ 4,328
======== ======== ======== ======== ======== ======== ========
Cash dividends................................... $ 0 $ 0 $ 542 $ 378 $ 252 $ 126 $ 63
======== ======= ======== ======== ======== ======== ========
PER COMMON SHARE
Net income - basic............................... $ 21.87 $ 20.27 $ 26.29 $ 19.92 $ 17.35 $ 17.62 $ 14.44
Net income - diluted............................. 21.87 20.27 26.29 19.92 17.35 17.62 14.44
Cash dividends paid.............................. 0.00 0.00 8.60 6.00 4.00 2.00 1.00
Book value....................................... 222.06 202.68 200.14 182.67 167.57 155.70 139.46
SELECTED AVERAGE BALANCES
(thousands)
Assets........................................... $127,817 $111,035 $111,762 $ 93,517 $ 82,343 $ 76,565 $ 71,486
Cash............................................. 4,205 4,533 4,458 4,430 4,193 3,605 3,261
Loans............................................ 83,697 71,846 72,787 62,348 52,226 46,447 44,564
Investment securities............................ 28,489 26,020 25,896 20,535 20,403 20,664 17,788
Demand deposits.................................. 20,820 19,180 18,971 17,469 16,189 14,631 13,255
Total deposits................................... 108,267 93,288 93,767 78,027 68,810 64,195 59,897
Total liabilities................................ 114,518 98,896 99,703 82,485 72,160 67,268 63,123
Shareholders' equity............................. 13,300 12,139 12,058 11,033 10,183 9,298 8,363
SELECTED PERIOD-END BALANCES
(thousands)
Assets........................................... $133,097 $121,083 $122,537 $100,986 $ 86,048 $ 78,638 $ 74,492
Earning assets................................... 124,555 112,479 113,841 92,901 78,465 71,219 68,252
Loans............................................ 88,896 76,615 78,498 67,076 57,620 46,832 46,062
Investment securities............................ 27,909 29,314 29,068 22,725 18,345 22,462 18,865
Demand deposits.................................. 22,005 20,033 19,616 18,326 16,612 15,766 13,495
Total deposits................................... 113,393 102,181 103,132 84,394 71,659 65,960 62,430
Total liabilities................................ 119,107 108,314 109,928 89,478 75,491 68,829 65,706
Shareholders' equity............................. 13,990 12,769 12,609 11,508 10,557 9,809 8,786
SELECTED RATIOS
Return on average assets......................... 1.44% 1.53% 1.48% 1.34% 1.33% 1.45% 1.27%
Return on average equity......................... 13.81 14.03 13.73 11.37 10.73 11.94 10.89
Average equity to average assets 13.87 14.58 10.79 11.80 12.36 12.14 11.69
Dividend payout ratio............................ 0.00 0.00 32.73 30.12 23.05 11.35 6.92
</TABLE>
11
<PAGE>
SPECIAL MEETING OF BANKSHARES AND PEE DEE BANK STOCKHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of Bankshares Stock
and Pee Dee Bank Stock in connection with the solicitation by the
Bankshares and Pee Dee Bank Boards of Directors of proxies for use at the
Special Meeting at which the Bankshares and Pee Dee Bank stockholders will
be asked to vote upon a proposal to approve the Agreement. The Special
Meeting will be held at the offices of Pee Dee Bank located at 110 West
Main Street, Timmonsville, South Carolina, at 4:00 P.M., local time, on
March 3, 1998. See "DESCRIPTION OF THE MERGER AND THE BANK MERGER."
RECORD DATES, VOTING RIGHTS, REQUIRED VOTES, AND REVOCABILITY OF PROXIES
The close of business on January 15, 1998, has been fixed as the Record
Date for determining holders of outstanding shares of Bankshares Stock and
Pee Dee Bank Stock entitled to notice of and to vote at the Special
Meeting. Only holders of Bankshares and Pee Dee Bank Stock of record on the
books of Bankshares or Pee Dee Bank at the close of business on the Record
Date are entitled to notice of and to vote at the Special Meeting. As of
the Record Date, there were 56,133 shares of Bankshares Stock issued and
outstanding and held by approximately 35 holders of record, and 63,000
shares of Pee Dee Bank Stock issued and outstanding and held by
approximately 30 holders of record.
Holders of Bankshares Stock and Pee Dee Bank Stock are entitled to one vote
on each matter considered and voted upon at the Special Meeting for each
share of Bankshares Stock and each share of Pee Dee Bank Stock held of
record as of the Record Date. To hold a vote on any proposal, a quorum must
be assembled, which is a majority of the shares of each of Bankshares Stock
and Pee Dee Bank Stock issued and outstanding and entitled to vote, present
in person or represented by proxy. In determining whether a quorum exists
at the Special Meeting for purposes of all matters to be voted on, all
votes "for" or "against," as well as all abstentions and broker non-votes,
with respect to the proposal receiving the most such votes, will be
counted. The vote required for the approval of the Agreement is two-thirds
of the shares of each of Bankshares Stock and the Pee Dee Bank Stock
entitled to be cast at the Special Meeting by holders of the issued and
outstanding shares of Bankshares Stock and the Pee Dee Bank Stock.
Consequently, with respect to the proposal to approve the Agreement,
abstentions will be counted as part of the base number of votes to be used
in determining if the proposal has received the requisite number of base
votes for approval. Thus, an abstention will have the same effect as a vote
against the proposal.
Shares of Bankshares Stock and Pee Dee Bank Stock represented by properly
executed proxies, if such proxies are received in time and not revoked,
will be voted in accordance with the instructions indicated on the proxies.
IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL
OF THE AGREEMENT AND, IN THE DISCRETION OF THE PROXY HOLDER, AS TO ANY
OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE SPECIAL MEETING. IF
NECESSARY, THE PROXY HOLDER MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE
SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF PROXIES IN THE
EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE FOREGOING PROPOSAL AT
THE TIME OF THE SPECIAL MEETING.
FAILURE EITHER TO RETURN THE PROXY CARD OR TO VOTE IN PERSON AT THE SPECIAL
MEETING WILL HAVE THE EFFECT OF A VOTE CAST AGAINST APPROVAL OF THE
AGREEMENT.
A Bankshares stockholder or a Pee Dee Bank stockholder who has given a
proxy may revoke it at any time prior to its exercise at the Special
Meeting by (i) giving written notice of revocation to the Secretary of
Bankshares or Pee Dee Bank, as the case may be, (ii) properly submitting to
Bankshares or Pee Dee Bank a duly executed proxy bearing a later date, or
(iii) attending the Special Meeting and voting in person. All written
notices of revocation and other communications with respect to revocation
of proxies should be addressed as follows: Pee Dee Bankshares, Inc., 110
West Main Street, Timmonsville, South Carolina 29161; Attention: Thomas J.
Levine, Secretary of Bankshares and Pee Dee Bank.
As of the Record Date, (i) directors and executive officers of Bankshares
and their affiliates were entitled to vote 41,006 shares, or
approximately 73.1%, of the outstanding shares of Bankshares Stock, and
(ii) Bankshares, its directors, executive officers and their affiliates,
were entitled to vote 71,343 shares, or approximately 97.4%, of the
outstanding shares of Pee Dee Bank Stock. It is anticipated that the shares
of Bankshares and Pee Dee Bank Stock owned
12
<PAGE>
by the directors and executive officers of Bankshares, and their
affiliates, will be voted in favor of the proposal to approve the
Agreement, thereby resulting in the approval of the proposal.
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
Bankshares by mail, in person, or by telephone or telegraph. Such persons
will receive no additional compensation for such services. Bankshares may
make arrangements with brokerage firms and other custodians, nominees, and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of Bankshares Stock and Pee Dee Bank Stock held of record
by such persons. Any such brokers, custodians, nominees, and fiduciaries
will be reimbursed for the reasonable out-of-pocket expenses incurred by
them for such services. All expenses associated with the solicitation of
proxies, other expenses associated with the Special Meeting, and expenses
related to the printing and mailing of this Proxy Statement, will be shared
by Centura and Bankshares as provided in the Agreement.
See "DESCRIPTION OF THE MERGER AND THE BANK MERGER -- Expenses and Fees."
RECOMMENDATION
The Boards of Directors of Bankshares and Pee Dee Bank have unanimously
approved the Agreement and the Merger and the Bank Merger contemplated
thereby, believe that the proposal to approve the Agreement is in the best
interests of Bankshares, Pee Dee Bank and their respective stockholders,
and unanimously recommend that the Bankshares and Pee Dee Bank stockholders
vote FOR approval of the proposal to approve the Agreement. The Bankshares
Directors intend to authorize the Pee Dee Bank Stock owned by Bankshares to
be voted for approval of the proposal to approve the Agreement. Since
Bankshares owns more than 95% of the outstanding shares of Pee Dee Bank
Stock entitled to vote, such a vote will result in the approval of the
proposal.
As of the Record Date, (i) directors and executive officers of
Bankshares and their affiliates were entitled to vote 41,006 shares,
or approximately 73.1%, of the outstanding shares of Bankshares Stock, and
(ii) Bankshares, its directors, executive officers and their affiliates,
were entitled to vote 71,343 shares, or approximately 97.4%, of the
outstanding shares of Pee Dee Bank Stock. It is anticipated that the shares
of Bankshares and Pee Dee Bank Stock owned by the directors and executive
officers of Bankshares, and their affiliates, will be voted in favor of the
proposal to approve the Agreement, thereby resulting in the approval of the
proposal.
DESCRIPTION OF THE MERGER AND THE BANK MERGER
THE FOLLOWING INFORMATION DESCRIBES CERTAIN ASPECTS OF THE MERGER AND THE
BANK MERGER. THIS DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE APPENDICES HERETO, INCLUDING
THE AGREEMENT, WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT AND
INCORPORATED HEREIN BY REFERENCE. ALL STOCKHOLDERS ARE URGED TO READ THE
APPENDICES IN THEIR ENTIRETY.
GENERAL
The Agreement provides for the acquisition of Bankshares by Centura
pursuant to the merger of Bankshares with and into Centura and the
acquisition of Pee Dee Bank by Centura Bank pursuant to the merger of Pee
Dee Bank with and into Centura Bank. At the Effective Time, each issued and
outstanding share of Bankshares Stock will be converted into and exchanged
for a number of shares of Centura Stock, determined by (i) dividing
$40,000,000 by the Average Share Price, (ii) multiplying the quotient
thereof by .95726984 (the percentage of Pee Dee Bank Stock owned by
Bankshares), and (iii) dividing the product thereof by 56,133 (the number
of outstanding shares of Bankshares Stock); provided, however, that if the
Average Share Price is greater than $69.32 but equal to or less than
$75.63, the Average Share Price shall be deemed to be $69.32; and provided
further, however, that if the Average Share Price is less than $50.42 or
more than $75.63, either party may elect to terminate the Agreement.
At the Effective Time, each issued and outstanding share of Pee Dee Bank
Stock, except those owned by Bankshares, will be converted into and
exchanged for a number of shares of Centura Stock determined by dividing
(i) $40,000,000 by the Average Share Price (as defined above), and (ii)
dividing the quotient thereof by 63,000 (the number of outstanding shares
of Pee Dee Bank Stock); provided, however, that if the Average Share Price
is greater than $69.32 but equal to or less than $75.63, the Average Share
Price shall be deemed to be $69.32; and provided further, however, that if
the
13
<PAGE>
Average Share Price is less than $50.42 or more than $75.63, either party
may elect to terminate the Agreement.
Assuming an Average Share Price of $69.32 (the maximum given that the
closing price of Centura Stock on January 16, 1998 was $69.4375), each
share of Bankshares Stock would convert to 9.84051 shares of Centura Stock
and each share of Pee Dee Bank Stock (except those owned by Bankshares)
would convert to 9.15927 shares of Centura Stock.
No fractional shares of Centura Stock will be issued. Rather, cash (without
interest) will be paid in lieu of any fractional share interest to which
any Bankshares stockholder or Pee Dee Bank stockholder would be entitled
upon consummation of the Merger or the Bank Merger, in an amount equal to
such fractional part of a share of Centura Stock multiplied by the Average
Share Price, or the amount of $69.32, whichever is less.
Centura's Board has approved the repurchase in the open market of shares of
Centura Stock equal in number to up to 9.9% of the shares of Centura Stock
to be issued in the Merger and the Bank Merger. Under rules promulgated by
the SEC under the Exchange Act, Centura will not be permitted to purchase
shares of Centura Stock in the open market during the period commencing two
business days prior to the mailing of this Proxy Statement and ending on
the date of the Special Meeting.
As of the Record Date, there were 56,133 shares of Bankshares Stock issued
and outstanding and 63,000 shares of Pee Dee Bank Stock issued and
outstanding. Assuming an Average Share Price of $69.32, it is anticipated
that upon consummation of the Merger and the Bank Merger, Centura would
issue approximately 577,033 shares of Centura Stock. Accordingly, Centura
would then have issued and outstanding approximately 26,439,408 shares of
Centura Stock based on the number of shares of Centura Stock issued and
outstanding on December 31, 1997, and excluding the effect of any shares
which may be issued or repurchased by Centura since such time.
Bankshares and Pee Dee Bank stockholders should be aware that the actual
market value of a share of Centura Stock at the Effective Time and at the
time certificates for those shares are delivered following surrender and
exchange of certificates for shares of Bankshares or Pee Dee Bank Stock may
be more or less than the Average Share Price. Bankshares and Pee Dee Bank
stockholders are urged to obtain information on the trading value of
Centura Stock that is more recent than that provided in this Proxy
Statement. See "COMPARATIVE MARKET PRICES OF COMMON STOCK AND DIVIDENDS."
BACKGROUND OF AND REASONS FOR THE MERGER AND THE BANK MERGER
BACKGROUND FOR THE MERGER. Since its organization in 1981, Bankshares and,
prior to its organization as a holding company, Pee Dee Bank, have operated
as a community-oriented "home town" commercial bank serving Timmonsville,
South Carolina and surrounding communities. The community-oriented banking
philosophy of Bankshares generally has allowed it to compete effectively
and profitably with the other banking institutions in its local market.
During the last several years, however, competition has dramatically
increased with other types of financial institutions offering services
traditionally offered only by banks. This increased competition has created
an increase in public demand for a broader range of consumer services from
community banking institutions. Providing such services and products to
customers requires significant amounts of technology, in terms of
equipment and software. Additionally, since 1991, the federal banking
agencies have imposed many additional regulations on banks.
The increase in competition has been accelerated in the last few years
through the consolidation in the banking industry in South Carolina whereby
many smaller financial institutions have been acquired by larger state-wide
or regional banks.
Given the rapid increase in technology and the greater size of many of
Bankshares' competitors, Bankshares would have to expend significant
amounts of capital to invest in the equipment and software necessary to
remain competitive.
Bankshares recognized that remaining an independent institution may not
best serve the long-term interests of Bankshares and Pee Dee Bank, their
shareholders, customers and employees. In recent years, throughout South
Carolina, many community financial institutions have been acquired by
state-wide banks. Additionally, the increased competition to provide
cost-effective services and products is a challenge to Bankshares, which
has fewer resources than many of its competitors in its market area.
Further, Bankshares and Pee Dee Bank Stock is rarely traded, and,
therefore, Bankshares' and Pee Dee Bank's stockholders have limited or no
ability to sell their Bankshares or Pee Dee Bank Stock.
14
<PAGE>
Given Bankshares' attractive franchise in Timmonsville and its environs,
various bank holding companies in the recent past had indicated informal
interest in acquiring Bankshares to expand their operations into the
Bankshares market. Consequently, Bankshares determined that it would be
wise to engage a financial advisor to advise it on strategic alternatives
and what type of value the marketplace would place upon Bankshares and Pee
Dee Bank if Bankshares chose to be acquired. Bankshares engaged the
services of The Carson Medlin Company, Raleigh, North Carolina ("Carson
Medlin") to assess Bankshares' strategic alternatives and to inquire of
various bank holding companies what potential value each would ascribe to
Bankshares and whether such entity was interested in acquiring Bankshares
and Pee Dee Bank. Carson Medlin assessed Bankshares' strategic alternatives
and, in June 1997, met with the management of Bankshares and Pee Dee Bank
to discuss the strategic alternatives available to them, their historical
and current operations and future prospects, the then-current market for
financial institution equities, and the then-current market conditions and
recent activity in mergers of financial institutions. Carson Medlin and
management of Bankshares and Pee Dee Bank also discussed the terms that
might potentially be available to them in a merger with another financial
institution, and the possible terms of an engagement of Carson Medlin by
Bankshares and Pee Dee Bank to assist in such a transaction.
On August 23, 1997, Carson Medlin met with certain major shareholders of
Bankshares and Pee Dee Bank to discuss the strategic alternatives available
to Bankshares and Pee Dee Bank, the historical and current operations and
future prospects for Bankshares and Pee Dee Bank, the then-current market
for financial institution equities, the then-current market conditions and
recent activity in mergers of financial institutions, certain other
financial institutions that might be potential merger partners, the
engagement of Carson Medlin by Bankshares and Pee Dee Bank to serve as a
financial adviser in a merger transaction, and the process of effecting
such a potential transaction.
On August 27, 1997, Pee Dee Bank entered into an agreement with Carson
Medlin to serve as its financial adviser in seeking an affiliation of
Bankshares and Pee Dee Bank with another financial institution and to
render its opinion that the terms of a resulting transaction, if any, are
fair to the shareholders of Bankshares and Pee Dee Bank, from a financial
point of view.
During September 1997, Carson Medlin met with the senior management of
Bankshares and Pee Dee Bank for an update on the their historical
operations, future prospects, competing financial institutions, and other
factors affecting the local banking market. Also during that month, Carson
Medlin assisted management of Bankshares and Pee Dee Bank in completing a
confidential informational memorandum (the "Confidential Memorandum") which
described the operations and historical financial results for Bankshares
and Pee Dee Bank as well as procedures by which prospective acquirers could
offer to merge with Bankshares and Pee Dee Bank.
During the first half of October 1997, Carson Medlin contacted eight
financial institutions that it considered to be potentially interested and
capable of completing a merger with institutions such as Bankshares and Pee
Dee Bank. Carson Medlin received initial indications of interest from five
of these parties, obtained executed confidentiality agreements on behalf of
Bankshares and Pee Dee Bank from each, and delivered the Confidential
Memorandum to each of them. During the last week of October 1997, Carson
Medlin received on behalf of Bankshares and Pee Dee Bank expressions of
interest in acquiring Bankshares and Pee Dee Bank, which included terms for
the exchange of stock, from four of these parties, including Centura.
Thereafter, management of Bankshares and Pee Dee Bank met with certain of
these parties to discuss the possible merger of their respective
institutions.
The Chairman and President of Bankshares and Pee Dee Bank met with officers
of Centura and the President of Bankshares and Pee Dee Bank met with
officials of another interested party in October and November 1997. The
Chairman and President, after considering the terms and values of the
proposed transactions, the impact of the proposed transactions on the
customers, employees and communities served by Pee Dee Bank as well as
their individual willingness to support the proposed transaction as
stockholders, determined to proceed in negotiating a definitive agreement
with Centura.
On December 23, 1997, the Board of Directors of Bankshares and Pee Dee
Bank, with one member absent, met to consider the Merger and Bank Merger,
respectively. At that meeting Carson Medlin presented its preliminary
fairness opinion via telephone and counsel to Bankshares and Pee Dee Bank
reviewed the terms of the Agreement, the Merger and the Bank Merger.
Following a discussion of various matters, the Boards unanimously voted to
approve the Merger and the Bank Merger and authorized the Chairman and the
President to sign the Agreement. The Agreement was signed as of December
30, 1997.
15
<PAGE>
BANKSHARES' AND PEE DEE BANK'S REASONS FOR THE MERGER AND THE BANK MERGER.
In reaching their determinations that the Merger and the Bank Merger are
fair to, and in the best interests of, Bankshares, Pee Dee Bank and their
respective stockholders, the Boards consulted with their legal advisors and
Carson Medlin, as well as with Bankshares' and Pee Dee Bank's management,
and considered a number of factors, including the following:
(i) Bankshares' and Pee Dee Bank's business, operations, earnings,
managerial requirements and resources, prospects and financial
condition;
(ii) Centura's business, operations, earnings and financial condition,
on both an historical and a prospective basis, the enhanced
opportunities for operating efficiencies that could result from the
Mergers, the enhanced opportunities for growth in Pee Dee Bank's
market areas that the Mergers would make possible, and the
respective contributions the parties would bring to a combined
institution;
(iii) the Boards' belief that Centura will generally retain Pee Dee
Bank's employees and continue to make substantial contributions in
the communities served by Pee Dee Bank;
(iv) the terms of the Agreement and Carson Medlin's assessment that,
based on historical stock prices and the prevailing market price of
the Centura Common Stock during the week immediately preceding
December 23, 1997 (the date of the board meetings), the
consideration to be received by the stockholders of Bankshares and
Pee Dee Bank was fair to the stockholders of Bankshares and Pee Dee
Bank from a financial point of view;
(v) Centura as an ongoing institution and its asset quality, reserve
coverage, capital adequacy and profitability;
(vi) the liquidity of the Centura Common Stock and the large number of
unaffiliated shareholders of Centura;
(vii) alternatives to the Mergers, including the alternatives of
remaining independent and growing internally, and remaining
independent for a period of time and then selling;
(viii) possible affiliation partners for Bankshares and Pee Dee Bank
(other than Centura), the prospects of such other possible
affiliation partners and the likelihood of any such affiliation;
(ix) the expectation that the Merger will be a tax-free transaction to
Bankshares and Pee Dee Bank and their shareholders (see "--Certain
Federal Income Tax Consequences");
(x) the potential for the increase (or decrease) in the market value of
the Centura Common Stock in the near future and long-term;
(xi) the current and prospective economic environment, competitive
constraints and regulatory burdens facing financial institutions,
including Pee Dee Bank; and
(xii) the impact of the Mergers on Pee Dee Bank's deposit account holders
and the public.
The Boards of Directors did not assign any specific or relative weight to
the foregoing factors in their consideration.
For a discussion of the ownership of Bankshares and Pee Dee Bank Stock by
the Board of Directors and executive officers of Bankshares, see
"INFORMATION ABOUT BANKSHARES AND PEE DEE BANK -- Security Ownership of
Management."
BANKSHARES' AND PEE DEE BANK'S BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND
THAT BANKSHARES AND PEE DEE BANK STOCKHOLDERS VOTE FOR APPROVAL OF THE
AGREEMENT.
CENTURA'S REASONS FOR THE MERGER AND THE BANK MERGER. Although Centura
currently is located throughout North Carolina and, to a limited extent, in
Southeast Virginia, it is not located and has no presence in South
Carolina. Accordingly, the Merger and the Bank Merger are consistent with
Centura's goal to leverage its existing market presence and to expand into
markets not previously served by it through acquisitions, which expansion
Centura believes will increase shareholder value. In approving the
Agreement, the Merger and the Bank Merger, the Centura Board of Directors
considered a number of additional factors concerning the benefits of the
Merger and the Bank Merger. Without
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assigning any relative or specific weights to the factors, the Centura
Board of Directors considered the following additional material factors:
(a) the information presented to the directors by the management of
Centura concerning the business, operations, earnings, asset quality,
and financial condition of Bankshares, including the composition of
the earning assets portfolio of Bankshares;
(b) the financial terms of the Merger and the Bank Merger, including the
relationship of the value of the consideration usable in the Merger
and the Bank Merger to the market value, tangible book value, and
earnings per share of Bankshares Stock and Pee Dee Bank Stock;
(c) the nonfinancial terms of the Merger and the Bank Merger, including
the treatment of the Merger and the Bank Merger as a tax-free
exchange of Bankshares Stock and Pee Dee Bank Stock for Centura Stock
for federal income tax purposes;
(d) the likelihood of the Merger and the Bank Merger being approved by
applicable regulatory authorities without undue conditions or delay;
(e) the opportunity for reducing the noninterest expense of the
operations of Pee Dee Bank and the ability of the operations of Pee
Dee Bank after the Effective Time to contribute to the earnings of
Centura through its existing products and services and additional
services offered by Centura;
(f) the attractiveness of the Pee Dee Bank franchise, the market position
of Pee Dee Bank in each of the markets in which it operates, and the
compatibility of the franchise of Pee Dee Bank with the operations of
Centura; and
(g) the compatibility of the community bank orientation of the
operations of Bankshares to that of Centura.
The Boards of Directors of Centura and Centura Bank determined that the
Merger and the Bank Merger were in the best interest of Centura and its
stockholders and of Centura Bank and approved the material terms
subsequently set forth in the Agreement on December 17, 1997, delegating
approval of the terms and conditions of the definitive Agreement to the
Executive Committee of each of such Boards. The Agreement in definitive
form was authorized and approved by the Executive Committees of Centura and
Centura Bank on December 29, 1997.
OPINION OF FINANCIAL ADVISOR
GENERAL. The Board of Directors of Pee Dee Bank retained Carson Medlin to
serve as its financial advisor with respect to a proposed transaction which
would lead to the acquisition of Pee Dee Bank. As part of its engagement,
Carson Medlin agreed to render its opinion as to the fairness, from a
financial point of view, of the consideration to be received. Carson Medlin
is a National Association of Securities Dealers, Inc.-member investment
banking firm which specializes in the securities of southeastern United
States financial institutions. As part of its investment banking
activities, Carson Medlin is regularly engaged in the valuation of
southeastern United States financial institutions and transactions relating
to their securities, including mergers and acquisitions. Carson Medlin will
be compensated for its services. No limitations were imposed by Pee Dee
Bank on Carson Medlin with respect to the investigations made or procedures
followed by Carson Medlin in rendering its opinion.
Based upon and subject to the various considerations set forth therein,
Carson Medlin delivered its oral opinion, dated as of December 23, 1997,
and its written opinion, dated as of January 8, 1998, in each case to the
Boards of Bankshares and Pee Dee Bank, that the terms of the Merger and the
Bank Merger are fair, from a financial point of view, to the holders of
Bankshares Stock and Pee Dee Bank Stock. The full text of Carson Medlin's
written opinion dated January 8, 1998 is attached as Appendix C to this
Proxy Statement and should be read in its entirety with respect to the
procedures followed, assumptions made, matters considered and
qualifications of and limitations on the review undertaken by Carson Medlin
in connection therewith. Carson Medlin's opinion is addressed to
Bankshares' and Pee Dee Bank's Boards only, and the opinion does not
constitute a recommendation to any holder of Bankshares Stock or Pee Dee
Bank Stock as to how such shareholder should vote at the Special Meeting
with respect to the proposal to approve the Agreement and the Merger and
the Bank Merger contemplated thereby or as to any other matter.
THE SUMMARY OF THE OPINION OF CARSON MEDLIN SET FORTH IN THIS PROXY
STATEMENT IS
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QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION
ATTACHED AS APPENDIX C.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the
purposes of rendering its opinion. Carson Medlin did not undertake any
independent evaluation or appraisal of the assets and liabilities of
Bankshares, Pee Dee Bank, or Centura, nor was it furnished with any such
appraisals. Carson Medlin assumed that the financial forecasts reviewed by
it have been reasonably prepared on a basis reflecting the best currently
available judgments and estimates of the managements of Bankshares, Pee Dee
Bank, and Centura, and that such projected financial results will be
realized in the amounts and at the times contemplated thereby. Carson
Medlin is not expert in the evaluation of loan portfolios, underperforming
or nonperforming assets, net charge-offs of such assets or the adequacy of
allowances for losses with respect thereto; has not reviewed any individual
credit files; and has assumed that the loan loss allowances for each of Pee
Dee Bank and Centura are in the aggregate adequate to cover such losses.
Carson Medlin assumed that the Merger and the Bank Merger will be recorded
as a pooling of interests under generally accepted accounting principles.
Carson Medlin's opinion is necessarily based on economic, market, and other
conditions as in effect on the date of its analysis, and on information
made available to it dated as of various earlier dates.
In connection with rendering its opinion, Carson Medlin performed a variety
of financial analyses. The preparation of a financial fairness opinion of
this nature involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods
to the particular circumstances, and, therefore, is not readily susceptible
to partial analysis or summary description. Carson Medlin believes that its
analyses must be considered together as a whole and that selecting portions
of such analyses and the facts considered therein, without considering all
other factors and analyses, could create an incomplete view of the analyses
and the process underlying Carson Medlin's opinion. In its analyses, Carson
Medlin made numerous assumptions with respect to industry performance,
business and economic conditions, and other matters, many of which are
beyond the control of Bankshares, Pee Dee Bank, and Centura and which may
not be realized in the amounts or at the times anticipated. Any estimates
contained in Carson Medlin's analyses are not necessarily predictive of
future results or values, which may be significantly more or less favorable
than such estimates. Estimates of values of companies do not purport to be
appraisals or necessarily reflect the prices at which such companies or
their securities may actually be sold. None of the analyses performed by
Carson Medlin was assigned a greater significance by Carson Medlin than any
other.
In connection with rendering its opinion dated the date hereof, Carson
Medlin reviewed (i) the Agreement; (ii) the annual reports to stockholders
of Bankshares, including audited financial statements, for the four years
ended December 31, 1996; (iii) the Uniform Bank Performance Report for Pee
Dee Bank as of September 30, 1997; (iv) the Call Report for Pee Dee Bank
as of September 30, 1997; (v) the annual reports to stockholders of
Centura, including audited financial statements, for the five years ended
December 31, 1996; (vi) the Quarterly Report on Form 10-Q of Centura, dated
September 30, 1997 (vii) monthly unaudited interim financial statements of
Pee Dee Bank through November 30, 1997; (viii) a preliminary copy of this
Proxy Statement prepared in connection with the Special Meeting; and (ix)
certain other financial and operating information with respect to the
business, operations, and prospects of Bankshares, Pee Dee Bank, and
Centura.
Carson Medlin also (i) held discussions with members of the senior
managements of Pee Dee Bank and Centura regarding their respective
historical and current business operations, financial conditions, and
future prospects; (ii) reviewed the historical market prices and trading
activity for the Centura Stock and compared them with those of certain
publicly traded companies which it deemed to be relevant; (iii) compared
the results of operations of Pee Dee Bank and Centura with those of certain
publicly traded companies which it deemed to be relevant; (iv) compared the
proposed financial terms of the Merger and the Bank Merger with the
financial terms, to the extent publicly available, of certain other recent
business combinations of commercial banking organizations; (v) analyzed the
pro forma financial impact of the Merger and the Bank Merger on Centura;
and (vi) conducted such other studies, analyses, inquiries and examinations
as Carson Medlin deemed appropriate.
The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion.
SUMMARY OF TRANSACTION CONSIDERATION. Carson Medlin reviewed the terms of
the proposed transaction, including the aggregate transaction value. Carson
Medlin reviewed the implied value of the consideration based upon the
$68.75 per share closing price of Centura Stock on January 6, 1998 which
showed that the implied value of the
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proposed transaction was $40 million. Given that Bankshares has immaterial
assets, liabilities, revenues, and expenses independent of Pee Dee Bank,
and that the total consideration to be received in the Merger and the Bank
Merger are to be allocated between Bankshares and Pee Dee Bank stockholders
based on the pro rata ownership of Pee Dee Bank, the analyses described
below were performed primarily from the perspective of Pee Dee Bank on a
stand alone basis.
Carson Medlin calculated that, as of January 6, 1998, the aggregate
transaction value represented 286% of Pee Dee Bank's stated book value at
September 30, 1997, and 22.8 times Pee Dee Bank's September 30, 1997
trailing twelve months earnings, a 26.1% premium on Pee Dee Bank's
September 30, 1997 core deposits (defined as the aggregate transaction
value minus stated book value, as a percentage of core deposits), and 29.9%
of the total assets of Pee Dee Bank at September 30, 1997.
COMPARABLE TRANSACTION ANALYSIS. Carson Medlin reviewed certain information
relating to 23 selected southeastern bank and thrift mergers announced
between March 1996 and September 1997 in which the acquired institutions
had total assets of from $38 million to $1.4 billion (the "Comparable
Transactions"). The Comparable Transactions are (acquiree/acquiror):
Enterprise National Bank/Compass Bancshares, Inc.; Fort Brooke
Bancorporation/The Colonial BancGroup, Inc.; Citi-Bancshares,
Inc./Huntington Bancshares Incorporated; Bank of Winter Park/Huntington
Bancshares Incorporated; Dadeland Bancshares, Inc./The Colonial BancGroup,
Inc.; South Florida Banking Corporation/The Colonial BancGroup, Inc.;
Rockdale Community Bank/Regions Financial Corporation; First
Bankshares/Regions Financial Corporation; SB&T Corporation/Regions
Financial Corporation; Bank Corp. of Georgia/Century South Banks, Inc.;
Citizens Gwinnett Bankshares, Inc./Premier Bancshares, Inc.; First
Community Bank/Centura Banks, Inc.; FirstSouth Bank/Centura Banks, Inc.;
Salem Trust Bank/CCB Financial Corporation; Old North State Bank/LSB
Bancshares, Inc.; Bank of Mecklenburg/Triangle Bancorp, Inc.; Carolina
State Bank/First Charter Corporation; American Federal Bank, FSB/CCB
Financial Corporation; Greenville Financial Corporation/Regions Financial
Corporation; W.B.T. Holding Co./First Commercial Corporation; Hanover
Bank/MainStreet BankGroup, Inc.; First Patriot Bankshares/United
Bankshares, Inc.; and George Mason Bankshares, Inc./United Bankshares, Inc.
Carson Medlin considered, among other factors, the earnings, capital level,
asset size and quality of assets of the acquired financial institutions.
Carson Medlin compared the transaction prices to the then recently reported
annual earnings, stated book values, total assets, and core deposits.
On the basis of the Comparable Transactions, Carson Medlin calculated a
range of purchase prices as a percentage of stated book value for the
Comparable Transactions from a low of 195.1% to a high of 369.5%, with a
mean of 263.3%. These transactions indicated a range of values for Pee Dee
Bank from $27.3 million to $51.7 million, with a mean of $36.8 million. The
aggregate consideration implied by the terms of the transaction is $40
million, which is above the average for the Comparable Transactions.
Carson Medlin calculated a range of purchase prices as a multiple of
earnings for the Comparable Transactions from a low of 10.6 times to a high
of 29.8 times, with a mean of 20.1 times. These transactions indicated a
range of values for Pee Dee Bank from $18.6 million to $52.3 million, with
a mean of $35.3 million (based on Pee Dee Bank's trailing twelve months
earnings of $1,755,000). The aggregate consideration implied by the terms
of the transaction is $40 million, or 22.8 times trailing twelve months
earnings, which is above the average for the Comparable Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 11.3% to a high of
31.8%, with a mean of 19.7%. The premium on Pee Dee Bank's core deposits
implied by the terms of the Agreement is 26.1%, which is above the average
for the Comparable Transactions.
Finally, Carson Medlin calculated a range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of
15.7% to a high of 31.8%, with a mean of 22.7%. The aggregate consideration
as a percentage of total assets implied by the terms of the Agreement is
approximately 29.9%, which is near the high end of the range for the
Comparable Transactions.
INDUSTRY COMPARATIVE ANALYSIS. In connection with rendering its opinion,
Carson Medlin compared selected operating results of Pee Dee Bank to those
of 49 publicly-traded community commercial banks in Alabama, Florida,
Georgia, North Carolina, South Carolina, Virginia and West Virginia (the
"SIBR Banks") as contained in the Southeastern Independent Bank Review(TM),
a proprietary research publication prepared by Carson Medlin quarterly
since 1991. The SIBR Banks range in asset size from approximately $103
million to $2.4 billion, and in shareholders' equity from approximately
$10.9 million to $235 million. Carson Medlin considers this group of
financial institutions more
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comparable to Pee Dee Bank than larger, more widely traded regional
financial institutions. Carson Medlin compared, among other factors, the
profitability, capitalization, and asset quality of Pee Dee Bank to those
of the SIBR Banks. Carson Medlin noted that for the six months ended June
30, 1997: (i) Pee Dee Bank had a return on average assets (ROA) of 1.38%
compared to 1.24% on average for the SIBR Banks; (ii) Pee Dee Bank had a
return on average equity (ROE) of 13.3% compared to 12.5% on average for
the SIBR Banks; (iii) Pee Dee Bank had common equity to total assets of
10.5% compared to 9.7% on average for the SIBR Banks; and (iv) Pee Dee
Bank's nonperforming assets ratio (defined as loans 90 days past due,
nonaccrual loans and other real estate to total loans net of unearned
income and other real estate) was 0.52% compared to 0.97% on average for
the SIBR Banks. Carson Medlin also noted that for the year ended December
31, 1996: (i) Pee Dee Bank's ROA was 1.44% compared to 1.23% on average for
the SIBR Banks; (ii) Pee Dee Bank's ROE was 13.3% compared to 12.6% on
average for the SIBR Banks; (iii) Pee Dee Bank had common equity to total
assets of 10.2% compared to 9.6% on average for the SIBR Banks; and (iv)
Pee Dee Bank's nonperforming assets ratio was 1.11% compared to 1.02% on
average for the SIBR Banks.
Carson Medlin also compared selected operating results of Centura to those
of 6 other publicly-traded southeastern United States mid-size regional
bank holding companies with assets between $4.6 and $29.8 billion (the
"Peer Banks"). The Peer Banks include: BB&T Financial Corporation, CCB
Financial Corporation, First American Corporation, First Virginia Banks,
Inc, National Commerce Bancorporation, and SouthTrust Corporation. Carson
Medlin considers this group of southeastern financial institutions
comparable to Centura as to financial characteristics, stock price
performance and stock trading volume. Carson Medlin compared selected
balance sheet data, asset quality, capitalization, and profitability ratios
at or for the nine months ended September 30, 1997, and stock market data
as of January 7, 1998. This comparison showed, among other things, that (i)
Centura's net interest margin was 4.52% compared to a mean of 4.41% and a
median of 4.33% for the Peer Banks; (ii) Centura's ROA was 1.23% compared
to a mean of 1.35% and a median of 1.36% for the Peer Banks; (iii)
Centura's ROE was 15.8% compared to a mean of 16.1% and a median of 16.1%
for the Peer Banks; (iv) Centura's stockholders' equity to total assets was
7.68% compared to a mean of 8.50% and a median of 8.04% for the Peer Banks;
(v) Centura's nonperforming assets to total assets were 0.57% compared to a
mean of 0.34% and a median of 0.36% for the Peer Banks; (vi) Centura's loan
loss reserve to nonperforming assets was 158% compared to a mean of 275%
and a median of 184% for the Peer Banks; and (vii) at January 7, 1998,
Centura's market capitalization was $1.7 billion compared to the Peer Banks
which ranged from a low of $1.5 billion to a high of $8.2 billion. This
comparison indicated that Centura's financial performance is higher than
the Peer Banks by some measures and lower than the Peer Banks by some
measures.
No company or transaction used in the preceding Industry Comparative or
Comparable Transaction Analyses is identical to Pee Dee Bank, Centura or
the contemplated transaction. Accordingly, evaluating the results of these
analyses necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of Pee
Dee Bank and Centura and other factors that could affect the value of the
companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method
of using comparable industry or transaction data.
CONTRIBUTION ANALYSIS. Carson Medlin reviewed the relative contributions in
terms of various balance sheet items, net income, and market capitalization
to be made by Pee Dee Bank and Centura to the combined institution based on
(i) balance sheet data at September 30, 1997, and (ii) income statement
data for the nine months ended September 30, 1997. The income statement and
balance sheet components analyzed included total assets, total loans, total
deposits, shareholders' equity, and net income. This analysis showed that,
while Pee Dee Bank shareholders would own approximately 2.20% of the
outstanding shares and 2.09% of aggregate shares and options of the
combined institution based on the exchange ratio, Pee Dee Bank is
contributing 1.90% of total assets, 1.96% of total loans (net of unearned
income), 2.13% of total deposits, 2.57% of shareholders' equity, and 2.26%
of annual net income. This analysis indicates that Pee Dee Bank's ownership
of Centura, after completion of the transaction, will be higher than Pee
Dee Bank's relative contribution for certain balance sheet items and less
than Pee Dee Bank's relative contribution for certain balance sheet items.
This analysis also indicates that Pee Dee Bank's ownership of Centura,
after completion of the transaction, will be lower than Pee Dee Bank's
relative contribution for annual net income.
PRESENT VALUE ANALYSIS. Carson Medlin calculated the present value of Pee
Dee Bank Stock assuming that Pee Dee Bank remains an independent bank. For
purposes of this analysis, Carson Medlin utilized certain projections of
Pee Dee Bank's future earnings through the year 2002. The analysis assumes
that Pee Dee Bank would pay a dividend in 1998 and each year thereafter
equal to 30% of projected net income. This analysis further assumes that
Pee Dee Bank would be acquired at the end of 2002 at a purchase price of
275% of projected book value. The present value of the
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annual dividends plus the merger consideration at the end of 2002 was then
calculated using discount rates of 13% to 15% per annum. These rates were
selected to reflect the rates that investors in securities such as the
Common Stock of Pee Dee Bank would likely require in order to be
competitive with alternative investments with similar characteristics. On
the basis of these assumptions, Carson Medlin calculated that the present
value of Pee Dee Bank as an independent bank ranged from $35.8 million to
$38.9 million. The aggregate consideration implied by the terms of the
Agreement is $40 million, which is above the high end of the range of the
calculated present value were Pee Dee Bank to remain independent through
2002. Carson Medlin considered the present value analysis because it is a
widely used valuation methodology, but noted that the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, including earnings growth rates, dividend payout rates, terminal
values and discount rates.
STOCK TRADING HISTORY. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for Centura Stock from January 1993 to January
1998. Carson Medlin also compared the price performance of Centura Stock
during this period to the Dow Jones Southeastern U.S. Banks Index and the
Dow Jones Equity Market Index and evaluated recent trading patterns and
price performance of Centura Stock relative to the six Peer Banks.
This analysis showed that for the five-year period ending January 6, 1998,
the total return (annualized) for Centura Stock (all cash distributions and
dividends reinvested on the ex-dividend date) was 29.68% compared to 25.77%
for the Dow Jones Southeastern U.S. Banks Index and 19.95% for the Dow
Jones Equity Market Index. For the twelve-month period ending January 6,
1998, the total return for Centura Stock was 55.19% compared to 37.20% for
the Dow Jones Southeastern U.S. Banks Index and 24.58% for the Dow Jones
Equity Market Index.
During the four quarters ending September 30, 1997, the ratio of stock
price to trailing 12 months earnings per share for the Peer Banks was: a
low of 15.2 times, a high of 20.3 times, and a mean of 17.0 times. For the
same periods, Centura's price to earnings ratio ranged from a low of 16.3
times to a high of 21.1 times with a mean of 18.6 times. Centura Stock has
traded on average at a higher price to earnings ratio than the Peer Banks.
During the four quarters ending September 30, 1997, the stock price as a
percentage of book value for the Peer Banks was: a low of 225%, a high of
306%, and a mean of 255%. For the same periods, Centura's price to book
ratio ranged from a low of 227% to a high of 292% with a mean of 261%.
Centura Stock has traded on average at a higher price to book value basis
compared to the Peer Banks.
Carson Medlin reviewed the trading volume of Centura Stock which trades on
the New York Stock Exchange. Carson Medlin considers Centura Stock to be
liquid and marketable.
Bankshares Stock and Pee Dee Bank Stock is closely held and does not trade
on a regular basis. Carson Medlin did not consider any transactions in
Bankshares Stock or Pee Dee Bank Stock in its analysis.
SHAREHOLDER CLAIMS ANALYSIS. Carson Medlin compared the ownership of all
shares of Pee Dee Bank Stock to the ownership of the shares of Centura
Stock to be received by Pee Dee Bank stockholders as a result of the Merger
and the Bank Merger (as implied by the terms of the transaction) from the
perspective of claims on various balance sheet and income statement
variables. Carson Medlin found that Pee Dee Bank shareholders would in
aggregate have had a claim to approximately $1,795,000 of 1997 earnings
after consummation of the transaction versus approximately $1,900,000
without the transaction, and an aggregate of $1,987,000 of projected pro
forma 1998 earnings versus a projected $2,300,000 without. Pee Dee Bank
shareholders would have had a claim to an aggregate $146,837,000 in
September 30, 1997 total assets after the transaction compared to
$133,823,000 without the transaction. Pee Dee Bank shareholders would have
had a claim to an aggregate $11,793,000 in September 30, 1997 pro forma
book value after the transaction compared to $13,990,000 before the
transaction. Furthermore, Pee Dee Bank's shareholders would be expected,
assuming continuation of Pee Dee Bank's recent dividend rate, to receive
aggregate cash dividends of $628,000 after the transaction versus $542,000
prior to the transaction.
OTHER ANALYSES. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for Centura. In addition, Carson Medlin
performed a dilution analysis and such other analyses and comparisons that
it deemed appropriate.
The opinion expressed by Carson Medlin was based upon market, economic, and
other relevant considerations as they existed and were evaluated as of the
date of the opinion. Events occurring after the date of issuance of the
opinion,
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including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or liabilities of
Bankshares, Pee Dee Bank, or Centura could materially affect the
assumptions used in preparing the opinion.
Pee Dee Bank has agreed to pay Carson Medlin 1.25% of the aggregate
consideration, plus expenses, for its services rendered in connection with
the transaction.
THE FULL TEXT OF CARSON MEDLIN'S OPINION, WHICH SETS FORTH CERTAIN
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS ON REVIEW UNDERTAKEN
IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT, IS INCORPORATED HEREIN
BY REFERENCE, AND SHOULD BE READ IN ITS ENTIRETY IN CONNECTION WITH THIS
PROXY STATEMENT. THE SUMMARY OF THE OPINION SET FORTH IN THIS PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION. CARSON
MEDLIN'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE CONSIDERATION TO THE STOCKHOLDERS OF BANKSHARES AND PEE DEE
BANK AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF
BANKSHARES OR PEE DEE BANK AS TO HOW SUCH STOCKHOLDER SHOULD VOTE ON THE
AGREEMENT.
EFFECTIVE TIME OF THE MERGER AND THE BANK MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger and the Bank Merger, the Effective Time will occur on the date and
at the time that the Articles of Merger relating to the Merger and Articles
of Bank Merger relating to the Bank Merger become effective with the North
Carolina Secretary of State and the South Carolina Secretary of State.
Unless otherwise agreed upon by Centura and Bankshares, and subject to the
conditions to the obligations of the parties to effect the Merger and the
Bank Merger, the Effective Time will occur not later than 30 days after the
expiration of all applicable waiting periods required by any regulatory
authority required for the Merger and the Bank Merger. However, the
Effective Time is expected to occur as soon as possible after the
expiration of all applicable waiting periods.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger
and the Bank Merger can or will be satisfied. Bankshares and Centura
anticipate that all conditions to consummation of the Merger and the Bank
Merger will be satisfied so that the Merger and Bank Merger can be
consummated during the first quarter of 1998. However, delays in the
consummation of the Merger and Bank Merger could occur.
The Board of Directors of either Bankshares or Centura generally may
terminate the Agreement if the Merger and Bank Merger are not consummated
by June 30, 1998. See " -- Conditions to Consummation of the Merger and the
Bank Merger" and " -- Waiver, Amendment, and Termination."
DISTRIBUTION OF CENTURA STOCK CERTIFICATES
Promptly after the Effective Time, Centura will cause Registrar and
Transfer Company, acting in its capacity as Exchange Agent, to mail a
letter of transmittal, together with instructions for the exchange of the
Certificates representing shares of Bankshares Stock and Pee Dee Bank Stock
for certificates representing shares of Centura Stock, to the former
stockholders of Bankshares and Pee Dee Bank.
BANKSHARES AND PEE DEE BANK STOCKHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of certificates for Bankshares Stock
and Pee Dee Bank Stock, together with a properly completed letter of
transmittal, there will be issued and mailed to each holder of Bankshares
Stock and Pee Dee Bank Stock surrendering such items a certificate or
certificates representing the number of shares of Centura Stock to which
such holder is entitled, if any, and a check for the amount to be paid in
lieu of any fractional share (without interest), together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon). After the Effective Time, to the extent permitted by
law, Bankshares stockholders and Pee Dee Bank stockholders of record as of
the Effective Time will be entitled to vote at any meeting of Centura
stockholders the number of whole shares of Centura Stock into which their
shares of Bankshares Stock or Pee Dee Bank Stock have been converted,
regardless of whether such stockholders have surrendered their Bankshares
Stock or Pee Dee Bank Stock certificates. Whenever a
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dividend or other distribution is declared by Centura on Centura Stock, the
record date for which is at or after the Effective Time, the declaration
will include dividends or other distributions on all shares issuable
pursuant to the Agreement, but no dividend or other distribution payable
after the Effective Time with respect to Centura Stock will be paid to the
holder of any unsurrendered Bankshares Stock or Pee Dee Bank Stock
certificate until the holder duly surrenders such certificate. Upon
surrender of such Bankshares Stock or Pee Dee Bank Stock certificate,
however, both the Centura Stock certificate, together with all undelivered
dividends or other distributions (without interest) and any undelivered
cash payments to be paid in lieu of fractional shares (without interest),
will be delivered and paid with respect to each share represented by such
certificate.
After the Effective Time, there will be no transfers of shares of
Bankshares Stock or Pee Dee Bank Stock on Bankshares' or Pee Dee Bank's
stock transfer books. If Certificates representing shares of Bankshares
Stock or Pee Dee Bank Stock are presented for transfer after the Effective
Time, they will be canceled and exchanged for the shares of Centura Stock
and a check for the amount due in lieu of fractional shares and undelivered
dividends, if any, deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER AND THE BANK MERGER
Consummation of the Merger and the Bank Merger is subject to various
conditions, including (i) receipt of the approval of the Agreement by the
stockholders of Bankshares and Pee Dee Bank as required by South Carolina
law, (ii) receipt of certain regulatory approvals required for consummation
of the Merger and the Bank Merger, (iii) receipt of a favorable opinion of
Sinkler & Boyd, P.A. that the transaction will constitute a reorganization
under Section 368 of the Internal Revenue Code, and a favorable opinion of
Poyner & Spruill, L.L.P. that no gain or loss will be recognized by Centura
as a result of the issuance of shares of Centura Stock in connection with
the Merger and the Bank Merger, (iv) receipt of approval of the shares of
Centura Stock issuable pursuant to the Merger and Bank Merger for listing
on the NYSE, subject to official notice of issuance, (v) the Registration
Statement being declared effective and receipt of all necessary SEC and
state approvals relating to the issuance or trading of the shares of
Centura Stock issuable pursuant to the Merger and the Bank Merger, (vi) the
accuracy, as of the date of the Agreement and as of the Effective Time, of
the representations and warranties of Bankshares and Centura as set forth
in the Agreement, (vii) the performance of all agreements and the
compliance with all covenants of Bankshares and Centura as set forth in the
Agreement, (viii) receipt of all consents required for consummation of the
Merger and the Bank Merger or for the preventing of any default under any
contract or permit which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a material adverse effect; (ix) the
absence of any law or order or any action taken by any court, governmental,
or regulatory authority prohibiting, restricting, or making illegal the
consummation of the transaction; (x) receipt of the fairness opinion of
Carson Medlin; and (xi) satisfaction of certain other conditions, including
the receipt of agreements of affiliates of Bankshares, certain legal
opinions and various certificates from the officers of Bankshares and
Centura. See " -- Regulatory Approvals" and " -- Waiver, Amendment, and
Termination."
No assurance can be provided as to when or if all of the conditions
precedent to the Merger and Bank Merger can or will be satisfied or waived
by the party permitted to do so. In the event the Merger or Bank Merger is
not effected on or before June 30, 1998, the Agreement may be terminated
and the Merger and the Bank Merger abandoned by a vote of a majority of the
Board of Directors of either Bankshares or Centura. See " -- Waiver,
Amendment, and Termination."
REGULATORY APPROVALS
The Merger and the Bank Merger may not proceed in the absence of receipt of
the requisite regulatory approvals. Applications for the approvals
described below have been submitted to the appropriate regulatory
agencies. The Merger and the Bank Merger will require the prior
approval of the Federal Reserve, pursuant to Section 3 of the BHC Act. In
evaluating the Merger and the Bank Merger, the Federal Reserve must
consider, among other factors, the financial and managerial resources and
future prospects of Centura, Centura Bank and Bankshares and the
convenience and needs of the communities to be served. The relevant
statutes prohibit the Federal Reserve from approving the Merger and the
Bank Merger if (i) it would result in a monopoly or be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any part of the United States or (ii) its effect in
any section of the country may be to substantially lessen competition or to
tend to create a monopoly, or if it would be a restraint of trade in any
other manner, unless the Federal Reserve finds that any anticompetitive
effects are outweighed clearly by the public interest and the probable
effect of the transaction in meeting the convenience and needs of the
communities to be served. The Merger and Bank Merger may not be consummated
until 30 days (which the Federal Reserve may reduce to 15 days) following
the date of the Federal Reserve approval, during which time the United
States Department of Justice may
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challenge the transaction on antitrust grounds. The commencement of any
antitrust action would stay the effectiveness of the approval of the
agencies, unless a court of competent jurisdiction specifically orders
otherwise.
The Merger and the Bank Merger also are subject to the approval of the
Commissioner, the North Carolina State Banking Commission, and the South
Carolina Board. In their evaluation, these state agencies will take into
account considerations similar to those applied by the Federal Reserve.
The approval of the Commissioner and the North Carolina State Banking
Commission have been received.
THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVAL WILL BE OBTAINED OR
AS TO THE TIMING OF ANY SUCH APPROVAL. There also can be no assurance that
any such approval will not impose conditions or be restricted in a manner
(including requirements relating to the raising of additional capital or
the disposition of assets) which in the reasonable judgment of the Board of
Directors of either Centura or Bankshares would so materially adversely
impact the economic or business benefits of the transactions contemplated
by the Agreement that, had such condition or requirement been known, such
party would not in its reasonable judgment have entered into the Agreement.
Bankshares and Centura are not aware of any material governmental approvals
or actions that are required for consummation of the Merger and the Bank
Merger, except as described above. Should any other approval or action be
required, it presently is contemplated that such approval or action would
be sought.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by applicable law, Bankshares and Centura, with the
approval of their respective Boards of Directors, may amend the Agreement
by written agreement at any time before or after approval of the Agreement
by the Bankshares and Pee Dee Bank stockholders; provided, however, that
after the Special Meeting, no amendment may alter the manner or basis in
which shares of Bankshares Stock and Pee Dee Bank Stock will be exchanged
for Centura Stock without the requisite approval of the holders of the
issued and outstanding shares of Bankshares Stock and Pee Dee Bank Stock
entitled to vote thereon. In addition, prior to or at the Effective Time,
either Bankshares or Centura, or both, acting through their respective
Boards of Directors or chief executive officers or other authorized
officers, may waive any default in the performance of any term of the
Agreement by the other party, may waive or extend the time for the
compliance or fulfillment by the other party of any and all of its
obligations under the Agreement, and may waive any of the conditions
precedent to the obligations of such party under the Agreement, except any
condition that, if not satisfied, would result in the violation of any
applicable law or governmental regulation. No such waiver will be effective
unless written and unless executed by a duly authorized officer of
Bankshares or Centura, as the case may be.
The Agreement may be terminated and the Merger and the Bank Merger
abandoned at any time prior to the Effective Time (i) by the mutual consent
of the Boards of Directors of Bankshares and Centura; or (ii) by the Board
of Directors of Bankshares or Centura (a) in the event of any inaccuracy of
any representation or warranty of the other party contained in the
Agreement which cannot be or has not been cured within 30 days after giving
written notice to the breaching party of such inaccuracy and which
inaccuracy would provide the terminating party the ability to refuse to
consummate the Merger or the Bank Merger under the applicable standards set
forth in the Agreement, (b) in the event of a breach by the other party of
any covenant or agreement contained in the Agreement which cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach, (c) if the Merger and the Bank Merger are
not consummated by June 30, 1998, (d) if (1) any approval of any regulatory
authority required for consummation of the Merger and the Bank Merger and
the other transactions contemplated by the Agreement has been denied by
final nonappealable action, or if any action taken by such authority is not
appealed within the time limit for appeal or (2) the stockholders of
Bankshares and Pee Dee Bank fail to vote their approval of the matters
submitted for the approval by such stockholders at the Special Meeting, or
(e) if any of the conditions precedent to the obligations of such party to
consummate the Merger and the Bank Merger have not been satisfied,
fulfilled, or waived by the appropriate party by June 30, 1998.
If the Merger or the Bank Merger are terminated as described above, the
Agreement will become void and have no effect, except that certain
provisions of the Agreement, including those relating to the obligations to
share certain expenses, maintain the confidentiality of certain information
obtained, and return all documents obtained from the other party under the
Agreement, will survive. In addition, termination of the Agreement will not
relieve any breaching party from
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liability for any uncured willful breach of a representation, warranty,
covenant, or agreement giving rise to such termination. See " -- Expenses
and Fees" and " -- Stock Option Agreement."
DISSENTERS' RIGHTS
Any stockholder of Bankshares or Pee Dee Bank entitled to vote on the
Merger or the Bank Merger has the right to dissent from such merger and
receive payment of the fair value of his shares of Bankshares or Pee Dee
Bank Stock, as the case may be, upon compliance with Sections 33-13-210 and
33-13-230 of the South Carolina Code. ONLY BANKSHARES STOCKHOLDERS MAY
DISSENT WITH RESPECT TO THE MERGER AND ONLY PEE DEE BANK STOCKHOLDERS MAY
DISSENT WITH RESPECT TO THE BANK MERGER. A stockholder may not dissent as
to less than all of the shares of either Bankshares or Pee Dee Bank that he
beneficially owns or over which he has power to direct the vote. A nominee
or fiduciary may not dissent on behalf of any beneficial owner as to less
than all of the shares of either Bankshares or Pee Dee Bank of such
beneficial owner held of record by such nominee or fiduciary. A beneficial
owner asserting dissenters' rights to shares held on his behalf must notify
either Bankshares or Pee Dee Bank in writing of the names and addresses of
the record holders of the shares, if known to him. Any stockholder
intending to enforce this right may not vote in favor of the Merger or Bank
Merger, as the case may be, and must file a written notice of intent to
demand payment for his shares (the "Objection Notice") with the Corporate
Secretary of Bankshares or Pee Dee Bank either before the Special Meeting
or before the vote is taken at the meeting. The Objection Notice must state
that the stockholder intends to demand payment for his shares of common
stock if the Merger or Bank Merger, as the case may be, is effected.
Although any stockholder who has filed an Objection Notice must not vote in
favor of the Merger or the Bank Merger, as the case may be, a vote in favor
of the Merger or the Bank Merger, as the case may be, cast by the holder of
a proxy appointment solicited by Bankshares or Pee Dee Bank (whether
pursuant to the instruction of the stockholder or otherwise) will not
disqualify the stockholder from demanding payment for his shares under the
South Carolina Code. A vote against approval of the Merger or the Bank
Merger, as the case may be, will not, in and of itself, constitute an
Objection Notice satisfying the requirements of Section 33-13-210 of the
South Carolina Code. If the Merger and the Bank Merger are approved by the
stockholders at the Special Meetings, each stockholder who has filed an
Objection Notice will be notified of such approval within 10 days after the
Special Meeting (the "Dissenters' Notice"). The Dissenters' Notice will (i)
state where dissenting stockholders must (a) send the Payment Demand (as
defined below) and (b) deposit their common stock certificates (the
"Certificates"), (ii) be accompanied by a form for demanding payment that
includes the date of the first announcement to the news media or to
stockholders of the terms of the proposed Merger or Bank Merger, (iii) set
a date by which (x) Bankshares or Pee Dee Bank, as the case may be, must
receive the Payment Demand, which may not be fewer than 30 or more than 60
days after the date the Dissenters' Notice is delivered and (y) the
Certificates must be deposited as instructed in the Dissenters' Notice,
which may not be earlier than 20 days after the date the Payment Demand is
received by Bankshares or Pee Dee Bank, as the case may be, and (iv) be
accompanied by a copy of Sections 33-13-101 through 33-13-310 of the South
Carolina Code. Within the time prescribed in the Dissenters' Notice, a
stockholder electing to dissent must make a demand for payment (the
"Payment Demand"), certify whether he (or the beneficial stockholder on
whose behalf he is asserting dissenters' rights) acquired beneficial
ownership of the shares of the common stock of Bankshares or Pee Dee Bank,
as the case may be, before December 31, 1997 (the date of the first public
announcement of the terms of the Agreement) and deposit his Certificates in
accordance with the terms of the Dissenters' Notice. Upon filing the
Payment Demand and depositing the Certificates, the stockholder will retain
all other rights of a stockholder until these rights are canceled or
modified by consummation of the Merger and the Bank Merger. FAILURE TO
COMPLY SUBSTANTIALLY WITH THESE PROCEDURES WILL CAUSE THE STOCKHOLDER TO
LOSE HIS DISSENTERS' RIGHTS TO PAYMENT FOR THE SHARES. CONSEQUENTLY, ANY
STOCKHOLDER WHO DESIRES TO EXERCISE HIS RIGHTS TO PAYMENT FOR HIS SHARES
IS URGED TO CONSULT HIS LEGAL ADVISOR BEFORE ATTEMPTING TO EXERCISE SUCH
RIGHTS.
As soon as the Merger or Bank Merger is consummated, or upon receipt of a
Payment Demand, Centura shall, pursuant to Section 33-13-250 of the South
Carolina Code, pay to each dissenting stockholder who has substantially
complied with the requirements of Section 33-13-230 of the South Carolina
Code, the amount that Centura estimates to be the fair value of the shares
of the common stock of Bankshares or Pee Dee Bank, as the case may be, plus
accrued interest. Section 33-13-250 of the South Carolina Code requires
that payment to be accompanied by (i) certain of the financial statements
of Bankshares or Pee Dee Bank, as the case may be, (ii) a statement of
Centura's estimate of fair value of the shares and explanation of how
Centura's estimate of fair value and the interest were calculated, (iii)
notification of rights to demand additional payment, and (iv) a copy of
Sections 33-13-101 through 33-13-310 of the South Carolina Code. As
authorized by Section 33-13-270, Centura intends to delay any payments with
respect to any shares (the "After-acquired shares") held by a dissenting
stockholder which were not held by such stockholder on the date of the
first public announcement of the terms of the Merger and Bank Merger,
unless the beneficial ownership devolved upon him by operation of law from
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a person who was the beneficial owner on such date. Where payments are so
withheld, Sections 33-13-270(b) and 33-13-280(a) of the South Carolina Code
will require Centura, after the Merger or the Bank Merger, to send to the
holder of the after-acquired shares an offer to pay the holder an amount
equal to Centura's estimate of their fair value plus accrued interest,
together with an explanation of the calculation of fair value and interest
and a statement of the holder's right to demand additional payment under
Section 33-13-280 of the South Carolina Code.
If the Merger or the Bank Merger is not consummated within 60 days after
the date set for demanding payment and depositing Certificates, Bankshares
or Pee Dee Bank, as the case may be, within the 60 day period, shall return
the deposited Certificates and release the transfer restrictions imposed on
uncertificated shares. If, after returning deposited Certificates and
releasing transfer restrictions, the Merger or the Bank Merger is
consummated, Bankshares or Pee Dee Bank, as the case may be, must send a
new Dissenters' Notice and repeat the payment demand procedure.
If the dissenting stockholder believes that the amount paid by Centura
pursuant to Section 33-13-250 of the South Carolina Code or offered under
Section 33-13-270 of the South Carolina Code is less than the fair value of
his shares or that the interest due is calculated incorrectly, or if
Centura fails to make payment or offer payment (or, if the Merger and the
Bank Merger have not been consummated, Bankshares and Pee Dee Bank do not
return the deposited Certificates or release the transfer restrictions
imposed on uncertificated shares), within 60 days after the date set in
the Dissenters' Notice, then the dissenting stockholder may within 30 days
after Centura made or offered payment for the shares or failed to pay for
the shares, notify Centura in writing of his own estimate of the fair value
of such shares (including interest due) and demand payment of such estimate
(less any payment previously received). FAILURE TO NOTIFY CENTURA IN
WRITING OF ANY DEMAND FOR ADDITIONAL PAYMENT WITHIN 30 DAYS AFTER CENTURA
MADE PAYMENT FOR SUCH SHARES WILL CONSTITUTE A WAIVER OF THE RIGHT TO
DEMAND ADDITIONAL PAYMENT.
If Centura and the dissenting stockholder cannot agree on a fair price
within 60 days after Centura receives such a demand for additional payment,
the statute provides that Centura will institute judicial proceedings in
the South Carolina Court of Common Pleas in Florence County (the "Court")
to fix (i) the fair value of the shares immediately before consummation of
the Merger or the Bank Merger, excluding any appreciation or depreciation
in anticipation of the Merger or the Bank Merger, unless such exclusion
would be inequitable and (ii) the accrued interest. The "fair value" of the
common stock of Bankshares or Pee Dee Bank, as the case may be, could be
more than, the same as, or less than that produced by the exchange ratio
set by the Merger or the Bank Merger. Centura must make all dissenters
whose demands for additional payment remain unsettled parties to the
proceeding and all such parties must be served with a copy of the petition.
The Court may, in its discretion, appoint an appraiser to receive evidence
and recommend a decision on the question of fair value. The Court is
required to issue a judgment for the amount, if any, by which the fair
value of the shares, as determined by the Court, plus interest, exceeds the
amount paid by Centura. If Centura does not institute such proceeding
within such 60 day period, Centura shall pay each dissenting stockholder
whose demand remains unsettled the respective amount demanded by each
stockholder.
The Court will assess the costs and expenses of such proceeding (including
reasonable compensation for and the expenses of the appraiser but excluding
fees and expenses of counsel and experts) against Centura, except that the
Court may assess such costs and expenses as it deems appropriate against
any or all of the dissenting stockholders if it finds that their demand for
additional payment was arbitrary, vexatious or otherwise not in good faith.
The Court may award fees and expenses of counsel and experts in amounts the
Court finds equitable: (i) against Centura if the Court finds that Centura
did not comply substantially with the relevant requirements of the South
Carolina Code or (ii) against either Centura or any dissenting stockholder,
if the Court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith.
THE FOREGOING IS A SUMMARY OF THE APPLICABLE PROVISIONS OF SECTIONS
33-13-101 THROUGH 33-13-310 OF THE SOUTH CAROLINA CODE. IT IS NOT INTENDED
TO BE A COMPLETE STATEMENT OF SUCH PROVISIONS, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH SECTIONS, WHICH ARE INCLUDED AS APPENDIX B
HEREOF. IT IS NOT INTENDED TO GIVE ANY RIGHT OF DISSENT OR PAYMENT TO ANY
STOCKHOLDER AND SHOULD NOT BE SO READ. STOCKHOLDERS' RIGHTS OF DISSENT AND
PAYMENT ARE LIMITED TO THOSE PROVIDED BY LAW. STOCKHOLDERS HAVE NO RIGHT OF
DISSENT WITH RESPECT TO A CORPORATION WHOSE STOCK THEY DO NOT OWN.
In general, any dissenting stockholder who perfects such holder's right to
be paid the "fair value" of such holder's Bankshares or Pee Dee Bank Stock
in cash will recognize taxable gain or loss for federal income tax purposes
upon receipt of such cash. See " -- Certain Federal Income Tax
Consequences."
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CONDUCT OF BUSINESS PENDING THE MERGER AND THE BANK MERGER
Pursuant to the Agreement, Bankshares has agreed that, except as otherwise
expressly contemplated in the Agreement, Bankshares will (i) preserve and
protect its present business organization, keep available its present
officers and employees, and preserve its relationships with customers,
depositors, creditors, correspondents, suppliers, and others having
business relationships with it; (ii) maintain all its properties and
equipment in customary repair, order and condition, ordinary wear and tear
excepted; (iii) maintain its books of account and records in the usual,
regular and ordinary manner in accordance with sound business practices
applied on a consistent basis; (iv) comply with all laws, rules and
regulations applicable to it, its properties and to the conduct of its
business; (v) continue to maintain in force insurance and to not modify any
bonds or policies of insurance in effect as of the date of the Agreement
unless the same, as modified, provides substantially equivalent coverage,
and not to cancel, allow to be terminated or, to the extent available, fail
to renew, any such bond or policy of insurance unless the same is replaced
with a bond or policy providing substantially equivalent coverage; and (vi)
provide to Centura Bankshares' quarterly consolidated balance sheets,
statements of income, statements of cash flows and changes in stockholders
equity.
In addition, Bankshares has agreed that, prior to the earlier of the
Effective Time or termination of the Agreement, Bankshares will not, except
as expressly contemplated or permitted by the Agreement, agree or commit to
do, any of the following: (i) amend its Articles of Incorporation or
Bylaws; (ii) make any change in its authorized capital stock, or create any
other or additional authorized capital stock or other securities, or issue,
sell, purchase, redeem, retire, reclassify, combine or split any shares of
its capital stock or other securities; (iii) issue any options, warrants,
calls, puts or other rights of any kind relating to the purchase of its
capital stock or any other securities; (iv) declare or pay any dividends or
make any other distributions on its shares of capital stock or otherwise to
its shareholders, except in accordance with its current cash dividend
policy at current dividend levels and declaration and payment dates; (v)
except as required by law, enter into or become bound by any contract,
agreement or commitment for the employment or compensation of any officer,
employee or consultant which is not immediately terminable by Bankshares
without cost or other liability on no more than 30 days' notice, or adopt,
enter into or become bound by any new or additional profit-sharing, bonus,
incentive, stock option, stock purchase, pension, retirement, insurance or
similar contract or agreement or plan with respect to or which provides for
benefits for any of its current or former directors, officers, employees or
consultants, or enter into or become bound by any contract with or
commitment to any labor or trade union or association or any collective
bargaining group; (vi) except for annual merit increases in the salary of
its employees, or other payments made to the employees or directors in
connection with existing compensation or benefit plans, and except for
bonus payments under Bankshares' bonus plan up to the aggregate amount
accrued by Bankshares for such plan prior to the Effective Time, increase
the compensation or benefits of, or pay any bonus or other special or
additional compensation to, any of Bankshares' directors, officers,
employees, or consultants; (vii) make any changes in its accounting
methods, practices or procedures; (viii) directly or indirectly acquire or
merge with or acquire any branch or all or any significant part of the
assets of any other entity, open any new branch or enter into or become
bound by any contract in furtherance thereof; (ix) except as may be
required by the FDIC, the South Carolina Board or any other governmental or
other regulatory agency or as shall be required by applicable law,
regulation or the Agreement, change in any material respect the nature of
its business or the manner in which it conducts its business, discontinue
any material portion or line of its business, or change in any material
respect its lending, investment, asset liability management, or other
material banking or business policies; (x) encourage, solicit or attempt to
negotiate with any entity relating to a merger or other acquisition of
Bankshares or a significant part of its assets; (xi) sell or lease (as
lessor) or enter into or become bound by any contract or agreement relating
to the sale, lease (as lessor) or other disposition of real estate or other
property, purchase or lease (as lessee) or enter into or become bound by
any contract relating to the purchase, lease (as lessee) or other
acquisition of any real property or other property, or sell or dispose of
or enter into a contract for the sale or disposal of any other asset of
Bankshares; (xii) except in the ordinary course of its business consistent
with past practices, incur any debt or assume, guarantee, or endorse or
otherwise become responsible or liable for any obligation of any other
person or entity; (xiii) mortgage, pledge or subject any of its assets to
any lien or any other encumbrance other than in the ordinary course of
business consistent with its past practice; (xiv) waive, release or
compromise any material rights in its favor except in good faith for fair
value; and (xv) enter into or become bound by any contracts or agreements
or understandings with respect to charitable contributions, any
governmental or regulatory agency or authority, or enter into any contract,
agreement, commitment or understanding which would obligate or commit
Bankshares to make expenditures for more than $25,000 (other than in the
ordinary course of Bankshares' lending operations).
Nothing in the Agreement precludes Centura from negotiating and concluding
a transaction with respect to a merger or other form of business
combination with another corporation or entity.
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STOCK OPTION AGREEMENT
Simultaneously with the execution of the Agreement, Centura and Bankshares
also entered into a Stock Option Agreement pursuant to which Bankshares
granted Centura the Bankshares Option, pursuant to which Centura is
entitled to purchase up to 11,170 shares, subject to certain adjustments,
of Bankshares Stock at a price, subject to certain adjustments, equal to
the book value of the Bankshares Stock on December 30, 1997. The
adjustments to the number of shares subject to the Bankshares Option
generally are intended to ensure that the shares subject to the Bankshares
Option will equal approximately 19.9% of the shares of Bankshares Stock
outstanding at the time of execution of the Bankshares Option, before
giving effect to any issuance of Bankshares Stock pursuant to the exercise
of the Bankshares Option. The Bankshares Option also grants Centura the
right, under certain circumstances, to require that Bankshares repurchase
the Bankshares Option from Centura at a price determined in accordance with
the terms of the Bankshares Option. The Bankshares Option is intended to
increase the likelihood that the Merger and the Bank Merger will be
effected by making it more difficult and more expensive for a third party
to acquire control of Bankshares, which would frustrate the determination
by the Board of Directors of Bankshares that the best interests of
Bankshares' and Pee Dee Bank's stockholders would be served by a business
combination with Centura. The Bankshares Option will expire upon the
earlier of the closing date of the transactions contemplated by the
Agreement or upon the termination of the Agreement in accordance with the
provisions of the Agreement.
As of the date of this Proxy Statement, Centura has not exercised the
Bankshares Option. The right of Centura to exercise the Bankshares Option
is subject to receipt of the prior approval of the Federal Reserve. Without
such approval, Centura is not permitted to acquire more than five percent
of the outstanding Bankshares Stock.
MANAGEMENT AND OPERATIONS AFTER THE MERGER AND THE BANK MERGER
Consummation of the Merger and the Bank Merger will not alter the present
management team or Board of Directors of Centura. Information concerning
the management of Centura is included in Centura's Proxy Statement for the
1997 Annual Meeting of Shareholders filed with the SEC, which is
incorporated herein by reference. See "DOCUMENTS INCORPORATED BY REFERENCE.
" For additional information regarding the interests of certain persons in
the Merger and the Bank Merger, see "DESCRIPTION OF THE MERGER AND THE BANK
MERGER" -- Interests of Certain Persons in the Merger and the Bank
Merger."
Centura and Centura Bank will be the surviving corporations resulting from
the Merger and the Bank Merger, and each shall continue to be governed by
the laws of the State of North Carolina and operate in accordance with its
Articles of Incorporation and Bylaws as in effect on the date of the
Agreement until otherwise amended or repealed after the Effective Time.
Centura Bank, as a North Carolina bank operating in the State of South
Carolina, however, will be subject to the laws and regulations of South
Carolina applicable to out-of-state banks operating in the State of South
Carolina. Bankshares and Pee Dee Bank will cease to be separate entities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND THE BANK MERGER
GENERAL. Certain members of Bankshares' management and of the Bankshares
Board of Directors have interests in the Merger and the Bank Merger that
are in addition to any interests they may have as stockholders of
Bankshares generally. These interests include, among other things, an
executive employment agreement between Centura and the President of
Bankshares and certain severance and other employee benefits, as described
below.
EXECUTIVE EMPLOYMENT AGREEMENT. In connection with the Merger and the Bank
Merger, upon closing, Centura will enter into an Executive Employment
Agreement (the "Employment Agreement") with R. B. Scarborough, President of
Bankshares and Pee Dee Bank, pursuant to which Mr. Scarborough will serve
as a Senior Market Manager for Centura Bank. The Employment Agreement is
for a term of three years and provides for an annual salary of $125,000.00.
In addition to annual salary, Mr. Scarborough will be eligible for bonus
compensation in accordance with Centura's executive bonus plan and be
entitled to participate in all employee benefit programs, including health
and insurance benefits, available to officers and employees of Centura in
comparable positions. Pursuant to the Employment Agreement, Mr. Scarborough
has agreed not to compete with Centura in the commercial banking business
in the State of South Carolina during the term of the Employment Agreement
and for a period of two years following its termination.
MATTERS RELATING TO BANKSHARES SEVERANCE AND OTHER EMPLOYEE BENEFIT PLANS.
The Agreement
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provides that, after the Effective Time, Centura will provide generally to
officers and employees of Bankshares who, at or after the Effective Time,
become officers or employees of Centura Bank, employee benefits under
employee benefit plans (other than stock option or other plans involving
the potential issuance of Centura Stock) on terms and conditions which,
when taken as a whole, are substantially similar to those currently
provided by the Centura companies to their similarly situated officers and
employees. For purposes of participation and vesting under such employee
benefit plans, the service of the employees of Bankshares prior to the
Effective Time shall be treated as service with a Centura company
participating in such employee benefit plans. In addition, any employee of
Bankshares (other than those serving pursuant to employment contracts) who,
following the Merger and at Centura's discretion, is terminated by Centura
for reasons other than the employee's misconduct within two years following
the Effective Time will be eligible for salary continuation as a result of
such termination. Salary continuation will consist of an amount equal to
two week's salary for each 12 months of active service with Bankshares
prior to the Merger. In addition, Centura shall make a lump sum payment to
certain employees terminated within two years after the Effective Date in
accordance with the terms and conditions of a severance plan to be created
by Centura in consultation with R. B. Scarborough, President of Bankshares,
or his designee. Pursuant to the Plan, Mr. Scarborough, or his designee,
shall determine the employees eligible to receive lump sum severance
payments and the amounts of such payments. The aggregate amount of all such
severance payments under the aforementioned plan may not exceed $250,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF CERTAIN MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER AND THE BANK MERGER, INCLUDING CERTAIN
CONSEQUENCES TO HOLDERS OF THE SHARES OF BANKSHARES STOCK AND PEE DEE BANK
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 BANKSHARES AND PEE DEE BANK 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 BANKSHARES STOCK AND PEE DEE BANK
SHAREHOLDERS WHO ACQUIRED THEIR SHARES OF BANKSHARES STOCK OR PEE DEE BANK
STOCK PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR RIGHTS OR
OTHERWISE AS COMPENSATION. SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER AND
THE BANK MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND
OTHER TAX LAWS. THE SUMMARY DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN
TAX CONSEQUENCES OF THE MERGER AND THE BANK MERGER, IF ANY.
Pursuant to the terms of the Agreement, the parties to the Agreement will
receive the opinion of Sinkler & Boyd, P.A., (as to the tax consequences to
Bankshares and Pee Dee Bank and their stockholders) and Poyner & Spruill,
L.L.P., (as to the tax consequences to Centura) 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 Agreement and assuming the Merger and the Bank Merger occur in
accordance with the Agreement and conditioned on the accuracy of certain
representations made by Bankshares, Pee Dee Bank, Centura and Centura Bank,
for federal income tax purposes:
1. The Merger and the Bank Merger will qualify as reorganizations
under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code provided that substantially all of the assets of
Bankshares and Pee Dee Bank are acquired in the Merger and the Bank
Merger.
2. No gain or loss will be recognized either to Centura,
Bankshares or Pee Dee Bank as a result of the Merger and the Bank
Merger.
3. No gain or loss will be recognized to the stockholders of
Bankshares or Pee Dee Bank upon their receipt of shares of
Centura Stock in the Merger and the Bank Merger (disregarding for
this purpose any cash received for whole or fractional shares or
otherwise in connection with the Merger and the Bank Merger).
4. The tax basis of the Centura Stock so received by
Bankshares and Pee Dee Bank stockholders in connection with
the Merger and the Bank Merger will be the same as the basis in
the Bankshares Stock and Pee Dee Bank Stock surrendered in
exchange for such Centura Stock as set forth above.
5. The holding period of the Centura Stock received by a
Bankshares and Pee Dee Bank stockholder will
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include the holding period of the shares of Bankshares Stock
and Pee Dee Bank Stock surrendered therefor provided that the
shares of Bankshares Stock and Pee Dee Bank Stock are capital
assets in the hand of the stockholder at the time of the Merger and
the Bank Merger.
CASH RECEIVED BY HOLDERS OF BANKSHARES STOCK AND PEE DEE BANK STOCK WHO
DISSENT. A stockholder of Bankshares or Pee Dee Bank who perfects his
dissenter's rights under South Carolina law and who receives payment of the
value of his shares of Bankshares Stock and Pee Dee Bank 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 Bankshares Stock and Pee Dee Bank 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 Bankshares Stock and Pee Dee Bank Stock who contemplates
exercising his dissenter's rights should consult with his own tax advisor
as to the possibility that any payment to him will be treated as dividend
income.
FRACTIONAL SHARE INTERESTS. A Bankshares or Pee Dee Bank stockholder who
receives cash in lieu of a fractional share interest in Centura Stock will
be treated as having received the cash in redemption of the fractional
share interest. The receipt of cash in lieu of a fractional share interest
should generally result in capital gain or loss to the holder equal to the
difference between the amount of cash received and the portion of the
holder's federal income tax basis in the Bankshares Stock and Pee Dee Bank
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 Centura Stock received, determined as set forth above, is longer than
one year.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED ON THE CODE (AND AUTHORITIES THEREUNDER) AS
IN EFFECT ON THE DATE OF THIS PROXY STATEMENT, WITHOUT CONSIDERATION OF THE
PARTICULAR FACTS OR CIRCUMSTANCES OF ANY STOCKHOLDER. STOCKHOLDERS ARE
URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND THE BANK MERGER IN THEIR
PARTICULAR SITUATIONS, AS WELL AS CONSEQUENCES UNDER ANY APPLICABLE STATE,
LOCAL, OR FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a
pooling-of-interests. In order for the Merger to qualify for pooling-of-
interests accounting treatment, substantially all (90% or more) of the
outstanding Bankshares Stock must be exchanged for Centura Stock with
substantially similar terms. There are certain other criteria that must be
satisfied in order for the Merger to qualify as a pooling-of-interests,
some of which criteria cannot be satisfied until after the Effective Time.
In addition, it is a condition to closing that Bankshares receive assurance
from J. W. Hunt and Company, LLP, and that Centura receive assurance from
KPMG Peat Marwick LLP, in form and content satisfactory to Bankshares and
Centura, respectively, in each case to the effect that the Merger will
qualify for pooling-of-interests accounting treatment.
For information concerning certain conditions to be imposed on the exchange
of Bankshares Stock and Pee Dee Bank Stock for Centura Stock in the Merger
and the Bank Merger by affiliates of Bankshares and certain restrictions to
be imposed on the transferability of the Centura Stock received by those
affiliates in the Merger and the Bank Merger in order, among other things,
to ensure the availability of pooling-of-interests accounting treatment,
see " -- Resales of Centura Stock."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by
the Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel.
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RESALES OF CENTURA STOCK
The issuance of Centura Stock to stockholders of Bankshares and Pee Dee
Bank in connection with the Merger and the Bank Merger will be registered
under the Securities Act. All shares of Centura Stock received by holders
of Bankshares Stock and Pee Dee Bank Stock and all shares of Centura Stock
issued and outstanding immediately prior to the Effective Time, upon
consummation of the Merger and the Bank Merger, will be freely transferable
by those stockholders of Bankshares and Pee Dee Bank not deemed to be
"Affiliates" of Bankshares or Centura. "Affiliates" generally are defined
as persons or entities who control, are controlled by, or are under common
control with Bankshares or Centura at the time of the Special Meeting
(generally, executive officers and directors).
Rules 144 and 145 promulgated under the Securities Act restrict the sale of
Centura Stock received in the Merger and the Bank Merger by Affiliates and
certain of their family members and related interests. Generally speaking,
during the one year following the Effective Time, Affiliates of Bankshares
or Centura may resell publicly the Centura Stock received by them in the
Merger and the Bank Merger within certain limitations as to the amount of
Centura Stock sold in any three-month period and as to the manner of sale.
After the one-year period, such Affiliates of Bankshares who are not
affiliates of Centura may resell their shares without restriction. The
ability of Affiliates of Bankshares or Centura to resell shares of Centura
Stock received in the Merger or the Bank Merger under Rule 144 or 145 as
summarized herein generally will be subject to Centura's having satisfied
its Exchange Act reporting requirements for specified periods prior to the
time of sale. Affiliates will receive additional information regarding the
effect of Rules 144 and 145 on their ability to resell Centura Stock
received in the Merger or the Bank Merger. Affiliates also would be
permitted to resell Centura Stock received in the Merger or the Bank Merger
pursuant to an effective registration statement under the Securities Act or
an available exemption from the Securities Act registration requirements.
This Proxy Statement does not cover any resales of Centura Stock received
by persons who may be deemed to be Affiliates of Bankshares or Centura.
Bankshares has agreed to use its reasonable efforts to cause each person
who may be deemed to be an Affiliate of Bankshares to execute and deliver
to Centura prior to the Effective Time, an agreement providing that such
Affiliate will not sell, pledge, transfer, or otherwise dispose of any
Centura Stock obtained as a result of the Merger or the Bank Merger
(i) except in compliance with the Securities Act and the rules and
regulations of the SEC thereunder, and (ii) in any case, until after
results covering 30 days of post-merger operations of Centura have been
published. Certificates representing shares of Bankshares Stock and Pee Dee
Bank Stock surrendered for exchange by any person who is an Affiliate of
Bankshares for purposes of Rule 145(c) under the Securities Act shall not
be exchanged for certificates representing shares of Centura Stock until
Centura has received such a written agreement from such person. The stock
certificates representing Centura Stock issued to Affiliates in the Merger
and the Bank Merger will bear a legend summarizing the foregoing
restrictions. See " --Conditions to Consummation of the Merger and the Bank
Merger."
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EFFECT OF THE MERGER AND THE BANK MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger and the Bank Merger, holders of Bankshares Stock
and Pee Dee Bank Stock (except Bankshares) will be exchanging their shares
of such stock for shares of Centura Stock. Centura is a North Carolina
corporation governed by the NCBCA and Centura's Articles of Incorporation
and Bylaws. Certain significant differences exist between the rights of
stockholders of Bankshares and Pee Dee Bank and those of Centura
stockholders. The differences deemed material by Bankshares and Centura are
summarized below. In particular, Centura's Articles and Bylaws contain
several provisions that may be deemed to have an anti-takeover effect in
that they could impede or prevent an acquisition of Centura unless the
potential acquirer has obtained the approval of Centura's Board of
Directors. The following discussion is necessarily general; it is not
intended to be a complete statement of all differences affecting the rights
of stockholders and their respective entities, and it is qualified in its
entirety by reference to the NCBCA as well as to Centura's Articles and
Bylaws and the Articles of Incorporation and Bylaws of Bankshares and Pee
Dee Bank.
ANTI-TAKEOVER PROVISIONS GENERALLY
The provisions of Centura's Articles and Bylaws described below under the
headings " -- Authorized Capital Stock," " -- Amendment of Articles of
Incorporation and Bylaws," " -- Classified Board of Directors and Absence
of Cumulative Voting," " -- Removal of Directors," " -- Limitations on
Director Liability," " -- Special Meeting of Stockholders," " -- Actions by
Stockholders Without a Meeting," " -- Stockholder Nominations and
Proposals," " -- Fair Price Provisions" and " -- Business Combinations" are
referred to herein as the "Protective Provisions." In general, the
Protective Provisions make it more likely that Centura's Board of Directors
will play a central role if any group or person attempts to acquire control
of Centura, so that the Centura Board of Directors can further the
interests of Centura and its stockholders as appropriate under the
circumstances. For example, if the Board determines that a sale of control
of Centura is in the best interests of Centura and its shareholders, the
Protective Provisions enhance the Board's ability to maximize the value to
be received by the stockholders upon such a sale.
Although Centura's management believes the Protective Provisions are
beneficial to Centura's stockholders, the Protective Provisions also may
tend to discourage some takeover bids. As a result, Centura's stockholders
may be deprived of opportunities to sell some or all of their shares at
prices that represent a premium over prevailing market prices. On the other
hand, defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the Protective Provisions
discourage undesirable proposals, Centura may be able to avoid those
expenditures of time and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Centura
Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Centura Stock by making the
stock less attractive to persons who invest in securities in anticipation
of price increases from potential acquisition attempts. The Protective
Provisions also may make it more difficult and time consuming for a
potential acquirer to obtain control of Centura through replacing the Board
of Directors and management. Furthermore, the Protective Provisions may
make it more difficult for Centura's stockholders to replace the Board of
Directors or management, even if a majority of the stockholders believe
such replacement is in the best interests of Centura. As a result, the
Protective Provisions may tend to perpetuate the incumbent Board of
Directors and management of Centura.
AUTHORIZED CAPITAL STOCK
CENTURA. Centura's Articles authorize issuance of up to (i) 50,000,000
shares of Centura Stock, of which 25,862,375 shares were issued and
outstanding as of December 31, 1997, and (ii) 25,000,000 of no par value
preferred stock ("Centura Preferred Stock"), of which no shares are issued.
Centura's Board of Directors may authorize the issuance of additional
shares of Centura Stock without further action by Centura's stockholders,
unless such action is required in a particular case by applicable laws or
regulations or by any stock exchange upon which Centura's capital stock may
be listed. Centura's stockholders do not have the preemptive right to
purchase or subscribe to any unissued authorized shares of Centura Stock or
any option or warrant for the purchase thereof.
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Similarly, Centura's Board of Directors may issue, without any further
action by the stockholders, shares of Centura Preferred Stock, in one or
more classes or series, with such voting, conversion, dividend, and
liquidation rights as the Board of Directors may specify. In establishing
and issuing shares of Centura Preferred Stock, Centura's Board of Directors
may designate that Centura Preferred Stock will have voting rights in
excess of one vote per share or will vote as a separate class on any or all
matters, thus diluting the voting power of the Centura Stock. The Board of
Directors also may designate that Centura Preferred Stock will have
dividend rights that are cumulative and that receive preferential treatment
compared to Centura Stock, and that Centura Preferred Stock will have
liquidation rights with priority over Centura Stock in the event of
Centura's liquidation. Subject to the rights of stockholders who perfect
dissenters' rights of appraisal and the payment of cash in lieu of
fractional shares, Centura will issue an estimated 577,033 shares
of Centura Stock in connection with the Merger and the Bank Merger. Based
on the number of shares of Centura Stock outstanding on December 31, 1997,
it is anticipated that, following the consummation of the Merger and the
Bank Merger, a total of approximately 26,439,408 shares of Centura
Stock will be outstanding, excluding the effect of any shares which may
be issued or repurchased by Centura after December 31, 1997.
The authority to issue additional shares of Centura Stock provides Centura
with the flexibility necessary to meet its future needs without the delay
resulting from seeking stockholder approval. The authorized but unissued
shares of Centura Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock
dividends, employee benefit and compensation plans, acquisitions, and
public or private sales for cash as a means of raising capital. Such shares
could be used to dilute the stock ownership of persons seeking to obtain
control of Centura. In addition, the sale of a substantial number of shares
of Centura Stock to persons who have an understanding with Centura
concerning the voting of such shares, or the distribution or declaration of
a dividend of shares of Centura Stock (or the right to receive Centura
Stock) to Centura stockholders, may have the effect of discouraging or
increasing the cost of unsolicited attempts to acquire control of Centura.
BANKSHARES AND PEE DEE BANK. Bankshares' Articles of Incorporation
authorize the issuance of up to 100,000 shares of Bankshares Stock, of
which 56,133 shares were issued and outstanding as of December 31, 1997.
Pee Dee Bank's Articles of Incorporation authorize the issuance of up to
65,000 shares of Pee Dee Bank Stock, of which 63,000 shares were
issued and outstanding as of December 31, 1997. The Boards of Directors of
each of Bankshares and Pee Dee Bank may authorize the issuance of
additional authorized shares of the common stock of those corporations
without further action by the stockholders of the corporation issuing the
stock. The stockholders of both Bankshares and Pee Dee Bank have the
preemptive right to purchase or subscribe to any unissued authorized shares
of the stock of their respective corporations or any option or warrant for
the purchase thereof; however, no preemptive right exists with respect to
stock which is issued as compensation or is sold otherwise than for money.
The authority to issue additional shares of common stock provides both
Bankshares and Pee Dee Bank the flexibility necessary to meet their
respective future capital needs without delay resulting from seeking
shareholder approval. The authorized but unissued shares of each of
Bankshares and Pee Dee Bank are issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock
dividends, employee benefits, compensation plans, acquisitions and public
or private sales for cash as a means of raising capital.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
CENTURA. The Articles of Incorporation of Centura provide that amendments
thereto may be adopted only upon receiving the affirmative vote of the
holders of at least two-thirds of all the shares of capital stock of
Centura issued and outstanding and entitled to vote thereon. However, if
such amendment has received the prior approval by an affirmative vote of a
majority of "Disinterested Directors," as defined therein, then the
affirmative vote of the holders of at least a majority of all the shares of
capital stock of Centura issued and outstanding and entitled to vote, or
such greater percentage approval as is required by North Carolina law, is
sufficient to amend the Articles. A "Disinterested Director" is defined in
the Articles as any member of the Board of Directors who is unaffiliated
with, and not a nominee of, a Control Person, as defined therein, and who
was a member of the Board of Directors prior to the time a Control Person
became such, and any successor of a Disinterested Director who is
unaffiliated with, and not a nominee of, a Control Person who is
recommended to succeed a Disinterested Director by a majority of
Disinterested Directors then on the Board of Directors. A "Control Person"
is defined in the Articles as any corporation, person, group, or other
entity, which together with its affiliates, prior to a Business Combination
(as defined herein) beneficially owns 10% or more of the
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shares of any class of equity or convertible securities of Centura, and any
affiliate of any such corporation, person, group, or other entity.
Subject to certain restrictions set forth below, either the Board of
Directors or the stockholders of Centura may amend Centura's Bylaws. The
Board of Directors may amend the Bylaws and adopt new bylaws except that:
(i) a bylaw adopted or amended by the stockholders may not be readopted,
amended, or repealed by the Board of Directors if neither the Articles nor
a bylaw adopted by the stockholders authorizes the Board of Directors to
adopt, amend, or repeal that particular bylaw; (ii) a bylaw that fixes a
greater quorum or voting requirement for the Board of Directors may not be
adopted by the Board of Directors by a vote of less than a majority of the
directors then in office and may not itself be amended by a quorum or vote
of directors less than the quorum or vote therein prescribed by a bylaw
adopted or amended by the stockholders; and (iii) if a bylaw fixing a
greater quorum or voting requirement for the Board of Directors is
originally adopted by the stockholders, it may be amended or repealed only
by the stockholders, unless the Bylaws permit amendment or repeal by the
Board of Directors. The stockholders of Centura generally may adopt, amend,
or repeal the Bylaws upon the affirmative vote of two-thirds of the
stockholders entitled to vote thereon.
BANKSHARES AND PEE DEE BANK. The Articles of Incorporation of Bankshares
and of Pee Dee Bank do not set forth any particular requirements for
adopting amendments to the Articles of Incorporation. Nevertheless, the
South Carolina Code requires that an amendment to the Articles of
Incorporation of either corporation have the affirmative approval of at
least two-thirds of the outstanding shares of that corporation.
For each of Bankshares and Pee Dee Bank, either the Board of Directors or
the stockholders of the corporation may amend the corporation's bylaws. The
stockholders of each corporation may adopt, amend or repeal bylaws upon the
affirmative vote of a majority of the stockholders entitled to vote
thereon.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
CENTURA. The Articles of Centura provide that Centura's Board of Directors
shall consist of not less than 15 nor more than 30 directors divided into
three classes, with each class to be as nearly equal in number as possible.
The directors in each class serve three-year terms of office. The effect of
Centura's having a classified Board of Directors is that only approximately
one-third of the members of the Board are elected each year, which
effectively requires two annual meetings for Centura's stockholders to
change a majority of the members of the Board. The purpose of dividing
Centura's Board of Directors into classes is to facilitate continuity and
stability of leadership of Centura by ensuring that experienced personnel
familiar with Centura will be represented on Centura's Board at all times,
and to permit Centura's management to plan for the future for a reasonable
time. However, by potentially delaying the time within which an acquirer
could obtain working control of the Board, this provision may discourage
some potential mergers, tender offers, or takeover attempts.
Pursuant to the Bylaws, each stockholder generally is entitled to one vote
for each share of Centura Stock held and is not entitled to cumulative
voting rights in the election of directors. With cumulative voting, a
stockholder has the right to cast a number of votes equal to the total
number of such holder's shares multiplied by the number of directors to be
elected. The stockholder has the right to distribute all of his votes in
any manner among any number of candidates or to cumulate such shares in
favor of one candidate. Directors are elected by a plurality of the total
votes cast by all stockholders. With cumulative voting, it may be possible
for minority stockholders to obtain representation on the Board of
Directors. Without cumulative voting, the holders of more than 50% of the
shares of Centura Stock generally have the ability to elect 100% of the
directors. As a result, the holders of the remaining Centura Stock
effectively may not be able to elect any person to the Board of Directors.
The absence of cumulative voting thus could make it more difficult for a
stockholder who acquires less than a majority of the shares of Centura
Stock to obtain representation on Centura's Board of Directors.
BANKSHARES AND PEE DEE BANK. The directors of each of Bankshares and Pee
Dee Bank are elected annually to serve terms of one year or until their
successors are elected and qualify. The Bylaws of Pee Dee Bank require that
each director own at least 1% of the capital stock of Pee Dee Bank.
Stockholders of Bankshares and Pee Dee Bank are entitled to cumulate their
votes for the election of directors.
REMOVAL OF DIRECTORS
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CENTURA. Centura's Articles of Incorporation provide that (i) a director
may be removed by the stockholders at any time with cause, and without
cause upon the affirmative vote of the holders of two-thirds of the voting
power of all shares of capital stock entitled to vote generally in the
election of directors, and (ii) vacancies on the Board of Directors may be
filled only by the Board of Directors. The purpose of this provision is to
prevent a majority stockholder from circumventing the classified board
system by removing directors and filling the vacancies with new individuals
selected by that stockholder. Accordingly, the provision may have the
effect of impeding efforts to gain control of the Board of Directors by
anyone who obtains a controlling interest in Centura Stock. The term of a
director appointed to fill a vacancy expires at the next meeting of
stockholders at which directors are elected.
BANKSHARES AND PEE DEE BANK. The directors of Bankshares and Pee Dee Bank
may be removed by the stockholders with or without cause by majority vote
of the stockholders voting on the matter at a meeting of stockholders
called for the purpose of removing the directors at which a quorum is
present. However, a director may not be removed if the number of votes
sufficient to elect him under cumulative voting is voted against his
removal.
LIMITATIONS ON DIRECTOR LIABILITY
CENTURA. Centura's Articles of Incorporation provide for the elimination of
the personal liability of each director arising out of an action by Centura
or otherwise for monetary damages for breach of his duty as a director,
except for liability with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in
conflict with the best interests of Centura, (ii) any liability under
Section 55-8-33 of the General Statutes of North Carolina, or (iii) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it
does limit the remedies available to a stockholder who has a valid claim
that a director acted in violation of his duties, if the action is among
those as to which liability is limited. This provision may reduce the
likelihood of stockholder derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duties, even though such action, if
successful, might have benefitted Centura and its stockholders. The SEC has
taken the position that similar provisions added to other corporations'
certificates of incorporation would not protect those corporations'
directors from liability for violations of the federal securities laws.
Similarly, the federal banking laws may not allow directors of banks and
bank holding companies to avoid liability for violations of federal banking
law or to receive indemnification for such violations.
BANKSHARES AND PEE DEE BANK. With respect to both Bankshares and Pee Dee
Bank, under the South Carolina Code, a director is not liable for any
action taken as a director or any failure to take any action if the
director performed the duties of his office: (i) in good faith; (ii) with
the care an ordinarily prudent person in a like position would exercise
under similar circumstances; and (iii) in a manner he reasonably believes
to be in the best interest of the corporation and its shareholders.
INDEMNIFICATION
CENTURA. Under the NCBCA, subject to certain exceptions, a corporation may
indemnify an individual made a party to a proceeding, because he is or was
a director, against liability incurred in the proceeding if (i) he
conducted himself in good faith; (ii) he reasonably believed (a) in the
case of conduct in his official capacity with the corporation, that his
conduct was in its best interests, and (b) in all other cases, that his
conduct was at least not opposed to its best interests; and (iii) in the
case of any criminal proceeding, he has no reasonable cause to believe his
conduct was unlawful. Moreover, unless limited by its articles of
incorporation, a corporation must indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the
proceeding. Expenses incurred by a director in defending a proceeding may
be paid by the corporation in advance of the final disposition of such
proceeding as authorized by the board of directors in the specific case or
as authorized or required under any provision in the articles of
incorporation or bylaws or by any applicable resolution or contract upon
receipt of an undertaking by or on behalf of a director to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation against such expenses. A director may also
apply for court-ordered indemnification under certain circumstances. Unless
a corporation's articles of incorporation provide otherwise, (i) an officer
of a corporation is entitled to mandatory indemnification and is entitled
to apply for court-ordered indemnification to the same extent as a
director, (ii) the corporation may indemnify and advance expenses to an
officer, employee, or agent of
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the corporation to the same extent as to a director and (iii) a corporation
may also indemnify and advance expenses to an officer, employee, or agent
who is not a director to the extent, consistent with public policy, that
may be provided by its articles of incorporation, bylaws, general or
specific action of its board of directors, or contract.
In addition and separate and apart from the indemnification rights
discussed above, the NCBCA further provides that a corporation may in its
articles of incorporation or bylaws or by contract or resolution indemnify
or agree to indemnify any one or more of its directors, officers,
employees, or agents against liability and expenses in any proceeding
(including without limitation a proceeding brought by or on behalf of the
corporation itself) arising out of their status as such or their activities
in any of the foregoing capacities; provided, however, that a corporation
may not indemnify or agree to indemnify a person against liability or
expenses he may incur on account of his activities which were at the time
taken known or believed by him to be clearly in conflict with the best
interests of the corporation. A corporation may likewise and to the same
extent indemnify or agree to indemnify any person who, at the request of
the corporation, is or was serving as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise or as a trustee or
administrator under an employee benefit plan. Any such provision for
indemnification may also include provisions for recovery from the
corporation of reasonable costs, expenses, and attorneys' fees in
connection with the enforcement of rights to indemnification and may
further include provisions establishing reasonable procedures for
determining and enforcing the rights granted therein.
Centura's Bylaws provide for the mandatory indemnification, to the fullest
extent permitted by law, of any person who at any time serves or has served
as a director or officer of Centura, or, at the request of Centura, is or
was serving as a director, officer, agent, partner, trustee, administrator,
or employee of another entity in the event such person is made or is
threatened to be made, a party to any threatened, pending, or completed
civil, criminal, administrative, investigative, or arbitrative action,
suit, or proceeding and any appeal therein (and any inquiry or
investigation that could lead to such action, suit, or proceeding), whether
or not brought by or on behalf of Centura, seeking to hold such person
liable by reason of the fact that such person is or was acting in such
capacity. The indemnification provision in the Centura Bylaws covers
reasonable expenses, including without limitation, all attorneys' fees
actually and necessarily incurred by such person in connection with any
such action, suit or proceeding, all reasonable payments made by such
person in satisfaction of any judgment, money decree, fine (including an
excise tax assessed with respect to an employee benefit plan), penalty, or
settlement for which such person may have become liable in such action,
suit, or proceeding, and all reasonable expenses incurred in enforcing the
indemnification rights. Furthermore, Centura may advance to such person his
reasonable expenses incurred in connection with any such action, suit, or
proceeding as authorized by the Board of Directors in the specific case or
as authorized or required under any Bylaw upon receipt of an undertaking by
or on behalf of such person to repay such amount unless it is ultimately
determined that such person is entitled to be indemnified by Centura
against such expenses.
Centura's Bylaws further provide that Centura may, but is not required to,
indemnify any agent, employee, or other person as the Board of Directors
deems appropriate. The Centura Board of Directors must take all such action
as may be necessary and appropriate to authorize Centura to pay the
indemnification required by the indemnification provision, including
without limitation, to the extent needed, making a good faith evaluation of
the manner in which the claimant for indemnity acted and of the reasonable
amount of indemnity to such claimant.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling Centura
pursuant to the foregoing provisions, Centura has been informed that, in
the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
BANKSHARES AND PEE DEE BANK. With respect to both Bankshares and Pee Dee
Bank, the South Carolina Code provides for indemnification of directors
which is the same as is described in the first paragraph under the heading
"Indemnification --Centura" above. No other indemnification is provided for
in either the Articles of Incorporation or Bylaws of Bankshares or Pee Dee
Bank.
SPECIAL MEETING OF STOCKHOLDERS
CENTURA. Centura's Bylaws provide that special meetings of stockholders may
be called only by the Board of Directors, the Chairman of the Board, or the
President. Holders of Centura Stock do not have the right to call a special
meeting or to require that Centura's Board of Directors call such a
meeting. As a result, this provision, taken together with the restriction
on the removal of directors, would prevent a substantial stockholder from
compelling stockholder
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consideration of any proposal (such as a proposal for a Business
Combination) over the opposition of Centura's Board of Directors by calling
a special meeting of stockholders at which such stockholder could replace
the entire Board of Directors with nominees who were in favor of such
proposal.
BANKSHARES AND PEE DEE BANK. The South Carolina Code permits a special
meeting of stockholders of either Bankshares or Pee Dee Bank to be called
by stockholders holding 10% or more of the outstanding shares of the
corporation.
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CONSTITUENCY AND STOCKHOLDER PROVISIONS
CENTURA. Centura's Articles of Incorporation expressly authorize the Board
of Directors of Centura, any committee of the Board of Directors, or any
individual director, in determining what is in the best interest of Centura
and its stockholders, to consider, in addition to the long-term and
short-term interests of the stockholders, the social and economic effects
of the matter to be considered on Centura and its subsidiaries, their
employees, depositors, customers, creditors, and the communities in which
Centura and its subsidiaries operate or are located. When evaluating a
Business Combination or a proposal by another person to make a Business
Combination or a tender offer or any other proposal relating to a potential
change in control of Centura, the Board of Directors may consider such
matters as the business and financial condition and earnings prospects of
the acquiring person, including, but not limited to, debt service and other
existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other likely financial obligations of
the acquiring person, and the possible effect of such conditions upon
Centura and its subsidiaries and the communities in which Centura and its
subsidiaries operate or are located, the competence, experience, and
integrity of the acquiring person and its management, and the prospects for
successful conclusion of the Business Combination, offer, or proposal. The
consideration of any of the above factors is completely discretionary with
the Centura Board of Directors and does not give any constituency other
than stockholders the right to be so considered.
The constituency provision of the Articles of Incorporation of Centura may
discourage or make more difficult certain acquisition proposals or Business
Combinations and, therefore, may adversely affect the ability of
stockholders to benefit from certain transactions opposed by the Centura
Board of Directors. The constituency provision would allow the Centura
Board of Directors to take into account the effects of an acquisition
proposal on a broad number of constituencies and to consider any potential
adverse effects in determining whether to accept or reject such proposal.
BANKSHARES AND PEE DEE BANK. Neither Bankshares nor Pee Dee Bank have
similar provisions in their Articles of Incorporation.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
CENTURA. The Bylaws of Centura provide that any action required or
permitted to be taken by Centura stockholders at a duly called meeting of
stockholders may be effected by the unanimous written consent of the
stockholders entitled to vote on such action.
BANKSHARES AND PEE DEE BANK. The South Carolina Code provides that any
action required or permitted to be taken by the stockholders of either
Bankshares or Pee Dee Bank at a duly called meeting of stockholders may be
effected by the unanimous written consent of the stockholders entitled to
vote on such action.
STOCKHOLDER NOMINATIONS AND PROPOSALS
CENTURA. Centura's Articles and Bylaws provide that no stockholder may
nominate individuals for election to the Board of Directors.
BANKSHARES AND PEE DEE BANK. The stockholders of each of Bankshares and Pee
Dee Bank may nominate individuals for election to the Board of Directors of
the respective corporations.
FAIR PRICE PROVISIONS
CENTURA. The fair price provision of Centura's Articles of Incorporation
applies to Business Combinations that have not received the approval of
two-thirds of the full Board of Directors and is available only to
stockholders who vote against such Business Combinations and who elect to
sell their shares to Centura for cash at the fair price of such shares. The
fair price provision requires that the consideration for such shares be
paid in cash by Centura and that the price per share be at least equal to
the highest of the following:
(a) the highest price per share paid for Centura Stock during the four
years immediately preceding the Business Combination vote by any
stockholder who beneficially owned 5.0% or more of Centura Stock and
who votes in favor of the Business Combination;
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(b) the cash value of the highest price per share previously offered
pursuant to a tender offer to the stockholders of Centura within the
four years immediately preceding the Business Combination vote;
(c) the aggregate earnings per share of Centura Stock during the four
fiscal quarters immediately preceding the Business Combination vote
multiplied by the highest price/earnings ratio of Centura Stock at
any time during the four fiscal quarters or up to the date the
Business Combination vote occurs;
(d) the highest price per share, including commissions and fees, paid by
a Control Person in acquiring any of its holdings of Centura Stock;
or
(e) the fair value per share of Centura Stock as determined by an
investment banking or appraisal firm chosen by a majority of the
members of the Board of Directors voting against the Business
Combination, such fair value not taking into consideration the fact
that the shares are held by a majority of the Centura stockholders.
The fair price provision is designed primarily to discourage attempts to
acquire Centura in transactions utilizing two-tier pricing tactics, but the
provision may affect and potentially discourage other transactions that are
not two-tier structured. Transactions utilizing two-tier pricing tactics
typically involve the accumulation of a substantial block of a target
corporation's stock followed by a merger or other reorganization of the
acquired corporation on terms determined by the purchaser. In such
two-tiered takeover attempts, the purchaser generally pays cash to acquire
a controlling interest in a corporation and acquires the remaining interest
by paying the remaining stockholders a price lower than that paid to
acquire the controlling interest. The Centura Board of Directors believes
that the fair price provision may prevent some of the potential inequities
of two-tiered takeover attempts by encouraging persons interested in
acquiring Centura to negotiate in advance with the Board of Directors
since, if two-thirds of the full Board of Directors approves certain
Business Combinations, the fair price provision would be avoided. The Board
of Directors believes that the interests of the stockholders of Centura
would be best served by such negotiation based on careful consideration of
all relevant factors. Despite this belief, however, some stockholders may
find the fair price provision disadvantageous to the extent it discourages
changes in control in which stockholders might receive, for at least some
of their shares, a substantial premium above the market price paid to
stockholders who vote against the Business Combination and then elect to
sell their shares to Centura for cash. Furthermore, the provision may
encourage stockholders to vote against a Business Combination, which has
been approved by a majority of a quorum but less than two-thirds of the
full Board of Directors. In addition, assets of Centura could be used to
reacquire shares, possibly at a substantial premium, from stockholders who
voted against the transaction, which may be to the detriment of
stockholders who voted for the transaction. Finally, if the fair price
provision has the effect of giving management more bargaining power in
negotiation with a potential acquirer, it could result in management using
the bargaining power not only to try to negotiate a favorable price for an
acquisition, but also more favorable terms for management.
BANKSHARES AND PEE DEE BANK. There are no similar provisions which apply to
either Bankshares or Pee Dee Bank.
BUSINESS COMBINATIONS
CENTURA. The Articles of Incorporation of Centura provide that, unless more
restrictively required by applicable law, any Business Combination, as
defined therein, must be approved by a majority of a quorum of the Board of
Directors and must receive one of the following levels of stockholder
approval: (i) at a special or annual meeting of stockholders by an
affirmative vote of the stockholders holding at least a majority of the
shares of Centura Stock issued and outstanding and entitled to vote
thereon, provided that such Business Combination has received the prior
approval by a resolution adopted by an affirmative vote of at least
two-thirds of the full Board of Directors before such Business Combination
is submitted for approval to the stockholders; or (ii) at a special or
annual meeting of stockholders by an affirmative vote of the stockholders
holding at least two-thirds of the shares of Centura Stock issued and
outstanding and entitled to vote thereon provided that such Business
Combination has received the prior approval by a resolution adopted by an
affirmative vote of at least a majority of a quorum of the Board of
Directors (but less than two-thirds of the Board of Directors). In
addition, if the Business Combination is approved by an affirmative vote of
at least two-thirds of the stockholders entitled to vote and by a majority
of a quorum of the Board of Directors but less than two-thirds of the full
Board of Directors, the Business Combination must grant to stockholders not
voting to approve the Business Combination certain fair price rights.
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The Articles of Incorporation of Centura define a "Business Combination" as
(i) any merger or consolidation of Centura into any other corporation,
person, group, or other entity where Centura is not the surviving or
resulting entity; (ii) any merger or consolidation of Centura with or into
any "Control Person" (as defined in the Articles of Incorporation) or with
any corporation, person, group, or other entity where the merger or
consolidation is proposed by or on behalf of a Control Person; (iii) any
sale, lease, exchange, or other disposition of all or substantially all of
the assets of Centura; (iv) any sale, lease, exchange, or other disposition
of more than 10% of the total assets of Centura (determined as of the end
of the most recent fiscal year) to a Control Person; (v) the issuance of
any securities of Centura to a Control Person; (vi) the acquisition by
Centura of any securities of a Control Person unless such acquisition
begins prior to the person becoming a Control Person or is an attempt to
prevent the Control Person from obtaining greater control of Centura; (vii)
the acquisition by Centura of all or substantially all of the assets of any
Control Person or any entity where the acquisition is proposed by or on
behalf of a Control Person; (viii) the adoption of any plan or proposal for
the liquidation or dissolution of Centura which is proposed by or on behalf
of a Control Person; (ix) any reclassification of securities or
recapitalization of Centura which has the effect of increasing the
proportionate share of the outstanding shares of any class of equity or
convertible securities of Centura which is beneficially owned or controlled
by a Control Person; (x) any of the above transactions which are between
Centura and any of its subsidiaries and which are proposed by or on behalf
of any Control Person; or (xi) any agreement, plan, contract, or other
arrangement providing for any of the above transactions.
The requirement of a supermajority vote of stockholders to approve certain
business transactions, as described above, may discourage a change in
control of Centura by allowing a minority of Centura's stockholders to
prevent a transaction favored by the majority of the stockholders. Also, in
some circumstances, the Board of Directors could cause a two-thirds vote to
be required to approve a transaction thereby enabling management to retain
control over the affairs of Centura and their positions with Centura. The
primary purpose of the supermajority vote requirement, however, is to
encourage negotiations with Centura's management by groups or corporations
interested in acquiring control of Centura and to reduce the danger of a
forced merger or sale of assets.
The North Carolina Shareholder Protection Act requires, under certain
circumstances and subject to certain exceptions, the affirmative vote of at
least 95% of the voting shares of a corporation to adopt or authorize
certain business combinations with any other entity. The 95% vote
requirement does not apply if all of certain fair price and procedural
requirements are satisfied. The North Carolina Shareholder Protection Act
applies to corporations that have a class of shares registered under
Section 12 of the Exchange Act (a "public corporation") and that have not
opted out of the provisions of the North Carolina Shareholder Protection
Act. Centura's Articles of Incorporation provide that Centura will not be
subject to the North Carolina Shareholder Protection Act.
The North Carolina Control Share Acquisition Act provides that in the event
any person or group acting in concert acquires certain designated
percentage interests of the total voting power of a corporation, the shares
acquired in the acquisition are not entitled to vote unless the right to
vote such shares is approved by a majority of all of the outstanding shares
of the corporation entitled to vote for the election of directors,
excluding certain interested shares, as that term is defined by the
statute. If voting rights are granted to the control shares, other
stockholders may have their shares redeemed by the corporation at their
fair value. The North Carolina Control Share Acquisition Act applies only
to a North Carolina public corporation with certain required contacts with
North Carolina (a "covered corporation"), the bylaws or articles of
incorporation of which do not opt out of the North Carolina Control Share
Acquisition Act, and does not apply to acquisitions of stock pursuant to a
merger or tender offer approved by the Board of Directors. Centura's
Articles of Incorporation provide that Centura will not be subject to the
North Carolina Control Share Acquisition Act.
BANKSHARES AND PEE DEE BANK. There are no similar provisions which apply to
either Bankshares or Pee Dee Bank.
DISSENTERS' RIGHTS OF APPRAISAL
CENTURA. Under the NCBCA, a stockholder is generally entitled to dissent
from, and obtain payment of the fair value of his shares in the event of:
(i) consummation of a plan of merger to which the corporation is a party,
unless either (a) stockholder approval is not required by the NCBCA, or (b)
such shares are then redeemable by the corporation at a price not greater
than the cash to be received in exchange for such shares; (ii) consummation
of a plan of share exchange to which the corporation is a party as the
corporation whose shares will be acquired, unless such shares are then
redeemable by the corporation at a price not greater than the cash to be
received in exchange for such shares; (iii)
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consummation of a sale or exchange of substantially all of the
corporation's property other than in the usual and regular course of
business, including a sale in dissolution, but not including a sale
pursuant to court order or to a plan by which substantially all of the net
proceeds of the sale will be distributed in cash to the stockholders within
one year after the date of sale; (iv) an amendment of the articles of
incorporation that materially and adversely affects rights in respect of a
dissenter's shares because it (a) alters or abolishes a preferential right
of the shares, (b) creates, alters, or abolishes a right in respect of
redemption of the shares, (c) alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other securities, (d) excludes or
limits the right of the shares to vote on any matter, or to cumulate votes,
(e) reduces the number of shares owned by the stockholder to a fraction of
a share if the fractional share so created is to be acquired for cash under
the NCBCA, or (f) changes the corporation into a nonprofit corporation or
cooperative organization; or (v) any corporate action taken pursuant to a
stockholder vote, to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provide that voting or nonvoting
stockholders are entitled to dissent and obtain payment for their shares.
Centura's Articles of Incorporation and Bylaws do not provide for any such
additional dissenters' rights.
BANKSHARES AND PEE DEE BANK. The stockholders of both Bankshares and Pee
Dee Bank have dissenters rights of appraisal in the event of any of the
corporate actions described in Section 33-13-102 of the South Carolina
Code, a copy of which is included in Appendix B. The dissent procedure is
described in detail above. See "DESCRIPTION OF THE MERGER AND THE BANK
MERGER-- Dissenters' Rights."
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
CENTURA. The NCBCA provides that a stockholder may inspect books and
records upon written demand under oath stating the purpose of the
inspection, if such purpose is reasonably related to such person's interest
as a stockholder.
BANKSHARES AND PEE DEE BANK. The South Carolina Code provides that a
stockholder of either Bankshares or Pee Dee Bank may inspect the books or
records of the corporation of which he is a stockholder upon written demand
stating the records requested and the purpose of inspection, if such
records are directly connected with his purpose. The books and records
which may be inspected are limited to those which are specifically set
forth in the South Carolina Code.
DIVIDENDS
CENTURA. Section 53-87 of the North Carolina General Statutes generally
allows Centura's subsidiary depository institution to pay cash dividends to
Centura only out of the subsidiary depository institution's undivided
profits and only if Centura's surplus is equal to at least 50% of its
paid-in capital stock. Substantially all of the funds available for the
payment of dividends by Centura are derived from its subsidiary depository
institution. There are various statutory limitations on the ability of
Centura's subsidiary depository institutions to pay dividends to Centura.
See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
BANKSHARES AND PEE DEE BANK. The directors of Bankshares may declare and
pay dividends so long as the payment of such dividends will not cause
Bankshares to be unable to pay its debts as they become due in the usual
course of business or to cause Bankshares' total assets to be less than the
sum of its total liabilities plus the amount, if any, that would be needed,
if the corporation were to be dissolved at the time of the payment, to
satisfy the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the dividend.
Pee Dee Bank's ability to pay dividends is subject to the same limitation
plus the additional limitations that: (i) the payment of any dividend must
first be approved by the South Carolina Board; (ii) the dividend may not
cause Pee Dee Bank not to meet its regulatory capital requirements; and
(iii) pursuant to Pee Dee Bank's Bylaws, dividends may not exceed more than
one half of the earnings of Pee Dee Bank for the calendar year.
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INFORMATION ABOUT BANKSHARES AND PEE DEE BANK
GENERAL
Bankshares is a South Carolina corporation and a bank holding company with its
corporate headquarters in Timmonsville, South Carolina. Bankshares commenced
operations in 1981, upon effectiveness of the acquisition of Pee Dee Bank as a
subsidiary. Bankshares does not engage in any business other than its ownership
of and through Pee Dee Bank. Pee Dee Bank was chartered in 1932 as a commercial
bank under South Carolina law with its home office in Timmonsville, South
Carolina.
As of September 30, 1997, Bankshares had total consolidated assets of
approximately $133 million, total consolidated liabilities of approximately $119
million, and total stockholders' equity of approximately $13 million. As of
September 30, 1997, Pee Dee Bank had total assets of approximately $134 million,
total deposits of approximately $113 million, and total stockholders' equity of
approximately $14 million.
Pee Dee Bank engages in a general commercial banking business through six
offices, located in Timmonsville, South Carolina, Florence, South Carolina
(three offices), Dillon, South Carolina and Sumter, South Carolina. Pee Dee Bank
is a member of the Federal Reserve System and its deposit accounts are insured
up to applicable limits by the Bank Insurance Fund of the FDIC.
Pee Dee Bank offers a full array of commercial bank services except trust
services. Deposit services include business and personal checking accounts, NOW
accounts, savings accounts, money market accounts, various term certificates of
deposit, IRA accounts, and other deposit services. Most of Pee Dee Bank's
deposits are attracted from individuals and small businesses.
Pee Dee Bank offers secured and unsecured, short-to-intermediate term loans,
with floating and fixed interest rates for agricultural, commercial and consumer
purposes. Consumer loans include: car loans, home equity improvement loans
secured by first and second mortgages, personal expenditure loans, education
loans, and the like. Agricultural and commercial loans include short term
unsecured loans, short and intermediate term real estate mortgage loans, loans
secured by listed stocks, loans secured by equipment, inventory, accounts
receivable, crops, and the like.
Other services offered by Pee Dee Bank include safe deposit boxes, night
depository service, VISA and Master Card charge cards (through a correspondent),
debit cards, tax deposits, sale of U.S. Treasury bonds, notes and bills and
other U. S. government securities (through a correspondent). Each branch of Pee
Dee Bank has an ATM and it is a member of the Honor and Cirrus networks.
COMPETITION
The market for financial institutions in Pee Dee Bank's market areas (Dillon,
Florence and Sumter Counties, South Carolina) is highly competitive. Banks
generally compete with other financial institutions through the banking services
and products offered, the pricing of services, the level of service provided,
the convenience and availability of services, and the degree of expertise and
personal concern with which services are offered. Pee Dee Bank encounters strong
competition from most of the financial institutions in its market areas. In the
conduct of certain banking business, Pee Dee Bank also competes with credit
unions, consumer finance companies, insurance companies, money market mutual
funds, and other financial institutions, some of which are not subject to the
same degree of regulation and restrictions imposed upon Pee Dee Bank. Most of
the other financial institutions in Pee Dee Bank's areas are branch offices of
large, regional banks. Many of these competitors have substantially greater
resources and lending limits than Pee Dee Bank and offer certain services, such
as international banking and trust services, that Pee Dee Bank does not provide.
Pee Dee Bank believes, however, that its relatively small size permits it to
offer more personalized services than many of its competitors. Pee Dee Bank
attempts to compensate for its lower lending limits by participating larger
loans with other institutions.
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PROPERTIES AND EMPLOYEES
Two branch offices of Pee Dee Bank are leased from an affiliated person of
Bankshares under long-term leases. The land on which two other branch offices
are built is leased from unaffiliated persons on long-term leases. The other
offices of Pee Dee Bank are owned by Pee Dee Bank. All of the offices are
believed to be well suited for their present uses.
At December 31, 1997, Pee Dee Bank had 92 full time equivalent employees.
Bankshares has no employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR PEE DEE BANKSHARES, INC.
The following discussion is intended to assist in understanding the financial
condition and results of operations of Bankshares, and should be read in
conjunction with the consolidated financial statements and related notes
contained elsewhere in this proxy statement/prospectus. Because the financial
statements of Bankshares are consolidated with those of Pee Dee Bank and because
there are no material differences between the financial conditions and results
of operations of Bankshares and Pee Dee Bank, the following discussion applies
to Pee Dee Bank as well.
EARNINGS PERFORMANCE
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1996
Net income for the nine months ended September 30, 1997 was $1,319,000, or
$23.54 per share, compared with net income of $1,215,000, or $21.75 per share,
for the nine month period ended September 30, 1996. This was an increase of
$104,000, or $1.79 per share, which represents an 8.6% increase in net income.
The increase in earnings reflects an increase in net interest income of
$752,000, or 16%, generated primarily by increased net loans of $12,281,000,
also an increase of 16%, and an increase in net yield on earning assets.
Offsetting this increase in net interest income was an increase in non-interest
expense of $614,000, or 17%, attributable primarily to increases in salaries and
employee benefits and other non-interest expense.
1996 COMPARED WITH 1995
Net income for the year ended December 31, 1996 was $1,574,000, or $28.18 per
share, compared with net income of $1,195,000, or $21.41 per share, for 1995.
This was an increase of $379,000, which represents a 32% increase in net income.
The increase in earnings reflects an increase in net interest income of
$1,115,000, which is primarily attributable to an increase in average interest
earning assets, coupled with an increase in net yield on those assets. The
increase in net interest income was offset partially by increases in
non-interest expense and the provision for loan losses. Non-interest expense
increased $402,000, the largest component of which was increased salaries and
employee benefits, and the provision for loan losses increased by $290,000 over
1995.
1995 COMPARED WITH 1994
Net income for the year ended December 31, 1995 was $1,195,000, or $21.41 per
share, compared with net income of $1,040,000, or $18.63 per share, for the year
ended December 31, 1994. This was an increase of $155,000, or $2.78 per share,
representing a 15% increase in net income and earnings per share from 1994. The
1995 increase in earnings is attributable to increases in net interest income of
$382,000, or 7.7%, over 1994, due primarily to an increase in average interest
earning assets, coupled with an increase in net yield on these assets. The
increase in net interest income was offset partially by increases in salaries
and employee benefits of $196,000 over 1994.
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NET INTEREST INCOME
Net interest income is the amount of interest earned on interest earning assets
(loans, investment securities, time deposits in other banks and federal funds
sold), less the interest expense incurred on interest bearing liabilities
(interest bearing deposits, federal funds purchased and repurchase agreements,
and other borrowed funds), and is the principal source of Bankshares' earnings.
Bankshares' interest income is affected by the level of interest rates, volume
and mix of interest earning assets and interest bearing liabilities and the
relative funding of these assets.
For the nine months ended September 30, 1997, net interest income increased
$752,000, or 16%, to $5,492,000 from the nine months ended September 30, 1996.
Average earning assets increased to $120,805,000, with an average yield of 7.4%.
Average interest bearing liabilities were $94,364,000 at an average cost of
3.5%. The net yield on average earning assets for the nine months ended
September 30, 1997 was 4.3%.
For the year ended December 31, 1996, net interest income increased $1,115,000,
or 21%, to $6,490,000. Average earning assets grew 23% to $113,842,000, while
the average yield grew to 10.4% from 10.2% for 1995. The positive effectiveness
of the increases in the volume and yield of earning assets was enhanced by a
0.17% decrease in the average cost of funds to 6.26% but was partially offset by
a 34% increase in average interest bearing liabilities from $60,922 in 1995 to
$82,018,000 in 1996. These changes resulted in a net interest margin of 6.26%,
down from 6.41% for the year ended December 31, 1995.
Net interest income was $5,375,000 and $4,993,000 for the years ended December
31, 1995 and 1994, respectively. The $382,000, or 7.7%, increase in 1995 was
attributable primarily to changes in the mix of earning assets. The average rate
paid on interest bearing liabilities increased by 1.3% to 4.98%. The average
yield on interest earning assets also increased during 1995 by 0.74% to 10.2%.
Increases in the volumes of both interest earning assets and interest bearing
liabilities also affected net interest income. Average interest earning assets
increased $14,859,000, or 19%, and average interest bearing liabilities
increased $11,981,000, or 21%, for 1995 compared to 1994. Net yield on interest
earning assets decreased by 0.35% to 6.4% in 1995. The primary reason for this
change was a general decline in the interest rate market. The overall cost of
funds rose to 3.49% from 2.48% in 1994. The overall growth is a continuation of
management's plans.
INTEREST RATE SENSITIVITY
Interest rate sensitivity management is concerned with the timing and magnitude
of repricing assets compared to liabilities and is an important part of
asset/liability management. It is the objective of interest rate sensitivity
management to generate stable growth in net interest income, and to control the
risks associated with interest rate movement. Management constantly reviews
interest rate risk exposure and the expected interest rate environment so that
adjustments in interest rate sensitivity can be timely made.
The table, "Interest Sensitivity Analysis", indicates that, on a cumulative
basis through twelve months, rate sensitive liabilities exceeded rate sensitive
assets, resulting in a liability sensitive position at December 31, 1996 of
$42,450,000 for a cumulative gap ratio of 49%. When interest sensitive assets
exceed interest sensitive liabilities for a specific repricing "horizon", a
positive interest sensitivity gap results. The gap is negative when interest
sensitive liabilities exceed interest sensitive assets, as was the case at the
end of 1996 with respect to the one year time horizon. For a bank with a
negative gap, falling interest rates would be expected to have a positive effect
on net interest income and rising rates would be expected to have the opposite
effect.
The table below reflects the balances of interest earning assets and interest
bearing liabilities at the earlier of their repricing or maturity dates.
Scheduled payment amounts of amortizing fixed rate loans are reflected at each
scheduled payment date. Variable rate amortizing loans reflect scheduled
payments at each scheduled payment date until the loan may be repriced
contractually; the unamortized balance is reflected at that point. Deposits in
other banks and debt securities are reflected at each instrument's ultimate
maturity date. Overnight federal funds sold are reflected in the earliest
repricing interval due to the immediately available nature of these funds.
Interest bearing liabilities with no contractual maturity, such as interest
bearing transaction accounts and savings deposits are reflected in the earliest
repricing interval due to contractual arrangements which give management the
opportunity
<PAGE>
<TABLE>
<CAPTION>
to vary the rates paid on these deposits within a thirty-day or shorter period.
However, Bankshares is under no obligation to vary the rates paid on those
deposits within any given period. Fixed rate time deposits, principally
certificates of deposit, are reflected at their contractual maturity dates.
Variable rate time deposits, principally individual retirement accounts, are
reflected at the earlier of their next repricing or maturity dates.
INTEREST SENSITIVITY ANALYSIS
December 31, 1996
--------------------------------------------------------------
Within 4-12 Over 1-5 Over 5
3 Months Months Years Years Total
----------- --------- ---------- ------ -------
(Dollars in thousands)
Interest earning assets
<S> <C> <C> <C> <C> <C>
Securities - fixed rate $ 1,125 $ 3,435 $21,220 $2,783 $ 28,563
Loans (1)
Fixed rate 9,461 13,357 41,586 1,736 66,140
Variable rate 12,917 44 - - 12,961
------- ------- ---------- -------- ---------
Total interest earning assets 23,503 16,836 $62,806 $4,519 $107,664
------- ------- ======= ======== ===========
Interest bearing liabilities
Interest bearing transaction accounts $27,415 $ - $ - $ - $ 27,415
Certificates 21,764 28,560 5,785 - 56,109
Federal funds purchased 4,600 - - - 4,600
------- ------- ---------- -------- ---------
Total interest bearing liabilities 53,779 28,560 $ 5,785 $ - $88,124
-------- ------- ======== ======= =============
Interest sensitivity gap (30,276) (11,724)
Cumulative interest sensitivity gap (30,276) (42,450)
Gap ratio .44 .59
Cumulative gap ratio .44 .49
</TABLE>
- -----------------------
(1) There were $241,000 of nonaccruing loans at December 31, 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses is charged to earnings based on management's
continuing review and evaluation of the loan portfolio and general economic
conditions. Provisions for loan losses were $450,000 for the nine months ended
September 30, 1997 and $620,000 and $330,000 for the years ended December 31,
1996 and 1995, respectively. These fluctuations in provisions for loan losses
are attributable primarily to changes in the amount of loans charged off during
the applicable period.
Net loan charge-offs for the period ended September 30, 1997 were $252,000 and
for the year ended December 31, 1996, charge-offs net of recoveries totaled
$501,000, compared with $226,000 in 1995. Management is not aware of any trend
toward significantly higher charge-offs in any particular loan category in 1997.
See "Nonperforming Loans; Other Problem Assets" and "Allowance for Loan Losses"
for a discussion of the factors management considers in its review of the
adequacy of the allowance and provisions for loan losses.
<PAGE>
NON-INTEREST INCOME
For the nine months ended September 30, 1997 non-interest income increased
$168,000, or 13%, from the corresponding period in 1996. This change resulted
primarily from higher other fees and commissions of $164,000, or 49% more than
the 1996 period. This increase is the result of increased mortgage loan
activity.
For the year ended December 31, 1996, non-interest income increased $247,000, or
17%, over the comparable period in 1995, resulting primarily from increases in
service charges on deposit accounts and other fees and commissions. These
charges and fees increased because of increased volume and rate increases.
For the year ended December 31, 1995, non-interest income increased $114,000, or
8.6%, over the 1994 period. This increase resulted primarily from increases in
service charges on deposit accounts, and an increase in net gain on sale of
foreclosed assets.
NON-INTEREST EXPENSES
For the nine months ended September 30, 1997, non-interest expenses increased
$614,000, or 17%, compared with the same period in 1996. This increase was the
result of increases in salaries and employee benefits of $233,000 and increased
other expenses of $277,000. These increases are attributable to overall growth
and computer software expenses.
For the year ended December 31, 1996, non-interest expenses grew $402,000, or
9%, to $5,007,000. The increased expenses reflect primarily higher salaries and
employee benefits, which are attributable to overall growth.
Non-interest expenses for the year ended December 31, 1995 increased $196,000,
or 4%, over 1994. This increase was attributable to higher salaries and employee
benefits.
INCOME TAXES
For 1996, federal and state income tax expense increased $272,000, or 44%, from
the 1995 period due to the increase in operating earnings. Income tax expense
continued to increase during the nine month period ended September 30, 1997,
also due to higher operating earnings. For this period, income tax expense rose
by $54,000, or 7%, from the prior period. For 1995, income tax expense increased
by $91,000, or 17%, due to increased earnings.
INVESTMENT PORTFOLIO
Information about Bankshares investment portfolio and its accounting policies
with respect to investment securities is included in Notes 2 and 1,
respectively, of the Notes to the Consolidated Financial Statements for the
Years Ended December 31, 1996 and 1995 of Bankshares and Pee Dee Bank (the
"Notes to 1996 and 1995 Consolidated Financial Statements").
LOAN PORTFOLIO
Management believes the loan portfolio is adequately diversified. There are no
significant concentrations of loans in any particular individuals or industry or
group of related individuals or industries, and there are no foreign loans.
The amount of loans outstanding at December 31, 1996 and 1995 is shown in Note 4
of Notes to 1996 and 1995 Consolidated Financial Statements.
<PAGE>
A certain degree of risk taking is inherent in the extension of credit.
Management has established loan and credit policies designed to control both the
types and amounts of risks assumed and to ultimately minimize losses. Such
policies include limitations on loan-to-collateral values for various types of
collateral, requirements for appraisals of real estate collateral, problem loan
management practices and collection procedures, and nonaccrual and charge-off
guidelines.
Commercial and industrial loans represent primarily loans made to businesses,
and may be made on either a secured or an unsecured basis. When taken,
collateral usually consists of liens on receivables, equipment, inventories,
furniture and fixtures. Unsecured business loans are generally short-term with
emphasis on repayment strengths and low debt to worth ratios. During 1996, total
commercial and industrial loans increased $2,368,000, or 22%. Commercial lending
involves significant risk because repayment usually depends on the cash flows
generated by a borrower's business, and the debt service capacity of a business
can deteriorate because of downturns in national and local economic conditions.
To control risk, sophisticated initial and continuing financial analysis of a
borrower's financial information is required.
Real estate construction loans generally consist of financing the construction
of 1-4 family dwellings and nonresidential real estate. Usually, loan to cost
ratios are limited to 75% and permanent financing commitments are required prior
to the advancement of loan proceeds. During 1996, outstanding real estate
construction loans increased by $1,431,000, or 44%.
Real estate mortgage loans of all types grew $2,479,000 during 1996. Residential
real estate loans consist mainly of first and second mortgages on single family
homes, with some multifamily loans. Loan-to-value ratios for these instruments
are generally limited to 75%. Nonresidential real estate loans are secured by
business and commercial properties with loan-to-value ratios generally limited
to 75%. The repayment of both residential and nonresidential real estate loans
is dependent primarily on the income and cash flows of the borrowers, with the
real estate serving as a secondary or liquidation source of repayment.
NONPERFORMING LOANS; OTHER PROBLEM ASSETS
Nonperforming loans include nonaccrual loans and loans that are 90 days or more
delinquent as to principal or interest payments. Following is a summary of
Bankshares' nonperforming loans:
<TABLE>
<CAPTION>
NONACCRUAL AND PAST DUE LOANS
(In thousands)
September 30, December 31,
---------------- --------------------------
1997 1996 1995
---- ------ --------
<S> <C> <C> <C>
Nonaccrual loans $112 $267 $187
Accruing loans 90 days or more past due 226 570 247
---- ---- ----
Total $338 $837 $432
==== ==== ====
Percent of total loans 0.37% 1.05% 0.64%
</TABLE>
When a loan is 90 days past due as to interest or principal or there is serious
doubt as to collectibility, the accrual of interest income is generally
discontinued unless the estimated net realizable value of collateral is
sufficient to assure collection of the principal balance and accrued interest.
Previously accrued interest on loans placed in a nonaccrual status is reversed
against current income, and subsequent interest income is recognized when
received. When the collectibility of a significant amount of principal is in
serious doubt, the principal balance is reduced to the estimated fair value of
collateral by charge-off to the allowance for loan losses and any subsequent
collections are credited first to the remaining principal balance and then to
the allowance for loan losses as a recovery of the amount charged off. A
nonaccrual loan is not returned to accrual status unless principal and interest
are current and the borrower has demonstrated the ability to continue making
payments as agreed.
<PAGE>
Interest income that would have been recorded if nonaccrual loans had been
current in accordance with their original terms amounted to $25,000 and $22,000
for 1996 and 1995, respectively. As of December 31, 1996, there were no
commitments to lend additional funds to debtors owing amounts on nonaccrual
loans.
POTENTIAL PROBLEM LOANS
Management has identified and maintains a list of potential problem loans. These
are loans that are not included in nonaccrual status, or loans that are past due
90 days or more and still accruing. A loan is added to the potential problem
list when management becomes aware of information about possible credit problems
of borrowers that causes serious doubts as to the ability of such borrowers to
comply with the current loan repayment terms. The total amount of loans
determined by management to be potential problem loans was $1,468,000 at
December 31, 1996 and $1,503,000 at September 30, 1997. These amounts do not
represent management's estimate of potential losses since a large proportion of
such loans is secured by various types of collateral.
FORECLOSED REAL ESTATE
Foreclosed real estate consists of foreclosed and in-substance foreclosed
properties and was $44,000 at September 30, 1997, $66,000 at December 31, 1996,
and $197,000 at December 31, 1995. Foreclosed real estate is initially recorded
at the lower of net loan principal balance or its estimated fair market value
less estimated selling costs. The estimated fair value is determined by
appraisal at the time of acquisition.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by direct charges to operating
expense. Losses on loans are charged against the allowance in the period in
which management has determined that it is more likely than not such loans have
become uncollectible. Recoveries of previously charged off loans are credited to
the allowance. The table, "Summary of Loan Loss Experience," summarizes loan
balances at the end of each period indicated, averages for each period, changes
in the allowance arising from charge-offs and recoveries by loan category, and
additions to the allowance which have been charged to expense.
In reviewing the adequacy of the allowance for loan losses at each year end,
management took into consideration the historical loan losses experienced by
Bankshares, current economic conditions affecting the borrowers' ability to
repay, the volume of loans, and the trends in delinquent, nonaccruing, and
potential problem loans, and the quality of collateral securing nonperforming
and problem loans. After charging off all known losses, management considers the
allowance for loan losses adequate to cover its estimate of possible future loan
losses inherent in the loan portfolio as of September 30, 1997 and at December
31, 1996.
In calculating the amount required in the allowance for loan losses, management
applies a consistent methodology that is updated monthly. The methodology
utilizes a loan risk grading system, detailed loan reviews to assess credit
risks, mix of the loan portfolio and the overall quality of the loan portfolio,
as well as other off-balance-sheet credit risks such as loan commitments and
standby letters of credit. Also, the calculation provides for management's
assessment of trends in national and local economic conditions that might affect
the general quality of the loan portfolio. Regulators review the adequacy of the
allowance for loan losses as part of their examination of Bankshares and may
require adjustments to the allowance based upon information available to them at
the time of the examination.
Bankshares has not historically allocated its allowance for loan losses to
individual loan categories. Management believes that its stringent loan
charge-off policy, along with its limited historic net charge-off experience,
makes an aggregate evaluation that emphasizes individual loan risk grades and
specific problem loan allocations more meaningful. Management's analysis of
historical net charge-offs and the composition of the loan portfolio at the end
of 1996 and at September 30, 1997 did not reflect any material change from the
prior years, nor is management aware of any significant degree of increased
exposure, risk of collection or other adverse features toward any particular
category of loans. Consequently, management has not estimated future charge-offs
related to individual loan categories or subcategories.
<PAGE>
Although management's calculation of the allowance for loan losses does not
provide an allocation by individual loan categories, the various categories have
differing degrees of risk. Commercial lending generally has the highest degree
of risk among the loan categories because repayment usually depends on cash
flows generated by a borrower's business, and the debt service capacity of a
business can deteriorate because of internal problems with a particular business
or because of downturns in national and local economic conditions. Real estate
lending generally has a significantly lower degree of risk than commercial
lending. The degree of risk in a real estate loan depends primarily on the
loan-to-value ratio, the interest rate and, to a lesser extent, the borrower's
ability to repay in an orderly fashion. Real estate construction loans may
involve a somewhat higher degree of risk than other real estate mortgage loans
because of the necessity of completing projects within specified time and cost
limits. This risk can, however, be reduced by limiting the type and extent of
Bankshares' involvement. Home equity lending generally is considered to be
relatively low-risk because these loans are secured by housing assets, the value
of which has historically performed well. Installment lending to individuals
generally carries a moderate risk, which is to some degree offset by higher
rates of interest charged and the relatively small amount of such loans.
Charge-offs for 1997 are expected to be approximately the same amounts as in
prior years. See "Summary of Loan Loss Experience" below.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
Year Ended December 31,
-----------------------
1996 1995
----- ------
(Dollars in thousands)
----------------------
<S> <C> <C>
Total loans outstanding at end of period $79,348 $67,810
Average amount of loans outstanding 73,579 63,041
Balance of allowance for loan losses - beginning $ 731 $ 627
------- -------
Loans charged off
Commercial and industrial 218 131
Real estate - mortgage 9 158
Consumer installment and credit cards 825 320
------- -------
Total charge-offs 1,052 609
------- -------
Recoveries of loans previously charged-off
Commercial and industrial 66 87
Real estate - mortgage 47 81
Consumer installment and credit cards 438 215
------- -------
Net charge-offs 501 226
------- -------
Additions to allowance charged to expense 620 330
------- -------
Balance of allowance for loan losses - ending $ 850 $ 731
------- -------
Ratios
Net charge-offs during period to average
loans outstanding during period 0.68% 0.36%
Net charge-offs to loans at end of period 0.63% 0.33%
Allowance for loan losses to average loans 1.15% 1.16%
Allowance for loan losses to loans at end of period 1.07% 1.08%
Allowance for loan losses to nonperforming loans
at end of period 104% 169%
Net charge-offs to allowance for loan losses 58.9% 30.9%
Net charge-offs to provision for loan losses 83.4% 68.5%
</TABLE>
DEPOSITS
The average amounts and percentage composition of deposits held by Bankshares
for the years ended December 31, 1996 and 1995, are summarized below:
<PAGE>
<TABLE>
<CAPTION>
AVERAGE DEPOSITS
December 31,
-----------------------------------------------------
1996 1995
---------------------- ---------------
Amount % Amount %
------- ---- ------ ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Noninterest bearing demand $19,567 19.0% $18,326 21.7%
Interest bearing transaction accounts 9,520 9.2% 7,154 8.5%
Savings 6,003 5.8% 5,452 6.5%
Time deposits - $100,000 or more 13,122 12.7% 8,873 10.5%
Other time deposits 54,879 53.2% 44,589 52.8%
-------- ----- ------- -----
Total deposits $103,091 $84,394
======== =======
</TABLE>
As of December 31, 1996, Bankshares held $12,563,000 in time deposits of
$100,000 or more, with approximately $5,707,000 maturing within three months,
$5,718,000 with maturities over three through twelve months, and $1,697,000 with
maturities over twelve months. Average time deposits of $100,000 or more were
$8,873,000 in 1995 and $13,122,000 in 1996. This fluctuation in large time
deposits, as well as other deposits, can be attributed to a planned strategy by
management. The vast majority of time deposits $100,000 and over are acquired
from customers within the market area of Bankshares in the ordinary course of
business. While most of the large time deposits are acquired from customers with
standing relationships with Bankshares, it is common industry practice not to
consider these types of deposits as core deposits because their retention can be
expected to be heavily influenced by rates offered, and therefore they have the
characteristics of shorter-term purchased funds. Certificates of deposit
$100,000 and over involve the maintenance of an appropriate matching of maturity
distribution and a diversification of sources to achieve an appropriate level of
liquidity. Such deposits are generally more volatile and interest rate sensitive
than other deposits.
RETURN ON EQUITY AND ASSETS
The following table shows the return on assets (net income divided by average
total assets), return on equity (net income divided by average equity), dividend
payout ratio (dividends declared per share divided by net income per share), and
equity to assets ratio (average equity divided by average total assets) for each
period indicated.
Year Ended December 31,
--------------------------
1996 1995
------ ---------
Return on average assets 1.40% 1.28%
Return on average equity 13.2% 11.0%
Dividend payout ratio 23.4% 21.0%
Average equity to average assets ratio 10.7% 11.6%
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 Bankshares' service area. Core deposits (total
<PAGE>
deposits less time deposits of $100,000 and over) provide a relatively stable
funding base, and were equal to 74% of total assets at December 31, 1996
compared with 75% at the end of 1995. Asset liquidity is provided from several
sources, including amounts due from banks and federal funds sold, and funds from
maturing loans. Management believes that Bankshares's overall liquidity sources
are adequate to meet its operating needs.
CAPITAL RESOURCES
The equity capital of Bankshares increased by $1,202,000 and $1,017,000 during
1996 and 1995, respectively, as the result of net income, adjusted for net
unrealized gains and losses in securities available-for-sale, plus proceeds from
issuance of common stock, minus dividends paid.
Bankshares 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 FDICIA, federal financial institution regulatory authorities
are required to implement prescribed "prompt corrective actions" upon the
deterioration of the capital position of a bank. See "SUPERVISION AND REGULATION
- -- Federal Deposit Insurance Corporation Improvement Act of 1991 -- Prompt
Corrective Action." If the capital position of an affected institution were to
fall below certain levels, increasingly stringent regulatory corrective actions
are mandated.
Bankshares' and Pee Dee Bank's December 31, 1996 capital ratios are presented in
the table in Note 17 of the Notes to 1996 and 1995 Consolidated Financial
Statements, compared with the "well capitalized" and minimum ratios under the
FDIC regulatory definitions and guidelines. The capital ratios for Bankshares
and Pee Dee Bank as of September 30, 1997 are shown in the table below:
<TABLE>
<CAPTION>
Bankshares Pee Dee Bank
---------------------- ----------------------
Amount Ratio Amount Ratio
--------- -------- ------ -------
AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C>
Total Capital (to risk weighted assets $15,626 16.7% $15,027 16.1%
Tier 1 Capital (to risk weighted assets) $14,578 15.6% $13,979 15.0%
Tier 1 Capital (to average assets)(leverage) $14,578 11.2% $13,979 10.7%
</TABLE>
INFLATION
Because the assets and liabilities of a bank are primarily monetary in nature
(payable in fixed, determinable amounts), the performance of a bank is affected
more by changes in interest rates than by inflation. Interest rates generally
increase as the rate of inflation increases, but the magnitude of the change in
rates may not be the same.
While the effect of inflation on banks is normally not as significant as is its
influence on those businesses which have large investments in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally corresponding increases in the money supply, and banks will normally
experience above-average growth in assets, loans and deposits. Also general
increases in the prices of goods and services will result in increased operating
expenses.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of September 30, 1997, the number of
shares and percentage of Bankshares Stock and/or Pee Dee Bank Stock
beneficially owned by each director of Bankshares and Pee Dee Bank and, in
the aggregate, by all directors and executive officers of Bankshares and
Pee Dee Bank as a group. Other than as set forth below and except for
Bankshares ownership of the Pee Dee Bank Stock, as of September 30, 1997,
no shareholder was known by management of Bankshares to be the beneficial
owner of more than five percent of either the Bankshares Stock or the Pee
Dee Bank Stock.
BANKSHARES
NAME SHARES %
- ------------------- ------ -
James A. Bruce 0 *
Thomas J. Levine 0 *
A. Dale Porter 461 *
Robert F. Richardson 175 *
James F. Richardson 224 *
F.R. Saunders, Jr. 0 *
Warren G. Saverance 1,086 1.9%
J. Banks Scarborough 22,626 40.3%
Rodney B. Scarborough 16,489(1) 29.4%
All officers and directors
as a group (9 persons) 41,006 73.1%
PEE DEE BANK
NAME SHARES %
- ---- ------ -
James A. Bruce 100 *
Thomas J. Levine 100 *
A. Dale Porter 100 *
Robert F. Richardson 100 *
James R. Rimer 110 *
F.R. Saunders, Jr. 100 *
Warren G. Saverance 100 *
J. Banks Scarborough 125 *
Rodney B. Scarborough 200 *
All officers and directors
as a group (9 persons) 1,035 1.6%
- --------------
* Less than 1%
(1) Includes 8,007 shares owned by others which Mr. Scarborough has the power
to vote pursuant to a voting trust agreement.
MARKET PRICE FOR COMMON STOCK AND DIVIDENDS
There is not an active trading market for the shares of Bankshares Stock or
Pee Dee Bank Stock, and trades have been infrequent and have been made on
the basis of private negotiations. Neither the Bankshares Stock or the Pee
Dee Bank Stock is traded on any exchange or on the NASDAQ National Market
System and no market makers in either stock are known to management of
Bankshares. In addition, management of Bankshares is not aware of any
transactions in which Bankshares Stock or Pee Dee Bank Stock was traded
during the last two years. Accordingly, no per share information is
available.
As of the Record Date, there were approximately 35 holders of record of
Bankshares Stock and approximately 30 holders of record of Pee Dee Bank
Stock.
Bankshares paid dividends of $4.50, $6.60 and $9.00 in 1995, 1996, and
1997 respectively. Pee Dee Bank paid dividends of $6.00, $8.60, and $9.50
in 1995, 1996 and 1997, respectively. For information relating to certain
statutory and regulatory restrictions on the ability of Bankshares and Pee
Dee Bank to pay dividends, see "CERTAIN REGULATORY CONSIDERATIONS --
Payment of Dividends."
42
<PAGE>
INFORMATION ABOUT CENTURA
GENERAL
Centura, a North Carolina corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. Centura has two wholly-owned
subsidiaries, Centura Bank, a North Carolina chartered bank, and Centura
Capital Trust I. Centura Bank is a North Carolina bank and Federal Reserve
member bank with deposits insured by the Bank Insurance Fund (the "BIF")
and the Savings Association Insurance Fund (the "SAIF") of the Federal
Deposit Insurance Corporation (the "FDIC"). Centura, through Centura Bank
and its subsidiaries, offers a full range of financial services throughout
North Carolina and in the Tidewater area of Virginia through a variety of
delivery channels.
Centura's strategic intent is to become the primary provider of financial
services for each of its customers. To that end, Centura offers
full-service commercial and consumer banking services, including bill
paying services, retail securities brokerage services, insurance brokerage
services covering a full line of personal and commercial lines, commercial
and retail leasing, trust department activities for individual estates and
for various types of employee benefit plans, and mortgage banking
activities.
Another component of Centura's strategic intent is the convenient delivery
of financial services and products to each of its customers. At December
31, 1997, Centura serviced its customers through 192 financial stores,
including 23 in-store locations, and through more than 300 automated teller
machines located in North Carolina, Virginia and South Carolina.
Alternatively, Centura offers Centura Highway, a centralized telephone
operation which handles a full line of financial services, a home page on
the Internet, and home banking through a telephone network operated by a
third party and connected to the personal computers of customers.
The principal executive offices of Centura and Centura Bank are located at
134 North Church Street, Rocky Mount, North Carolina 27804, and the
telephone number at such address is (919) 977-4400. Additional information
with respect to Centura and its subsidiaries is included in documents
incorporated by reference in this Proxy Statement. See "AVAILABLE
INFORMATION," "DOCUMENTS INCORPORATED BY REFERENCE," and "CERTAIN
REGULATORY CONSIDERATIONS."
RECENT DEVELOPMENTS
On January 7, 1998, Centura released its operating results for the year
ended December 31, 1997. Net income increased 21.9% to $83.1 million,
versus $68.2 million during 1996. Excluding a 1996 special SAIF assessment
on deposits, net income increased 14.7%. Earnings per share increased to
$3.15 per diluted share, compared to $2.60 the prior year. Without the
assessment, diluted earnings per share for 1996 were $2.76. At December 31,
1997, on a consolidated basis, Centura had total assets of $7.1 billion,
loans of $4.6 billion, liabilities of $6.6 billion, deposits of $5.4
billion, and stockholders' equity of $538.3 million, compared to $6.3
billion, $4.1 billion, $4.7 billion, and $475.2 million, respectively, at
December 31, 1996. For additional information, see Centura's press release
dated January 7, 1998, included as an exhibit to Centura's Current Report
on Form 8-K dated January 7, 1998, which is incorporated herein by
reference. See "DOCUMENTS INCORPORATED BY REFERENCE."
POTENTIAL ACQUISITIONS
Centura continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and,
in some cases, negotiations, frequently take place, and future business
combinations involving cash, debt, or equity securities can be expected.
Any future business combination or series of business combinations that
Centura might undertake may be material, in terms of assets acquired or
liabilities assumed, to Centura=s financial condition. Recent business
combinations in the banking industry have typically involved the payment of
a premium over book and market values. This practice could result in
dilution of book value and net income per share for the acquirer.
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CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to Centura and Centura Bank,
and to Bankshares and Pee Dee Bank.
GENERAL
Centura is a bank holding company registered with the Federal Reserve under
the BHC Act and with the North Carolina Commissioner of Banks (the
"Commissioner") under the North Carolina Bank Holding Company Act of 1984,
as amended (the "North Carolina Act"). As such, Centura and its
subsidiaries are subject to the supervision, examination, and reporting
requirements of the BHC Act and the North Carolina Act, and the regulations
of the Federal Reserve and the Commissioner.
Bankshares is also a bank holding company registered with the Federal
Reserve under the BHC Act and is registered with the South Carolina Board
under the South Carolina Bank Holding Company Act, as amended (the "South
Carolina Act"). As such, Bankshares and Pee Dee Bank are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
South Carolina Act, and the regulations of the Federal Reserve and the
South Carolina Board.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or
indirect ownership or control of any voting shares of any bank if, after
such acquisition, the bank holding company will directly or indirectly own
or control more than 5.0% of the voting shares of the bank; (ii) it or any
of its subsidiaries, other than a bank, may acquire all or substantially
all of the assets of any bank; or (iii) it may merge or consolidate with
any other bank holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of
which may be substantially to lessen competition or to tend to create a
monopoly in any section of the country, or that in any other manner would
be in restraint of trade, unless the anticompetitive effects of the
proposed transaction are clearly outweighed by the public interest in
meeting the convenience and needs of the community to be served. The
Federal Reserve is also required to consider the financial and managerial
resources and future prospects of the bank holding companies and banks
concerned and the convenience and needs of the community to be served.
Consideration of financial resources generally focuses on capital adequacy
and consideration of convenience and needs issues includes the parties'
performance under the Community Investment Act of 1977 (the "CRA"). Both
capital adequacy and the CRA are discussed below. See "-- Capital Adequacy"
and "-- Community Reinvestment."
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), authorizes interstate acquisitions of, and
mergers between, banks and bank holding companies without geographic
limitation, subject to certain deposit-percentage limitations, aging
requirements, and other restrictions upon such acquisitions and mergers.
The Interstate Banking Act also generally provides that national and
state-chartered banks may branch interstate through acquisitions of banks
in other states, provided that such states have not prohibited interstate
branching by "opting out" of the application of the Interstate Banking Act.
Since neither North Carolina nor South Carolina "opted out" of the
interstate branching provisions of the Interstate Banking Act prior to the
June 1, 1997, effective date of such legislation, Centura will be able to
consolidate Pee Dee Bank with Centura Bank and operate Centura Bank as a
single bank with interstate branches following the Bank Merger.
It is anticipated that the effect of the Interstate Banking Act will be to
increase competition within the markets in which Centura Bank now operates,
although the extent to which such competition will increase in such markets
or the timing of such increase cannot be predicted.
The BHC Act generally prohibits Centura from engaging in activities other
than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of
any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal
Reserve must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public, such as
greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices. For example, factoring accounts receivable,
acquiring or servicing loans, leasing personal property, conducting
discount securities brokerage activities, performing certain data
processing services, acting as agent or broker in selling credit life
insurance and certain other types of insurance in connection with credit
transactions, and performing certain insurance underwriting activities all
have been determined by the Federal Reserve to be permissible activities of
bank holding companies. The BHC Act does not place territorial limitations
on permissible bank-related activities of bank holding companies. Despite
prior approval, the Federal Reserve has the power to order a holding
company or its subsidiaries to terminate any activity or to terminate its
ownership or control of any subsidiary when it has reasonable cause to
believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability
of any bank subsidiary of that bank holding company.
Centura Bank and Pee Dee Bank are both members of the Federal Deposit
Insurance Corporation (the "FDIC"), and as such, their deposits are insured
by the FDIC to the maximum extent provided by law. Centura Bank and Pee Dee
Bank are both subject to
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numerous state and federal statutes and regulations that affect their
business, activities, and operations. As a North Carolina-chartered bank
that is a member of the Federal Reserve System, Centura Bank is supervised
and examined by the Federal Reserve and the Commissioner. Pee Dee Bank, a
South Carolina-chartered bank that is not a member of the Federal Reserve
System, is supervised and examined by the FDIC and the South Carolina
Board. The federal banking agencies and the Commissioner, with respect to
Centura Bank, and the South Carolina Board, with respect to Pee Dee Bank,
regularly examine the operations of Centura Bank and Pee Dee Bank and are
given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions, and to prevent
the commencement or continuation of unsafe or unsound banking practices or
other violations of law. The federal banking agencies and the Commissioner,
with respect to Centura Bank, and the South Carolina Board, with respect to
Pee Dee Bank, regulate and monitor all areas of the operations of Centura
Bank and Pee Dee Bank, including loans, mortgages, issuances of securities,
capital adequacy, loss reserves, and compliance with the CRA and other laws
and regulations. Interest and certain other charges collected and
contracted for by Centura Bank and Pee Dee Bank are also subject to state
usury laws and certain federal laws concerning interest rates.
COMMUNITY REINVESTMENT
Bankshares and Centura are subject to the provisions of the CRA and the
federal banking agencies' implementing regulations. Under the CRA, all
financial institutions have a continuing and affirmative obligation
consistent with their safe and sound operation to help meet the credit
needs for their entire communities, including low- and moderate-income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions, nor does it limit an institution's
discretion to develop the types of products and services that it believes
are best suited to its particular community, consistent with the CRA. The
CRA requires a depository institution's federal regulator, in connection
with its examination of the institution, to assess the institution's record
in assessing and meeting the credit needs of the community served by that
institution, including low- and moderate-income neighborhoods. The
regulatory agency's assessment of the institution's record is made
available to the public. Further, such assessment is required of any
institution which has applied to: (i) charter a national bank; (ii) obtain
deposit insurance coverage for a newly chartered institution; (iii)
establish a new branch office that will accept deposits; (iv) relocate an
office; or (v) merge or consolidate with, or acquire the assets or assume
the liabilities of, a federally regulated financial institution. In the
case of a bank holding company applying for approval to acquire a bank or
other bank holding company, the Federal Reserve will assess the records of
each subsidiary depository institution of the applicant bank holding
company, and such records may be the basis for denying the application.
Following their most recent CRA compliance examinations, Centura and
Bankshares each received a "Satisfactory" CRA rating.
PAYMENT OF DIVIDENDS
Centura and Bankshares are legal entities separate and distinct from their
respective banking and other subsidiaries. The principal source of cash
flow of Centura and Bankshares, respectively, including cash flow to pay
dividends to their respective stockholders, is dividends from Centura Bank
and Pee Dee Bank, respectively. There are statutory and regulatory
limitations on the payment of such dividends to Centura and Bankshares, as
well as by Centura and Bankshares to their stockholders.
Centura is not subject to any direct legal or regulatory restrictions on
dividends (other than the requirements under the NCBCA that distributions
may not be made if, after giving them effect, the corporation would not be
able to pay its debts as they become due in the usual course of business or
the corporation's total assets would be less than its liabilities). Centura
Bank is subject to statutory and regulatory restrictions on the payment of
cash dividends, including the requirement that cash dividends be paid only
out of undivided profits and only if the bank has surplus of a specified
level. If a bank having capital stock of $15,000 or more has surplus of
less than 50% of its paid-in capital stock, no cash dividend may be
declared until the bank has transferred from undivided profits to surplus
25% of its undivided profits or any lesser percentage sufficient to raise
the bank's surplus to an amount equal to 50% of its paid-in capital stock.
The directors of Bankshares may declare and pay dividends so long as the
payment of such dividends will not cause Bankshares to be unable to pay its
debts as they become due in the usual course of business or to cause
Bankshares' total assets to be less than the sum of its total liabilities
plus the amount, if any, that would be needed, if the corporation were to
be dissolved at the time of the payment, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to
those receiving the dividend. Pee Dee Bank's ability to pay dividends is
subject to the same limitation plus the additional limitations that: (i)
the payment of any dividend must first be approved by the South Carolina
Board; (ii) the dividend may not cause Pee Dee Bank not to meet its
regulatory capital requirements; and (iii) pursuant to Pee Dee Bank's
Bylaws, dividends may not exceed more than one half of the earnings of Pee
Dee Bank for the calendar year.
Furthermore, if, in the opinion of the federal banking regulator, a bank
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such
authority may require, after notice and hearing, that such institution
cease and desist from such practice. The federal banking agencies have
indicated that paying dividends that deplete a depository institution's
capital base to an inadequate level would be an unsafe and unsound banking
practice. Under the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), a depository institution may not pay any dividend if
payment would cause it to become undercapitalized or if it already is
undercapitalized. See " -- Prompt Corrective Action." Moreover, the federal
agencies have issued policy statements that provide that bank holding
companies and insured banks should generally only pay dividends out of
current operating earnings.
At September 30, 1997, under dividend restrictions imposed under federal
and state laws, Centura Bank, without obtaining
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governmental approvals, could declare aggregate dividends of approximately
$45 million. At such date, with approval of the South Carolina Board, Pee
Dee Bank could declare and pay dividends of approximately $8 million.
The payment of dividends by Centura and Bankshares may also be affected or
limited by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines. See "-- Capital Adequacy."
CAPITAL ADEQUACY
Centura, Centura Bank, and Bankshares are required to comply with the
capital adequacy standards established by the Federal Reserve and Pee Dee
Bank is required to comply with the capital adequacy standards established
by the FDIC. There are two basic measures of capital adequacy for bank
holding companies and their banking subsidiaries that have been promulgated
by the Federal Reserve and the FDIC: a risk-based measure and a leverage
measure. All applicable capital standards must be satisfied for a bank
holding company or a bank to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and
bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and
off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio ("Risk-Based Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At
least half of Total Capital must comprise common stock, minority interests
in the equity accounts of consolidated subsidiaries, noncumulative
perpetual preferred stock, and a limited amount of cumulative perpetual
preferred stock, less goodwill and certain other intangible assets ("Tier 1
Capital"). The remainder may consist of subordinated debt, other preferred
stock, and a limited amount of loan loss reserves ("Tier 2 Capital"). At
September 30, 1997, Centura's consolidated Risk-Based Capital Ratio and its
Tier 1 Risk-Based Capital Ratio (i.e., the ratio of Tier 1 Capital to
risk-weighted assets) were 11.68% and 11.08%, respectively, and Bankshares'
Risk-Based Capital and Tier 1 Risk-Based Capital Ratios were 15.01% and
16.4%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets,
less goodwill and certain other intangible assets, of 3.0% for bank holding
companies that meet certain specified criteria, including having the
highest regulatory rating. All other bank holding companies generally are
required to maintain a Leverage Ratio of at least 3.0%, plus an additional
cushion of 100 to 200 basis points. Centura's and Bankshares' respective
Leverage Ratios at September 30, 1997, were 7.85% and 10.66%, respectively.
The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets. Furthermore, the Federal
Reserve has indicated that it will consider a "tangible Tier 1 Capital
Leverage Ratio" (deducting all intangibles) and other indicia of capital
strength in evaluating proposals for expansion or new activities.
The risk-based and leverage capital requirements adopted by the Federal
Reserve and the FDIC for Centura Bank and Pee Dee Bank, respectively, are
substantially similar to those adopted by the Federal Reserve for bank
holding companies. Both Centura Bank and Pee Dee Bank were in compliance
with applicable minimum capital requirements as of September 30, 1997.
Neither Centura or Centura Bank, nor Bankshares or Pee Dee Bank has been
advised by any federal banking agency of any specific minimum capital ratio
requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking
of brokered deposits, and certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See " -- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their
current levels. In this regard, the federal banking agencies have amended
the risk-based capital standards that calculate the change in an
institution's net economic value attributable to increases and decreases in
market interest rates and require banks with excessive interest rate risk
exposure to hold additional amounts of capital against such exposures.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve policy, Centura and Bankshares are expected to act as
a source of financial strength for, and to commit resources to support,
Centura Bank and Pee Dee Bank, respectively. This support may be required
at times when, absent such Federal Reserve policy, Centura and Bankshares
may not be inclined to provide it. In addition, any capital loans by a bank
holding company to any of its banking subsidiaries are subordinate in right
of payment to deposits and to certain other indebtedness of such banks. In
the event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee
and entitled to a priority of payment. In addition, the Federal Deposit
Insurance Act (the "FDIA") provides that any financial institution whose
deposits are insured by the FDIC generally shall be liable for any loss
incurred by the FDIC in connection with the default of, or any assistance
provided by the FDIC to, a commonly controlled financial institution.
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PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system the federal
banking regulators are required to rate supervised institutions on the
basis of five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and
are authorized to take other discretionary actions, with respect to
institutions in the three undercapitalized categories, the severity of
which will depend upon the capital category in which the institution is
placed. Generally, subject to a narrow exception, FDICIA requires the
banking regulator to appoint a receiver or conservator for an institution
that is critically undercapitalized. The federal banking agencies have
specified by regulation the relevant capital level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Risk-Based Capital Ratio of 10%
or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a
Leverage Ratio of 4.0% or greater is considered to be adequately
capitalized. A depository institution that has a Risk-Based Capital Ratio
of less than 8.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, or
a Leverage Ratio of less than 4.0% is considered to be undercapitalized. A
depository institution that has a Risk-Based Capital Ratio of less than
6.0%, a Tier 1 Risk-Based Capital Ratio of less than 3.0%, or a Leverage
Ratio of less than 3.0%. is considered to be significantly
undercapitalized, and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible
equity" includes core capital elements counted as Tier 1 Capital for
purposes of the risk-based capital standards, plus the amount of
outstanding cumulative perpetual preferred stock (including related
surplus), minus all intangible assets with certain exceptions. A depository
institution may be deemed to be in a capitalization category that is lower
than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking
agency. Under FDICIA, a bank holding company must guarantee that a
subsidiary depository institution meet its capital restoration plan,
subject to certain limitations. The obligation of a controlling bank
holding company under FDICIA to fund a capital restoration plan is limited
to the lesser of 5.0% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An
undercapitalized institution is also generally prohibited from increasing
its average total assets, making acquisitions, establishing any branches,
or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In
addition, the appropriate federal banking agency is given authority with
respect to any undercapitalized depository institution to take any of the
actions it is required to or may take with respect to a significantly
undercapitalized institution as described below if it determines "that
those actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital
restoration plan or fail to implement an approved capital restoration plan,
the appropriate federal banking agency must require the institution to take
one or more of the following actions: (i) sell enough shares, including
voting shares, to become adequately capitalized; (ii) merge with (or be
sold to) another institution (or holding company), but only if grounds
exist for appointing a conservator or receiver; (iii) restrict certain
transactions with banking affiliates as if the "sister bank" exception to
the requirements of Section 23A of the Federal Reserve Act did not exist;
(iv) otherwise restrict transactions with bank or non-bank affiliates; (v)
restrict interest rates that the institution pays on deposits to
"prevailing rates" in the institution's "region;" (vi) restrict asset
growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any
director or senior executive officer who held office for more than 180 days
immediately before the institution became undercapitalized, provided that
in requiring dismissal of a director or senior officer, the agency must
comply with certain procedural requirements, including the opportunity for
an appeal in which the director or officer will have the burden of proving
his or her value to the institution; (x) employ "qualified" senior
executive officers; (xi) cease accepting deposits from correspondent
depository institutions; (xii) divest certain non-depository affiliates
which pose a danger to the institution; or (xiii) be divested by a parent
holding company. In addition, without the prior approval of the appropriate
federal banking agency, a significantly undercapitalized institution may
not pay any bonus to any senior executive officer or increase the rate of
compensation for such an officer.
At September 30, 1997, both Centura Bank and Pee Dee Bank had the requisite
capital levels to qualify as well capitalized under the regulations
implementing the prompt corrective action provisions of FDICIA.
SAFETY AND SOUNDNESS STANDARDS
The FDIA, as amended by FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset
growth, asset quality, earnings, stock valuation and compensation, fees and
benefits and such other operational and managerial standards as the
agencies deem appropriate. The federal bank regulatory agencies have
adopted a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure,
asset growth and compensation, fees, and benefits. In general, the
guidelines require, among other things, appropriate systems and practices
to identify and manage the risks and
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exposures specified in the guidelines. The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe compensation as
excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director, or
principal stockholders. The federal banking agencies determined that stock
valuation standards were not appropriate. In addition, the agencies adopted
regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not
satisfying any of such safety and soundness standards to submit a
compliance plan. If, after being so notified, an institution fails to
submit an acceptable compliance plan, the agency must issue an order
directing action to correct the deficiency and may issue an order directing
other actions of the types to which an undercapitalized association is
subject under the prompt correction action provisions of FDICIA. See
" --Prompt Corrective Action." If an institution fails to comply with such
an order, the agency may seek to enforce such order in judicial proceedings
and to impose civil money penalties. The federal bank regulatory agencies
also proposed guidelines for asset quality and earnings standards.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation
against an insured depository institution would be afforded a priority over
other general unsecured claims against such an institution in the
"liquidation or other resolution" of such an institution by any receiver.
DESCRIPTION OF CENTURA CAPITAL STOCK
Centura is authorized to issue 50,000,000 shares of Centura Stock, of which
25,862,375 shares were issued and outstanding as of December 31, 1997.
Centura is also authorized to issue 25,000,000 shares of Centura no par
value preferred stock, none of which is issued and outstanding. The shares
of Centura Stock are nonassessable. In the event of the liquidation of
Centura, holders of Centura Stock would be entitled to share ratably in any
of the assets or funds of Centura that are available for distribution to
Centura stockholders after the satisfaction of Centura's liabilities (or
after adequate provision is made therefor) and after preferences of any
outstanding preferred stock.
Holders of Centura Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available
therefore. The ability of Centura to pay dividends is affected by the
ability of its subsidiary depository institution to pay dividends, which is
limited by applicable regulatory requirements and capital guidelines. At
September 30, 1997, under such requirements and guidelines, Centura's
subsidiary depository institution had approximately $45 million of
undivided profits legally available for the payment of dividends. See
"CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
For a further description of Centura Stock, See "EFFECT OF THE MERGER AND
THE BANK MERGER ON RIGHTS OF STOCKHOLDERS."
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OTHER MATTERS
As of the date of this Proxy Statement, the Boards of Directors of
Bankshares and Pee Dee Bank know of no matters that will be presented for
consideration at the Special Meeting other than as described in this Proxy
Statement. However, if any other matters shall properly come before the
Special Meeting or any adjournment thereof and be voted upon, the enclosed
proxy shall be deemed to confer discretionary authority to the individuals
named as proxies therein to vote the shares represented by such proxy as to
any such matters.
EXPERTS
The consolidated financial statements of Centura Banks, Inc. and subsidiary
as of December 31, 1996 and 1995, and for each of the years in the
three-year period ended December 31, 1996, 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.
The consolidated financial statements of Bankshares as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December
31, 1996, have been included herewith and in the Registration Statement in
reliance upon the report of J. W. Hunt and Company, LLP, independent
certified public accountants, included herewith, and upon the authority of
said firm as experts in accounting and auditing.
OPINIONS
The legality of the shares of Centura Stock to be issued in the Merger will
be passed upon by Poyner & Spruill, L.L.P., Rocky Mount, North Carolina. In
addition, certain legal matters relating to the Merger and the Bank Merger
and relating to certain tax consequences of the transaction will be passed
upon by Poyner & Spruill, L.L.P.
Certain legal matters will be passed upon for Bankshares and Pee Dee Bank
by Sinkler & Boyd, P.A., Columbia, South Carolina. In addition, certain tax
consequences of the transaction will be passed upon by Sinkler & Boyd, P.A.
Charles T. Lane, a partner of Poyner & Spruill, L.L.P., is a director of
Centura and Centura Bank. As of December 31, 1997, Mr. Lane owned
beneficially 28,518 shares of Centura Stock and other members of Poyner &
Spruill, L.L.P., beneficially owned 30,296 shares of Centura Stock. No
other expert or counsel employed by Centura or Bankshares had, or is to
receive in connection with the Merger or the Bank Merger, a substantial
interest, direct or indirect, in Centura or Bankshares or is otherwise
connected with Centura or Bankshares.
SHAREHOLDER PROPOSALS
Bankshares and Pee Dee Bank held their 1998 annual meetings of shareholders
on January 20, 1998. If the Merger and the Bank Merger are not consummated
for any reason, Bankshares and Pee Dee Bank expect to hold their 1999
annual meetings of shareholders in January 1999. In such event, any
proposal of a shareholder that is intended to be presented at the 1999
annual meeting of shareholders of either Bankshares or Pee Dee Bank must be
presented at the meeting by the shareholder or his duly appointed proxy.
Management of Bankshares and Pee Dee Bank do not intend to solicit proxies
with respect to such meetings.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PEE DEE BANKSHARES, INC. AND SUBSIDIARY
Page
FINANCIAL STATEMENTS
Independent Auditors' Report F-4
Consolidated balance sheets,
December 31, 1996 and 1995 F-5
Consolidated statements of income,
years ended December 31, 1996 and 1995 F-6
Consolidated statements of changes in stockholders' equity,
years ended December 31, 1996 and 1995 F-7
Consolidated statements of cash flows,
years ended December 31, 1996 and 1995 F-8
Notes to consolidated financial statements'
years ended December 31, 1996 and 1995 F-10
Consolidated balance sheets,
September 30, 1997 and 1996 (unaudited) F-34
Consolidated statements of income, nine months
ended September 30, 1997 and 1996 (unaudited) F-35
Consolidated statements of changes in stockholders' equity,
nine months ended September 30, 1997 and 1996 (unaudited) F-36
Consolidated statements of cash flows, nine months
ended September 30, 1997 and 1996 (unaudited) F-37
Notes to consolidated financial statements (unaudited) F-38
Certain other schedules are omitted because the required information is either
not applicable or is included elsewhere herein.
F-1
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
AND
INDEPENDENT AUDITORS' REPORT
F-2
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 2
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6-7
Notes to Consolidated Financial Statements 8-31
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Pee Dee Bankshares, Inc.
Timmonsville, South Carolina
We have audited the consolidated balance sheets of Pee Dee Bankshares, Inc., and
subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. The audits include examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. The audits also include
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pee Dee Bankshares,
Inc., and subsidiary as of December 31, 1996 and 1995, and the results of their
operations and cash flows for the years then ended, in conformity with generally
accepted accounting principles.
/s/ J.W. Hunt and Company, LLP
Columbia, South Carolina
January 24, 1997
F-4
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1996 AND 1995
- -----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AND SHARES)
ASSETS
1996 1995
---- ----
<S> <C> <C>
Cash and due from banks $ 4,437 $ 4,480
---------------- -----------------
Federal funds sold (Note 3) 3,275 -
---------------- -----------------
Securities purchased under agreements to resell (Note 3) 3,000 3,100
---------------- -----------------
Investment securities: (Note 2)
Securities available-for-sale, at fair value 3,016 2,951
Securities held-to-maturity (approximate fair
value $26,128 - 1996; $20,101 - 1995) 26,052 19,774
---------------- -----------------
Total investment securities 29,068 22,725
Loans - net (Note 4) 78,498 67,076
Premises and equipment (Note 5) 2,067 1,815
Real estate owned other than bank premises (Note 4) 66 197
Other assets 2,126 1,593
---------------- -----------------
Total assets 122,537 100,986
================ =================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Deposits:
Demand $ 19,608 $ 18,308
CD's of $100,000 and over 12,563 8,752
Other time and savings 70,961 57,316
---------------- -----------------
Total deposits 103,132 84,376
Federal funds purchased (Note 6) - 425
Securities sold under agreements to repurchase (Note 6) 4,600 2,747
Other borrowed funds (Note 7) 665 757
Other liabilities 1,007 795
---------------- -----------------
Total liabilities 109,404 89,100
---------------- -----------------
Minority interest 599 554
---------------- -----------------
Stockholders' equity:
Capital stock - common $1 par value - authorized 100,000 shares, issued and
outstanding 55,865 shares in 1996
and 55,828 shares in 1995 56 56
Surplus 2,785 2,776
Reserve for contingencies 1 1
Unrealized gain on securities available-for-sale,
net of applicable deferred income taxes 7 19
Undivided profits 9,685 8,480
---------------- -----------------
Total stockholders' equity 12,534 11,332
---------------- -----------------
Total liabilities and stockholders' equity 122,537 100,986
================ =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-5
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME,
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME:
Loans, including fees $ 8,505 $ 6,948
Lease financing 114 105
Investment securities:
Available for sale:
U. S. Treasury securities 151 154
Obligations of state and political subdivisions 6 -
Held to maturity:
U. S. Treasury securities 819 684
Obligations of other U. S. Government agencies and corporations 272 247
Obligations of state and political subdivisions 205 198
Interest on federal funds sold and repurchase agreements 393 323
------------------- -------------------
Total interest income 10,465 8,659
------------------- -------------------
INTEREST EXPENSE:
CD's of $100,000 and over 631 374
Other time and savings 3,109 2,711
Interest on federal funds purchased and repurchase agreements 174 134
Interest on other borrowed funds 61 65
------------------- -------------------
Total interest expense 3,975 3,284
------------------- -------------------
Net interest income 6,490 5,375
Provision for loan losses 620 330
------------------- -------------------
Net interest income after provision for loan losses 5,870 5,045
------------------- -------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 1,148 928
Other fees and commissions 445 302
Other (Note 11) 92 208
------------------- -------------------
Total non-interest income 1,685 1,438
------------------- -------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,879 2,671
Occupancy expense 380 291
Furniture and equipment expense 386 352
Other (Note 11) 1,362 1,291
------------------- -------------------
Total non-interest expense 5,007 4,605
------------------- -------------------
Income before income taxes 2,548 1,878
Income taxes (Note 9) 895 623
------------------- -------------------
Income before minority interest 1,653 1,255
Less, minority interest in earnings of subsidiary 79 60
------------------- -------------------
Net income 1,574 1,195
=================== ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-6
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY,
YEARS ENDED DECEMBER 31, 1996 AND 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
UNREALIZED
GAIN (LOSS)
ON SECURITIES
AVAILABLE-FOR-SALE
NET OF
COMMON STOCK RESERVE APPLICABLE TOTAL
NUMBER FOR DEFERRED UNDIVIDED STOCKHOLDERS'
OF SHARES AMOUNT SURPLUS CONTINGENCIES INCOME TAXES PROFITS EQUITY
--------- ------ ------- ------------- ------------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 55,828 $ 56 $ 2,776 $ 1 $ (54) $ 7,536 $ 10,315
Net income - 1995 - - - - - 1,195 1,195
Unrealized gain on securities
available-for-sale, net of applicable
deferred income taxes of $43 - - - - 73 - 73
Cash dividends declared
($4.50 per share) - - - - - (251) (251)
--------------------------------------------------------------------------------------------
Balance, December 31, 1995 55,828 56 2,776 1 19 8,480 11,332
Net income - 1996 - - - - - 1,574 1,574
Unrealized loss on securities
available-for-sale, net of applicable
deferred income taxes of $9 - - - - (12) - (12)
Cash dividends declared
($6.60 per share) - - - - - (369) (369)
Issuance of common stock 37 - 9 - - - 9
--------------------------------------------------------------------------------------------
Balance, December 31, 1996 55,865 56 2,785 1 7 9,685 12,534
============================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-7
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS,
YEARS ENDED DECEMBER 31, 1996 AND 1995
- -----------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,574 $ 1,195
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 305 301
Discount accretion and premium amortization 58 (24)
Provision for loan losses 620 330
Provision for deferred taxes (43) (17)
Loss on disposal of equipment - 1
(Gain) on sales of foreclosed real estate, net (30) (154)
Change in other assets and liabilities:
Increase in interest receivable (121) (210)
(Increase) decrease in income taxes receivable (146) 36
Increase in other assets (214) (82)
Increase in interest payable 150 213
Increase (decrease) in income taxes payable (2) 2
Increase in other liabilities 14 59
Increase in minority interest 54 43
-------------------------------
Net cash provided by operating activities 2,219 1,693
-------------------------------
Cash flows from investing activities:
Purchases of securities available for sale (592) (551)
Proceeds from maturities of securities available for sale 500 500
Purchases of securities to be held to maturity (12,943) (11,643)
Proceeds from maturities and calls of securities
held to maturity 6,937 7,069
Purchases of mortgage-backed securities (505) -
Proceeds from mortgaged-backed securities 181 343
Net increase in customer loans (12,042) (10,171)
Purchases of premises and equipment (556) (500)
Proceeds from sale of fixed assets 5 1
Proceeds from sale of other real estate 155 594
Increase in federal funds sold and securities
purchased under agreement to resell (3,175) (600)
-------------------------------
Net cash used in investing activities (22,035) (14,958)
-------------------------------
(Continued) - 1.
F-8
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------
1996 1995
---- ----
Cash flows from financing activities:
Net increase in demand, time and savings deposits $ 8,464 $ 4,211
Net increase in certificates of deposit 10,292 8,535
Net increase in federal funds purchased and
securities sold under agreements to repurchase 1,428 961
Net decrease in capital lease obligations (42) (91)
Cash dividends paid (369) (251)
-------------------------------
Net cash provided by financing activities 19,773 13,365
-------------------------------
Net increase (decrease) in cash and cash equivalents (43) 100
Cash and cash equivalents at beginning of year 4,480 4,380
-------------------------------
Cash and cash equivalents at end of year 4,437 4,480
===============================
Supplemental disclosures:
Non-cash investing and financing activities:
Real estate acquired in full or partial settlement of loans $ - $ 385
===============================
Total unrealized gain (loss) on securities available-for-sale $ (12) $ 116
===============================
Common stock issued in exchange for common stock
of subsidiary $ 9 $ -
===============================
Cash flow information: Cash paid during the year for:
Interest $ 2,711 $ 2,378
===============================
Income taxes $ 1,083 $ 685
===============================
(Concluded) - 2.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
F-9
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
- -------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of Pee Dee Bankshares, Inc., and
subsidiary conform with generally accepted accounting principles and with the
prevailing practices within the banking industry. The Company provides a variety
of financial services to individuals and corporate customers throughout the Pee
Dee area in the State of South Carolina
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Pee Dee
Bankshares, Inc., and its subsidiary, Pee Dee State Bank (the Bank) after
elimination of all material intercompany accounts and transactions. Minority
interests are segregated and specifically identified within the consolidated
financial statements.
INVESTMENT SECURITIES:
Debt securities that management has the ability and intent to hold to maturity
are classified as held-to-maturity and carried at cost, adjusted for
amortization of premium and accretion of discounts using methods approximating
the interest method. Interest income on investment securities is after giving
effect to current period premium amortization and discount accretion.
Mortgage-backed securities represent participating interests in pools of
long-term first mortgage loans originated and serviced by issuers of the
securities. Mortgage-backed securities are carried at unpaid principal balances.
Management intends and has the ability to hold such securities to maturity.
Other marketable securities are classified as available-for-sale and are carried
at fair value. Unrealized gains and losses on securities available-for-sale are
recognized as direct increases or decreases in stockholders' equity. Cost of
securities sold used to compute the realized gain or loss on sales is recognized
using the specific identification method. Investments include debt securities,
required capital stock of the Federal Reserve Bank and acquisitions of Federal
Home Loan Bank of Atlanta and Business Development Corporation Capital Stock.
F-10
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
LOANS:
Loans and lease financing are carried at the amount of unpaid principal reduced
by unearned discount and an allowance for loan losses. Unearned discount on
installment loans is recognized as income over the terms of the loans by methods
which generally approximate the interest method. Interest on commercial loans,
credit card loans and simple interest installment loans is credited to income
based upon the principal amount outstanding. The accrual of interest is
generally discontinued on loans which become 90 days past due as to principal or
interest or on other such loans on which the payment of principal or interest is
not expected.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is maintained at a level considered adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions that may
effect the borrowers' ability to pay, volume, growth and composition of the loan
portfolio, and other risks inherent in the portfolio. The allowance for loan
losses is increased through a provision for loan losses charged to expenses.
Loans are charged against the allowance for loan losses when management believes
that the collectibility of the principal is unlikely, net of recoveries.
While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary, based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for losses on
loans. Such agencies may require the Bank to recognize additions to the
allowances based on their judgments about information available to them at the
time of their examination.
OTHER REAL ESTATE (ORE):
Real estate acquired in satisfaction of a loan is reported as "Real estate owned
other than bank premises." Properties acquired by foreclosures or deed in lieu
of foreclosure are transferred to ORE and recorded at the lower of the
outstanding loan balance at the time of acquisition or the estimated market
value. Market value is determined on the basis of the properties being disposed
of in the normal course of business and not on a liquidation or distress basis.
Loan losses arising from the acquisition of such properties are charged against
the allowance for loan losses. Gains or losses arising from the sale of ORE are
reflected in current operations.
F-11
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are computed primarily by declining
balance accelerated methods over the estimated useful lives of the assets.
Useful lives are approximately ten to thirty-nine years for buildings, land
improvements and capital leases and three to ten years for equipment. Additions
to bank premises and equipment and major replacements are added to the accounts
at cost. Maintenance and repairs and minor replacements are charged to expense
when incurred. Gains and losses on routine dispositions are reflected in current
operations.
Leasehold improvements are amortized on the straight-line basis over the lesser
of the estimated useful lives of the improvements or the terms of the respective
leases.
INCOME TAXES:
Amounts provided for income taxes are based on income reported for financial
statement purposes. Deferred income taxes are provided for timing differences
between the period in which certain income and expense items are recognized for
financial reporting purposes and the period in which they affect taxable income.
PROFIT SHARING PLAN:
The Bank maintains a profit sharing plan under the provisions of Section 401(K)
of the Internal Revenue Code. The plan covers all full-time and part-time
employees who have completed 1,000 hours of service during a 12-month period and
one year of service and have reached their twentieth birthday. Plan participants
elect to contribute 1% to 15% of annual compensation as a before tax
contribution. The Bank matches 50% of these contributions up to 6%.
Additionally, the Bank can elect to make a contribution to the plan from current
earnings.
In general, bank policy does not provide for post-retirement health insurance
benefits.
CASH AND CASH EQUIVALENTS AND CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and amounts due from banks. Amounts due from banks are non-interest bearing
cash accounts maintained with other financial institutions.
At December 31, 1996, the Bank balances with correspondent banks were $184,000,
of which $31,000 was in excess of the federally insured limits. The Bank feels
the credit risk associated with exceeding these limits is balanced by the
stability of the financial institutions.
F-12
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
RECLASSIFICATIONS:
Certain amounts in 1995 have been reclassified to conform with the 1996
presentation and disclosure requirements.
<TABLE>
<CAPTION>
NOTE 2 - INVESTMENT SECURITIES:
Securities held-to-maturity consist of the following:
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------- ------- ------ ------
<S> <C> <C> <C> <C>
(Dollars in thousands)
December 31, 1996:
U. S. Treasury securities $ 13,778 $ 80 $ 50 $ 13,808
Obligations of other
U. S. Government
corporations and agencies 6,692 21 15 6,698
Mortgage backed securities 1,199 6 13 1,192
Obligations of states and
political subdivisions (*) 4,383 62 15 4,430
------------------ ----------------- ----------------- ---------------------
Total 26,052 169 93 26,128
================== ================= ================= =====================
(Dollars in thousands)
December 31, 1995:
U. S. Treasury securities $ 12,301 $ 219 $ 32 $ 12,488
Obligations of other
U. S. Government
corporations and agencies 2,541 32 - 2,573
Mortgage backed securities 1,165 12 10 1,167
Obligations of states and
political subdivisions (*) 3,767 111 5 3,873
------------------ ----------------- ----------------- ---------------------
Total 19,774 374 47 20,101
================== ================= ================= =====================
</TABLE>
F-13
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE 2 - INVESTMENT SECURITIES (CONTINUED):
Securities available-for-sale consist of the following:
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ------- ------- -------
<S> <C> <C> <C> <C>
(Dollars in thousands)
December 31, 1996:
U. S. Treasury Securities $ 2,498 $ 16 $ 4 $ 2,510
Federal Reserve Bank stock 151 - - 151
Federal Home Loan Bank
stock 305 - - 305
Business Development
Corporation stock 50 - - 50
------------------ ----------------- ----------------- ---------------------
Total 3,004 16 4 3,016
================== ================= ================= =====================
(Dollars in thousands)
December 31, 1995:
U. S. Treasury Securities $ 2,507 $ 34 $ 1 $ 2,540
Federal Reserve Bank stock 101 - - 101
Federal Home Loan Bank
stock 260 - - 260
Business Development
Corporation stock 50 - - 50
------------------ ----------------- ----------------- ---------------------
Total 2,918 34 1 2,951
================== ================= ================= =====================
</TABLE>
(*) The fair values of state, county and municipal securities are established
with the assistance of an independent pricing service. The values are
based on data which often reflect transactions of relatively small size
and are not necessarily indicative of the value of the securities when
traded in large volumes.
There were no realized gains or losses on sales of investment securities during
the years ending December 31, 1996 and 1995.
At December 31, 1996, investment securities with an amortized cost of
$11,420,000 and an approximate fair value of $11,416,000 were pledged to secure
public deposits, demand notes due to the U. S. Treasury, securities sold under
repurchase agreements and for other purposes as required by law. The amortized
cost and approximate fair values of such pledged securities were $8,905,000 and
$8,917,000, respectively, at December 31, 1995.
F-14
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE 2 - INVESTMENT SECURITIES (CONTINUED):
The amortized cost and approximate fair value of debt securities
held-to-maturity and available-for-sale at December 31, 1996, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
SECURITIES SECURITIES
HELD-TO-MATURITY AVAILABLE-FOR-SALE
---------------------------------------- ------------------------------------------
AMORTIZED APPROXIMATE AMORTIZED APPROXIMATE
COST FAIR VALUE COST FAIR VALUE
----- ---------- ---- ----------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Due in one year or less $ 4,057 $ 4,060 $ 502 $ 503
Due after one year
through five years 12,117 12,081 1,996 2,007
Due after five years
through ten years 1,987 2,097 - -
------------------ --------------------- ------------------- ----------------------
Subtotal 18,161 18,238 2,498 2,510
No contractural
maturity 7,891 7,890 506 506
------------------ --------------------- ------------------- ----------------------
Total 26,052 26,128 3,004 3,016
================== ===================== =================== ======================
</TABLE>
NOTE 3 - FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL:
Federal funds sold and securities purchased under agreements to resell generally
mature within one to three days from the transaction date. The amounts advanced
under these agreements represent short-term loans and are reflected as a
receivable in the statement of financial condition.
The Bank enters into purchases of securities under agreements to resell the
identical securities. Securities purchased under agreements to resell at
December 31, 1996 consist of U. S. Treasury securities. The securities
underlying the agreements are book-entry securities. The securities were
delivered by appropriate entry into the Bank's account maintained with the
counterparty under a written custodial agreement that explicitly recognizes the
Bank's interest in the securities.
Information concerning securities purchased under agreements to resell is
summarized as follows:
1996 1995
---- ----
(Dollars in thousands)
Average month-end balance during the year $3,092 $2,669
Average interest rate during the year 5.15% 5.76%
F-15
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Maximum month-end balance during the year $3,100 $3,100
<TABLE>
<CAPTION>
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES:
The following summary reflects the classification of loans at December 31, 1996
and 1995:
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands) Real estate loans:
Construction $ 4,720 $ 3,289
Mortgage 28,295 25,816
Loans to farmers 1,055 1,288
Commercial and industrial loans 13,240 10,872
Loans to individuals for household, family and
other consumer expenditures 30,696 25,586
Lease financing 1,013 693
All other loans 329 266
------------------- -------------------
Total 79,348 67,810
Less: Unearned interest - (3)
Allowance for loan losses (850) (731)
------------------- -------------------
Balance 78,498 67,076
=================== ===================
<CAPTION>
A summary of transactions in the allowance for loan losses is scheduled below:
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Balance at January 1 $ 731 $ 627
Provision charged to income 620 330
Loans charged off (1,052) (609)
Recoveries 551 383
------------------- -------------------
Balance at December 31 850 731
=================== ===================
</TABLE>
At December 31, 1996 and 1995, the aggregate amount of loans for which the
accrual of interest has been discontinued was $267,000 and $187,000,
respectively. Interest income which was foregone on non-accrual loans was
approximately $25,000 for 1996 and $22,000 for 1995.
Included in the balance sheet under the caption, "Real estate owned other than
bank premises," are certain real properties which were acquired as a result of
completed foreclosure proceedings. Such foreclosed properties totaled $66,000
and $197,000 at December 31, 1996 and 1995, respectively.
The Bank grants agribusiness, commercial, and residential loans to customers
throughout the Pee Dee area. Although the Bank has a diversified loan portfolio,
a substantial portion of its debtors' ability to honor their contracts is
dependent upon the economy of the Pee Dee area.
F-16
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED):
Effective January 1, 1995, the Bank adopted Statement of Financial Accounting
Standards No. 114 (SFAS 114), ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN,
and Statement of Financial Accounting Standards No. 118 (SFAS 118), ACCOUNTING
BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURES. These
statements require creditors to account for impaired loans, except for those
loans that are accounted for at fair value or at the lower of cost or fair
value, at the present value of the expected future cash flows discounted at the
loan's effective interest rate.
The Bank determines when loans become impaired through its normal loan
administration and review functions. Those loans identified as substandard or
doubtful as a result of the loan review process are potentially impaired loans.
A loan is impaired when, based on current information and events, it is probable
that a creditor will be unable to collect all principal and interest amounts due
according to the contractual terms of the loan agreement. A loan is not impaired
during a period of delay in payment if the Bank expects to collect all amounts
due, including interest accrued at the contractual interest rate, for the period
of delay.
In accordance with these standards, the Bank does not apply SFAS 114 and SFAS
118 to large groups of smaller-balance homogeneous loans that are collectively
evaluated for impairment. These groups include the Bank's credit card,
residential mortgage, overdraft protection, home equity lines, Business Manager,
and consumer installment loans.
The Bank's adoption of these accounting standards did not have a material effect
on the financial condition and results of operations of the Bank.
In accordance with SFAS 114, historical information has not been restated to
reflect the application of this standard.
<TABLE>
<CAPTION>
NOTE 5 - PREMISES AND EQUIPMENT:
Premises and equipment at December 31, 1996 and 1995, consist of the following:
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Land and buildings $ 1,022 $ 937
Leasehold improvements 521 309
Property under capital leases 860 860
Equipment 2,765 2,515
Construction in progress - 8
------------------- -------------------
Total 5,168 4,629
Less, accumulated depreciation and amortization 3,101 2,814
------------------- -------------------
F-17
<PAGE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Premises and equipment - net 2,067 1,815
=================== ===================
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT (CONTINUED):
Provisions for depreciation and amortization included in operating expenses for
the years ended December 31, 1996 and 1995, were $299,000 and $283,000,
respectively.
NOTE 6 - FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE:
Federal fund purchased and securities sold under agreements to repurchase
generally mature within one to three days from the transaction date.
Information concerning securities sold under agreements to repurchase is
summarized as follows:
1996 1995
---- ----
(Dollars in thousands)
Average month-end balance during the year $3,871.00 $2,625.00
Average interest rate during the year 4.47% 5.12%
Maximum month-end balance during the year $5,008.00 $3,013.00
<TABLE>
<CAPTION>
NOTE 7 - OTHER BORROWED FUNDS:
Other borrowed funds at December 31, 1996 and 1995, are summarized as follows:
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Interest-bearing demand note issued to the U. S. Treasury,
collateralized with $500,000 par U. S. Treasury Note $ - $ 50
Capital lease obligation to a related party - payable monthly at
$6,265, including interest at 10%, through March 2005
423 452
Capital lease obligation to a related party - payable monthly at $2,415,
including interest at 6.5% through January 2009
242 255
------------------- -------------------
Total 665 757
=================== ===================
</TABLE>
NOTE 8 - LEASES:
OPERATING:
The Bank was obligated at December 31, 1996, under certain operating leases
extending to the year 2005 for land and buildings used primarily for banking
purposes. The following is a schedule by years of future minimum rental payments
required under operating leases which
F-18
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
have initial or remaining lease periods in excess of one year as of December 31,
1996, and does not reflect possible additional payments due if renewal options
are exercised:
NOTE 8 - LEASES (CONTINUED):
OPERATING (CONTINUED):
(Dollars in thousands)
Year ending December 31:
1997 $ 106
1998 101
1999 102
2000 114
2001 114
2002-2005 465
-------------------
Total 1,002
===================
Amounts charged against operations in regard to operating leases were $113,000
and $111,000 for the years ending December 31, 1996 and 1995, respectively. Such
leases are on various real properties.
CAPITAL:
The Bank has long-term lease agreements with a related party for two of its
branch facilities. The assets acquired under the long-term lease agreements have
been capitalized and the related obligations are reflected in the accompanying
financial statements based upon the present value of the future minimum lease
payments. The future minimum lease payments under the capitalized leases and the
present value of the net minimum lease payments as of December 31, 1996, are as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
Year ending December 31:
<S> <C>
1997 $ 104
1998 104
1999 104
2000 104
2001 104
Later years 450
------------------
Total minimum lease payments 970
Less, amount representing interest 305
-------------------
Present value of net minimum lease payments with
interest rate of 10.0% and 6.5% 665
===================
</TABLE>
F-19
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE 9 - INCOME TAXES:
Pee Dee Bankshares, Inc. and the Bank file consolidated federal income tax
returns on a calendar year basis. The consolidated provision for income taxes
consisted of the following for the years ended December 31:
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Currently payable:
Federal $ 846 $ 585
State 80 55
------------------- -------------------
926 640
Deferred (31) (17)
------------------- -------------------
Total 895 623
=================== ===================
</TABLE>
Deferred income taxes result from timing differences in the recognition of
income and expense for tax and financial reporting purposes. The principal
sources of these differences and the related deferred tax effects are as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Reserve for loan loss $ (46) $ (36)
Loan origination costs (1) (3)
Other real estate - (11)
Bond accretion (2) 10
Depreciation 12 10
Other 6 13
---------------------- -------------------
Total (31) (17)
===================== ==================
</TABLE>
The following is a reconciliation of the provision made for income taxes in the
financial statements versus an amount computed by applying the statutory federal
income tax rate of 34 percent to income before income taxes:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Computed "expected" tax expense at statutory rate $ 866 $ 639
Increase (reduction) of taxes:
Non-taxable interest income (63) (71)
State income tax, net of federal income tax benefits 80 55
Other 12 -
--------------------- ------------------
Total 895 623
===================== ==================
</TABLE>
F-20
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES (CONTINUED):
The net deferred tax asset included in other assets in the accompanying
consolidated financial statements includes the following components:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Deferred tax assets $ 59 $ 14
Deferred tax liabilities (3) (10)
--------------------- ------------------
Net deferred tax asset (liability) 56 4
===================== ==================
</TABLE>
NOTE 10 - EMPLOYEE BENEFITS:
The Bank has a profit sharing plan for substantially all full-time and part-time
employees that meet the requirements. Salaries and employee benefits expense
include $137,000 in 1996, and $143,000 in 1995, for the profit sharing plan.
NOTE 11 - OTHER INCOME AND EXPENSE:
The following is a summary of the components of other non-interest income for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Net gain on sale of foreclosed assets $ 29 $ 154
Other 63 54
-------------------- -------------------
Total 92 208
=================== ===================
</TABLE>
The following is a summary of the components of other non-interest expense for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Office supplies $ 266 $ 212
Legal 82 165
Credit cards 198 133
Advertising 134 115
Federal depository insurance 2 81
Other 680 585
------------------- -------------------
F-21
<PAGE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total 1,362 1,291
=================== ===================
</TABLE>
NOTE 12 - CONTINGENT LIABILITIES:
The Bank is involved as defendant in various litigation arising out of the
normal course of business. Management and legal counsel are of the opinion at
this time that losses, if any, would not have a material effect on the financial
statements.
NOTE 13 - SUBSIDIARY DIVIDENDS:
The payment of cash dividends by the subsidiary, a state bank, requires advance
approval of state banking regulatory authorities. Dividends declared but unpaid
at December 31, 1996, were $542,000.
NOTE 14 - RELATED PARTY TRANSACTIONS:
The Bank has entered into transactions with its directors and their business
interests (related parties). Such transactions were made in the ordinary course
of business on substantially the same terms and conditions, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other customers, and did not, in the opinion of management,
involve more than normal credit risk or present other unfavorable features. The
aggregate amount of loans to such related parties at December 31, 1996, was
$139,000 and at December 31, 1995, was $90,000. During 1996, new loans to such
related parties amounted to $144,000 and repayments amounted to $95,000.
The Bank leases two of its branch facilities from a major shareholder of the
Bank. The annual payments for 1996 and 1995 on these facilities were $104,000,
each year. The leases continue though March 1, 2005, and are classified in the
financial statements as capital leases.
NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
The Bank is a party to financial instruments with off-balance sheet risks in the
normal course of business to meet the financing needs of its customers and to
manage its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credits.
These instruments involve to varying degrees, elements of credit, interest rate,
or liquidity risk in excess of the amounts recognized in the balance sheet. The
contract amounts of these instruments express the extent of involvement the Bank
has in particular classes of financial instruments. Such 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 the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
F-22
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
(CONTINUED):
DEC. 31,
1996
(Dollars in thousands)
Financial instruments whose contract amounts
represents credit risks:
Commitments to extend credit $ 6,957
Standby letters of credit 126
COMMITMENTS TO EXTEND CREDIT:
These are legally binding agreements to lend to a customer. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future liquidity requirements. The Bank evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit assessment of the counterparty. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and personal
guarantees.
STANDBY LETTERS OF CREDIT:
These instruments are conditional commitments, issued by the Bank guaranteeing
the performance of a customer to a third party. All standby letters of credit
outstanding at December 31, 1996, expire in 1997. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers. The amount of collateral obtained if deemed
necessary by the Bank is based on management's credit evaluation of the
customer.
NOTE 16 - FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet. In
cases where quoted market prices are not available, fair values of financial
instruments are based on estimates using present value or other valuation
techniques, for which it is practicable to estimate the value. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instruments.
Statement No. 107 excludes certain financial instruments and all nonfinancial
F-23
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Bank.
NOTE 16 - FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED):
CASH AND CASH EQUIVALENTS:
The carrying amounts reported in the balance sheet for cash and cash equivalents
approximate those assets' fair values.
INVESTMENT SECURITIES:
Fair values for investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
LOANS:
For variable-rate loans that reprice frequently and with no significant change
in credit risk, fair values are based on carrying amounts. The fair values for
other loans are estimated using discounted cash flow analysis, based on interest
rates currently being offered for loans with similar terms to borrowers of
similar credit quality. Loan fair value estimates include judgments regarding
future expected loss experience and risk characteristics. The carrying amount of
accrued interest receivable approximates its fair value.
DEPOSITS:
The fair values disclosed for demand deposits, savings accounts, and certain
money market deposits are, by definition, equal to the amount payable on demand
at the reporting date. The fair values for certificates of deposits are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated contractual
maturities on such time deposits. The carrying amount of accrued interest
payable approximates fair value.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT:
Commitments to extend credit were evaluated and fair value was 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 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 at the reporting date.
F-24
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 16 - FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED):
<TABLE>
<CAPTION>
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT
(CONTINUED):
The estimated fair value of the Bank's financial instruments are as follows:
... DECEMBER 31, 1996 ...
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
(Dollars in thousands) Financial assets:
Cash $ 4,437 $ 4,437
Fed funds sold 3,275 3,275
Securities purchased under agreements to resell 3,000 3,000
Investment securities 29,068 29,144
Loans:
Loans 79,348 78,617
Less: allowance for loan losses (850) (850)
------------------- ------------------
Net loans 78,498 77,767
Financial liabilities:
Deposits 103,132 103,418
Securities sold under agreements to repurchase 4,600 4,600
Unrecognized financial instruments:
Commitments to extend credit 6,957 6,893
Standby letters of credit 126 126
</TABLE>
NOTE 17 - REGULATORY MATTERS:
Pee Dee Bankshares, Inc. (the Company) and its banking subsidiary are subject to
various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory - and possibly additional discretionary - actions by regulators that,
if undertaken, could have a direct material effect on the financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and its subsidiary must meet specific capital
guidelines that involve quantitative measures of the assets, liabilities, and
certain off-balance sheet-items as calculated under regulatory accounting
practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its subsidiary to maintain minimum amounts and ratios
(set forth in the table below) of total
F-25
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
and Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I Capital (as defined) to average assets (as defined).
Management believes, as of December 31, 1996, that the Company and its
subsidiary meet all capital adequacy requirements to which they are subject.
NOTE 17 - REGULATORY MATTERS (CONTINUED):
As of December 31, 1996, the most recent notification from the State of South
Carolina Board of Financial Institutions categorized the Company and its
subsidiary as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the entities must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the institutions' category.
Actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------ ------------------ --------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
As of December 31, 1996:
Total capital
(to Risk Weighted assets):
Consolidated $ 13,975 16.59% $ 6,740 8.00% $ 8,425 10.00%
Pee Dee State Bank 13,451 15.97% 6,740 8.00% 8,425 10.00%
Tier I Capital
(to Risk Weighted Assets):
Consolidated 13,125 15.58% 3,370 4.00% 5,055 6.00%
Pee Dee State Bank 12,601 14.96% 3,370 4.00% 5,055 6.00%
Tier I Capital (to Average Assets):
Consolidated 13,125 10.66% 4,927 4.00% 6,158 5.00%
Pee Dee State Bank 12,601 10.23% 4,927 4.00% 6,158 5.00%
</TABLE>
NOTE 18 - CONDENSED FINANCIAL STATEMENTS:
Presented below are condensed financial statements for Pee Dee Bankshares, Inc.,
(Parent Company only) and Pee Dee State Bank.
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., YEAR ENDED
(PARENT COMPANY ONLY): DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Balance Sheet:
Assets:
Cash $ 8 $ 18
Investment in Pee Dee State Bank 12,010 10,954
F-26
<PAGE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Other assets 516 360
------------------- -------------------
Total assets 12,534 11,332
=================== ===================
Stockholders' equity $ 12,534 $ 11,332
=================== ===================
</TABLE>
NOTE 18 - CONDENSED FINANCIAL STATEMENTS (CONTINUED):
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., YEAR ENDED
(PARENT COMPANY ONLY) (CONTINUED): DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
(Dollars in thousands)
Statement of Income:
Income:
Interest on investments $ - $ 1
Dividends from Pee Dee State Bank 516 360
------------------- -------------------
Total income 516 361
Expenses:
Accounting fees 1 1
------------------- -------------------
Income before income taxes and equity in
undistributed earnings of subsidiary 515 360
Equity in undistributed earnings of subsidiary 1,059 835
------------------- -------------------
Net income 1,574 1,195
=================== ===================
</TABLE>
F-27
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - CONDENSED FINANCIAL STATEMENTS (CONTINUED):
(Dollars in thousands)
Statement of Changes in Stockholders' Equity:
PEE DEE STATE BANK
UNREALIZED
GAIN (LOSS) ON
SECURITIES
AVAILABLE-
FOR-SALE, NET OF
RESERVE APPLICABLE
COMMON FOR DEFERRED UNDIVIDED
STOCK SURPLUS CONTINGENCIES INCOME TAXES PROFITS
--------- --------- --------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 56 $ 2,776 $ 1 $ (54) $ 7,536
PDSB unrealized gain on securities
available-for-sale, net of applicable
deferred income taxes - - - 73 -
Net income - 1995 - - - - 1,195
Cash dividends declared - - - - (251)
------------- --------------- ---------------------- -------------------- -------------
Balance, December 31, 1995 56 2,776 1 19 8,480
Net income - 1996 - - - - 1,574
PDSB unrealized loss on securities
available-for-sale, net of applicable
deferred income taxes - - - (12) -
Cash dividends declared - - - - (369)
Issuance of common stock - 9 - - -
------------- --------------- ---------------------- -------------------- -------------
Balance, December 31, 1996 56 2,785 1 7 9,685
============= =============== ====================== ==================== ============
<CAPTION>
TOTAL
---------
<S> <C>
Balance, December 31, 1994 $10,315
PDSB unrealized gain on securities
available-for-sale, net of applicable
deferred income taxes 73
Net income - 1995 1,195
Cash dividends declared (251)
-------------
Balance, December 31, 1995 11,332
Net income - 1996 1,574
PDSB unrealized loss on securities
available-for-sale, net of applicable
deferred income taxes (12)
Cash dividends declared (369)
Issuance of common stock 9
-------------
Balance, December 31, 1996 12,534
=============
</TABLE>
F-28
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------------
NOTE 18 - CONDENSED FINANCIAL STATEMENTS (CONTINUED):
YEAR ENDED
DECEMBER 31,
1996 1995
----- ------
(Dollars in thousands)
<S> <C> <C>
Statement of Cash Flows:
Cash flows from operating activities:
Net income $ 1,574 $ 1,195
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in other assets (156) (120)
Excess of earnings of subsidiary over dividend income (1,059) (835)
------------------- -------------------
Net cash provided by operating activities 359 240
------------------- -------------------
Cash flows from financing activities:
Dividends paid (369) (251)
------------------- -------------------
Net cash used in financing activities (369) (251)
------------------- -------------------
Net decrease in cash and cash equivalents (10) (11)
Cash and cash equivalents at beginning of year 18 29
------------------- -------------------
Cash and cash equivalents at end of year 8 18
=================== ===================
</TABLE>
<TABLE>
<CAPTION>
PEE DEE STATE BANK:
YEAR ENDED
DECEMBER 31,
(Dollars in thousands) 1996 1995
---- ----
<S> <C> <C>
Balance Sheet:
Assets:
Cash and due from banks $ 4,437 $ 4,480
Federal funds sold and securities purchased
under agreements to resell 6,275 3,100
Investment securities 29,068 22,725
Loans - net 78,498 67,076
Premises and equipment 2,067 1,815
Deferred income taxes 56 4
Other assets 2,136 1,786
------------------- -------------------
Total assets 122,537 100,986
=================== ===================
</TABLE>
F-29
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------------------------------------------
NOTE 18 - CONDENSED FINANCIAL STATEMENTS (CONTINUED):
PEE DEE STATE BANK (CONTINUED):
YEAR ENDED
DECEMBER 31,
1996 1995
----- -----
<S> <C> <C>
Liabilities:
Deposits $ 103,140 $ 84,394
Federal funds purchased and securities
sold under agreement to repurchase 4,600 3,172
Other liabilities 2,188 1,912
------------------- -------------------
Total liabilities 109,928 89,478
Stockholders' equity 12,609 11,508
------------------- -------------------
Total liabilities and stockholders' equity 122,537 100,986
=================== ===================
(Dollars in thousands) Statement of Income:
Income:
Interest and fees on loans $ 8,505 $ 6,948
Lease financing 114 105
Interest on investment securities 1,453 1,283
Interest on federal funds sold and repurchase agreements 393 323
Other income 1,685 1,438
------------------- -------------------
Total income 12,150 10,097
------------------- -------------------
Expenses:
Salaries and employee benefits 2,879 2,671
Interest on deposits 3,740 3,086
Other interest expense 235 199
Provision for loan losses 620 330
Other expenses 2,125 1,933
------------------- -------------------
Total expenses 9,599 8,219
------------------- -------------------
Income before income taxes 2,551 1,878
Income taxes 895 623
------------------- -------------------
Net income 1,656 1,255
=================== ===================
</TABLE>
F-30
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - CONDENSED FINANCIAL STATEMENTS (CONTINUED):
PEE DEE STATE BANK (CONTINUED):
(Dollars in thousands, except per share data)
Statement of Changes in Stockholders' Equity:
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
SECURITIES
AVAILABLE-
FOR-SALE
NET OF
RESERVE APPLICABLE
COMMON FOR DEFERRED UNDIVIDED
STOCK SURPLUS CONTINGENCIES INCOME TAXES PROFITS TOTAL
----- ------- ------------- ------------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 315 $ 3,070 $ 1 $ (54) $ 7,225 $ 10,557
Net income - 1995 - - - - 1,255 1,255
Unrealized gain on securities available-for-sale,
net of applicable deferred income taxes - - - 74 - 74
Cash dividends paid - - - - (378) (378)
---------------------------------------------------------------------------------
Balance, December 31, 1995 315 3,070 1 20 8,102 11,508
Net income - 1996 - - - - 1,656 1,656
Transfer - 1,650 - - (1,650) -
Unrealized loss on securities available-for-sale,
net of applicable deferred income taxes - - - (13) - (13)
Cash dividends paid - - - - (542) (542)
---------------------------------------------------------------------------------
Balance, December 31, 1996 315 4,720 1 7 7,566 12,609
=================================================================================
</TABLE>
F-31
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
NOTE 18 - CONDENSED FINANCIAL STATEMENTS (CONTINUED):
PEE DEE STATE BANK (CONTINUED):
YEAR ENDED
DECEMBER 31,
1996 1995
------ -------
<S> <C> <C>
(Dollars in thousands)
Statement of Cash Flows:
Cash flows from operating activities:
Net income $ 1,656 $ 1,255
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 305 301
Discount accretion and premium amortization 58 (24)
Provision for loan losses 620 330
Provision for deferred taxes (44) (17)
Loss on disposal of equipment - 1
Gain on sales of foreclosed real estate, net (30) (154)
Change in other assets and liabilities:
Increase in interest receivable (121) (210)
(Increase) decrease in income taxes receivable (146) 36
Increase in other assets (214) (82)
Increase in interest payable 150 213
Increase (decrease) in income taxes payable (2) 2
Increase in other liabilities 170 180
------------------- -------------------
Net cash provided by operating activities 2,402 1,831
------------------- -------------------
Cash flows from investing activities:
Purchases of securities available for sale (592) (551)
Proceeds from maturities of securities available for sale 500 500
Purchases of securities to be held to maturity (12,943) (11,643)
Proceeds from maturities and calls of securities
held to maturity 6,937 7,069
Purchases of mortgage-backed securities (505) -
Proceeds from mortgaged-backed securities 181 343
Net increase in customer loans (12,042) (10,171)
Purchases of premises and equipment (556) (500)
Proceeds from sale of premises and equipment 5 1
Proceeds from sale of other real estate 155 594
Increase in federal funds sold and securities purchased
under agreement to resell (3,175) (600)
------------------- -------------------
Net cash used in investing activities (22,035) (14,958)
------------------- -------------------
</TABLE>
F-32
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------------------------------
NOTE 18 - CONDENSED FINANCIAL STATEMENTS (CONTINUED):
PEE DEE STATE BANK (CONTINUED):
YEAR ENDED
DECEMBER 31,
1996 1995
--------- -------
<S> <C> <C>
Cash flows from financing activities:
Net increase in demand, time and savings deposits $ 8,454 $ 4,200
Net increase in certificates of deposits 10,292 8,535
Net increase in federal funds purchased and
securities sold under agreements to repurchase 1,428 961
Net decrease in capital lease obligation (42) (91)
Cash dividends paid (542) (378)
------------------- -------------------
Net cash provided by financing activities 19,590 13,227
------------------- -------------------
Net increase (decrease) in cash and cash equivalents (43) 100
Cash and cash equivalents at beginning of year 4,480 4,380
------------------- -------------------
Cash and cash equivalents at end of year 4,437 4,480
=================== ===================
</TABLE>
THESE NOTES ARE AN INTEGRAL PART OF THE ACCOMPANYING FINANCIAL STATEMENTS
F-33
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AND SHARES)
- -----------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
Cash and due from banks $ 3,974 $ 4,586
-----------------------------------
Federal funds sold 4,750 3,450
-----------------------------------
Securities purchased under
agreements to resell 3,000 3,100
-----------------------------------
Investment securities:
Securities available-for-sale, at fair value 2,595 3,010
Securities held-to-maturity 25,314 26,304
-----------------------------------
Total investment securities 27,909 29,314
Loans - net 88,896 76,615
Premises and equipment 2,446 2,031
Real estate owned other than bank
premises 44 66
Other assets 2,078 1,921
-----------------------------------
Total assets 133,097 121,083
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 21,984 $ 20,025
CD's of $100,000 and over 13,842 12,030
Other time and savings 77,546 70,118
-----------------------------------
Total deposits 113,372 102,173
-----------------------------------
Securities sold under agreements
to repurchase 3,821 4,182
Other borrowed funds 628 676
Other liabilities 1,265 1,275
-----------------------------------
Total liabilities 119,086 108,306
-----------------------------------
Minority interest 597 606
-----------------------------------
Stockholders' equity:
Capital stock - common $1 par value -
authorized 100,000 shares, issued and
outstanding 56133 shares in 1997
and 55,865 shares in 1996 56 56
Surplus 2,845 2,784
Reserve for contingencies 1 1
Unrealized gain on securities available-for-sale,
net of applicable deferred income taxes 11 3
Undivided profits 10,501 9,327
-----------------------------------
Total stockholders' equity 13,414 12,171
-----------------------------------
Total liabilities and
stockholders' equity 133,097 121,083
===================================
</TABLE>
F-34
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans, including fees $ 7,190 $ 6,247 $ 2,545 $ 2,206
Lease financing 122 79 38 29
Investment securities:
Available for sale:
U. S. Treasury securities 154 113 39 76
Obligations of state and political
subdivisions - 5 - 3
Held to maturity:
U. S. Treasury securities 593 607 204 177
Obligations of other U.S. Government
agencies and corporations 373 149 124 68
Obligations of state and political
subdivisions 152 156 45 57
Interest on federal funds sold and
repurchase agreements 250 282 82 109
---------------------------------- ----------------------------------
Total interest income 8,834 7,638 3,077 2,725
---------------------------------- ----------------------------------
INTEREST EXPENSE:
CD's of $100,000 and over 525 452 185 163
Other time and savings 2,637 2,272 914 809
Interest on federal funds purchased
and repurchase agreements 139 127 43 50
Interest on other borrowed funds 41 47 14 22
---------------------------------- ----------------------------------
Total interest expense 3,342 2,898 1,156 1,044
---------------------------------- ----------------------------------
Net interest income 5,492 4,740 1,921 1,681
Provision for loan losses 450 300 150 112
---------------------------------- ----------------------------------
Net interest income after
provision for loan losses 5,042 4,440 1,771 1,569
---------------------------------- ----------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 870 858 302 304
Other fees and commissions 502 338 181 119
Other 61 69 33 32
---------------------------------- ----------------------------------
Total non-interest income 1,433 1,265 516 455
---------------------------------- ----------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,426 2,193 837 755
Occupancy expense 317 224 88 76
Furniture and equipment expense 271 260 56 95
Other 1,265 988 478 400
---------------------------------- ----------------------------------
Total non-interest expense 4,279 3,665 1,459 1,326
---------------------------------- ----------------------------------
Income before income taxes 2,196 2,040 828 698
Income taxes 818 764 315 261
---------------------------------- ----------------------------------
Income before minority interest 1,378 1,276 513 437
Less, minority interest in earnings
of subsidiary 59 61 22 22
---------------------------------- ----------------------------------
Net income 1,319 1,215 491 415
================================== ==================================
Per Share
Weighted average shares outstanding 56,025 55,858 56,025 55,858
================================== ==================================
Net income per common share $ 23.54 $ 21.75 $ 8.76 $ 7.43
======================================================================
</TABLE>
F-35
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- ------------------------------------------------------------------------------------------------------------------------------------
UNREALIZED
GAIN (LOSS)
ON SECURITIES
AVAILABLE-FOR-SALE
NET OF
COMMON STOCK RESERVE APPLICABLE TOTAL
NUMBER FOR DEFERRED UNDIVIDED STOCKHOLDERS'
OF SHARES AMOUNT SURPLUS CONTINGENCIES INCOME TAXES PROFITS EQUITY
--------- ------ ------- ------------- ------------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 55,865 $ 56 $ 2,785 $ 1 $ 7 $ 9,685 $ 12,534
Net income for the period - - - - - 1,319 1,319
Unrealized loss on securities
available-for-sale, net of applicable
deferred income taxes of - - - - 4 - 4
Cash dividends declared
($9.00 per share) - - - - - (503) (503)
Issuance of common stock 268 - 60 - - - 60
----------------------------------------------------------------------------------------
Balance, SEPTEMBER 30, 1997 56,133 56 2,845 1 11 10,501 13,414
========================================================================================
</TABLE>
F-36
<PAGE>
<TABLE>
<CAPTION>
PEE DEE BANKSHARES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,319 $ 1,215
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 258 221
Discount accretion and premium amortization 30 44
Provision for loan losses 450 300
Provision for deferred taxes 2 (21)
Loss on disposal of equipment - -
(Gain) on sales of foreclosed real estate, net (19) (30)
Change in other assets and liabilities:
Increase in interest receivable (51) (143)
(Increase) decrease in income taxes receivable 111 -
Increase in other assets (58) (415)
Increase in interest payable (14) 61
Increase (decrease) in income taxes payable - 193
Increase in other liabilities 271 244
Increase in minority interest (9) 52
----------------------------------------------
Net cash provided by operating activities 2,290 1,721
----------------------------------------------
Cash flows from investing activities:
Purchases of securities available for sale (120) (592)
Proceeds from maturities of securities available for sale 495 -
Purchases of securities to be held to maturity (2,537) (9,180)
Proceeds from maturities and calls of securities
held to maturity 3,252 3,708
Purchases of mortgage-backed securities - (505)
Proceeds from mortgaged-backed securities 111 122
Net increase in customer loans (10,848) (9,839)
Purchases of premises and equipment (635) (436)
Proceeds from sale of fixed assets - 5
Proceeds from sale of other real estate 83 155
Increase in federal funds sold and securities
purchased under agreement to resell (1,475) (3,450)
----------------------------------------------
Net cash used in investing activities (11,674) (20,012)
----------------------------------------------
Cash flows from financing activities:
Net increase in demand, time and savings deposits 5,093 8,927
Net increase in certificates of deposit 5,160 8,860
Net increase in federal funds purchased and
securities sold under agreements to repurchase (779) 1,010
Net decrease in capital lease obligations (37) (31)
Cash dividends paid (516) (369)
----------------------------------------------
Net cash provided by financing activities 8,921 18,397
----------------------------------------------
Net increase (decrease) in cash and cash equivalents (463) 106
Cash and cash equivalents at beginning of year 4,437 4,480
----------------------------------------------
Cash and cash equivalents at end of year 3,974 4,586
==============================================
</TABLE>
F-37
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in accordance with the
requirements for interim financial statements and, accordingly, they omit
disclosures which would substantially duplicate those contained in the most
recent annual report to stockholders. The financial statements as of
September 30, 1997 and 1996, and for the interim periods ended September 30,
1997 and 1996, are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation.
NOTE 2 - MERGER AGREEMENT:
On December 30, 1997, Pee Dee Bankshares, Inc. entered into a merger agreement
with Centura Banks, Inc., whereby Centura Banks, Inc. will acquire the
outstanding shares of Pee Dee Bankshares, Inc. through exchange of Centura
Banks, Inc. common stock. The agreement is subject to the approval of the Pee
Dee Bankshares, Inc. stockholders and certain regulatory agencies.
F-38
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
A-1
<PAGE>
CENTURA BANKS, INC.
AND
PEE DEE BANKSHARES, INC.
*****
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of December 30, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
GENERAL
2.1 Procedure........................................................... 4
2.2 Required Regulatory Filings......................................... 5
2.3 Preparation of Registration Statement............................... 5
2.4 Authorization and Issuance of Centura Common Stock.................. 6
2.5 Reasonable Efforts; Cooperation..................................... 6
2.6 Confidential Information............................................ 6
2.7 Effectiveness of the Reorganization................................. 6
2.8 Effect of the Reorganization........................................ 7
2.9 Employment Agreements............................................... 8
2.10 Other Employees..................................................... 8
2.11 Terminated Employees................................................ 9
2.12 Pee Dee Employee Bonuses - 1998..................................... 9
2.13 Stock Option........................................................ 10
2.14 Taking of Necessary Action.......................................... 10
ARTICLE III
CONSIDERATION FOR ACQUISITION
AND RELATED MATTERS
3.1 The Exchange........................................................ 10
3.2 Cash in Lieu of Fractional Shares................................... 10
3.3 Exchange Agent...................................................... 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY PEE DEE
4.1 Organization, Good Standing, and Authority.......................... 11
4.2 Binding Obligations; Due Authorization.............................. 12
4.3 Absence of Default.................................................. 12
4.4 Capitalization...................................................... 12
4.5 Subsidiaries; Investments........................................... 12
4.6 Filing of Reports................................................... 12
4.7 Financial Statements................................................ 12
4.8 Absence of Certain Developments..................................... 13
4.9 Loan Loss Allowances................................................ 13
4.10 Books of Account; Corporate Records................................. 13
4.11 Taxes............................................................... 13
4.12 Qualification to do Business........................................ 14
4.13 Insurance........................................................... 14
4.14 Litigation.......................................................... 14
4.15 Brokerage; Advisors................................................. 14
4.16 Properties.......................................................... 14
4.17 Fiduciary Activities................................................ 14
i
<PAGE>
TABLE OF CONTENTS (continued)
4.18 Intangible Property..................................................15
4.19 Employee Relations and Employee Benefit Plans....................... 15
4.20 Regulatory Approvals and Organizational Documents................... 17
4.21 Contracts or Other Types of Agreements.............................. 17
4.22 Environmental Matters............................................... 18
4.23 Registration Statement Information.................................. 19
4.24 Information Furnished............................................... 19
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY CENTURA
5.1 Organization, Good Standing, and Authority.......................... 19
5.2 Subsidiaries of Centura............................................. 20
5.3 Binding Obligations; Due Authorization.............................. 20
5.4 Absence of Default.................................................. 20
5.5 Capitalization...................................................... 20
5.6 Financial Statements................................................ 21
5.7 Filing of Reports................................................... 21
5.8 Absence of Certain Developments..................................... 21
5.9 Taxes............................................................... 21
5.10 Litigation.......................................................... 21
5.11 Brokerage; Advisors................................................. 22
5.12 Books of Account; Corporate Records................................. 22
5.13 Fiduciary Activities................................................ 22
5.14 Registration Statement Information.................................. 22
5.15 Loan Loss Allowances................................................ 22
5.16 Qualification to do Business........................................ 22
5.17 Employee Relations and Employee Benefit Plans....................... 23
5.18 Regulatory Approvals and Organizational Documents................... 24
5.19 Information Furnished............................................... 24
ARTICLE VI
ACCESS TO AND INFORMATION CONCERNING
PROPERTIES AND RECORDS
6.1 Access by Centura................................................... 24
6.2 Access by Pee Dee................................................... 25
6.3 Tax-Related Information............................................. 25
ARTICLE VII
AFFIRMATIVE COVENANTS OF PEE DEE
7.1 Operation of Business............................................... 25
7.2 Payment of Taxes.................................................... 25
7.3 Substantial Litigation; Adverse Condition........................... 25
7.4 Properties.......................................................... 25
7.5 Contracts............................................................26
7.6 Insurance........................................................... 26
7.7 Financial Statements................................................ 26
ii
<PAGE>
TABLE OF CONTENTS (continued)
7.8 Accounting Principles and Practices................................. 26
7.9 Rule 145 and Other Restrictions Upon Transfer of
Centura Common Stock Received in the Merger......................... 26
7.10 Special Meeting and Approval of Pee Dee
and State Bank Shareholders......................................... 26
7.11 Environmental Assessment.............................................26
ARTICLE VIII
AFFIRMATIVE COVENANTS OF CENTURA
8.1 Maintenance of Existence............................................ 27
8.2 Filings with Commission............................................. 27
8.3 Registration Under the Securities Act............................... 27
8.4 Accounting Principles and Practices................................. 27
8.5 Issuance and Reservation of Centura Common Stock.................... 27
8.6 Payment of Taxes.................................................... 27
8.7 Substantial Litigation; Adverse Condition........................... 27
8.8 Properties.......................................................... 27
8.9 Contracts........................................................... 28
8.10 Insurance........................................................... 28
ARTICLE IX
NEGATIVE COVENANTS OF PEE DEE
9.1 Amendments...........................................................28
9.2 Capitalization...................................................... 28
9.3 Long-Term Indebtedness.............................................. 28
9.4 Hypothecations...................................................... 28
9.5 Dividends........................................................... 28
9.6 Employee Benefits................................................... 29
9.7 Inconsistent Agreements............................................. 29
9.8 Capital Improvements................................................ 29
9.9 Acquisition of Control.............................................. 29
9.10 Other Acquisitions and Mergers...................................... 29
9.11 Sale of Assets...................................................... 29
ARTICLE X
NEGATIVE COVENANTS OF CENTURA
10.1 Dividends........................................................... 29
10.2 Inconsistent Agreements............................................. 29
10.3 Section 368(a) Reorganization....................................... 30
iii
<PAGE>
TABLE OF CONTENTS (continued)
ARTICLE XI
INDEMNIFICATION
ARTICLE XII
CONDITIONS PRECEDENT TO THE CLOSING
12.1 Restraining Orders.................................................. 31
12.2 Pee Dee's Representations........................................... 31
12.3 Opinion of Counsel to Pee Dee....................................... 31
12.4 Accountants' Letter................................................. 31
12.5 Affiliates' Agreement............................................... 31
12.6 Accounting Treatment................................................ 31
12.7 Centura's Representations........................................... 32
12.8 Opinion of Counsel to Centura....................................... 32
12.9 Accountants' Letter................................................. 32
12.10 Accounting Treatment.................................................32
12.11 Fairness Opinion.....................................................32
ARTICLE XIII
CLOSING DATE
ARTICLE XIV
SURVIVAL OF REPRESENTATIONS,
WARRANTIES, AND COVENANTS
ARTICLE XV
ENTIRE AGREEMENT
ARTICLE XVI
TERMINATION OF AGREEMENT
16.1 Mutual Consent; Absence of Shareholder Approval;
Termination Date.................................................... 33
16.2 Election by Centura................................................. 34
16.3 Election by Pee Dee................................................. 34
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 Expenses............................................................ 34
17.2 Publicity........................................................... 34
17.3 Amendment........................................................... 34
17.4 Governing Law....................................................... 35
17.5 Communications...................................................... 35
17.6 Successors and Assigns.............................................. 36
17.7 Cover, Table of Contents, and Headings.............................. 36
17.8 Counterparts........................................................ 36
iv
<PAGE>
TABLE OF CONTENTS (continued)
EXHIBIT A AGREEMENT AND PLAN OF MERGER BETWEEN CENTURA BANKS, INC. AND
PEE DEE BANKSHARES, INC.
EXHIBIT B AGREEMENT AND PLAN OF MERGER BETWEEN CENTURA BANK AND PEE
DEE STATE BANK
EXHIBIT C EXECUTIVE EMPLOYMENT AGREEMENT - R. B. SCARBOROUGH
EXHIBIT D STOCK OPTION AGREEMENT BETWEEN PEE DEE BANKSHARES, INC. AND
CENTURA BANKS, INC.
v
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as
of December 30, 1997, between Centura Banks, Inc., a North Carolina bank holding
corporation with its principal office in Rocky Mount, North Carolina
("Centura"), and Pee Dee Bankshares, Inc., a South Carolina bank holding
corporation with its principal office in Timmonsville, South Carolina ("Pee
Dee").
W I T N E S S E T H:
WHEREAS, Centura and Pee Dee desire to enter into an agreement
providing for, subject to the necessary regulatory approvals and the approval of
the shareholders of Pee Dee, the merger of Pee Dee with and into Centura (the
"Merger"), which Merger will be evidenced and accomplished by means of an
Agreement and Plan of Merger to be entered into by Pee Dee and Centura in
substantially the form of Exhibit A attached hereto (the "Merger Agreement")
pursuant to which all of the issued and outstanding shares of capital stock of
Pee Dee shall be converted into and exchanged for shares of Centura Common
Stock; and
WHEREAS, Centura and Pee Dee desire that, immediately following the
Merger, Pee Dee State Bank, a South Carolina bank corporation subsidiary of Pee
Dee ("State Bank"), merge with and into Centura Bank, a North Carolina bank
corporation subsidiary of Centura ("Centura Bank"), which merger (the "Bank
Merger") will be evidenced and accomplished by means of an Agreement and Plan of
Bank Merger to be entered into by State Bank and Centura Bank in substantially
the form of Exhibit B attached hereto (the "Bank Merger Agreement") (the Merger
and the Bank Merger are collectively referred to herein as the
"Reorganization"); and
WHEREAS, the Boards of Directors of Pee Dee and State Bank have
determined that the Reorganization will be in the respective best interests of
Pee Dee, State Bank and each of their shareholders, and have approved this
Agreement, the Merger Agreement, the Bank Merger Agreement and the transactions
contemplated hereby and thereby and have authorized the execution and delivery
of this Agreement, the Merger Agreement and the Bank Merger Agreement; and
WHEREAS, the Boards of Directors of Centura and Centura Bank have
determined that the Reorganization will be in the respective best interests of
Centura, Centura Bank, and each of their shareholders, have approved this
Agreement, the Merger Agreement, the Bank Merger Agreement and the transactions
contemplated hereby and thereby, including the issuance and delivery of the
Centura Common Stock in connection therewith, and have authorized the execution
and delivery of the Agreement, the Merger Agreement and the Bank Merger
Agreement; and
WHEREAS, Centura and Pee Dee desire to provide for certain
undertakings, conditions, representations, warranties, and covenants in
connection with the Merger and the Bank Merger, and the related transactions
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided in this Agreement, the capitalized terms
set forth below (in their singular and plural forms, as applicable) shall have
the following meanings:
1
<PAGE>
"Aggregate Purchase Price" shall mean $40,000,000, payable in shares of
Centura Common Stock.
"Average Share Price" shall mean average daily closing price of Centura
Common Stock as reported on the New York Stock Exchange - Composite Transactions
List (as reported by the Wall Street Journal or, if not reported thereby,
another authoritative source chosen by Centura), for the 10 trading days prior
to the day immediately prior to the Closing Date.
"BHC Act" shall mean the Bank Holding Company Act of 1956, as amended.
"Bank Merger" shall mean the merger of Centura Bank and State Bank, as
provided herein and in the Bank Merger Agreement.
"Bank Merger Agreement" shall mean the Agreement and Plan of Bank
Merger between Centura Bank and State Bank which shall be substantially in the
form attached hereto as Exhibit B and which shall be executed by the parties
thereto on or prior to the Closing Date.
"Board" shall mean the South Carolina State Board of Financial
Institutions.
"Centura Common Stock" shall mean the issued and unissued authorized
shares of common stock of Centura, without par value.
"Centura Subsidiaries" shall mean Centura Bank, a North Carolina bank
corporation, and Centura Capital Trust I, a Delaware Corporation, each of which
is a subsidiary of Centura, and Centura Securities, Inc., Centura Insurance
Services, Inc., CB Services, Corp., CBRM, Inc., Pepco, Inc., CBNC, Inc., Centura
SBIC, Inc., CLG, Inc., and Church Street Management, Incorporated, each of which
is a North Carolina corporation subsidiary of Centura Bank except Church Street
Management, Incorporated, which is a Virginia corporation.
"Closing Date" shall mean the date specified pursuant to Article XIII
hereof as the date on which the parties hereto shall close the transactions
contemplated herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Commissioner of Banks" shall mean the Commissioner of Banks of the
State of North Carolina.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.7 hereof as the effective date of the Reorganization.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
"Exchange Agent" shall mean Registrar and Transfer Company, Cranford,
New Jersey.
"Exchange Ratios" shall mean the relationship of shares of Centura
Common Stock to shares of Pee Dee Common Stock and State Bank Common Stock as
established by Section 3.1 hereof.
"Exhibits" shall mean the Exhibits referenced herein and so marked,
which Exhibits are hereby incorporated by reference and made a part hereof.
2
<PAGE>
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve" shall mean, collectively, the Board of Governors of
the Federal Reserve System and the Federal Reserve Bank of Richmond.
"Financial Statements" shall mean (a) with respect to Centura, (i) the
consolidated balance sheets (including related notes and schedules, if any) of
Centura as of December 31, 1996 and 1995 and the related consolidated statements
of income, shareholders' equity, and cash flows (including related notes and
schedules, if any) for each of the three years ended December 31, 1996, 1995,
and 1994 as filed by Centura in the SEC Documents, and (ii) the consolidated
balance sheets of Centura (including related notes and schedules, if any) and
related statements of income, shareholders' equity, and cash flows (including
related notes and schedules, if any) included in the SEC Documents filed with
respect to periods ended subsequent to December 31, 1996, and (b) with respect
to Pee Dee, (i) the consolidated balance sheets (including related notes and
schedules, if any) of Pee Dee as of December 31, 1996 and 1995 and the related
statements of income, stockholders' equity and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1996, 1995, and 1994, and (ii) the consolidated balance sheets (including
related notes and schedules, if any) and related statements of income and cash
flows (including related notes and schedules, if any) of Pee Dee with respect to
periods ended subsequent to December 31, 1996, all of which Financial Statements
shall be prepared in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles as applied
to financial institutions on a consistent basis.
"Merger" shall mean the merger of Centura and Pee Dee, as provided
herein and in the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger between
Centura and Pee Dee which shall be substantially in the form attached hereto as
Exhibit A and which shall be executed by the parties thereto on or prior to the
Closing Date.
"Pee Dee Common Stock" shall mean the existing class of common stock of
Pee Dee, par value $1.00 per share.
"Pee Dee Subsidiary" shall mean State Bank, a South Carolina banking
corporation subsidiary of Pee Dee.
"Previously Disclosed" shall mean (i) information disclosed in a letter
delivered on or before the date of this Agreement, from the party making such
disclosure to the other party, or (ii) information regarding Centura disclosed
in an SEC Document delivered on or before the date of this Agreement.
"Proxy Statement" shall mean the proxy statement/prospectus to be
furnished to shareholders of Pee Dee and State Bank in connection with the
solicitation of proxies for shareholder approval of this Agreement, the Merger
Agreement, the Bank Merger Agreement and the transactions contemplated hereby
and thereby.
"Registration Statement" shall mean the registration statement,
including any post-effective amendments thereto, to be filed by Centura with the
Commission pursuant to the Securities Act in connection with the registration of
the shares of the Centura Common Stock to be exchanged for Pee Dee Common Stock
and State Bank Common Stock.
"Regulatory Authorities" shall mean, as the context requires, any or
all of the Federal Reserve, the FDIC, the Commissioner of Banks, the North
Carolina Secretary of State, the Commission, the Board and the United States
Department of Justice.
"Reorganization" shall mean, collectively, the Merger and the Bank
Merger.
3
<PAGE>
"SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by Centura pursuant to the Securities Laws.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time.
"Securities Laws" shall mean the Securities Act, the Exchange Act, the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"State Bank Common Stock" shall mean the existing class of common stock
of State Bank, par value $5.00 per share.
"Tax Opinion" shall mean the opinions, which shall be reasonably
satisfactory to the parties hereto, of (i) Sinkler & Boyd, P.A., counsel to Pee
Dee, to the effect that the Reorganization constitutes one or more
reorganizations pursuant to and within the meaning of Section 368(a) and other
applicable provisions of the Code, and that no income, gain or loss will be
recognized as a result of such transactions by Pee Dee, its shareholders or
State Bank or its shareholders, except to the extent that income, gain or loss
may be recognized as a result of the payment of cash in lieu of fractional
shares of Centura Common Stock or upon the exercise of dissenters' rights or as
a result of the required recapture of any tax attributes of Pee Dee and State
Bank, and (ii) Poyner & Spruill, L.L.P., counsel to Centura, to the effect that
no gain or loss will be recognized by Centura as a result of the issuance of
shares of Centura Common Stock in connection with the Merger or the Bank Merger.
ARTICLE II
GENERAL
Centura and Pee Dee shall take all steps required by applicable law and
regulations or deemed appropriate by the Boards of Directors of each institution
to effect the Reorganization, including:
2.1 Procedure. Subject to the provisions and conditions specified
herein and in the Merger Agreement and the Bank Merger Agreement, and the
obtaining of all required federal and state regulatory approvals:
(a) Pee Dee will be merged with and into Centura and under the
organizational documents of Centura. The resulting institution shall
retain the articles of incorporation of Centura and shall operate under
and be known by the name "Centura Banks, Inc.";
(b) Immediately following the merger described in Section
2.1(a) above, State Bank will be merged with and into Centura Bank and
under the organizational documents of Centura Bank. The resulting
institution shall retain the articles of incorporation of Centura Bank
and shall operate in the States of North Carolina, Virginia and South
Carolina under and be known by the name "Centura Bank";
(c) At the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, each share of Pee Dee
Common Stock issued and outstanding at the Effective Time (other than
shares held by shareholders of Pee Dee who exercise dissenters'
rights), shall cease to be outstanding and shall be converted into and
exchanged for the number of shares of Centura Common Stock determined
in accordance with Section 3.1 hereof, subject to the terms of this
Agreement and the Merger Agreement;
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(d) At the Effective Time, by virtue of the Bank Merger and
without any action on the part of the holders thereof, each share of
State Bank Common Stock issued and outstanding at the Effective Time
(other than shares held by shareholders of State Bank who exercise
dissenters' rights), shall cease to be outstanding and each such share,
except those owned by Centura as a result of the Merger, shall be
converted into and exchanged for the number of shares of Centura Common
Stock determined in accordance with Section 3.1 hereof, subject to the
terms of this Agreement and the Bank Merger Agreement;
(e) Upon completion of the Reorganization, the deposits of
State Bank will be held by Centura Bank, and such deposits will be
insured under the Bank Insurance Fund of the FDIC.
The Reorganization shall be accomplished in accordance with the terms
of this Agreement, the Merger Agreement and the Bank Merger Agreement and with
all applicable state and federal statutes and regulations promulgated by or
subject to the authority of the Regulatory Authorities.
2.2 Required Regulatory Filings. As soon as practicable after the
execution and delivery of this Agreement:
(a) Centura and Pee Dee shall cause to be prepared and filed
with the Federal Reserve, the Commissioner of Banks, and the Board, as
applicable, appropriate notices, applications and other materials to
obtain the necessary approval of the acquisition of Pee Dee by Centura;
(b) Centura and Pee Dee shall cause to be prepared and filed
with the Federal Reserve, the Commissioner of Banks, and the Board, as
applicable, appropriate applications for approval of the Bank Merger;
and
(c) Centura and Pee Dee shall file or cause to be filed with
the applicable Regulatory Authorities such other applications, filings,
and documents as shall be necessary to consummate the Reorganization in
such forms as may be prescribed by the respective Regulatory
Authorities and containing all appropriate information as may be
required.
In connection with the foregoing, the parties hereto shall take all
reasonable and necessary steps and actions to comply with and to secure all
approvals for the Reorganization as may be required by all applicable state and
federal law, rules, and regulations, including those of the Regulatory
Authorities.
2.3 Preparation of Registration Statement. Centura shall prepare the
Registration Statement for filing with the Commission pursuant to the Securities
Act and shall prepare and file with the state securities law authorities all
applications and materials prescribed by applicable state securities laws and
regulations in respect of the Centura Common Stock issued in the Reorganization.
The Registration Statement shall contain a combined Proxy Statement/ Prospectus,
which will be furnished to the shareholders of Pee Dee and State Bank in
connection with the solicitation by the Boards of Directors of Pee Dee and State
Bank of proxies for the approval of this Agreement, the Merger Agreement, the
Bank Merger Agreement, and the transactions contemplated hereby and thereby.
Centura and Pee Dee shall cooperate in the preparation of the Proxy
Statement/Prospectus and the Registration Statement. The Registration Statement
shall be filed with the Commission as soon as reasonably practicable and the
Proxy Statement/Prospectus, this Agreement, the Merger Agreement, the Bank
Merger Agreement, and the transactions contemplated hereby and thereby shall be
submitted by Pee Dee to its and State Bank's shareholders at a special meeting
of its and State Bank's shareholders called for such purpose (the "Special
Meeting") as soon as practicable after the Registration Statement is declared
effective by the Commission. The Boards of Directors of Pee Dee and State Bank
shall recommend approval of this Agreement, the Merger Agreement, the Bank
Merger Agreement, and the transactions contemplated hereby and thereby at the
Special Meeting.
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2.4 Authorization and Issuance of Centura Common Stock. At or prior to
the Effective Time, Centura shall take such corporate action as shall be
necessary to authorize and approve the issuance of the shares of Centura Common
Stock to be issued to the shareholders of Pee Dee and State Bank as provided in
this Agreement, the Merger Agreement, and the Bank Merger Agreement. The Merger
shall effect no change in the shares of the Centura Common Stock issued and
outstanding at the Effective Time, except for the issuance of additional shares
of Centura Common Stock by virtue of the Merger.
2.5 Reasonable Efforts; Cooperation. Centura and Pee Dee shall each use
all reasonable efforts to satisfy the conditions to the effectiveness of the
transactions contemplated by this Agreement, the Merger Agreement and the Bank
Merger Agreement on or before March 31, 1998, or as soon as is reasonably
practicable. Centura and Pee Dee will each cooperate in the preparation by the
other of such applications, articles of merger, petitions, registration
statements, proxy statements and other documents and materials as Centura or Pee
Dee, as the case may be, may deem necessary or desirable to submit to the
Regulatory Authorities and, where appropriate, to the various state securities
law authorities and to any other regulatory authority in order to obtain all
approvals of, consents to, and permissions for, the consummation of the
transactions contemplated by this Agreement, the Merger agreement and the Bank
Merger Agreement. Each party shall have the right to review and approve, in
advance, all data and characterizations of or relating to it or any of its
subsidiaries which appear in any such applications, petitions, registration
statements, or other documents or materials prepared by the other party and each
party shall promptly advise the other of comments received from any of the
Regulatory Authorities, whether oral or written, in respect to any such filings
or which may affect the timing or consummation of the transactions contemplated
by this Agreement.
2.6 Confidential Information. Any information obtained by Centura and
Pee Dee concerning the other in the course of negotiating this Agreement or of
effecting the transactions contemplated hereby or by the Merger Agreement or
Bank Merger Agreement shall be kept confidential by the recipient; provided,
however, that (i) any of such information may be disclosed to the directors,
officers, employees, agents, and representatives of Centura, Centura Bank, Pee
Dee and State Bank who need to know such information in connection with such
negotiations or transactions (it being understood that such persons will be
informed of the confidential nature of such information and shall be directed to
keep such information confidential), (ii) any of such information may be
disclosed to the extent necessary (subject to court seal or other confidential
treatment to the extent reasonably available) to a court or other governmental
body having jurisdiction or in any registration statement, application, or
related or similar document filed with any governmental body, and (iii) any
other disclosure of any such information may be made to which the other consents
in writing. Upon termination of this Agreement, all such written information
(including all copies thereof) obtained hereunder by either party from the other
party shall be returned to such party as soon as possible. This Section 2.6
shall become inoperative with respect to any of such information that (x)
becomes generally available to the public other than as a result of disclosure
not otherwise permitted hereby by the party obtaining such information or by its
directors, employees, agents, or representatives, or (y) was available to such
party on a nonconfidential basis prior to its disclosure by the other party, or
(z) becomes available to such party from a source not bound to such party by any
confidentiality agreement or duty of confidentiality regarding such information.
2.7 Effectiveness of the Reorganization. The Reorganization provided
for hereunder, including each of the steps set forth in Section 2.1 hereof,
shall become effective (which effectiveness shall be followed by a closing of
the transactions contemplated by this Agreement, the Merger Agreement and the
Bank Merger Agreement as provided in Article XIII hereof) upon and on the date
of occurrence of the last of the following events (the "Effective Time") each of
which events shall constitute conditions precedent to the consummation of the
Merger and the closing of the Reorganization:
(a) All required regulatory approvals in connection with the
Reorganization shall have been received and all applicable waiting
periods shall have expired without adverse action;
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(b) The requisite approval by the shareholders of Pee Dee and
State Bank of this Agreement, the Merger Agreement, the Bank Merger
Agreement, and the transactions contemplated hereby and thereby shall
have been obtained. Centura acknowledges, as the sole shareholder of
Centura Bank, that it has approved this Agreement and the Bank Merger
Agreement prior to the date of this Agreement;
(c) The Registration Statement shall have been declared
effective under the Securities Act and Centura shall have received all
applicable state securities laws or "blue sky" permits and other
authorizations or confirmation of the availability of exemption from
registration requirements necessary to issue the Centura Common Stock
in the Reorganization. Neither the Registration Statement nor any such
permit, authorization, or confirmation shall be subject to a stop-order
or threatened stop-order by the Commission or any state securities
authority;
(d) Centura, Centura Bank, Pee Dee and State Bank shall have
received the Tax Opinion;
(e) There shall have been delivered for filing with the North
Carolina Secretary of State and the South Carolina Secretary of State
articles of merger (containing such terms and provisions, including the
Merger Agreement and Bank Merger Agreement, as are required by
applicable law and which articles of merger shall be completed, signed,
and verified by Centura, Centura Bank, Pee Dee and State Bank, as
applicable), or, if it shall be later, the issuance of the Certificates
of Merger issued by the North Carolina Secretary of State and the South
Carolina Secretary of State with respect to the Merger and Bank Merger;
and
(f) All conditions to be performed by the parties, as set
forth in this Agreement, shall have been complied with or otherwise
satisfied, unless appropriately waived in writing by the appropriate
party or parties hereto.
2.8 Effect of the Reorganization. At the Effective Time:
(a) Centura and Pee Dee shall, as provided by applicable law,
be a single corporation and the separate existence of Pee Dee shall
cease, with Centura being the surviving corporation;
(b) Centura, as the surviving corporation, shall be deemed to
be the same corporation as Pee Dee and, without limiting the generality
of the foregoing, all rights, franchises, and interests of Pee Dee in
and to every type of property (real, personal, and mixed) and choses in
action shall be transferred to and vested in Centura by virtue of the
Merger, without any deed or other transfer, and Centura, without any
order or other action on the part of any court or otherwise, shall hold
and enjoy all rights of property, franchises, and interests, in the
same manner and to the same extent as such rights, franchises, and
interests were held or enjoyed by Pee Dee at the time the Merger
becomes effective; and Centura shall be liable for all liabilities of
Pee Dee, and all debts, liabilities, obligations, and contracts of Pee
Dee, matured or unmatured, whether accrued, absolute, contingent, or
otherwise, and whether or not reflected or reserved against on balance
sheets, books of account, or records of Pee Dee, shall be those of
Centura and shall not be released or impaired by the Merger; and all
rights of creditors and other obligees and all liens on property of Pee
Dee shall be preserved unimpaired;
(c) The Articles of Incorporation and Bylaws of Centura as in
effect at the Effective Time shall be and constitute the Articles of
Incorporation and the Bylaws of Centura as the surviving corporation,
until the same shall thereafter be altered, amended, or repealed in
accordance with applicable law;
(d) The Board of Directors and officers of Centura immediately
prior to the Effective Time shall be the Board of Directors and
officers of Centura as the surviving corporation, all of whom shall
continue in office until their current terms expire or until their
successors shall have been duly elected and qualified;
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(e) Centura Bank and State Bank shall, as provided by
applicable law, be a single corporation which is a wholly-owned
subsidiary of Centura, and the separate existence of State Bank shall
cease, with Centura Bank being the surviving corporation;
(f) Centura Bank, as the surviving corporation, shall be
deemed to be the same corporation as State Bank and, without limiting
the generality of the foregoing, all rights, franchises, and interests
of State Bank in and to every type of property (real, personal, and
mixed) and choses in action shall be transferred to and vested in
Centura Bank by virtue of the Bank Merger, without any deed or other
transfer, and Centura Bank, without any order or other action on the
part of any court or otherwise, shall hold and enjoy all rights of
property, franchises, and interests, in the same manner and to the same
extent as such rights, franchises, and interests were held or enjoyed
by State Bank at the time the Bank Merger becomes effective; and
Centura Bank shall be liable for all liabilities of State Bank, and all
debts, liabilities, obligations, and contracts of State Bank, matured
or unmatured, whether accrued, absolute, contingent, or otherwise, and
whether or not reflected or reserved against on balance sheets, books
of account, or records of State Bank, shall be those of Centura Bank
and shall not be released or impaired by the Bank Merger; and all
rights of creditors and other obligees and all liens on property of
State Bank shall be preserved unimpaired;
(g) The Articles of Incorporation and Bylaws of Centura Bank
as in effect at the Effective Time shall be and constitute the Articles
of Incorporation and the Bylaws of Centura Bank as the surviving
corporation, until the same shall thereafter be altered, amended, or
repealed in accordance with applicable law; and
(h) The Board of Directors and officers of Centura Bank
immediately prior to the Effective Time shall be the Board of Directors
and officers of Centura Bank as the surviving corporation, all of whom
shall continue in office until their current terms expire or until
their successors shall have been duly elected and qualified.
2.9 Employment Agreement. Centura shall cause Centura Bank to enter
into an employment agreement with R. B. (Rod) Scarborough, President of Pee Dee,
in substantially the form of Exhibit C hereto.
2.10 Other Employees. Any employee of Pee Dee or State Bank who,
following the Merger and at Centura's sole discretion, becomes employed by
Centura Bank (a "Retained Employee"), will be provided with the employee welfare
benefits generally available to all similarly situated employees of Centura
Bank, including the group insurance plan of Centura Bank (including
hospitalization, life and disability, and dental coverage) on the same terms and
at the same cost as similarly situated employees of Centura Bank with no
interruption in benefits and with acceptance of all pre-existing conditions
accepted under the comparable plan or plans maintained by Pee Dee or State Bank.
Such benefits shall be provided for dependents and/or families of such employees
as permitted by Centura Bank's employee benefits plans on the same terms and at
the same cost as for dependents and/or families of similarly situated Centura
Bank employees. The existing employee welfare benefit plans of Pee Dee or State
Bank shall be terminated at the Effective Time, but without prejudice to the
vested rights of participants therein. After the Effective Time, and solely for
purposes of Section 4980B of the Code, Centura's group health plan or plans
shall be treated as successor plans to the terminated group health plan or plans
of Pee Dee or State Bank.
To the extent Pee Dee or State Bank maintains any nonqualified pension
or similar plans for the payment of deferred compensation or similar benefits
(excluding any arrangement maintained under Section 408(p) of the Code), the
accrual of additional benefits under such plans shall be frozen at the Effective
Time, and Centura may, in its sole discretion, (a) terminate any of such plans
and pay to the participants the present value of the frozen accrued benefits
thereunder; (b) assume the existing obligations under any of such plans, as
frozen, in accordance with the terms thereof; or (c) with the consent of the
participants, terminate any of such plans and cancel all obligations thereunder
in exchange for comparable benefits provided under existing nonqualified plans
of Centura.
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At (or prior to) the Effective Time, contributions under any employee
defined contribution pension plan which is intended to be qualified under
Section 401(a) of the Code (including any plan permitting elective deferrals
under Section 401(k) of the Code) maintained by Pee Dee or State Bank shall be
discontinued. Prior to the Effective Time, Pee Dee or State Bank shall fund any
and all contributions accrued under any such plan. At the Effective Time,
Centura shall assume or cause Centura Bank to assume such plan as successor plan
sponsor, and Centura may thereafter, in its sole discretion, terminate such
plan, subject to Internal Revenue Service approval, and distribute or transfer
the accounts in accordance with the elections of participants thereunder made in
a manner consistent with the terms of such plan, ERISA, and the Code.
At (or prior to) the Effective Time, benefit accruals under any
employee defined benefit pension plan which is intended to be qualified under
Section 401(a) of the Code maintained by Pee Dee or State Bank shall be frozen.
At the Effective Time, Centura shall assume or cause Centura Bank to assume such
plan as successor plan sponsor, and Centura may thereafter, in its sole
discretion, terminate such plan, subject to Internal Revenue Service approval,
and distribute or transfer the accounts in accordance with the elections of
participants thereunder made in a manner consistent with the terms of such plan,
ERISA, and the Code.
Prior to the Effective Time, Pee Dee or State Bank shall fund any and
all contributions accrued under any plan or arrangement maintained under Section
408(p) of the Code (hereinafter referred to as a "SIMPLE Plan"), and shall take
all appropriate actions to discontinue the accrual of future benefits under such
SIMPLE Plan. Centura shall have no obligation to make contributions to a SIMPLE
Plan at the Effective Time or at any time thereafter, and Centura shall have no
other obligation or responsibility in connection with a SIMPLE Plan, including
but not limited to responsibility for compliance with the Code or ERISA.
All Retained Employees will be eligible to participate in the pension
and 401(k) plans of Centura in accordance with the terms of such plans and will
be credited for purposes of vesting and eligibility (but not for purposes of
benefit accruals) under such plans with one year of service to Centura Bank for
each year of service to Pee Dee or State Bank prior to the Effective Time.
It is expressly agreed by the parties hereto that the obligations under
this Section 2.10 with respect to qualified plans shall be performed in
accordance with the requirements of the Code and ERISA, including without
limitation Sections 404 and 415 of the Code, and any other applicable federal or
state statutes or regulations or decisions of any administrative agency or court
interpreting the same.
2.11 Terminated Employees. For a period of two years following the
Closing Date, Centura shall make a lump sum severance payment to certain
employees of Pee Dee whose employment is terminated within such time period in
accordance with the terms and provisions of a severance plan to be created by
Centura (in consultation with R. B. Scarborough, President of State Bank, or his
designee). Such severance plan shall be effective as of the closing Date and
shall provide, inter alia, that R. B. Scarborough shall act as administrator
and, in such capacity, shall determine the employees eligible to receive lump
sum severance payments and the amount of each such payment; provided, however,
that the aggregate amount of such severance plan payments shall not exceed
$250,000. The severance payments provided in this Section 2.11 shall be in
addition to and not in lieu of any bonus, severance or similar type payments to
which such terminated employees are entitled by virtue of law, and/or Centura's
then existing Salary Continuation Plan.
2.12 Pee Dee Employee Bonuses - 1998. Pee Dee agrees to accrue, during
the first fiscal quarter of 1998, all bonuses payable to employees of Pee Dee
for services rendered to Pee Dee after January 1, 1998 but prior to the Closing
Date, and to allocate such accrual to each eligible employee. Centura agrees to
pay such accrued and allocated bonuses to the appropriate Pee Dee employees
during the first fiscal quarter of 1999 at such time as it pays bonuses and
incentive compensation to Centura employees in accordance with Centura's
incentive compensation plan or plans.
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2.13 Stock Option. Pee Dee and Centura agree to execute and deliver a
Stock Option Agreement on the date of their execution of this Agreement in the
form of Exhibit D hereto.
2.14 Taking of Necessary Action. If any further action should become
necessary or desirable to carry out the purposes of this Agreement, the Merger
Agreement or the Bank Merger Agreement and to vest in Centura the full and
absolute right to all of the assets, rights, privileges, immunities, powers, and
franchises of Pee Dee and the Pee Dee Subsidiaries, as existed immediately prior
to the Effective Time (including, without limitation, the perfection of title to
any real property by appropriate public recordation of documents or instruments
of transfer if required by law), the appropriate officers of Centura and Centura
Bank, as the surviving corporations, shall be, and they hereby are, authorized
to take all such necessary action as may be appropriate.
ARTICLE III
CONSIDERATION FOR ACQUISITION
AND RELATED MATTERS
3.1 The Exchange. At the Effective Time, and subject to the provisions
of this Section 3.1 for adjustments of the Exchange Ratio and the provisions for
fractional payments set forth in Section 3.2 hereof, the shares of issued and
outstanding Pee Dee Common Stock and State Bank Common Stock shall, by virtue of
the Merger and at the Effective Time, automatically be canceled and, without any
further notice to or action on the part of the holders thereof, (i) each holder
of State Bank Common Stock (other than Pee Dee) shall be entitled to receive, in
exchange for each share of State Bank Common Stock owned by such shareholder,
the number of shares of Centura Common Stock determined by dividing (a) the
Aggregate Purchase Price by the Average Share Price, and (b) the quotient
thereof by 63,000, and (ii) each holder of Pee Dee Common Stock shall be
entitled to receive, in exchange for each share of Pee Dee Common Stock owned by
such shareholder, the number of shares of Centura Common Stock determined in
accordance with the following formula:
APP
NC=(---X.95726984) divided by 56,133
ASP
where NC = the number of shares of Centura Common Stock to be issued for each
share of Pee Dee Common Stock, APP = Aggregate Purchase Price, and ASP = Average
Share Price; provided, however, that if the Average Share Price is less than
$50.42 or more than $75.63, either party may elect to terminate this Agreement.
Notwithstanding the foregoing, however, if the Average Share Price is greater
than $69.32 but equal to or less than $75.63, the amount of $69.32, in lieu of
the Average Share Price, shall be used to determine the number of shares of
Centura Common Stock to be issued in the exchange for Pee Dee Common Stock and
State Bank Common Stock pursuant to the above.
The number of shares of Centura Common Stock into which shares of Pee
Dee Common Stock and State Bank Common Stock are to be converted under this
Section 3.1 shall be adjusted to reflect any consolidation, split up, other
subdivision or combination of Centura Common Stock, any dividend payable in
Centura Common Stock or any capital reorganization involving the
reclassification of Centura Common Stock subsequent to the date of this
Agreement.
3.2 Cash in Lieu of Fractional Shares. No fractional shares of Centura
Common Stock will be issued or delivered hereunder, but, in lieu thereof, a cash
adjustment shall be made on the basis of Average Share Price of Centura Common
Stock multiplied by the fractional interest. Centura and Pee Dee acknowledge
that any such cash adjustment is simply a means of dispensing with the need to
issue fractional shares and is not separately bargained for consideration.
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3.3 Exchange Agent. Registrar and Transfer Company, Cranford, New
Jersey, shall serve as the exchange agent under the Merger Agreement and Bank
Merger Agreement. Immediately prior to the Effective Time, Centura shall deposit
with the Exchange Agent that amount of shares of Centura Common Stock and cash
necessary to consummate the Merger and the Bank Merger. Promptly after the
Effective Time, the Exchange Agent will forward to each former shareholder of
Pee Dee and State Bank a letter of transmittal providing for the transmission of
the certificate or certificates theretofore representing shares of Pee Dee
Common Stock and State Bank Common Stock to the Exchange Agent for exchange and
conversion in accordance with Sections 3.1 and 3.2, above.
Each holder of Pee Dee Common Stock and State Bank Common Stock (other
than Pee Dee), upon presentation and surrender of the certificate or
certificates therefor to Centura or the Exchange Agent, shall be entitled to
receive in exchange therefor a certificate or certificates representing the
whole number of shares of Centura Common Stock and a check for the amount of
cash payable with respect to fractional shares, if any, to which that holder is
entitled under the terms of this Agreement, the Merger Agreement and the Bank
Merger Agreement. Until so presented and surrendered in exchange for a
certificate representing Centura Common Stock, each certificate which
represented issued and outstanding shares of Pee Dee Common Stock and State Bank
Common Stock (other than shares of State Bank Common Stock acquired by Centura
as a result of the Merger) at the Effective Time shall be deemed for all
purposes to evidence ownership of that whole number of shares of Centura Common
Stock and the right to receive a cash payment for any fractional interest in
shares (without interest) into which such shares of Pee Dee Common Stock and
State Bank Common Stock have been converted pursuant to the Merger and the Bank
Merger. Following the Effective Time, holders of certificates of Pee Dee Common
Stock and State Bank Common Stock that are deemed to evidence ownership of
shares of Centura Common Stock shall be entitled to participate in all dividends
declared by Centura on an equal basis, and shall be permitted to vote at any
meeting of the shareholders of Centura; provided, however, that such holders of
certificates of Pee Dee Common Stock and State Bank Common Stock shall be
entitled to receive such dividends (without interest) only after the surrender
of such certificates in exchange for certificates representing Centura Common
Stock as provided herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY PEE DEE
Except as Previously Disclosed, which disclosures shall be by specific
reference to the applicable section or sections of this Article IV, Pee Dee
represents and warrants as follows:
4.1 Organization, Good Standing, and Authority. Pee Dee is a bank
holding corporation duly organized, validly existing and in good standing under
the laws of the State of South Carolina. State Bank is a bank corporation duly
organized, validly existing and in good standing under the laws of the State of
South Carolina. Pee Dee and State Bank have all requisite corporate power and
authority to enter into and carry out the provisions of this Agreement, the Bank
Merger Agreement and the Merger Agreement, and Pee Dee and the Pee Dee
Subsidiary has all requisite corporate power and authority to conduct its
business as it is now conducted, to own and operate its properties and assets,
and to lease properties used in its business. Neither Pee Dee nor the Pee Dee
Subsidiary is in violation of its organizational documents or bylaws, or of any
applicable federal or state law or regulation, or in default with respect to any
order, writ, injunction, or decree of any court, or in default under any order,
license, regulation, or demand of any governmental agency, any of which
violations or defaults would materially and adversely affect the businesses,
properties, financial positions, or results of operations of Pee Dee or the Pee
Dee Subsidiary. The deposits held by State Bank are insured by the FDIC under
the Bank Insurance Fund of the FDIC pursuant to the provisions of the Federal
Deposit Insurance Act (the "FDI Act") and State Bank has paid all assessments
and filed all reports and statements required to be paid or filed under the FDI
Act.
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4.2 Binding Obligations; Due Authorization. This Agreement constitutes,
and the Merger Agreement and the Bank Merger Agreement upon execution and
delivery will constitute, valid and binding obligations of Pee Dee and State
Bank, as applicable, and subject to required regulatory approvals, will be
enforceable against them in accordance with the terms of such documents, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights generally, and except that the
availability of equitable remedies (including, without limitation, specific
performance) is within the discretion of the appropriate court. The execution,
delivery, and performance of this Agreement, the Merger Agreement, the Bank
Merger Agreement and the transactions contemplated hereby and thereby have been
duly authorized by the Boards of Directors of Pee Dee and State Bank, as
applicable.
4.3 Absence of Default. None of the execution or the delivery of this
Agreement, the Bank Merger Agreement and the Merger Agreement, the consummation
of the transactions contemplated hereby or thereby, or the fulfillment of the
terms hereof or thereof, will conflict with, or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, the articles of
incorporation or bylaws of Pee Dee or State Bank. None of such execution,
consummation, or fulfillment will conflict with, or result in a breach of the
terms, conditions, or provisions of, or constitute a default under (i) any
agreement or instrument under which Pee Dee or the Pee Dee Subsidiary is
obligated or (ii) (assuming receipt of the approvals referred to in Section 2.2
hereof) violate any statute or regulation of any government or agency to which
Pee Dee or the Pee Dee Subsidiary is subject, any of which conflicts, breaches,
defaults, or violations will prevent consummation of the Merger or the Bank
Merger or have a material adverse effect on the business or operation of Pee Dee
or the Pee Dee Subsidiary, taken as a whole.
4.4 Capitalization. The authorized capitalization of Pee Dee as of
November 30, 1997 consisted solely of 100,000 shares of Pee Dee Common Stock,
$1.00 par value per share, of which 56,133 shares are duly issued and
outstanding and are held by approximately 33 shareholders of record. The
authorized capitalization of State Bank as of November 30, 1997 consisted solely
of _________ shares of State Bank Common Stock, $5.00 par value per share, of
which 63,000 shares are duly issued and outstanding and are held by
approximately 24 shareholders of record in addition to Pee Dee. As of September
30, 1997, no persons or entities were the beneficial owner(s) of or have the
contractual right to own beneficially more than five percent (5%) of the issued
and outstanding Pee Dee Common Stock. For purposes of this Section 4.4, the term
"beneficial owner" shall have the meaning provided in Rule 13d-3 (17 C.F.R.
ss.240.13d-3) of the Commission, as in effect on the date hereof. There are not
outstanding any options, rights, securities, or warrants binding upon Pee Dee
that enable the holder thereof to purchase or otherwise acquire shares of any
class of the capital stock of Pee Dee.
4.5 Subsidiaries; Investments. Except as Previously Disclosed, other
than the Pee Dee Subsidiary and shares held by it for the account of others in a
fiduciary or custodial capacity in the ordinary course of its business or held
in satisfaction of debts previously contracted (which, except as Previously
Disclosed, do not in the aggregate constitute more than five percent (5%) of the
voting shares of any "company," as defined herein), Pee Dee does not, directly
or indirectly, own, control, or hold with the power to vote any shares of the
capital stock of any "company," as that term is defined by the BHC Act.
4.6 Filing of Reports. Pee Dee and the Pee Dee Subsidiary have timely
filed all reports required to be filed with the applicable Regulatory
Authorities and such reports, as filed, complied in all material respects with
applicable law and regulations.
4.7 Financial Statements. Pee Dee has Previously Disclosed copies of
Pee Dee's Financial Statements and such Financial Statements are true, complete,
and correct in all material respects and fairly present the consolidated
financial position of Pee Dee and the Pee Dee Subsidiary as of the dates
indicated and the results of operations, retained earnings and changes in
financial position or cash flows for the periods then ended in conformity with
GAAP.
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4.8 Absence of Certain Developments. Since December 31, 1996 and prior
to the date hereof, except as Previously Disclosed, there has been (i) no
material adverse change in the condition, financial or otherwise, of Pee Dee,
the Pee Dee Subsidiary or in the assets, properties, liabilities, or businesses
of Pee Dee and the Pee Dee Subsidiary taken as a whole; (ii) no incurrence by or
subjection of Pee Dee or the Pee Dee Subsidiary to any obligation or liability
(whether fixed, accrued, or contingent) or commitment material to Pee Dee and
the Pee Dee Subsidiary taken as a whole not referred to in this Agreement or
Previously Disclosed, except such obligations or liabilities as were or may be
incurred in the ordinary course of business; (iii) except as referred to in
Section 9.5 herein, no declarations setting aside, or payment of, any special
dividend or other distribution with respect to any class of capital stock of Pee
Dee; (iv) no material loss, destruction, or damage to any property of Pee Dee or
the Pee Dee Subsidiary, which loss, destruction, or damage is not adequately
covered by insurance; and (v) no material acquisition or disposition of any
asset or contract nor any other transaction by Pee Dee or the Pee Dee Subsidiary
other than for fair value in the ordinary course of business. Since such date
and prior to the date hereof, except as Previously Disclosed, Pee Dee and the
Pee Dee Subsidiaries have conducted their business only in the ordinary course
and in substantial compliance with all laws which govern the ownership of their
property and the conduct of its business.
4.9 Loan Loss Allowances. The allowances for loan losses set forth in
Pee Dee's most recent audited Financial Statements are adequate in the opinion
of Pee Dee's management, as of the date thereof, to absorb reasonably
anticipated losses in the loan and lease portfolios of Pee Dee and the Pee Dee
Subsidiary in view of the size and character of such portfolios, current
economic conditions, and other pertinent factors.
4.10 Books of Account; Corporate Records. The books of account of Pee
Dee and the Pee Dee Subsidiary are maintained in substantial compliance with all
applicable legal and accounting requirements and in such a manner as to reflect
accurately each respective item of income and expense and all of their
respective assets, liabilities, and shareholders' equity. To the best knowledge
of Pee Dee's management, each of Pee Dee and the Pee Dee Subsidiary has filed
all material reports and returns required by any law or regulation to be filed
by it, and it has duly paid or accrued on its books of account all taxes and
charges due pursuant to such reports and returns, or assessed against it,
including, without limitation, all such reports and statements, and all such
assessments which Pee Dee and the Pee Dee Subsidiary are required to have filed
or paid, none of which reports, statements, or assessments has been the subject
of any material objection by any Regulatory Authority. The minute books of Pee
Dee and the Pee Dee Subsidiary contain complete and accurate records in all
material respects of the corporate actions of their shareholders and Boards of
Directors and of all committees thereof.
4.11 Taxes. To the knowledge of Pee Dee's management, and except as
Previously Disclosed, Pee Dee and the Pee Dee Subsidiary have filed all material
tax returns, reports, lists, and statements required to be filed by any federal,
state, local, foreign, or other taxing jurisdiction of any nature whatsoever,
and paid all taxes, assessments, and other governmental charges due upon them or
any of their income, property, assets, or net worth (other than taxes or charges
which are not yet delinquent, are being contested in good faith, have not been
finally determined, or for which there are adequate reserves that were
established on or before December 31, 1996), and no extensions for the time of
any such payment have been requested or granted. Except as Previously Disclosed,
no material additional assessments of tax by any governmental authority are, as
of the date hereof, pending or, to the best knowledge of Pee Dee's management,
known to be pending, threatened, or in process of proposal, and no unexpired
waivers or other extensions of the statute of limitations executed by or binding
upon Pee Dee or the Pee Dee Subsidiary with respect to federal or other income
taxes or any other taxes are in effect as of the date hereof. In the opinion of
Pee Dee's management, the accruals and reserves made for tax liabilities in the
December 31, 1996, audited balance sheet and the September 30, 1997, unaudited
balance sheet are adequate for the payment of all federal, state, local,
foreign, and other tax liabilities of any nature whatsoever of Pee Dee and the
Pee Dee Subsidiary or with respect to its assets and properties whether or not
proposed, pending, threatened, or disputed, for all periods ending on or prior
to such date.
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4.12 Qualification to do Business. Each of Pee Dee and the Pee Dee
Subsidiary is duly qualified and licensed to do business and is in good standing
in all jurisdictions where the conduct of its business requires it to be
qualified and licensed to do such business and where the failure to be so
qualified and licensed could result in liability or adversely affect the
operations and properties of Pee Dee or the Pee Dee Subsidiary in any material
respect.
4.13 Insurance. Pee Dee has in effect insurance coverage with reputable
insurers, including blanket bond coverage, which coverage in respect of amounts,
types, and risks insured is, in the opinion of Pee Dee's management, adequate
for the business conducted by it and the Pee Dee Subsidiary.
4.14 Litigation. On the date hereof, except as Previously Disclosed,
and except for actions, suits, investigations, or proceedings which are not
individually or in the aggregate material to Pee Dee or which are adequately
covered by insurance, no action, suit, investigation, or proceeding is pending
or threatened against Pee Dee or the Pee Dee Subsidiary before any court or
governmental agency, domestic or foreign, nor, to the best knowledge of Pee
Dee's management, is there any basis for any other material action, suit,
investigation, or proceeding which, in the judgment of legal counsel for Pee
Dee, has a reasonable prospect for success. On the date hereof, except as
Previously Disclosed, there is no action, suit, investigation, or proceeding
brought by Pee Dee or the Pee Dee Subsidiary (other than suits to collect on
extensions of credit) which seeks damages in excess of $25,000. Except as
Previously Disclosed, on the date hereof, there is no litigation, proceeding, or
governmental investigation pending or threatened against Pee Dee or the Pee Dee
Subsidiary relating to any of the transactions contemplated by this Agreement,
the Merger Agreement or the Bank Merger Agreement.
4.15 Brokerage; Advisors. Except as Previously Disclosed (which
disclosure shall include the total amount of fees or commissions), neither Pee
Dee nor any of its officers, directors or employees has employed any broker,
finder or financial advisor or incurred any liability for any fees or
commissions in connection with the transactions contemplated herein. There are
no claims for brokerage commissions, finder's fees, or similar compensation
arising out of or due to any act of Pee Dee in connection with the transactions
contemplated by this Agreement and the Merger Agreement or based upon any
agreement or arrangement made by or on behalf of Pee Dee, and Pee Dee has not
entered into any agreement or understanding with any party relating to financial
advisory services provided or to be provided with respect to the transactions
contemplated by this Agreement or the Merger Agreement. Pee Dee shall indemnify
and hold Centura harmless against any liability or expenses arising out of such
a claim, agreement, or understanding.
4.16 Properties. Except as Previously Disclosed, and except for
property and assets disposed of in the ordinary course of business, Pee Dee and
the Pee Dee Subsidiary own, free and clear of any mortgage, pledge, lien,
charge, or other encumbrance which would materially interfere with the business
or operations of Pee Dee or the Pee Dee Subsidiary, all of their real or
personal property and other assets reflected in Pee Dee's most recent audited
Financial Statements or acquired subsequent to the date thereof. The real and
personal property leased by Pee Dee and the Pee Dee Subsidiary is free from any
adverse claim which would materially interfere with the business or operations
of Pee Dee and the Pee Dee Subsidiary taken as a whole. Except as Previously
Disclosed, all of the properties and equipment owned or leased by Pee Dee and
the Pee Dee Subsidiary is in normal operating condition, free from any known
defects, except such minor defects as do not materially interfere with the
conduct of the normal operations of Pee Dee and the Pee Dee Subsidiary taken as
a whole.
4.17 Fiduciary Activities. State Bank has conducted and currently
conducts fiduciary and custodial activities in all material respects in
accordance with applicable law. Except as Previously Disclosed and except for
pending or threatened legal actions or other proceedings which are not
individually or in the aggregate material to Pee Dee, neither Pee Dee nor the
Pee Dee Subsidiary has been, nor is, a party to or threatened with any legal
action or other proceeding which sought to surcharge Pee Dee or the Pee Dee
Subsidiary or to obtain any other remedy against it or any of its properties
relating to the exercise of any fiduciary and custodial powers.
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4.18 Intangible Property. To the best knowledge of Pee Dee's
management, Pee Dee and the Pee Dee Subsidiary own or possess the right, free of
the claims of any third party, to use the trademarks, service marks, trade
names, copyrights, patents, and licenses currently used by them in the conduct
of their businesses. To the best knowledge of Pee Dee's management, no material
product or service offered and no material trademark, service mark, or similar
right used by them infringes upon any rights of any other person, and, as of the
date hereof, Pee Dee has received no written or oral notice of any claim of such
infringement.
4.19 Employee Relations and Employee Benefit Plans.
(a) Except as Previously Disclosed, as of the date hereof, Pee
Dee and the Pee Dee Subsidiary are in all material respects in compliance with
all federal and state laws, regulations, and orders respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and, to the knowledge of Pee Dee's management after reasonable investigation, is
not engaged in any unfair labor practice. As of the date hereof, no dispute
exists between Pee Dee or the Pee Dee Subsidiary and any of its employees
regarding any employee organization, wages, hours, or conditions of employment
which would materially interfere with the business or operations of Pee Dee and
the Pee Dee Subsidiary taken as a whole. Except as Previously Disclosed, as of
the date hereof, there are no employment, consulting, labor, or collective
bargaining agreements binding upon Pee Dee or the Pee Dee Subsidiary. As of the
date hereof, Pee Dee is not aware of any attempts to organize a collective
bargaining unit to represent any employees of Pee Dee or the Pee Dee Subsidiary.
All contributions due on or prior to the date hereof to any pension,
profit-sharing, or similar plan of Pee Dee, if any, have been paid or provided
for in accordance with ERISA and all other applicable federal and state statutes
and regulations.
(b) Pee Dee has Previously Disclosed any and all employee
benefit plans, employment or severance agreements, or similar arrangements to
which Pee Dee or the Pee Dee Subsidiary is or has ever been a party or by which
it is or has ever been bound, legally or otherwise, including, without
limitation, (i) any "employee welfare benefit plan" or "employee pension benefit
plan" (within the meaning of Sections 3(1) and 3(2) of ERISA) (for purposes of
this Section 4.19, the "Benefit Plans;") (ii) any profit sharing, deferred
compensation, bonus, stock option, stock purchase, equity-based compensation,
pension, retainer, consulting, retirement, severance, welfare or incentive plan,
agreement, or arrangement, (iii) any plan, agreement, or arrangement providing
for "fringe benefits" or perquisites to employees, officers, directors, or
agents, including but not limited to benefits relating to Pee Dee or the Pee Dee
Subsidiary's automobiles, clubs, vacation, child care, parenting, sabbatical,
sick leave, disability, medical, dental, hospitalization, life insurance and
other types of insurance (including, without limitation, any "voluntary
employees' beneficiary association" (as defined in Section 501(c)(9) of the
Code), or similar trust fund providing the same or similar benefits), or (iv)
any employment agreement not terminable on thirty (30) days notice (or less).
The plans, agreements, and arrangements described in this Section 4.19 may be
referred to herein as the "Benefit Arrangements." Pee Dee and the Pee Dee
Subsidiary have delivered to Centura true and complete copies of all documents
and summary plan descriptions with respect to the Benefit Arrangements, or
summary written descriptions of any of the Benefit Arrangements not otherwise in
writing, along with (1) the most recent actuarial and financial reports and
statements of assets and liabilities prepared with respect to any of the Benefit
Arrangements, (2) the three most recent annual reports filed with any government
agency with respect to any of the Benefit Arrangements, including, without
limitation, all schedules thereto and financial statements with attached
opinions of independent accountants, if required, and (3) all governmental
rulings, advisory opinions and determination letters and any open requests for
governmental rulings, advisory opinions or determination letters that pertain to
any Benefit Arrangement. Each of the Benefit Arrangements may be amended or
terminated at any time by Pee Dee or the Pee Dee Subsidiary or, after the
Effective Time, by Centura.
None of the Benefit Arrangements is (i) a plan subject to
Title IV of ERISA, or (ii) a "multiemployer plan" (within the meaning of Section
3(37) of ERISA). Except as Previously Disclosed, neither Pee Dee nor the Pee Dee
Subsidiary are obligated to provide any post-retirement welfare benefits to
their employees or former employees, including post-retirement health or life
insurance coverage. There are no negotiations, demands, or proposals that are
pending or have been made which concern matters now covered, or that would be
covered, by plans, agreements, or arrangements of the type described in this
Section 4.19(b).
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(c) Pee Dee and the Pee Dee Subsidiary has fully complied in
all material respects with all provisions of ERISA and the Code and any and all
other laws, rules, and regulations applicable to the Benefit Arrangements.
Except as Previously Disclosed, all reports and descriptions of any Benefit
Arrangements required by ERISA or the Code have been timely filed and
distributed and all notices required by ERISA, the Code, or any state or federal
law or any ruling or regulation of any state or federal administrative agency
with respect to all Benefit Arrangements have been appropriately given. Neither
Pee Dee nor the Pee Dee Subsidiary has received written notice of the existence
of any default or violation by any other party of ERISA or the Code or any other
laws, rules, or regulations applicable to the Benefit Arrangements. Other than
routine claims for benefits, neither Pee Dee nor the Pee Dee Subsidiary has
received any written notice of any pending material claims or lawsuits which
have been asserted or instituted against any of the Benefit Arrangements, the
sponsor or administrator of any of the Benefit Arrangements, or against any
fiduciary of any of the Benefit Arrangements with respect to the operation of
such arrangement. Neither Pee Dee nor the Pee Dee Subsidiary has received any
written notice of any pending investigation or pending enforcement action by the
Internal Revenue Service, the Department of Labor, the Pension Benefic Guaranty
Corporation or any other governmental agency with respect to any of the Benefit
Arrangements.
(d) Each Benefit Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service to the effect that such plan is qualified under
Section 401(a) of the Code and that the trust under such plan is tax exempt
under Section 501(a) of the Code. No such determination letter has been revoked
or threatened to be revoked and no event has occurred that will or could give
rise to disqualification or loss of tax-exempt status of any such plan or trust
under such sections. No event has occurred that will or could subject any
Benefit Plan to tax under Section 511 of the Code. Neither Pee Dee nor the Pee
Dee Subsidiary has material liability under any such plan that is not reflected
in the Financial Statements of Pee Dee or the Pee Dee Subsidiary as of December
31, 1996. All contributions due on or prior to the date hereof to any Benefit
Plan have been timely paid or provided for in accordance with ERISA and all
other applicable federal and state statutes and regulations. No Benefit Plan has
an "accumulated funding deficiency" (within the meaning of Section 412 of the
Code or Section 302 of ERISA).
(e) No "prohibited transaction" (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt under Section 408
of ERISA, or prohibited by Section 4975 of the Code and not exempt under Section
4975(d) of the Code) has occurred with respect to any Benefit Plan (i) which
would result in the imposition, directly or indirectly, of an excise tax under
Section 4975 of the Code or a penalty under Section 502 of ERISA, or (ii) the
correction of which would have an adverse effect on the financial condition,
results of operations, or business of Pee Dee or the Pee Dee Subsidiary.
(f) Each of the Benefit Arrangements has been duly authorized
by all necessary corporate action by Pee Dee or the Pee Dee Subsidiary.
(g) Each of the Benefit Arrangements which constitutes a
"group health plan" (within the meaning of Section 5000(b)(1) of the Code) has
been operated in compliance with the group health plan continuation coverage
requirements of Section 4980B of the Code and Sections 601 through 608 of ERISA,
the requirements of Part 7, Title I of ERISA, the standards and requirements of
Section 609 of ERISA, Title XXII of the Public Health Service Act, and the
provisions of the Social Security Act, to the extent such requirements are
applicable. No event has occurred and no condition exists with respect to any
such group health plan which would subject Pee Dee or the Pee Dee Subsidiary to
any excise tax under Section 4980B of the Code. Each such plan which is subject
to Section 1862(b)(1) of the Social Security Act has been operated in compliance
with the secondary payor requirements of such section. Each of the Benefit
Arrangements has been operated in compliance with the provisions of the
Americans with Disabilities Act of 1990 and the Family and Medical Leave Act of
1993.
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(h) Neither Pee Dee or the Pee Dee Subsidiary nor, to the best
knowledge of Pee Dee or the Pee Dee Subsidiary's management, any administrator
or fiduciary of any of such Benefit Plans (or agent or delegate of any of the
foregoing) has engaged in any transaction or acted or failed to act in any
manner which could subject Pee Dee or State Bank to any direct or indirect
liability for a breach of any fiduciary, cofiduciary, or other duty under ERISA
(including, without limitation, any direct or indirect liability under Sections
502(c), 502(l), or 4071 of ERISA). No oral or written representation or
communication with respect to any aspect of the Benefit Plans has been made to
employees of Pee Dee or the Pee Dee Subsidiary prior to the Effective Time which
is not in accordance with the written or otherwise preexisting terms and
provisions of such Benefit Plans in effect immediately prior to the Effective
Time.
(i) Pee Dee or the Pee Dee Subsidiary does not and has not
employed the services of any "leased employees" (within the meaning of Section
414(n) of the Code) who must be taken into account for the requirements of
Section 414(n)(3) of the Code.
4.20 Regulatory Approvals and Organizational Documents. Pee Dee has
Previously Disclosed or made available to Centura or granted access to originals
or copies of the following documents or summary descriptions of the following
information relating to Pee Dee and the Pee Dee Subsidiary, which copies or
summary descriptions are complete and accurate as of the date hereof, except as
otherwise expressly provided hereunder:
(i) all regulatory approvals relating to all acquisitions or
the establishment of de novo operations;
(ii) organizational documents, and bylaws and any amendments
thereto as well as minutes of all meetings of shareholders and Board of
Directors and committees thereof;
(iii) any pending application, including any documents or
materials related thereto, which has been filed with any federal or
state regulatory agency with respect to the establishment of a new
branch office or the acquisition or establishment of an additional
regulated activity or subsidiary; and
(iv) all federal and state tax returns filed for the years
1994, 1995 and 1996 (if available), copies of the most recent federal
and state revenue agency examinations, and all private letter tax
rulings received from the Internal Revenue Service since January 1,
1988.
4.21 Contracts or Other Types of Agreements. Without limiting any of
the foregoing representations and warranties and except as Previously Disclosed,
on the date hereof:
(i) All policies of insurance (including surety and blanket
bonds) insuring any material risks of Pee Dee and the Pee Dee
Subsidiaries are in force on the date hereof and Pee Dee is not in any
material default with respect to any such policies;
(ii) To the best knowledge of Pee Dee's management, each
material lease, contract, mortgage, promissory note, deed of trust,
loan, credit arrangement, or other commitment or arrangement of Pee Dee
and the Pee Dee Subsidiary is in all material respects valid and
enforceable in accordance with its terms (except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting creditors rights generally and except that the
availability of equitable remedies is within the discretion of the
appropriate court) and is not subject to termination as a result of the
Merger or the Bank Merger without the consent of any other party, and
neither Pee Dee nor the Pee Dee Subsidiary is in default in any
material respect under any such lease, contract, mortgage, promissory
note, deed of trust, loan, or other commitment or arrangement, which
default would materially and adversely affect the business and
operations of Pee Dee and the Pee Dee Subsidiary taken as a whole; and
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(iii) Except in the ordinary course of the business of taking
deposits and extending credit and except as Previously Disclosed,
neither Pee Dee nor the Pee Dee Subsidiary is obligated under (x) any
contract, lease, mortgage, or other commitment, arrangement, or
agreement, or subject to any law, regulation, or decree or to any
restriction in its organizational documents or bylaws which materially
and adversely affects its business, properties, prospects, assets, or
condition, financial or otherwise or (y) any lease, contract,
promissory note, deed of trust, or any other commitment which involves
an aggregate annual payment by Pee Dee or the Pee Dee Subsidiary of
more than $25,000 or which extends beyond 24 months.
4.22 Environmental Matters.
(a) For purposes of this Section and Section 7.11 of this
Agreement, the "Premises" means and includes, collectively, all the real
property owned in fee or leased by Pee Dee and the Pee Dee Subsidiary.
(b) For purposes of this section, "Hazardous Materials" means
and includes petroleum products, any flammable explosives, radioactive
materials, asbestos or any material containing asbestos, and/or any hazardous,
toxic, regulated or dangerous waste, substance or material defined as such by
the United States Environmental Protection Agency, the South Carolina Department
of Health and Environmental Control, or for the purpose of or by any
Environmental Laws as may now or at any time hereafter be in effect.
(c) For purposes of this section, "Environmental Laws" means
and includes the Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic
Substances Control Act, the Coastal Zone Management Act, the Coastal Area
Management Act, any "Superfund" or "Superlien" law, applicable South Carolina
environmental statutes, or any other law, regulation or decree regulating,
relating to, or imposing liability, responsibility or standards of conduct
applicable to environmental conditions and/or releases (or potential releases)
of Hazardous Materials in, on, at or affecting the Premises, as such may now or
at any time hereafter be defined or in effect.
(d) Pee Dee hereby represents and warrants to Centura for the
purposes of this Agreement and the contemplated transfer, sale and conveyance of
the Premises that:
(i) To the knowledge of Pee Dee, no Hazardous
Materials have been used or placed in, on or at the Premises
in violation of, and the Premises are presently in compliance
with, all applicable Environmental Laws, and there are no
circumstances presently existing in, on, at or relating to the
Premises which would result in violation of any applicable
Environmental Law;
(ii) Except for cleaning and office supplies used in
the ordinary course of business, Pee Dee has not caused or
permitted the installation, storage, treatment, disposal,
discharge, release or threatened release of Hazardous
Materials in, on, at or from the Premises and has not engaged
in, and has no knowledge of, any activity on or in the
vicinity of the Premises which resulted in, the presence or
release of any Hazardous Materials;
(iii) As of the Closing Date, the Premises shall be
free of the presence of Hazardous Materials;
(iv) Pee Dee and the Pee Dee Subsidiary have complied
in all material respects with, and have caused the Premises to
comply in all material respects with, all applicable
Environmental Laws relating to or affecting the Premises, and
the Premises are free and clear of any liens imposed pursuant
to any applicable Environmental Laws;
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(v) Pee Dee and the Pee Dee Subsidiary have, and at
all times have had and/or maintained, all licenses, permits
and other governmental or regulatory authority necessary for
compliance with all applicable Environmental Laws;
(vi) Pee Dee and the Pee Dee Subsidiary have complied
in all material respects with all Environmental Laws relating
specifically to notification, registration, record keeping,
installation, financial responsibility, leak detection,
equipment, facilities, activities and operations on the
Premises;
(vii) There is not now pending or, to Pee Dee's
knowledge, threatened any action, suit, investigation or
proceeding against Pee Dee or the Pee Dee Subsidiary or the
Premises (or against any other party relating to the Premises)
seeking to enforce any right or remedy under any Environmental
Laws;
(viii) Neither Pee Dee nor the Pee Dee Subsidiary is
now, nor has been, subject to any order, threatened with any
enforcement action, received any notice, or received any
request for information or any other demand or inquiry
pursuant to any Environmental Law with respect to the Premises
or any activity or condition in, on, at or relating to the
Premises;
(ix) Pee Dee immediately shall give Centura oral and
written notice in the event that Pee Dee or the Pee Dee
Subsidiary receives any notice from any governmental agency,
entity or any other party with regard to Hazardous Materials
in, on, at or affecting the Premises; and
(x) Pee Dee shall provide to Centura on or before the
Closing Date and Pee Dee has a continuing obligation to
provide to Centura, copies of all information in its
possession, or under its control concerning the environmental
condition of the Premises and any and all properties adjacent
to the Premises.
4.23 Registration Statement Information. When the Registration
Statement or any post-effective amendment thereto shall become effective, and at
all times subsequent to such effectiveness up to and including the Closing Date,
all information set forth therein furnished by Pee Dee relating to Pee Dee and
the Pee Dee Subsidiary, (i) shall comply in all material respects with the
applicable provisions of the Securities Laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein not
false or misleading.
4.24 Information Furnished. Each representation and warranty in this
Article IV, all information Previously Disclosed to Centura, and all information
otherwise furnished or to be furnished to Centura pursuant to the terms of this
Agreement, the Merger Agreement, or the Bank Merger Agreement as of the date
hereof or the date furnished, are and shall be true, accurate, and complete in
all material respects.
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY CENTURA
Except as Previously Disclosed, which disclosures shall be by specific
reference to the applicable section or sections of this Article V, Centura
represents and warrants as follows:
5.1 Organization, Good Standing, and Authority. Centura is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of North Carolina. Centura is a bank holding company duly
registered pursuant to the BHC Act and the North Carolina Bank Holding Company
Act of 1984, and it has all requisite corporate power and authority to enter
into and carry out the provisions of this Agreement and the
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Merger Agreement. Centura is not in violation of its organizational documents or
bylaws, or of any applicable federal or state law or regulation, or in default
with respect to any order, writ, injunction, or decree of any court, or in
default under any order, license, regulation, or demand of any governmental
agency, any of which violations or defaults would materially and adversely
affect any of its businesses, properties, financial position, or results of
operations taken as a whole. Centura has all requisite corporate power and
authority to conduct its business as now conducted or proposed to be conducted,
and to own and operate and lease the properties and assets used in such
business.
5.2 Subsidiaries of Centura. Each of the Centura Subsidiaries is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation, and all of the capital stock of
each Centura Subsidiary is owned by either Centura or Centura Bank. None of the
Centura Subsidiaries is in violation of its charter documents or bylaws, or of
any applicable federal or state law or regulation, or in default with respect to
any order, writ, injunction, or decree of any court, or in default under any
order, license, regulation, or demand of any governmental agency, any of which
violations or defaults would materially and adversely affect the businesses,
properties, financial position, or results of operation of Centura and the
Centura Subsidiaries taken as a whole. The Centura Subsidiaries have all
requisite corporate power and authority to conduct their businesses as now
conducted or proposed to be conducted, and to own and operate and lease the
properties and assets used in such businesses. Centura Bank has all requisite
corporate power and authority to enter into and carry out the provisions of the
Bank Merger Agreement.
5.3 Binding Obligations; Due Authorization. This Agreement constitutes,
and the Merger Agreement and the Bank Merger Agreement upon execution and
delivery will constitute, valid and binding obligations of Centura and Centura
Bank, as applicable, and, subject to required regulatory approvals, will be
enforceable against them in accordance with the terms of such documents, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights generally, and except that the
availability of equitable remedies (including, without limitation, specific
performance) is within the discretion of the appropriate court. The execution,
delivery, and performance of this Agreement, the Bank Merger Agreement and the
Merger Agreement, and the transactions contemplated hereby and thereby have been
duly authorized by the Boards of Directors of Centura and Centura Bank, as
applicable.
5.4 Absence of Default. None of the execution or the delivery of this
Agreement, the Merger Agreement and the Bank Merger Agreement, the consummation
of the transactions contemplated hereby or thereby, or the fulfillment of the
terms hereof or thereof, will conflict with, or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, the articles of
incorporation or bylaws of Centura or Centura Bank, as applicable. None of such
execution, consummation, or fulfillment will conflict with, or result in a
breach of the terms, conditions, or provisions of, or constitute a default under
(i) any agreement or instrument under which Centura or Centura Bank is
obligated, or (ii) (assuming receipt of the approvals referred to in Section 2.2
hereof) violate any statute or regulation of any government or agency to which
Centura or Centura Bank is subject, any of which conflicts, breaches, defaults,
or violations will prevent consummation of the Merger or the Bank Merger, or
have a material adverse effect on the business or operation of Centura or
Centura Bank.
5.5 Capitalization. The authorized capital stock of Centura as of
November 30, 1997 consisted of (i) 50,000,000 shares of Common Stock, without
par value, of which 25,855,783 shares are presently outstanding, and (ii)
25,000,000 shares of Preferred Stock, without par value, none of which has been
issued or is presently outstanding. All such outstanding shares of capital stock
are duly authorized, validly issued, fully paid, and nonassessable. None of the
capital stock of Centura is subject to any restrictions upon the transfers
thereof under the terms of its articles of incorporation or bylaws. In addition,
there are reserved for issuance under Centura's Omnibus Equity Compensation Plan
and certain other equity compensation plans assumed from predecessor
corporations an aggregate of 2,292,291 shares of Centura Common Stock, of which
amount options to purchase 1,200,493 shares have been granted and are currently
outstanding. Other than the foregoing, there are not outstanding any options,
rights, securities, or warrants binding upon Centura or upon its shareholders
that enable the holder or holders thereof to purchase or otherwise acquire
shares of Centura Common Stock.
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5.6 Financial Statements. Centura has Previously Disclosed copies of
Centura's Financial Statements and such Financial Statements are true, complete,
and correct in all material respects and fairly present the consolidated
financial position of Centura and the Centura Subsidiaries as of the dates
indicated and the consolidated results of operations, retained earnings and
changes in financial position or cash flows for the periods then ended in
conformity with generally accepted accounting principles applicable to financial
institutions applied on a consistent basis.
5.7 Filing of Reports. Centura and each Centura Subsidiary have timely
filed all reports required to be filed with the applicable Regulatory
Authorities and such reports, as filed, complied in all material respects with
applicable law and regulations. Centura has filed all SEC Documents required to
be filed by the Securities Laws and all documents required by any applicable
state securities laws and such SEC Documents and other documents, as filed,
complied in all material respects with the Securities Laws and such state
securities laws.
5.8 Absence of Certain Developments. Since December 31, 1996 and prior
to the date hereof, there has been (i) no material adverse change in the
condition, financial or otherwise, of Centura or the Centura Subsidiaries or in
the assets, properties, liabilities, or businesses of Centura or the Centura
Subsidiaries; (ii) no occurrence by or subjection of Centura or the Centura
Subsidiaries to any material obligation or liability (whether fixed, accrued, or
contingent) or commitment not referred to in this Agreement, except such
obligations or liabilities as were or may be incurred in the ordinary course of
business; (iii) no declarations, setting aside, or payment of any dividend or
other distribution with respect to any class of the capital stock of Centura or
the Centura Subsidiaries, except for regular quarterly dividends paid or to be
paid with respect to shares of its common stock; (iv) no material loss,
destruction, or damage to any property of Centura or the Centura Subsidiaries,
which loss, destruction, or damage is not adequately covered by insurance; and
(v) no material acquisition or disposition of any asset or contract nor any
other transaction by Centura or the Centura Subsidiaries other than for fair
value. Since such date and prior to the date hereof, Centura and the Centura
Subsidiaries have conducted their businesses in substantial compliance with all
laws which govern the ownership of their property and the conduct of their
businesses.
5.9 Taxes. To the best of Centura's knowledge, Centura and the Centura
Subsidiaries have filed all material tax returns, reports, lists, and statements
required to be filed by any federal, state, local, foreign or other taxing
jurisdiction of any nature whatsoever, and paid all taxes, assessments, and
other governmental charges due to any of the said taxing jurisdictions upon it
or them or any of their respective income, property, assets, or net worth (other
than taxes or charges which are not yet delinquent, are being contested in good
faith, have not been finally determined, or for which there are adequate
reserves that were established on or before December 31, 1996), and no
extensions for the time of any such payment have been requested or granted. No
material additional assessments of tax by any of the said taxing jurisdictions
are pending, as of the date hereof, or to the knowledge of Centura's management,
threatened, or in process of proposal other than possible assessments for which
there are adequate reserves that were established on or before December 31,
1996. Except as Previously Disclosed, no unexpired waivers or other extensions
of the statute of limitations executed by, or binding upon, Centura or Centura
Bank with respect to federal or other income taxes or any other taxes are in
effect as of the date hereof. In the opinion of Centura's management, the
accruals and reserves made for tax liabilities in the Financial Statements are
adequate for the payment of all federal, state, local, foreign, and other tax
liabilities of any nature whatsoever of Centura or Centura Bank or with respect
to any asset or property of Centura or Centura Bank, whether or not proposed,
pending, threatened, or disputed, for all periods ending on or prior to the date
thereof.
5.10 Litigation. On the date hereof, except as Previously Disclosed and
except for actions, suits, investigations, or proceedings which are not
individually or in the aggregate material to Centura or the Centura Subsidiaries
or which are adequately covered by insurance, no action, suit, investigation or
proceeding is pending or threatened against Centura or the Centura Subsidiaries
before any court or governmental agency, domestic or foreign, nor, to the best
knowledge of the management of Centura, is there any basis for any other
material action, suit, investigation, or proceeding which, in the judgment of
legal counsel to Centura, has a reasonable prospect for
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success. Centura further represents that there is no litigation, proceeding, or
governmental investigation pending or threatened against Centura or any of its
subsidiaries relating to any of the transactions contemplated by this Agreement,
the Merger Agreement or the Bank Merger Agreement.
5.11 Brokerage; Advisors. Neither Centura nor any of its officers,
directors or employees has employed any broker, finder, or financial advisor or
incurred any liability for any fees or commissions in connection with the
transactions contemplated herein. There are no claims for brokerage commissions,
finder's fees, or similar compensation arising out of or due to any act of
Centura in connection with the transactions contemplated by this Agreement and
the Merger Agreement or based upon any agreement or arrangement made by or on
behalf of Centura, and Centura has not entered into any agreement or
understanding with any party relating to financial advisory services provided or
to be provided with respect to the transactions contemplated by this Agreement
or the Merger Agreement. Centura shall indemnify and hold Pee Dee harmless
against any liability or expenses arising out of such a claim, agreement, or
understanding.
5.12 Books of Account; Corporate Records. The books of account of
Centura and the Centura Subsidiaries are maintained in substantial compliance
with all applicable legal and accounting requirements and in such a manner as to
reflect accurately each respective item of income and expense and all of its or
their respective assets, liabilities, and shareholders' equity. To the best
knowledge of Centura's management, Centura and the Centura Subsidiaries have
filed all material reports and returns required by any law or regulation to be
filed by it or them, and it or they have duly paid or accrued on its or their
respective books of account all taxes and charges due pursuant to such reports
and returns, or assessed against it or them, including, without limitation, all
such reports and statements, and all such assessments which it or they are
required to have filed or paid, none of which reports, statements, or
assessments has been the subject of any material objection by any Regulatory
Authority. The minute books of Centura and the Centura Subsidiaries contain
complete and accurate records in all material respects of the corporate actions
of their respective shareholders and Boards of Directors and of all committees
thereof.
5.13 Fiduciary Activities. Centura is not directly engaged in any
fiduciary or custodial activities. Centura Bank has conducted and currently
conducts fiduciary and custodial activities in all material respects in
accordance with applicable law. Except for pending or threatened legal actions
or other proceedings which are not individually or in the aggregate material to
Centura, neither Centura nor Centura Bank has been, or is, a party to or
threatened with any legal action or other proceeding which sought to surcharge
Centura or Centura Bank or to obtain any other remedy against either Centura or
Centura Bank or any of their properties relating to the exercise of fiduciary or
custodial powers.
5.14 Registration Statement Information. When the Registration
Statement, or any post-effective amendment thereto, shall become effective, and
at all times subsequent to such effectiveness up to and including the Closing
Date, all information set forth or incorporated therein furnished by Centura
relating to Centura and the Centura Subsidiaries, (i) shall comply in all
material respects with the applicable provisions of the Securities Laws, and
(ii) shall not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements contained therein not false or misleading.
5.15 Loan Loss Allowances. The allowances for loan losses set forth in
Centura's most recent audited Financial Statements are adequate in the opinion
of Centura's management, as of the date thereof, to absorb reasonably
anticipated losses in the loan and lease portfolios of Centura and the Centura
Subsidiaries in view of the size and character of such portfolios, current
economic conditions, and other pertinent factors.
5.16 Qualification to do Business. Centura and each of the Centura
Subsidiaries is duly qualified and licensed to do business and is in good
standing in all jurisdictions where the conduct of its business requires it to
be qualified and licensed to do such business and where the failure to be so
qualified and licensed could result in liability or adversely affect the
operations and properties of Centura or a Centura Subsidiary in any material
respect.
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5.17 Employee Relations and Employee Benefit Plans.
(a) Except as Previously Disclosed, as of the date hereof,
Centura and the Centura Subsidiaries are in all material respects in compliance
with all federal and state laws, regulations, and orders respecting employment
and employment practices, terms and conditions of employment, and wages and
hours, and, to the knowledge of Centura's management after reasonable
investigation, is not engaged in any unfair labor practice. As of the date
hereof, no dispute exists between Centura or a Centura Subsidiary and any of its
employees regarding any employee organization, wages, hours, or conditions of
employment which would materially interfere with the business or operations of
Centura and the Centura Subsidiaries taken as a whole. Except as Previously
Disclosed, as of the date hereof, there are no employment, consulting, labor, or
collective bargaining agreements binding upon Centura or a Centura Subsidiary.
As of the date hereof, Centura is not aware of any attempts to organize a
collective bargaining unit to represent any employees of Centura or a Centura
Subsidiary. All contributions due on or prior to the date hereof to any pension,
profit-sharing, or similar plan of Centura, if any, have been paid or provided
for in accordance with ERISA and all other applicable federal and state statutes
and regulations.
(b) To the knowledge of Centura's management, Centura has
fully complied in all material respects with all provisions of ERISA and any and
all other laws, rules, and regulations applicable to the qualified pension or
profit sharing plans, any deferred compensation, consultant, bonus or group
insurance contract, or any other incentive, welfare, or employee benefit plan or
agreement maintained for the benefit of employees or former employees of Centura
and Centura Subsidiaries (for purposes of this Section 5.17, the "Centura
Benefit Plans"), all reports and descriptions of any Benefit Plans required by
ERISA have been timely filed and distributed and all notices required by ERISA,
the Code, or any state or federal law or any ruling or regulation of any state
or federal administrative agency with respect to all Benefit Plans have been
appropriately given.
(c) A favorable determination letter has been issued by the
Internal Revenue Service with respect to each of Centura's "employee pension
benefit plans" (as defined in Section 3(2) of ERISA) which is intended to be
qualified under Section 401(a) of the Code, to the effect that the form of such
plan is qualified under Section 401(a) of the Code. No such letter has been
revoked or threatened to be revoked and Centura knows of no ground on which such
revocation may be based. Centura has no material liability under any such plan
that is not reflected in the Financial Statements of Centura as of December 31,
1996. To the knowledge of Centura's management, each such plan is and has been
administered in accordance with its provisions and applicable law.
(d) To the knowledge of Centura's management, Centura (or any
pension plan maintained by Centura) has not incurred any material liability to
the Pension Benefit Guaranty Corporation or the Internal Revenue Service with
respect to any pension plan qualified under Section 401 of the Code except
liabilities to the Pension Benefit Guaranty Corporation pursuant to Section 4007
of ERISA, all of which have been fully paid. No reportable event under Section
4043(b) of ERISA has occurred with respect to any such pension plan and there
exists, to the knowledge of Centura's management, no condition or set of
circumstances presenting a material risk of the termination or partial
termination of any such plan which could result in a material liability on the
part of Centura to the Pension Benefit Guaranty Corporation or any other person.
(e) Centura does not participate in, or has not incurred any
liability under Section 4201 of ERISA for a complete or partial withdrawal from,
a multiemployer plan (as such term is defined in ERISA).
(f) To the knowledge of Centura's management, no "prohibited
transaction" (which shall mean any transaction prohibited by Section 406 of
ERISA and not exempt under Section 408 of ERISA) has occurred with respect to
any Centura Benefit Plan (i) which would result in the imposition, directly or
indirectly, of an excise tax under Section 4975 of the Code, or (ii) the
correction of which would have an adverse effect on the financial condition,
results of operations or business of Centura.
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(g) To the knowledge of Centura's management, neither Centura
nor any administrator or fiduciary of any of such Benefit Plans (or agent or
delegate of any of the foregoing) has engaged in any transaction or acted or
failed to act in any manner which could subject Centura to any direct or
indirect liability for a breach of any fiduciary, cofiduciary, or other duty
under ERISA. No written or, to the knowledge of Centura's management, oral
representation or communication with respect to any aspect of the Centura
Benefit Plans has been made to employees of Centura or a Centura Subsidiary
prior to the Effective Time which is not in accordance with the written or
otherwise preexisting terms and provisions of such Centura Benefit Plans in
effect immediately prior to the Effective Time. Except as Previously Disclosed,
there are no unresolved claims or disputes under the terms of, or in connection
with, the Centura Benefit Plans and no action, legal or otherwise, has been
commenced with respect to any claim.
5.18 Regulatory Approvals and Organizational Documents. Centura has
Previously Disclosed or made available to Pee Dee or granted access to originals
or copies of the following documents or summary descriptions of the following
information relating to Centura and the Centura Subsidiaries, which copies or
summary descriptions are complete and accurate as of the date hereof, except as
otherwise expressly provided hereunder:
(i) all regulatory approvals relating to all acquisitions or
the establishment of de novo operations;
(ii) organizational documents, and bylaws and any amendments
thereto as well as minutes of all meetings of shareholders and Board of
Directors and committees thereof;
(iii) any pending application, including any documents or
materials related thereto, which has been filed with any federal or
state regulatory agency with respect to the establishment of a new
branch office or the acquisition or establishment of an additional
regulated activity or subsidiary; and
(iv) all federal and state tax returns filed for the years
1994, 1995, and 1996 (if available), copies of the most recent federal
and state revenue agency examinations, and all tax rulings received
from the Internal Revenue Service since January 1, 1988.
5.19 Information Furnished. Each representation and warranty in this
Article V, all information Previously Disclosed to Pee Dee, and all information
otherwise furnished or to be furnished to Pee Dee pursuant to the terms of this
Agreement or the Merger Agreement, as of the date hereof or the date furnished,
are and shall be true, accurate, and complete in all material respects.
ARTICLE VI
ACCESS TO AND INFORMATION CONCERNING
PROPERTIES AND RECORDS
6.1 Access by Centura. For purposes of this Section 6.1, the term "Pee
Dee" shall include Pee Dee and the Pee Dee Subsidiary. Pee Dee, to the extent
permitted by law, shall give Centura, its counsel, accountants, investment
bankers, and other representatives full access, at reasonable times and upon
reasonable notice throughout the period from the date of this Agreement through
the Effective Time, to all of Pee Dee's properties, books, contracts,
commitments, and records, and Pee Dee shall furnish to Centura during such
period all such information concerning Pee Dee and its affairs as Centura may
reasonably request. In addition, Pee Dee shall also make its officers available
to discuss with Centura's representatives the substance of all documents,
financial statements, and other information provided by Pee Dee to Centura and
such other matters as Centura shall deem pertinent to the transactions
contemplated by this Agreement, the Merger Agreement and the Bank Merger
Agreement.
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6.2 Access by Pee Dee. For purposes of this Section 6.2, the term
"Centura" shall include Centura and the Centura Subsidiaries. Centura, to the
extent permitted by law, shall give Pee Dee, its counsel, accountants,
investment bankers, and other representatives full access, at reasonable times
and upon reasonable notice throughout the period from the date of this Agreement
through the Effective Time, to such information relating to Centura and to be
specified by Pee Dee as shall be reasonably necessary and appropriate under the
then circumstances for Pee Dee to confirm the accuracy of the representations
and warranties set forth in Article V hereof and to carry out the transactions
contemplated by this Agreement. In addition, Centura shall also make its
officers available to discuss with Pee Dee's representatives the substance of
all documents, financial statements, and other information provided by Centura
to Pee Dee and such other matters as Pee Dee shall deem pertinent to the
transactions contemplated by this Agreement, the Merger Agreement and the Bank
Merger Agreement.
6.3 Tax-Related Information. The parties intend that the Reorganization
will be accomplished as a tax-free reorganization within the meaning of Section
368 of the Code. Accordingly, each party will provide all information reasonably
requested in connection with (i) the Tax Opinion, and (ii) the Closing in
reliance on such Tax Opinion. Each party shall also, to the extent requested by
the recipient of the information, verify all such information in a manner
comparable to a verification required by such Tax Opinion.
ARTICLE VII
AFFIRMATIVE COVENANTS OF PEE DEE
Except as otherwise consented to or waived by Centura in writing, Pee
Dee, throughout the pendency of this Agreement, will:
7.1 Operation of Business. Maintain and operate its business, and cause
the Pee Dee Subsidiary to maintain and operate its businesses, only in the
usual, regular, and ordinary manner and to comply in all material respects with
all applicable laws, regulations, orders, judgments, and decrees except where
Pee Dee is in good faith contesting the validity of any of the foregoing; and,
to the extent consistent with such operation and sound business practices as
determined in good faith by Pee Dee, make all reasonable efforts to preserve
intact its present business organization, keep available the services of its
present officers and employees, and preserve its present relationships with
depositors, suppliers, customers, and others having business dealings with it.
7.2 Payment of Taxes. Punctually pay and discharge, and cause the Pee
Dee Subsidiary to punctually pay and discharge, all taxes, assessments, and
other governmental charges lawfully imposed upon them or any of their property,
or upon the income and profits thereof; provided, however, that nothing herein
contained shall prohibit Pee Dee from contesting in good faith and by
appropriate proceedings the validity of any tax, assessment, or governmental
charge; and, provided further, that any such contested assessment or charge be
reported to Centura.
7.3 Substantial Litigation; Adverse Condition. Promptly upon receipt of
notice, notify Centura of (i) the commencement of any litigation against Pee Dee
or the Pee Dee Subsidiary seeking damages in excess of $25,000 or threatening
the consummation of the Merger or the Bank Merger, or (ii) the existence of
severe and adverse business conditions materially threatening the continued,
normal business operations of Pee Dee or the Pee Dee Subsidiary.
7.4 Properties. At all times maintain, preserve, and keep all
properties in a satisfactory condition so as to ensure their normal use in its
business operations, except where failure to do so would not materially or
adversely affect the business or operations of Pee Dee.
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7.5 Contracts. Perform all obligations under all material contracts,
leases, and documents relating to or affecting its assets, properties, and
business, except where failure to do so would not materially or adversely affect
the business or operations of Pee Dee.
7.6 Insurance. Maintain in full force and effect insurance in amount
and scope of coverage which, in the judgment of Pee Dee's management, is
consistent with the nature and scope of all activities as conducted now or in
the future by Pee Dee.
7.7 Financial Statements. Provide Centura promptly with each quarterly
consolidated balance sheet, statement of income, statement of changes in
financial position, and statement of changes in shareholders' equity prepared by
Pee Dee.
7.8 Accounting Principles and Practices. Maintain all of its books and
records, including all financial statements, in accordance with accounting
principles and practices consistent with those used for its most recent
financial statements, except for changes in such principles and practices
required by federal or state regulation or under generally accepted accounting
principles.
7.9 Rule 145 and Other Restrictions Upon Transfer of Centura Common
Stock Received in the Merger. Prior to the Effective Time, Pee Dee shall deliver
to Centura a letter identifying all persons who are (in the opinion of Pee Dee
and its counsel, which opinion is concurred in by Centura and its counsel), at
the time the Merger is submitted to a vote of shareholders of Pee Dee,
"affiliates" of Pee Dee for purposes of Rule 145 under the Securities Act. Prior
to the Effective Time, Pee Dee shall use its best efforts to cause all such
persons to conform to the provisions of the Securities Act (including the
provisions of Rule 145 promulgated thereunder) with regard to the resale of the
Centura Common Stock received in the Merger. Specifically, Pee Dee will advise
said affiliates in writing of the restrictions on resale of securities contained
in Rule 145, the permissible methods of resale available under Rule 145, and the
imposition of the restrictive legend and stop transfer orders referred to in the
last sentence of this Section 7.9. Prior to the Effective Time, Pee Dee shall
deliver to Centura a written agreement signed by each of said affiliates stating
that he or she will not sell, pledge, transfer, or otherwise dispose of the
shares of Centura Common Stock (i) except in compliance with applicable
provisions of the Securities Act, and (ii) until such time as the financial
results governing at least thirty (30) days of combined operations of Centura
and Pee Dee have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies. Such written advice and
agreement shall be approved in advance by counsel to Centura. All certificates
representing shares of Centura Common Stock delivered to such affiliates shall
bear appropriate legends referring to the aforementioned restrictions, and
Centura shall instruct its stock transfer agent to impose stop orders with
respect to such certificates.
7.10 Special Meeting and Approval of Pee Dee and State Bank
Shareholders. Pee Dee will duly call and convene the Special Meeting of its
shareholders and the shareholders of State Bank to act upon this Agreement, the
Merger Agreement, the Bank Merger Agreement and the transactions contemplated
hereby and thereby. Pee Dee shall prepare and mail (or otherwise provide) to its
shareholders, the Proxy Statement/Prospectus to solicit the approval of this
Agreement, the Merger Agreement, and the transactions contemplated hereby and
thereby by the shareholders of Pee Dee and State Bank. Pee Dee will use its best
efforts to obtain the required approval by its shareholders and the shareholders
of State Bank, including, subject to their legal obligations as directors of Pee
Dee, a recommendation of a favorable vote on the transactions contemplated
hereby by the Board of Directors of Pee Dee.
7.11 Environmental Assessment. Pee Dee shall permit Centura to have
performed, at Centura's expense, a Phase II Environmental Site Assessment and
any other investigation and exploration that Centura, in its sole discretion and
cost, deems necessary, of each parcel of the Premises by an individual or
organization acceptable to Centura. Such assessment, investigation or
exploration shall include, without limitation, such matters as shall be
applicable to each parcel of the Premises, and as may be specified by Centura in
a writing referring specifically to this Section 7.11.
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ARTICLE VIII
AFFIRMATIVE COVENANTS OF CENTURA
Except as otherwise consented to or waived by Pee Dee in writing,
Centura covenants that, throughout the pendency of this Agreement, it will:
8.1 Maintenance of Existence. Maintain its existence as a bank holding
company under the BHC Act and applicable state laws regarding bank holding
companies, cause Centura Bank to maintain its existence as a North Carolina bank
corporation, and conduct, and cause Centura Bank to conduct, its and their
respective businesses in compliance with all material obligations and duties
imposed on it and them by laws, governmental regulations, rules, and ordinances,
and judicial orders, judgments, and decrees applicable to Centura and Centura
Bank or its or their respective businesses or properties, except where Centura
or Centura Bank in good faith and by appropriate proceedings contests the
validity of any of the foregoing.
8.2 Filings with Commission. Provide Pee Dee promptly with a copy of
any and all filings made with the Commission from the date hereof through the
Effective Time.
8.3 Registration Under the Securities Act. Prepare and file with the
Commission the Registration Statement with respect to the Centura Common Stock
to be issued as contemplated by this Agreement and take such actions as are
reasonable to cause the Registration Statement to be declared effective. The
Registration Statement shall include the form of Proxy Statement/Prospectus that
will be mailed to the shareholders of Pee Dee and State Bank in connection with
the Reorganization, and, pursuant thereto, Centura will offer to exchange shares
of Centura Common Stock for the shares of Pee Dee Common Stock and State Bank
Common Stock which such shareholders own as provided herein.
8.4 Accounting Principles and Practices. Maintain all of its books and
records and the books and records of the Centura Subsidiaries, including all
financial statements, in accordance with accounting principles and practices
consistent with those used for its most recent financial statements, except for
changes in such principles and practices required by federal or state regulation
or under generally accepted accounting principles.
8.5 Issuance and Reservation of Centura Common Stock. As and when
required to consummate the Reorganization, issue the shares of Centura Common
Stock for which and into which shares of the Pee Dee Common Stock and State Bank
Common Stock (other than shares of State Bank Common Stock acquired by Centura
as a result of the Merger) issued and outstanding at the Effective Time are to
be exchanged and converted as provided herein.
8.6 Payment of Taxes. Punctually pay and discharge, all taxes,
assessments, and other governmental charges lawfully imposed upon it or the
Centura Subsidiaries or any of its or their respective properties, or upon the
income and profits thereof; provided, however, that nothing herein contained
shall prohibit Centura or any of the Centura Subsidiaries from contesting in
good faith and by appropriate proceedings the validity of any tax, assessment,
or governmental charge.
8.7 Substantial Litigation; Adverse Condition. Promptly upon receipt of
notice, notify Pee Dee of (i) the commencement of any litigation against Centura
or any of the Centura Subsidiaries seeking damages in excess of $500,000 or
threatening the consummation of the Merger or the Bank Merger, or (ii) the
existence of severe and adverse business conditions materially threatening the
continued, normal business operations of Centura or any of the Centura
Subsidiaries.
8.8 Properties. At all times maintain, preserve, and keep all of its
properties and the properties of any of the Centura Subsidiaries in a
satisfactory condition so as to ensure their normal use in the respective
business operations of it and the Centura Subsidiaries, except where failure to
do so would not materially or adversely affect the business or operations of
either Centura or any of the Centura Subsidiaries.
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8.9 Contracts. Perform all obligations under all material contracts,
leases, and documents relating to or affecting its or the Centura Subsidiaries
respective assets, properties, and business, except where failure to do so would
not materially or adversely affect the business or operations of either Centura
or any of the Centura Subsidiaries.
8.10 Insurance. Maintain in full force and effect insurance in amount
and scope of coverage which, in the judgment of Centura's management, is
consistent with the nature and scope of all activities as are conducted now or
will be conducted in the future by Centura and the Centura Subsidiaries.
ARTICLE IX
NEGATIVE COVENANTS OF PEE DEE
Pee Dee covenants that, throughout the pendency of this Agreement,
unless (i) specifically provided herein or permitted hereunder, or (ii) Centura
shall have consented in writing to an exception to any such covenant, it will
not:
9.1 Amendments. Amend the articles of incorporation or bylaws of Pee
Dee or the Pee Dee Subsidiary.
9.2 Capitalization. Authorize or establish any other class of capital
stock; issue, sell, or otherwise dispose of any shares of any class of capital
stock or any of its securities convertible into or representing a right or
option to purchase any such shares, or enter into other agreements (including
stock option agreements) to issue or sell any shares of any class of capital
stock, or change the presently outstanding shares of any class of capital stock
into a greater or lesser number of shares either by way of a stock dividend,
stock split, reclassification, combination, recapitalization, reorganization,
consolidation of shares or the like, or by way of a merger or consolidation.
9.3 Long-Term Indebtedness. Incur, or allow the Pee Dee Subsidiary to
incur, any indebtedness for money borrowed that becomes due and payable more
than one year after such incurrence; provided, however, that the foregoing shall
not prohibit Pee Dee or the Pee Dee Subsidiary from incurring such indebtedness
(i) in the ordinary course of the taking of deposits or the funding of a
particular loan, (ii) for the purpose of financing capital expenditures
permitted by Section 9.8 hereof, and (iii) for the purpose of refinancing any
indebtedness existing on the date hereof or permitted by this Agreement on terms
at least as favorable to Pee Dee or the Pee Dee Subsidiary, so long as the
consummation of the Reorganization or any related transaction will not
constitute a violation of any term of any such indebtedness.
9.4 Hypothecations. Except in the ordinary course of conducting
operations, purchase, redeem, retire, or otherwise acquire, or hypothecate,
pledge, or otherwise encumber, any shares of any class of its capital stock.
9.5 Dividends. Declare, set aside, or pay dividends on any shares of
any class of capital stock or make any other distribution of assets to the
holders of any shares of any class of capital stock. Notwithstanding the
foregoing, Pee Dee and State Bank shall be permitted to pay their regularly
scheduled dividend on January 2, 1998, in an amount equal to the lesser of $9.50
or the percentage of their 1997 net income that equals the percentage of its
1996 net income paid as a dividend and, after January 2, 1998, but prior to the
Closing Date, to declare and pay, or to declare for payment, a dividend payable
to the shareholders of Pee Dee in an aggregate amount not to exceed the lesser
of (i) an amount equal to the aggregate dividend the shareholders of Pee Dee
would have received in respect of Centura Common Stock had the Closing Date
occurred on the day prior to the dividend declaration by Pee Dee, or (ii) an
amount equal to 25% of the aggregate dividend paid by Pee Dee to its
shareholders for fiscal year 1997.
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9.6 Employee Benefits. Enter into or institute, or allow the Pee Dee
Subsidiary to enter into or institute, any employment contract, deferred
compensation, bonus, stock option, profit-sharing, pension, retirement, or
insurance plan, or similar employee benefit plan or program or terminate or
materially amend any such employee benefit now in existence, except as required
pursuant to this Agreement or periodic renewals of existing benefits, or
increase the salaries and other compensation payable to its directors, officers,
and employees other than normal increases in the ordinary course of business
consistent with prior practices and commitments existing as of the date hereof.
9.7 Inconsistent Agreements. Enter into, or allow the Pee Dee
Subsidiary to enter into, any agreement, understanding, or commitment, written
or oral, with any other party which is inconsistent in any material respect with
the obligations of Pee Dee or the Pee Dee Subsidiary arising under this
Agreement, the Merger Agreement, or the Bank Merger Agreement.
9.8 Capital Improvements. Effect any single capital improvement or
single purchase of equipment or furnishings involving an expenditure in excess
of $25,000. All expenditures in excess of such amount contemplated by Pee Dee as
of the date hereof are Previously Disclosed and are hereby consented to by
Centura, provided that the aggregate expenditures for all projects Previously
Disclosed shall not exceed $100,000.
9.9 Acquisition of Control. Acquire direct or indirect ownership or
control of voting shares or securities convertible into voting shares of, or any
other interest in, any presently nonaffiliated corporation, any newly-organized
business entity, any joint venture or other entity, other than shares or
interests acquired in the ordinary course of business in a fiduciary or
custodial capacity or as a result of debts previously contracted.
9.10 Other Acquisitions and Mergers. Initiate, propose, or otherwise
solicit from any person, corporation, or other group acting in concert any bids
or offers to purchase or acquire Pee Dee or the Pee Dee Subsidiary, cause Pee
Dee or the Pee Dee Subsidiary to merge into or consolidate with any other
corporation or person or permit any other corporation to be merged or
consolidated with it, or acquire all or any substantial part of the assets of
any other corporation or person not affiliated with Pee Dee as of the date
hereof, except where such acquisition relates to foreclosure procedures on
extensions of credit of Pee Dee or State Bank.
9.11 Sale of Assets. Sell or lease, or allow the Pee Dee Subsidiary to
sell or lease, all or any material portion of its assets or business other than
in the ordinary course of business or as agreed to by Centura.
ARTICLE X
NEGATIVE COVENANTS OF CENTURA
Centura covenants that, throughout the pendency of this Agreement,
unless (i) specifically provided herein or permitted hereunder, or (ii) Pee Dee
shall have consented in writing to an exception to any such covenant, it will
not:
10.1 Dividends. Declare, set aside, or pay dividends on any shares of
any class of capital stock or make any other distribution of assets to the
holders of any shares of any class of capital stock, other than (i) dividends by
Centura Bank to Centura, (ii) Centura's regular quarterly cash dividends payable
with respect to shares of Centura Common Stock, and (iii) stock dividends or
splits payable with respect to shares of Centura Common Stock. The payment of
any and all dividends by Centura to its shareholders and by Centura Bank to
Centura shall be subject to all applicable federal and state laws and
regulations.
10.2 Inconsistent Agreements. Enter into any agreement, understanding,
or commitment, written or oral, with any other party which is inconsistent in
any material respect with the obligations of Centura or Centura Bank arising
under this Agreement, the Merger Agreement or the Bank Merger Agreement or which
would prevent
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Centura from completing the transactions contemplated by this Agreement, the
Merger Agreement and the Bank Merger Agreement; provided, however, nothing in
this Agreement shall preclude Centura or any of its subsidiaries from
negotiating and concluding transactions with respect to a merger or other form
of business combination with any other corporation or entity.
10.3 Section 368(a) Reorganization. Take any action that will prevent
the Reorganization from being, or fail to take any action required of it
necessary for the Reorganization to be, treated as a reorganization pursuant to
and within the meaning of Section 368(a) and other applicable provisions of the
Code.
ARTICLE XI
INDEMNIFICATION
Each party represents and warrants that all information concerning it
which is included in any statement and application (including the Registration
Statement) made to any governmental agency in connection with the transactions
contemplated by this Agreement, the Merger Agreement or the Bank Merger
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. The party so representing and warranting will indemnify and hold
harmless the other, each of its directors and officers, and each person, if any,
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 (including, but not limited
to, the Securities Act and the Exchange Act) and will reimburse them for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any actions whether or not resulting in liability,
insofar as such losses, claims, damages, expenses, liabilities, or actions arise
out of are based upon any untrue statement or alleged untrue statement of a
material fact contained in any such application or statement or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing by
the representing and warranting party expressly for use therein. Each party
agrees at any time upon the request of the other to furnish to the other a
written letter or statement confirming the accuracy of the information contained
in any proxy statement, registration statement, report, or other application or
statement, or in any draft of any such document, and confirming that the
information contained in such document or draft was furnished expressly for use
therein or, if such is not the case, indicating the inaccuracies contained in
such document or draft or indicating the information not furnished expressly for
use therein. The indemnity agreement contained in this Article XI shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the other party.
ARTICLE XII
CONDITIONS PRECEDENT TO THE CLOSING
In addition to the conditions precedent contained in Section 2.7
hereof, the following are conditions to the consummation of the Merger and the
Bank Merger and the closing of the Reorganization, except that (i) any of such
conditions may be waived, to the extent permitted by law, by the mutual consent
in writing of Centura and Pee Dee; (ii) Centura may unilaterally waive in
writing, on behalf of all parties hereto, to the extent permitted by law, the
conditions set forth in Sections 12.2 through 12.6 and (iii) Pee Dee may
unilaterally waive in writing, on behalf of all parties hereto, to the extent
permitted by law, the conditions set forth in Sections 12.7 through 12.11.
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12.1 Restraining Orders. No order, judgment, or decree shall be
outstanding whether against a party hereto or a third party that would have the
effect of preventing completion of the Merger; no suit, action, or other
proceeding shall be pending or threatened by any governmental body in which it
is sought to restrain or prohibit the Reorganization; and no suit, action, or
other proceeding shall be pending before any court or governmental agency in
which it is sought to restrain or prohibit the Reorganization or obtain other
substantial monetary or other relief against one or more of the parties hereto
in connection with this Agreement, unless in the reasonable opinion of counsel
to the party wishing to proceed (which opinion shall be satisfactory in
substance to the other party in its reasonable judgment), such suit, action, or
proceeding is likely to be resolved in such a way as not to deprive either party
of any of the material benefits to it of the Reorganization and not to
materially adversely affect the business or financial condition of the party
subject thereto.
12.2 Pee Dee's Representations. The representations and warranties of
Pee Dee with respect to Pee Dee contained herein shall have been true and
correct in all material respects on the date made and shall be true and correct
in all material respects at the Effective Time as though made at such time,
excepting any changes occurring in the ordinary course of business, none of
which individually or in the aggregate has been materially adverse, and
excepting any changes contemplated or permitted by this Agreement. Pee Dee shall
have in all material respects duly performed all covenants, not otherwise waived
by Centura in writing, required by this Agreement, the Merger Agreement or the
Bank Merger Agreement to be performed by it prior to or at the Effective Time.
Centura shall have received a certificate of appropriate officers of Pee Dee
dated as of the Effective Time and certifying in such detail as Centura may
reasonably request to the fulfillment of the foregoing conditions.
12.3 Opinion of Counsel to Pee Dee. Centura shall have received an
opinion satisfactory in form and substance to it from Sinkler & Boyd, P.A.,
counsel to Pee Dee, dated the Effective Time and addressed to Centura as to the
matters addressed in Sections 2.7(b) (first sentence) and (c) (last sentence),
4.1, 4.2, 4.3 and 4.14 hereof and as to such other material matters as Centura
may reasonably request.
12.4 Accountants' Letter. Centura shall have received from J.W. Hunt
and Company, LLP, independent public accountants ("J.W. Hunt"), a letter dated
the Effective Time and addressed to Centura in form and substance satisfactory
to Centura to the effect that:
(i) they are independent public accountants with respect to
Pee Dee; and
(ii) in their opinion the audited financial statements of Pee
Dee examined by them and included in the Independent Auditor's Report,
dated January 24, 1997, comply as to form in all material respects with
the applicable requirements of the Securities Act and the applicable
published rules and regulations of the Commission with respect to the
preparation of such reports; and
(iii) in their opinion the audited financial statements of Pee
Dee examined by them and included in the Registration Statement comply
as to form in all material respects with the applicable requirements of
the Securities Act and the applicable published rules and regulations
of the Commission with respect to Registration Statements on Form S-4
or such other form of registration statement as may be applicable to
the filing of the Registration Statement.
12.5 Affiliates' Agreement. Each of the affiliates of Pee Dee, as
identified under Section 7.9 of this Agreement, shall have signed and delivered
the agreement referred to therein in form and substance satisfactory to Centura
and its counsel agreeing to comply with the restrictions on resale of the shares
of Centura Common Stock to be issued to them pursuant to this Agreement.
12.6 Accounting Treatment. Pee Dee shall have received from J. W. Hunt
letters, dated the day of or shortly prior to each of the mailing date of the
Proxy Statement/Prospectus and the Effective Date, stating its opinion that the
Reorganization shall qualify for pooling-of-interest accounting treatment.
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12.7 Centura's Representations. The representations and warranties of
Centura (other than with respect to the representations and warranties regarding
the number of issued and outstanding shares of Centura Common Stock set forth in
Section 5.5 hereof) contained herein shall have been true and correct in all
material respects on the date made and shall be true and correct in all material
respects at the Effective Time as though made at such time, excepting any
changes occurring in the ordinary course of business, none of which either
individually or in the aggregate has been materially adverse, and excepting for
any changes contemplated or permitted by this Agreement. Centura shall have in
all material respects duly performed all covenants, not otherwise waived by Pee
Dee in writing, required by this Agreement, the Merger Agreement or the Bank
Merger Agreement to be performed by it prior to or at the Effective Time. Pee
Dee shall have received a certificate of appropriate officers of Centura dated
such date and certifying in such detail as Pee Dee may reasonably request to the
fulfillment of the foregoing conditions.
12.8 Opinion of Counsel to Centura. Pee Dee shall have received an
opinion satisfactory in form and substance to it from Poyner and Spruill,
counsel to Centura, dated the Effective Time and addressed to Pee Dee as to the
matters addressed in Sections 2.7(a) and (c) (first and second sentences), 5.1,
5.2, 5.3, 5.4 and 5.10 hereof and as to such other material matters as Pee Dee
may reasonably request.
12.9 Accountants' Letter. Pee Dee shall have received from KPMG Peat
Marwick, independent public accountants ("KPMG"), a letter dated the Effective
Time, and addressed to Pee Dee, in form and substance satisfactory to Pee Dee,
to the effect that:
(i) they are independent public accountants with respect to
Centura; and
(ii) in their opinion the audited consolidated financial
statements of Centura examined by them and included in the Registration
Statement (by incorporation by reference or otherwise) comply as to
form in all material respects with the applicable requirements of the
Securities Act and the applicable published rules and regulations of
the Commission thereunder with respect to Registration Statements on
Form S-4 or such other form of registration statement as may be
applicable to the filing of the Registration Statement.
12.10 Accounting Treatment. Centura shall have received from KPMG
letters, dated the day of or shortly prior to each of the mailing date of the
Proxy Statement/Prospectus and the Effective Date, stating its opinion that the
Reorganization shall qualify for pooling-of-interest accounting treatment.
12.11 Fairness Opinion. Pee Dee shall have received the opinion of The
Carson Medlin Company ("Carson Medlin"), its financial advisor, that
consideration to be received in the Reorganization is fair to the shareholders
of Pee Dee and State Bank from a financial point of view, which opinion shall be
dated as of the date of the Proxy Statement/Prospectus, confirmed as of a date
within five business days prior to the Closing Date and in a form reasonably
satisfactory to Pee Dee.
ARTICLE XIII
CLOSING DATE
As soon as practicable after the later of (i) the receipt by Centura of
the final regulatory approval or consent necessary to effect the Reorganization,
or (ii) the thirtieth (30th) calendar day following the effective date of the
order issued by the Federal Reserve approving the Reorganization, Centura and
Pee Dee shall agree upon a scheduled closing date (such date referred to herein
as the "Closing Date") which, unless otherwise mutually agreed, shall be the
last business day of the month during which the last of (i) or (ii) occurs, and
the Reorganization shall occur at such time or as soon thereafter as
practicable.
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ARTICLE XIV
SURVIVAL OF REPRESENTATIONS,
WARRANTIES, AND COVENANTS
Centura and Pee Dee agree that no representation, warranty, or covenant
contained in this Agreement, in the Merger Agreement, or in the Bank Merger
Agreement or in any exhibit, schedule, letter, certificate, or other instrument
referred to in this Agreement, in the Merger Agreement or the Bank Merger
Agreement or delivered or made by or on behalf of any party to either this
Agreement, the Merger Agreement, or the Bank Merger Agreement in connection with
any transactions contemplated by this Agreement, the Merger Agreement, or the
Bank Merger Agreement shall survive either the Effective Time or any termination
of this Agreement, the Merger Agreement, or the Bank Merger Agreement pursuant
to Article XVI hereof, except for (i) the covenants set forth in Sections 7.9,
10.3 and 17.1, and Article XI hereof which shall survive the Effective Time;
(ii) the covenants set forth in Sections 2.6 and 17.1 hereof which shall survive
the termination of this Agreement; and (iii) the Merger Agreement and the Bank
Merger Agreement which shall survive the Effective Time. Nothing in this
Agreement or the Merger Agreement shall be construed to alter the effectiveness
of any legal opinion, accountant's certificate, or any other letter or report
rendered in connection with the transactions contemplated by this Agreement, the
Merger Agreement or the Bank Merger Agreement.
ARTICLE XV
ENTIRE AGREEMENT
This Agreement, the Merger Agreement, the Bank Merger Agreement and all
exhibits, appendices, schedules, or supplements to any of such documents embody
the entire agreement between the parties hereto with respect to the transactions
contemplated hereby, and, except as expressly provided herein or in the Merger
Agreement and the Bank Merger Agreement, none of this Agreement, the Merger
Agreement and the Bank Merger Agreement shall be affected by reference to any
other document. All prior negotiations, discussions, and agreements by and
between the parties hereto with respect to the transactions contemplated hereby
which are not reflected or set forth in this Agreement, the Merger Agreement or
the Bank Merger Agreement therefore have no force or effect. Each
representation, warranty, covenant, condition, or agreement contained in this
Agreement, the Merger Agreement or the Bank Merger Agreement made by any of the
parties hereto shall have independent force and effect and shall not be affected
by any other representation except by specific reference.
ARTICLE XVI
TERMINATION OF AGREEMENT
16.1 Mutual Consent; Absence of Shareholder Approval; Termination Date.
This Agreement, the Merger Agreement and the Bank Merger Agreement shall
terminate at any time when the parties hereto mutually agree in writing. This
Agreement, the Merger Agreement and the Bank Merger Agreement shall terminate at
the election of either Centura or Pee Dee,upon written notice from the party
electing to terminate this Agreement to the other party if the Merger Agreement
and the Bank Merger Agreement are not ratified, confirmed, and approved by the
legally required affirmative vote of the shareholders of Pee Dee and State Bank
at the Special Meeting or at any continuations of such Special Meeting after the
adjournment thereof or there has been a denial which is not appealable of any
material regulatory approval or consent required to consummate the
Reorganization. Unless extended by the written mutual agreement of the parties,
as provided herein, this Agreement and the Merger Agreement shall terminate if
all requisite regulatory approvals are not received prior to June 30, 1998 (the
"Termination Date"). The Termination Date may be extended in the event that an
application is pending before a regulatory agency on the Termination Date and
the party on whose behalf such application has been filed certifies to the other
party hereto that there is no reason to believe that such application will be
disapproved; provided, however, that such extension shall not be effective for
more than ninety (90) days after the Termination Date.
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16.2 Election by Centura. Notwithstanding the approval of the Merger
Agreement and the Bank Merger Agreement by the shareholders of Pee Dee and State
Bank, this Agreement shall terminate at Centura's election, upon written notice
from Centura to Pee Dee, (i) in accordance with the applicable provisions of
Section 3.1 hereof, (ii) if Centura elects, within thirty (30) days following
the date of the execution of this Agreement to terminate this Agreement as a
result of the information Previously Disclosed to Centura in accordance with the
terms of this Agreement or as a result of its due diligence investigation
carried out in connection with the transactions contemplated by this Agreement,
the Merger Agreement and the Bank Merger Agreement, which information in either
case, materially and adversely differs from the information contained in Pee
Dee's Financial Statements or from information Previously Disclosed to Centura
prior to the execution of this Agreement, or (iii) if either or both of the
following events shall occur and shall not have been remedied to the
satisfaction of Centura within thirty (30) days after written notice is
delivered to Pee Dee: (a) there shall have been any material breach of any of
the obligations, covenants, or warranties of Pee Dee hereunder or under the
Merger Agreement or Bank Merger Agreement, or (b) there shall have been any
representation or statement furnished by Pee Dee hereunder or under the Merger
Agreement or the Bank Merger Agreement which is false or misleading in any
material respect at the time furnished.
16.3 Election by Pee Dee. Notwithstanding the approval of the Merger
Agreement by the shareholders of Pee Dee, this Agreement shall terminate at Pee
Dee's election, upon written notice from Pee Dee to Centura, (i) in accordance
with the applicable provisions of Section 3.1 hereof, (ii) if Pee Dee elects,
within thirty (30) days following the date of the execution of this Agreement,
to terminate this Agreement as a result of the information Previously Disclosed
to Pee Dee in accordance with the terms of this Agreement or as a result of its
due diligence investigation carried out in connection with the transactions
contemplated by this Agreement and the Merger Agreement, which information
materially and adversely differs from the information contained in Centura's
Financial Statements or from information Previously Disclosed to Centura prior
to the execution of this Agreement, (iii) if Pee Dee shall have failed to
receive the fairness opinion of Carson Medlin, as described in Section 12.11
above, or (iv) if either or both of the following events shall occur and shall
not have been remedied to the satisfaction of Pee Dee within thirty (30) days
after written notice is delivered to Centura (a) there shall have been any
material breach of any of the obligations, covenants, or warranties of Centura
hereunder or under the Merger Agreement or (b) there shall have been any
representation or statement furnished by Centura hereunder or under the Merger
Agreement which is false or misleading in any material respect at the time
furnished.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 Expenses. Whether or not the transactions contemplated hereunder
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
17.2 Publicity. Except as may be required to comply with disclosure
obligations and after reasonable attempts have been made to comply with this
Section 17.2, the form, content, and timing of all announcements,
communications, and press releases of any kind concerning this Agreement, the
Merger Agreement, or any of the transactions contemplated hereby or thereby
shall be subject to the prior approval of Centura and Pee Dee.
17.3 Amendment. Neither this Agreement, the Merger Agreement nor the
Bank Merger Agreement may be amended, modified, or supplemented except by an
instrument in writing signed by duly authorized representatives of each of
Centura and Pee Dee, as applicable. No covenant, condition, or other provision
of this Agreement, the Merger Agreement or the Bank Merger Agreement may be
waived, and no exception may be consented to, except by an instrument in writing
signed by a duly authorized representative of the party entitled to grant such
waiver or consent.
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17.4 Governing Law. This Agreement, the Merger Agreement, the Bank
Merger Agreement and the transactions contemplated hereby and thereby shall be
governed by and construed in accordance with the laws of the State of North
Carolina, except as to the statutory requirements related to the Merger and the
Bank Merger, which shall be governed and construed in accordance with South
Carolina law and North Carolina law, as applicable, and as otherwise expressly
provided in this Agreement, the Merger Agreement or the Bank Merger Agreement or
as federal law may be applicable to the transactions contemplated by this
Agreement.
17.5 Communications. All notices, requests, demands, consents, waivers,
and other communications hereunder shall be in writing and shall be delivered by
hand, by commercial courier service such as Federal Express, or sent by
certified or registered mail, postage prepaid, return receipt requested, or by
confirmed telegram, as follows:
If to Centura:
Centura Banks, Inc.
Post Office Box 1220
134 North Church Street
Rocky Mount, North Carolina 27804
Attn: Joseph A. Smith, Jr., Esq.
Senior Vice President
and General Counsel
With a copy to:
Michael S. Colo, Esq.
Poyner & Spruill, L.L.P.
Post Office Box 353
130 South Franklin Street
Rocky Mount, North Carolina 27802-0353
or
If to Pee Dee:
Pee Dee Bankshares, Inc.
Post Office Box 5956
2000 West Palmetto Street
Florence, South Carolina 29502
Attn: R.B. Scarborough
President
With a copy to:
George S. King, Jr., Esq.
Sinkler & Boyd, P.A.
The Palmetto Center
Post Office Box 11889 (29211-1889)
1426 Main Street, Suite 1200
Columbia, South Carolina 29201-2834
Any such notice or other communication so addressed shall be deemed to have been
received by the addressee as of the date of such receipt or confirmation.
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17.6 Successors and Assigns. The rights and obligations of the parties
hereto shall inure to the benefit of and shall be binding upon the successors
and assigns of each of them; provided, however, that this Agreement, the Merger
Agreement, the Bank Merger Agreement and any of the rights, interests, or
obligations hereunder and thereunder shall not be assigned by either of the
parties hereto without the prior written consent of the other party hereto.
17.7 Cover, Table of Contents, and Headings. The cover, the table of
contents, and the headings of the Articles and Sections of this Agreement, the
Merger Agreement and the Bank Merger Agreement have been inserted for
convenience of reference only and shall not be deemed to be a part of either
such document.
17.8 Counterparts. This Agreement, the Merger Agreement and the Bank
Merger Agreement may be executed in several identical counterparts, each of
which when executed by the parties hereto and delivered shall be an original,
but all of which together shall constitute a single instrument. In making proof
of this Agreement, it shall not be necessary to produce or account for more than
one such counterpart.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal as of the 30th day of December, 1997.
CENTURA BANKS, INC.
By: /s/ Steven J. Goldstein
________________________________
Steven J. Goldstein
Chief Financial Officer
ATTEST:
/s/ Joseph A. Smith, Jr.
________________________________
Secretary
(SEAL)
PEE DEE BANKSHARES, INC.
By: /s/ R. B. Scarborough
________________________________
R. B. Scarborough
President
ATTEST:
/s/ Thomas J. Levine
________________________________
Secretary
(SEAL)
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of this _____ day of ____________________, 1998, by and between Centura
Banks, Inc., a North Carolina bank holding company its principal place of
business in Rocky Mount, North Carolina ("Centura"), and Pee Dee Bankshares,
Inc., a South Carolina bank holding company having its principal place of
business in Timmonsville, South Carolina ("Pee Dee").
W I T N E S S E T H:
The respective Boards of Directors of Centura and Pee Dee have
determined that the merger of Pee Dee with and into Centura, pursuant to the
terms and conditions set forth herein, is in the best interests of Centura and
Pee Dee and their shareholders. This Agreement is made and entered into as
contemplated by an Agreement and Plan of Reorganization, dated as of December
____, 1997 (the "Reorganization Agreement"), between Centura and Pee Dee, which
Reorganization Agreement is incorporated herein by reference and made a part
hereof. In consideration of the premises, and the mutual covenants and
agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
All terms used in this Agreement, unless otherwise defined herein,
shall have the same meanings as set forth in the Reorganization Agreement.
ARTICLE II
TERMS AND CONDITIONS OF THE MERGER
2.1 In General. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined herein), Pee Dee shall be merged (the
"Merger") with and into Centura pursuant to the provisions of, and with the
effect provided in, Sections 55-11-01 and 55-11-06 of the North Carolina General
Statutes and Sections 34-25-40 of the Code of Laws of South Carolina. Pee Dee
and Centura are collectively referred to herein as the "Merging Corporations."
2.2 Effect of Merger. At the Effective Time, the separate existence of
Pee Dee shall cease and Centura, as the surviving entity, shall continue to
operate under the Articles of Incorporation of Centura and with the name
"Centura Banks, Inc." Centura is hereinafter sometimes referred to as the
"Surviving Corporation".
2.3 Business of the Surviving Corporation. The business of the
Surviving Corporation shall be that of a North Carolina bank holding company and
shall be conducted at the principal office of the Surviving Corporation, which
shall be located at 134 North Church Street, Rocky Mount, North Carolina 27804.
ARTICLE III
EFFECTIVE TIME
3.1 Effective Time of Merger. The Merger shall be effective at
__________ __.m. on ___________________, 1998 (the "Effective Time").
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3.2 As of the Effective Time:
(a) Pee Dee shall be merged into and continued in the
Surviving Corporation, and the separate corporate existence of Pee Dee shall
cease.
(b) All assets, rights, franchises, and interests of Pee Dee
in every type of property (real, personal and mixed) and choses in action shall
be transferred to and vested in the Surviving Corporation by virtue of the
Merger without any deed or other transfer. The Surviving Corporation, upon the
Merger and without any order or other action on the part of any court or
otherwise, shall hold and enjoy all rights of property, franchises, and
interests in the same manner and to the same extent as such rights, franchises,
and interest were held or enjoyed by Pee Dee at the Effective Time.
(c) The Surviving Corporation shall be liable for all
liabilities of every kind and description of Pee Dee to the extent provided by
law.
ARTICLE IV
EXCHANGE OF SHARES
4.1 The Exchange. At the Effective Time, and subject to the provisions
of this Section 4.1 for adjustments of the Exchange Ratio and the provisions for
fractional payments set forth in Section 4.2 hereof, the shares of issued and
outstanding Pee Dee Common Stock shall, by virtue of the Merger and at the
Effective Time, automatically be canceled and, without any further notice to or
action on the part of the holders thereof, each holder of Pee Dee Common Stock
shall be entitled to receive, in exchange for each share of Pee Dee Common Stock
owned by such shareholder, the number of shares of Centura Common Stock
determined in accordance with the following formula:
APP
NC=(---X.95726984) divided by 56,133
ASP
where NC = the number of shares of Centura Common Stock to be issued for each
share of Pee Dee Common Stock, APP = Aggregate Purchase Price, and ASP = Average
Share Price; provided, however, that if the Average Share Price is less than
$50.42 or more than $75.63, either party may elect to terminate this Agreement.
Notwithstanding the foregoing, however, if the Average Share Price is greater
than $69.32 but equal to or less than $75.63, the amount of $69.32, in lieu of
the Average Share Price, shall be used to determine the number of shares of
Centura Common Stock to be issued in the exchange for Pee Dee Common Stock
pursuant to the above.
The number of shares of Centura Common Stock into which shares of Pee
Dee Common Stock are to be converted under this Section 4.1 shall be adjusted to
reflect any consolidation, split up, other subdivision or combination of Centura
Common Stock, any dividend payable in Centura Common Stock or any capital
reorganization involving the reclassification of Centura Common Stock subsequent
to the date of this Agreement.
4.2 Cash in Lieu of Fractional Shares. No fractional shares of Centura
Common Stock will be issued or delivered hereunder, but, in lieu thereof, a cash
adjustment shall be made on the basis of Average Share Price of Centura Common
Stock multiplied by the fractional interest. Centura and Pee Dee acknowledge
that any such cash adjustment is simply a means of dispensing with the need to
issue fractional shares and is not separately bargained for consideration.
4.3 Exchange Agent. Registrar and Transfer Company, Cranford, New
Jersey, shall serve as the exchange agent under the Merger Agreement.
Immediately prior to the Effective Time, Centura shall deposit with the Exchange
Agent that amount of shares of Centura Common Stock and cash necessary to
consummate the
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Merger. Promptly after the Effective Time, the Exchange Agent will forward to
each former shareholder of Pee Dee a letter of transmittal providing for the
transmission of the certificate or certificates theretofore representing shares
of Pee Dee Common Stock to the Exchange Agent for exchange and conversion in
accordance with Sections 4.1 and 4.2, above.
Each holder of Pee Dee Common Stock, upon presentation and surrender of
the certificate or certificates therefor to Centura or the Exchange Agent, shall
be entitled to receive in exchange therefor a certificate or certificates
representing the whole number of shares of Centura Common Stock and a check for
the amount of cash payable with respect to fractional shares, if any, to which
that holder is entitled under the terms of this Agreement and the Merger
Agreement. Until so presented and surrendered in exchange for a certificate
representing Centura Common Stock, each certificate which represented issued and
outstanding shares of Pee Dee Common Stock at the Effective Time shall be deemed
for all purposes to evidence ownership of that whole number of shares of Centura
Common Stock and the right to receive a cash payment for any fractional interest
in shares (without interest) into which such shares of Pee Dee Common Stock have
been converted pursuant to the Merger. Following the Effective Time, holders of
certificates of Pee Dee Common Stock that are deemed to evidence ownership of
shares of Centura Common Stock shall be entitled to participate in all dividends
declared by Centura on an equal basis, and shall be permitted to vote at any
meeting of the shareholders of Centura; provided, however, that such holders of
certificates of Pee Dee Common Stock shall be entitled to receive such dividends
(without interest) only after the surrender of such certificates in exchange for
certificates representing Centura Common Stock as provided herein.
4.4 Dissenters' Rights. Holders of shares of Pee Dee Common Stock shall
be entitled to such dissenters' rights as provided in the Code of the laws of
South Carolina in connection with the Merger.
ARTICLE V
ARTICLES OF INCORPORATION AND BY-LAWS
OF SURVIVING CORPORATION
The Articles of Incorporation and the By-Laws of Centura in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and the By-Laws of the Surviving Corporation, amended as set forth below in each
case, until further amended in accordance with applicable law.
ARTICLE VI
GENERAL PROVISIONS
6.1 Entire Agreement. This Agreement and the Reorganization Agreement
contain the entire agreement and understanding between the parties with respect
to the Merger, and supersede any and all prior arrangements or understandings
with respect thereto. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
6.2 Amendment. At any time before the Effective Time, the Merging
Corporations may interpret or amend this Agreement.
6.3 Termination. At any time before the Effective Time, this Agreement
may be terminated, notwithstanding any prior shareholder vote or approval by
written consent of the Boards of Directors of the Merging Corporations.
6.4 Shareholder Vote. This Agreement has been approved by the
shareholders of Pee Dee.
6.5 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of North Carolina and the State of
South Carolina, as applicable.
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6.6 Headings, etc. The headings and captions contained in this
Agreement are for convenience of reference only and are not part of this
Agreement and shall not affect the construction.
6.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Merging Corporations has caused this
Agreement to be executed by their respective duly authorized officers and their
corporate seals to be hereunto affixed and attested by their officers thereunto
duly authorized, all as of the day and year first above written.
CENTURA BANKS, INC.
By: ____________________________________________
Its: ___________________________________________
ATTEST:
- ----------------------------------
Secretary
[SEAL]
PEE DEE BANKSHARES, INC.
By: ____________________________________________
Its: ___________________________________________
ATTEST:
- ----------------------------------
Secretary
[SEAL]
A-4
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of this _____ day of ____________, 1998, by and between Centura Bank, a
North Carolina banking corporation having its principal place of business in
Rocky Mount, North Carolina ("Centura") and Pee Dee State Bank, a South Carolina
bank corporation having its principal place of business in Florence, South
Carolina ("State Bank").
W I T N E S S E T H:
The respective Boards of Directors of State Bank and Centura have
determined that the merger of State Bank with and into Centura, pursuant to the
terms and conditions set forth herein, is in the best interests of State Bank
and Centura and the interests of their shareholders. This Agreement is made and
entered into as contemplated by an Agreement and Plan of Reorganization, dated
as of December ____, 1997 (the "Reorganization Agreement"), between Pee Dee
Bankshares, Inc. and Centura Banks, Inc., which Reorganization Agreement is
incorporated herein by reference and made a part hereof. In consideration of the
premises, and the mutual covenants and agreements contained in this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
All terms used in this Agreement, unless otherwise defined herein,
shall have the same meanings as set forth in the Reorganization Agreement.
ARTICLE II
TERMS AND CONDITIONS OF THE MERGER
2.1 In General. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined herein), State Bank shall be merged (the
"Merger") with and into Centura pursuant to the provisions of, and with the
effect provided in, Sections 53-2 and 53-13 of the North Carolina General
Statutes and Section 34-25- 240 of the Code of Laws of South Carolina. State
Bank and Centura are collectively referred to herein as the "Merging Banks."
2.2 Effect of Merger. At the Effective Time, the separate existence of
State Bank shall cease and Centura, as the surviving entity, shall continue to
operate in the States of North Carolina and South Carolina under the Articles of
Incorporation of Centura and with the name "Centura Bank". Centura is
hereinafter sometimes referred to as the "Surviving Bank".
2.3 Business of the Surviving Bank. The business of the Surviving Bank
shall be that of a North Carolina bank corporation doing business in North
Carolina and South Carolina and shall be conducted at the Main Office of the
Surviving Bank in North Carolina at 134 North Church Street, Rocky Mount, North
Carolina, with its principal office in South Carolina at 2000 West Palmetto
Street, Florence, South Carolina 29502, and at its legally established or
authorized branch offices, agencies and facilities, including all such branches,
offices, agencies, and facilities of State Bank.
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ARTICLE III
EFFECTIVE TIME
3.1 Effective Time of Merger. The Merger shall be effective at
__________ __.m. on ___________ ___, 1998 (the "Effective Time").
3.2 As of the Effective Time:
(a) State Bank shall be merged into and continued in the
Surviving Bank, and the separate corporate existence of State Bank shall cease.
(b) All assets, rights, franchises, and interests of State
Bank in every type of property (real, personal and mixed) and choses in action
shall be transferred to and vested in the Surviving Bank by virtue of the Merger
without any deed or other transfer. The Surviving Bank, upon the Merger and
without any order or other action on the part of any court or otherwise, shall
hold and enjoy all rights of property, franchises, and interests, including
appointments, designations, and nominations, and all other rights and interests
as trustee, executor, administrator, registrar of stock and bonds, guardian of
estates, assignee, and receiver, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interest were
held or enjoyed by State Bank at the Effective Time.
(c) The Surviving Bank shall be liable for all liabilities of
every kind and description of State Bank to the extent provided by law.
ARTICLE IV
EXCHANGE OF COMMON STOCK
4.1 The Exchange. At the Effective Time, and subject to the provisions
of this Section 4.1 for adjustments of the Exchange Ratio and the provisions for
fractional payments set forth in Section 4.2 hereof, the shares of issued and
outstanding State Bank Common Stock shall, by virtue of the Merger and at the
Effective Time, automatically be canceled and, without any further notice to or
action on the part of the holders thereof, each holder of State Bank Common
Stock (other than Pee Dee Bankshares, Inc.) shall be entitled to receive, in
exchange for each share of State Bank Common Stock owned by such shareholder,
the number of shares of Centura Common Stock determined by dividing (a) the
Aggregate Purchase Price by the Average Share Price, and (b) the quotient
thereof by 63,000; provided, however, that if the Average Share Price is less
than $50.42 or more than $75.63, either party may elect to terminate this
Agreement. Notwithstanding the foregoing, however, if the Average Share Price is
greater than $69.32 but equal to or less than $75.63, the amount of $69.32, in
lieu of the Average Share Price, shall be used to determine the number of shares
of Centura Common Stock to be issued in the exchange for Pee Dee Common Stock
and State Bank Common Stock pursuant to the above.
The number of shares of Centura Common Stock into which shares of State
Bank Common Stock are to be converted under this Section 4.1 shall be adjusted
to reflect any consolidation, split up, other subdivision or combination of
Centura Common Stock, any dividend payable in Centura Common Stock or any
capital reorganization involving the reclassification of Centura Common Stock
subsequent to the date of this Agreement.
4.2 Cash in Lieu of Fractional Shares. No fractional shares of Centura
Common Stock will be issued or delivered hereunder, but, in lieu thereof, a cash
adjustment shall be made on the basis of Average Share Price of Centura Common
Stock multiplied by the fractional interest. Centura and Pee Dee acknowledge
that any such cash adjustment is simply a means of dispensing with the need to
issue fractional shares and is not separately bargained for consideration.
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<PAGE>
4.3 Exchange Agent. Registrar and Transfer Company, Cranford, New
Jersey, shall serve as the exchange agent under the Merger Agreement.
Immediately prior to the Effective Time, Centura shall deposit with the Exchange
Agent that amount of shares of Centura Common Stock and cash necessary to
consummate the Merger. Promptly after the Effective Time, the Exchange Agent
will forward to each former shareholder of Pee Dee a letter of transmittal
providing for the transmission of the certificate or certificates theretofore
representing shares of Pee Dee Common Stock to the Exchange Agent for exchange
and conversion in accordance with Sections 4.1 and 4.2, above.
Each holder of Pee Dee Common Stock, upon presentation and surrender of
the certificate or certificates therefor to Centura or the Exchange Agent, shall
be entitled to receive in exchange therefor a certificate or certificates
representing the whole number of shares of Centura Common Stock and a check for
the amount of cash payable with respect to fractional shares, if any, to which
that holder is entitled under the terms of this Agreement and the Merger
Agreement. Until so presented and surrendered in exchange for a certificate
representing Centura Common Stock, each certificate which represented issued and
outstanding shares of Pee Dee Common Stock at the Effective Time shall be deemed
for all purposes to evidence ownership of that whole number of shares of Centura
Common Stock and the right to receive a cash payment for any fractional interest
in shares (without interest) into which such shares of Pee Dee Common Stock have
been converted pursuant to the Merger. Following the Effective Time, holders of
certificates of Pee Dee Common Stock that are deemed to evidence ownership of
shares of Centura Common Stock shall be entitled to participate in all dividends
declared by Centura on an equal basis, and shall be permitted to vote at any
meeting of the shareholders of Centura; provided, however, that such holders of
certificates of Pee Dee Common Stock shall be entitled to receive such dividends
(without interest) only after the surrender of such certificates in exchange for
certificates representing Centura Common Stock as provided herein.
4.4 Dissenters' Rights. Holders of shares of State Bank Common Stock
shall be entitled to such dissenters' rights as provided in the Code of the laws
of South Carolina in connection with the Merger.
ARTICLE V
ARTICLES OF INCORPORATION AND BY-LAWS
OF SURVIVING BANK
The Articles of Incorporation and the By-Laws of Centura in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and the By-Laws of the Surviving Bank, amended as set forth below in each case,
until further amended in accordance with applicable law.
ARTICLE VI
GENERAL PROVISIONS
6.1 Entire Agreement. This Agreement and the Reorganization Agreement
contain the entire agreement and understanding between the parties with respect
to the Merger, and supersede any and all prior arrangements or understandings
with respect thereto. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
6.2 Amendment. At any time before the Effective Time, the Merging Banks
may interpret or amend this Agreement.
6.3 Termination. At any time before the Effective Time, this Agreement
may be terminated, notwithstanding any prior shareholder vote or approval by
written consent of the Boards of Directors of the Merging Banks.
B-3
<PAGE>
6.4 Shareholder Vote. This Agreement has been approved by Centura
Banks, Inc., as the sole shareholder of Centura and by the shareholders of State
Bank.
6.5 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of North Carolina and the laws of
South Carolina, as applicable.
6.6 Headings, etc. The headings and captions contained in this
Agreement are for convenience of reference only and are not part of this
Agreement and shall not affect the construction.
6.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Merging Banks has caused this Agreement
to be executed by their respective duly authorized officers and their corporate
seals to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
CENTURA BANK
By: ____________________________________________
Its: ___________________________________________
ATTEST:
- ----------------------------------
Secretary
[SEAL]
PEE DEE STATE BANK
By: ____________________________________________
Its: ___________________________________________
ATTEST:
- ----------------------------------
Secretary
[SEAL]
B-4
<PAGE>
EXHIBIT C
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into
and made effective this _____ day of ____________, 199__, between R. B.
Scarborough ("Executive") and Centura Bank (the "Bank"), a wholly-owned
subsidiary of Centura Banks, Inc. ("Centura").
WHEREAS, the Bank desires to provide for Executive's employment with
the Bank; and
WHEREAS, the Bank desires to enter into this Agreement with Executive
to set forth the terms of his employment; and
WHEREAS, Executive agrees that the terms of this Agreement will allow
him to be employed with and to devote his best efforts to the Bank.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the parties agree as follows:
1. EMPLOYMENT.
The Bank shall employ Executive as Senior Market Manager, with the
duties, responsibilities and powers of such position as assigned to him and as
customarily associated with such position. Executive shall faithfully and
diligently discharge his duties and responsibilities under this Agreement.
2. TERM.
The Term of this Agreement shall be three (3) years, commencing on the
date hereof.
3. COMPENSATION AND BENEFITS.
During the Term of this Agreement, the Bank shall pay to Executive as
compensation for his services as Senior Market Manager at an annual salary of
ONE HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($125,000.00), payable in
equal monthly installments. Executive shall also be eligible for bonus
compensation in accordance with the Bank's Economic Value Added Incentive Plan
with respect to similarly situated employees.
The above-stated compensation shall not be deemed inclusive nor prevent
Executive from receiving any other compensation provided by the Bank, and he
shall be entitled in any event (either directly or through salary adjustment) to
health and hospitalization insurance (including major medical), with no
interruption in benefits and with acceptance of all pre-existing conditions
accepted under comparable plans previously maintained by Pee Dee State Bank
("State Bank"), long-term disability insurance and life insurance, all in
accordance (except as otherwise expressly provided herein) with the Bank's
insurance plans for officers and employees in comparable positions as such plans
may be modified from time to time. For so long as Executive is an officer or
employee of the Bank, Executive shall be entitled to participate in all current
and future employee benefit plans and arrangements in which officers and
employees of the Bank in comparable positions are permitted to participate.
4. TERMINATION.
Executive's employment under this Agreement shall terminate:
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(a) Death. Upon the death of Executive;
(b) Disability. Upon notice from the Bank to Executive in the
event Executive becomes "permanently disabled." For purposes of this Agreement,
Executive shall be deemed "permanently disabled" six (6) months after the first
date that he has become disabled by bodily or mental illness, disease, or
injury, to the extent that he is prevented from performing his material and
substantial duties of employment, and such disability has continued
uninterrupted for six (6) months. If the parties or their representatives cannot
agree as to whether Executive is "permanently disabled," as defined herein, they
shall choose a physician to examine Executive for the purpose of determining or
confirming the existence or extent of any disability. If the parties or their
representatives cannot agree on the choice of a physician to make such
examination, each party or its representative shall select one physician to make
such examination and the two physicians selected shall select a third physician
to make such examination and the three examining physicians shall by majority
vote determine or confirm the existence or extent of any disability. All fees
and costs associated with such examination will be borne by Bank;
(c) Cause. Upon notice from the Bank to Executive for cause.
For purposes of this Agreement, "cause" shall be defined as (i) a willful and
continued failure by Executive to perform his duties in the capacities indicated
above (other than due to disability); or (ii) a material breach by Executive of
his fiduciary duties of loyalty or care to the Bank, as established by the Board
of Directors of the Bank (other than due to disability); or (iii) a willful
violation by Executive of any provision of this Agreement; or (iv) a conviction
of, or the entering of a plea of nolo contendere by Executive for any felony or
any crime involving fraud or dishonesty; or (v) a willful violation of any
federal or state banking laws or regulations applicable to the Bank. In
addition, if Executive shall terminate his employment for a breach of this
Agreement by the Bank in accordance with Section 4(d) hereof, and it is
ultimately determined that no reasonable basis existed for Executive's
termination on account of the alleged default of the Bank, such event shall be
deemed cause for termination by the Bank.
Any notice of termination of Executive's employment with the
Bank for cause shall set forth in reasonable detail the facts and circumstances
claimed to provide the basis for termination of his employment under the
provisions contained herein and the date of termination (the "Termination
Date"). If the cause alleged by the Bank shall be (i), (ii), or (iii) set forth
above, Executive shall be given the opportunity to cure the breach within a
reasonable period of time upon receipt of notice but in no event to exceed
thirty (30) days, unless such breach is not reasonably susceptible to being
corrected within thirty (30) days, in which case Executive shall have the
opportunity to cure such breach, provided that Executive has commenced
corrective action within such thirty (30) day period and diligently pursues such
action to completion;
(d) Breach. Upon notice from Executive to the Bank of the
Bank's failure to comply with any material provision of this Agreement, provided
that the Bank shall have thirty (30) days from the receipt of such notice to
cure any default under this Agreement. If such default shall be cured or if Bank
shall have taken steps to cure the default within the thirty (30) day period and
diligently pursues such action to completion, Executive shall have no right to
terminate his employment under the provisions of this Section 4(d);
(e) Expiration of Term. Upon the expiration of the Term of
this Agreement as set forth in Section 2 hereof.
5. COMPENSATION AND BENEFITS PAYABLE UPON TERMINATION.
(a) Upon Executive's death during the Term of this Agreement,
Centura shall provide such death or insurance benefits as are provided in
accordance with the regular policy of Centura to similarly positioned employees
and pursuant to the terms of any benefit plans or arrangements maintained by
Centura which provide such benefits.
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<PAGE>
(b) In the event Executive becomes permanently disabled and is
terminated as set forth in Section 4(b) hereof, Centura shall pay to Executive
or his estate or beneficiaries for the balance of the Term of this Agreement,
the then-existing base salary set forth in Section 3 hereof, provided that such
payment shall be offset by any amounts received by Executive (i) under any long
term disability plan maintained for the employees of Centura, (ii) from any
other collateral source payable due to disability to the extent that such
payments are derived from insurance or direct payments furnished by Bank, and
(iii) social security benefits. Executive agrees to use reasonable efforts to
obtain the benefit of any disability plan or policy covering him as a result of
his employment by Centura in the circumstances contemplated by Section 4(b) and
this Section 5(b).
(c) If Executive's employment shall be terminated by Executive
pursuant to Section 4(d) hereof, Centura shall continue to pay to Executive or
his estate his full base salary in effect at the Termination Date and all
applicable benefits due hereunder (provided that the terms of any employee
benefit plan pursuant to which such benefits are provided permit participation
by similarly positioned former employees of Centura; to the extent Executive is
not permitted to participate in any such plan or benefits, Centura shall pay
Executive a sum sufficient for Executive to obtain such benefits elsewhere) for
the balance of the Term of this Agreement, provided that such payments shall not
be made after the expiration of the Term of this Agreement; and provided further
that such payments shall be offset by any amounts paid to Executive under any
severance or salary continuation policy or plan of Centura applicable to
Executive.
(d) In the event termination is for cause as described in
Section 4(c) hereof or is due to the expiration of the Term of this Agreement,
Centura shall pay Executive the compensation and benefits described in Section 3
hereof through the Termination Date and no other compensation or benefits shall
be paid to Executive hereunder; provided, however, that nothing herein shall be
deemed to terminate or limit the Executive's vested rights under any other
benefit, retirement, or pension plan of Centura applicable to Executive, and the
terms of those plans, programs, or arrangements shall govern.
6. CONFIDENTIALITY.
Executive hereby acknowledges that, by virtue of his employment by
Centura, Executive has gained certain valuable knowledge and has developed
certain expertise with respect to the business of the Centura, including certain
confidential information and trade secrets relating to such business and
information relating to certain customers and potential customers of Centura. In
connection with and in view of the foregoing, Executive hereby agrees as
follows:
(a) Executive agrees that, during the term of his employment
pursuant to this Agreement and for a period of two (2) years thereafter,
Executive will not, directly or indirectly, engage in, or participate in the
promotion, financing, ownership or management of, or otherwise provide services
to, any firm, corporation, or business (whether as an employee, officer,
director, agent, owner, partner, shareholder, consultant, or otherwise), engaged
in the commercial banking business in competition with Centura within the State
of South Carolina.
(b) Executive agrees that, during the term of his employment
pursuant to this Agreement and for a period of two (2) years thereafter,
Executive will not, directly or indirectly, call upon, solicit, sell to, attempt
to sell to, or otherwise in any way engage in or attempt to engage in the
commercial banking business in competition with Centura to any firm,
corporation, person or business that is a customer of Centura at the time of
such activity or was a customer of Centura at any time during the term of his
employment pursuant to this Agreement.
(c) Executive agrees that, during the Term of this Agreement
and for a term of two (2) years thereafter, Executive will hold in a fiduciary
capacity for the benefit of Centura, and shall not directly or indirectly use or
disclose, except as required in Executive's judgment in connection with the
performance of his duties, as required by law or judicial or regulatory
proceedings or as authorized by Centura, any "Centura Information" (as defined
below) that Executive may have or acquire (whether or not developed or compiled
by Executive) during the Term of this Agreement. The term "Centura Information"
as used in this Agreement shall mean confidential
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or proprietary information including technical and financial information and
customer or client lists, relating to the Centura or its programs or procedures,
including without limitation, information received by the Centura from third
parties under confidential conditions. The term "Centura Information" shall also
include, without limitation, the Centura's computer data-base, forms and form
letters, form contracts, information regarding specific transactions, financial
information and estimates and long-term planning and goals. The term "Centura
Information" shall not include information that has become generally available
to the public other than by the act of the Executive with respect to information
the Executive does not have the right to disclose without violating any right of
Centura.
(d) In addition to the foregoing and not in limitation
thereof, Executive agrees that, during the term of this Agreement and for a term
of two (2) years thereafter, Executive will hold in a fiduciary capacity for the
benefit of the Centura and shall not directly or indirectly use or disclose,
except as required in Executive's judgment in connection with the performance of
his duties, as required by law or judicial or regulatory proceedings or as
authorized by the Centura, any "Customer Information" (as defined below) that
Executive may have or acquire (whether or not developed or compiled by Executive
and whether or not Executive has been authorized to have access to such Customer
Information) during the Term of this Agreement. The term "Customer Information"
as used in this Agreement shall mean confidential or proprietary information,
including technical and financial information and customer lists received by the
Centura or Executive from any customer or potential customer of the Centura, and
shall include any information subject to the provisions of the federal Right to
Financial Privacy Act. The term "Customer Information" shall not include
information that has become generally available to the public other than by the
act of the Executive with respect to information the Executive does not have the
right to disclose without violating any right of the customer to which such
information pertains.
(e) Executive agrees and acknowledges that, if a violation of
any covenant contained in this Section 6 occurs or is threatened, such violation
or threatened violation will cause irreparable injury to the Centura, that the
remedy at law for any such violation or threatened violation will be inadequate
and that the Centura shall be entitled to appropriate equitable relief.
(f) The covenants contained in this Section 6 shall inure to
the benefit of the Centura, any successor of it and every subsidiary of it.
(g) The restrictions contained in this Section 6 are
considered by the parties hereto to be fair and reasonable and necessary for the
protection of the legitimate business interests of the Centura.
(h) In the event of a termination of this Agreement by
Executive pursuant to Section 4(d) hereof, the restrictions contained in this
Section 6 shall no longer apply to Executive from and after the Termination
Date.
7. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Centura, and the
Centura shall require any such successor to expressly assume and agree to
perform this Agreement. As used in this Agreement, "Centura" shall mean the
Centura as hereinbefore defined and any successor to its business and/or assets
as aforesaid.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's estate.
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<PAGE>
8. MISCELLANEOUS.
(a) All notices required or permitted hereunder shall be given
in writing by actual delivery or by registered or certified mail (postage
prepaid) at the following addresses or at such other places as shall be
designated in writing:
Executive: R.B. Scarborough
Centura Bank
2000 West Palmetto Street
Florence, South Carolina 29502
Centura: Centura Bank
134 North Church Street
Post Office Box 1220
Rocky Mount, North Carolina 27802
Attention: Chief Executive Officer
(b) If any provision of this Agreement shall be determined to
be void by any court of competent jurisdiction, then such determination shall
not affect any other provision of this Agreement, all of which shall remain in
full force and effect.
(c) The failure of the parties to complain of any act or
omission on the part of either party, no matter how long the same may continue,
shall not be deemed to be a waiver of any of its rights hereunder.
(d) This Agreement contains the entire agreement of the
parties. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. It may be changed or terminated only by
a writing signed by the party against whom enforcement of any waiver, change,
modification, extension, discharge or termination is sought.
(e) This Agreement shall be construed and enforced in
accordance with the laws of the State of North Carolina, except as preempted by
the Employee Retirement Income Security Act of 1974, as amended.
(f) BY HIS EXECUTION HEREOF, THE EXECUTIVE HEREBY WAIVES HIS
RIGHTS UNDER, AND RELEASES PEE DEE BANKSHARES, INC. PEE DEE STATE BANK, CENTURA
BANK AND CENTURA BANKS, INC., FROM ANY CLAIMS ARISING OUT OF OR RELATED TO, ANY
AGREEMENT, UNDERSTANDING OR ARRANGEMENT BETWEEN THE EXECUTIVE AND PEE DEE
BANKSHARES, INC. OR PEE DEE STATE BANK WHICH GRANTS THE EXECUTIVE THE RIGHT TO
RECEIVE ANY COMPENSATION, BONUS OR PAYMENT UPON THE OCCURRENCE OF A CHANGE IN
CONTROL OF OR ACQUISITION OF PEE DEE BANKSHARES, INC.OR PEE DEE STATE BANK.
IN WITNESS WHEREOF, Executive has executed this Agreement under seal by
adopting the word "SEAL" beside his name and the Bank has executed this
Agreement under seal through its duly authorized officers as of the day and year
first above written.
EXECUTIVE:
____________________________________(SEAL)
R. B. Scarborough
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<PAGE>
CENTURA BANK
By: _____________________________________________
ATTEST:
- ----------------------------------------
___________ Secretary
(Corporate Seal)
C-6
<PAGE>
EXHIBIT D
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement"), dated as of the ____ day
of _____________, 1997, between Pee Dee Bankshares, Inc. ("Issuer"), and Centura
Banks, Inc. ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), dated as of December ____,
1997, pursuant to which Issuer has agreed to merge with and into Grantee,
subject to the conditions contained in the Reorganization Agreement; and
WHEREAS, as a condition to Grantee's entry into the Reorganization
Agreement and in consideration for such entry, Issuer has agreed to grant
Grantee the Option (as hereinafter defined), subject to the approval of such
grant by each of the appropriate Regulatory Authorities.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Reorganization Agreement,
the parties hereto agree as follows:
1. Subject to the approval of each of the appropriate Regulatory
Authorities, Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 11,170
fully paid and nonassessable shares of common stock, $1.00 par value (the
"Common Stock"), of Issuer at a price equal to the book value of the Common
Stock on the date hereof; provided, however, that in the event Issuer issues or
agrees to issue any shares of the Common Stock at a price less than said book
value (as adjusted pursuant to subsection (b) of Section 5), such price shall be
equal to such lesser price (such price, as adjusted if applicable, the "Option
Price"). The number of shares of the Common Stock that may be received upon the
exercise of the option and the Option Price are subject to adjustment as herein
set forth.
2. (a) Provided that (i) Grantee shall not be in material breach of the
agreements or covenants contained in this Agreement or in the Reorganization
Agreement, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, the Holder (as
defined herein) may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as defined
below); provided, that the Option shall terminate and be of no further force and
effect upon the earliest to occur of (A) the Closing Date, or (B) termination of
the Reorganization Agreement in accordance with the terms thereof. The term
"Holder" shall mean the holder or holders of the Option.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) without Grantee's prior written consent, Issuer
shall have authorized, recommended or publicly proposed, or
publicly announced an intention to authorize, recommend or
propose, or entered into an agreement with any person (other
than Grantee or any subsidiary of Grantee) to effect an
Acquisition Transaction (as defined below). As used herein,
the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or its
subsidiary, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or of its subsidiary
representing in either case 19.9% or more of the consolidated
assets of Issuer and its subsidiaries, or (C) the issuance,
sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 19.9% or more of the voting power of
Issuer or any of its subsidiaries;
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<PAGE>
(ii) any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership (as such
term is defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act")) of or the
right to acquire beneficial ownership of, or any "group" (as
such term is defined under the 1934 Act) shall have been
formed which beneficially owned or has the right to acquire
beneficial ownership of, 19.9% or more of the then outstanding
shares of Issuer Common Stock;
(iii) any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such term is
defined in Rule 14d-2 under the 1934 Act) or shall have filed
a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender
offer or exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such offer, such
person would own or control 19.9% or more of the then
outstanding shares of Issuer Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively); or
(iv) the holders of Issuer Common Stock shall not
have approved the Reorganization Agreement at the meeting of
such shareholders held for the purpose of voting on the
Agreement, such meeting shall not have been held or shall have
been canceled prior to termination of the Reorganization
Agreement or Issuer's Board of Directors shall have withdrawn
or modified in a manner adverse to Grantee the recommendation
of Issuer's Board of Directors with respect to the
Reorganization Agreement, in each case after it shall have
been publicly announced that any person (other than Grantee or
any subsidiary of Grantee) shall have (A) made, or disclosed
an intention to make, a proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect
to an Exchange Offer or (C) filed an application (or given a
notice), whether in draft or final form, under the Bank
Holding Company Act of 1956, as amended, the Bank Merger Act
or the Change in Bank Control Act of 1978, for approval to
engage in an Acquisition Transaction.
(c) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice no later than 30
days prior to the expiration of the Option (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(d) At the closing referred to in subsection (c) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price for the
shares of the Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(e) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (d) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of the Common Stock purchased by the Holder and, if the
option should be exercised in part only, a new Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable hereunder,
and the Holder shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
D-2
<PAGE>
(f) Certificates for the Common Stock delivered at the closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended, a copy
of which agreement is on file at the principal office of
Issuer. A copy of such agreement will be provided to the
holder hereof without charge upon receipt by Issuer of a
written request."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel, in form and substance
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(g) Upon the giving by the Holder to Issuer of the written
notice of exercise of the option provided for under subsection (b) of this
Section 2, the tender of the applicable purchase price in immediately available
funds and the tender of a copy of this Agreement to Issuer, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all federal, state and local taxes and other charges that
may be payable in connection with the preparation, issuance and delivery of
stock certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of the
Common Stock so that the Option may be exercised without additional
authorization of the Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase the Common Stock,
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including cooperating fully with the Holder in preparing such applications or
notices and providing such information to federal or state regulatory
authorities as they may require in connection therewith) in order to permit the
Holder to exercise the Option and Issuer duly and effectively to issue shares of
the Common Stock pursuant hereto, and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase
in the aggregate the same number of shares of the Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any Stock
Option Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
D-3
<PAGE>
5. In addition to the adjustment in the number of shares of the Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of the Common Stock purchasable upon the
exercise hereof shall be subject to adjustment from time to time as provided in
this Section 5.
(a) (i) In the event of any change in the Common Stock by
reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions,
exchanges of shares or the like, the type and number of shares
of the Common Stock purchasable upon exercise hereof shall be
appropriately adjusted.
(ii) Issuer may make such increases in the number of
shares of the Common Stock purchasable upon exercise hereof,
in addition to those required under subsection (a)(i), as
shall be determined by its Board of Directors to be advisable
in order to avoid taxation so far as practicable of any
dividend of stock or stock rights or any event treated as such
for federal income tax purposes to the recipients.
(b) Whenever the number of shares of the Common Stock
purchasable upon exercise hereof is adjusted as provided in this Section 5, the
Option Price shall be adjusted by multiplying the Option Price by a fraction,
the numerator of which is equal to the number of shares of the Common Stock
purchasable prior to the adjustment and the denominator of which is equal to the
number of shares of the Common Stock purchasable after the adjustment.
6. The 30-day period for exercise of certain rights under Section 2
shall be extended to the extent necessary to obtain all regulatory approvals for
the exercise of such rights and for the expiration of all statutory waiting
periods.
7. (a) At any time after the occurrence of a Purchase Event at the
request of the Holder, delivered prior to the expiration of the Option, Issuer
(or any successor thereto) shall repurchase the Option from the Holder at a
price (the "Option Repurchase Price") equal to the amount by which (A) the offer
price (as defined below) exceeds (B) the Option Price, multiplied by the number
of shares for which this Option may then be exercised. The term "offer price"
shall mean the highest of (i) the price per share of Common Stock at which a
tender or exchange offer therefore has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with the
Issuer with respect to an Acquisition Transaction, or (iii) in the event of a
sale of all or substantially all of Issuer's assets or deposits, the sum of the
net price to be paid in such sale for such assets and deposits and the current
market value of the remaining net assets of Issuer determined by an investment
banking firm selected by the Holder and reasonably acceptable to Issuer, divided
by the number of shares of Common Stock of Issuer outstanding at the time of
such sale. In determining the offer price, the value of consideration other than
cash shall be determined by an investment banking firm selected by the Holder
and reasonably acceptable to Issuer.
(b) The Holder may exercise its right to require Issuer to
repurchase the Option pursuant to this Section 7 by surrendering for such
purpose to Issuer a copy of this Agreement accompanied by a written notice
stating that the Holder elects to require Issuer to repurchase this Option in
accordance with the provisions of this Section 7. As promptly as practicable,
and in any event within five business days after the surrender of the Option and
the receipt of notice relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price therefore or the portion
thereof that Issuer is not then prohibited under applicable law or regulation
from so delivering.
(c) To the extent Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option in full, Issuer shall immediately notify the Holder and thereafter
deliver or cause to be delivered, from time to time, to the Holder that portion
of the Option Repurchase Price that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no
D-4
<PAGE>
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder the Option Repurchase
Price, in full (and Issuer hereby undertakes to use its reasonable best efforts
to obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish such repurchase), the
Holder may revoke its notice of repurchase of the Option whether in whole or to
the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder that portion of the Option Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver to the Holder a
new Agreement evidencing the right of the Holder to purchase that number of
shares of Common Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereto theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price. If a
Purchase Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this paragraph (c), the Holder shall
nevertheless have the right to exercise the Option.
8. Issuer hereby represents and warrants to Grantee as follows:
(a) Subject to all required regulatory or shareholder
approvals, Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of the Common Stock equal to the maximum number of shares of the Common
Stock at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
9. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, provided,
however, that the Grantee's rights and obligations under this Option Agreement
and the Option created hereunder shall be automatically transferred to any
corporation succeeding to the rights and obligations of Grantee.
10. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation, making application to list the
shares of the Common Stock issuable hereunder on any national securities
exchange on which the Common Stock of Issuer is listed upon official notice of
issuance and applying to any necessary federal or state regulatory authorities
for approval to acquire the shares issuable hereunder.
11. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
D-5
<PAGE>
12. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire the full number of shares of the
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
13. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Reorganization Agreement.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of South Carolina.
15. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
16. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
17. Except as otherwise expressly provided herein, this Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
18. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Reorganization Agreement.
D-6
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
ISSUER:
PEE DEE BANKSHARES, INC.
By: ____________________________________________
R. B. Scarborough
President
ATTEST:
- -------------------------------
Secretary
(Corporate Seal)
GRANTEE:
CENTURA BANKS, INC.
By: ____________________________________________
Chief Executive Officer
ATTEST:
- -------------------------------
Secretary
(Corporate Seal)
D-7
<PAGE>
APPENDIX B
CHAPTER 13 OF TITLE 33 OF THE SOUTH CAROLINA CODE
<PAGE>
APPENDIX B
SOUTH CAROLINA BUSINESS CORPORATION ACT
CHAPTER 13. DISSENTERS' RIGHTS
SS. 33-13-101. DEFINITIONS.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 33-13-102 and who exercises that right when and
in the manner required by Sections 33-13-200 through 33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. The value of the shares is to be determined by
techniques that are accepted generally in the financial community.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SS. 33-13-102. RIGHT TO DISSENT.
A shareholder is entitled to dissent from, and obtain payment of
the fair value of, his shares in the event of any of the following corporate
actions:
(1) consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by Section 33-11-103
or the articles of incorporation and the shareholder is entitled to vote
on the merger or (ii) if the corporation is a subsidiary that is merged
with its parent under Section 33-11-104 or 33-11-108 or if the corporation
is a parent that is merged with its subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares are to be acquired, if the
shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan
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<PAGE>
by which all or substantially all of the net proceeds of the sale
must be distributed to the shareholders within one year after the
date of sale;
(4) an amendment of the articles or incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on
any matter, or or cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Section 33-6-104; or
(5) the approval of a control share acquisition under Article 1 of
Chapter 2 of Title 35;
(6) any corporate action to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
SS. 33-13-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if he dissents with respect to all shares of which he
is the beneficial shareholder or over which he has power to direct the vote. A
beneficial shareholder asserting dissenters' rights to shares held on his
behalf shall notify the corporation in writing of the name and address of the
record shareholder of the shares, if known to him.
SS. 33-13-200. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this chapter and be accompanied by a copy of this
chapter.
(b) If corporate action creating dissenters' rights under Section
33-13-102 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Section
33-13-220.
SS. 33-13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights (1) must give to the
corporation
B-2
<PAGE>
before the vote is taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated and (2) must not vote his shares
in favor of the proposed action. A vote in favor of the proposed action cast
by the holder of a proxy solicited by the corporation shall not disqualify a
shareholder from demanding payment for his shares under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this chapter.
SS. 33-13-220. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days
after the corporate action was taken and must:
(1) state where the payment demand must be sent and where
certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent
transfer of the shares is to be restricted after the payment demand is
received;
(3) supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he or, if he is a nominee asserting dissenters'
rights on behalf of a beneficial shareholder, the beneficial shareholder
acquired beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment
demand, which may not be fewer than thirty nor more than sixty days after the
date the subsection (a) notice is delivered and set a date by which
certificates for certificated shares must be deposited, which may not be
earlier than twenty days after the demand date; and
(5) be accompanied by a copy of this chapter.
SS. 33-13-230. SHAREHOLDERS' PAYMENT DEMAND.
(a) A shareholder sent a dissenters' notice described in Section
33-13-220 must demand payment, certify whether he (or the beneficial
shareholder on whose behalf he is asserting dissenters' rights) acquired
beneficial ownership of the shares before the date set forth in the dissenters'
notice pursuant to Section 33-13-220(b)(3), and deposit his certificates in
accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not comply substantially with the
requirements that he demand payment and deposit his share certificates where
required, each by the date set in the dissenters' notice, is not entitled to
payment for his shares under this chapter.
B-3
<PAGE>
SS. 33-13-240. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated
shares from the date the demand for payment for them is received until the
proposed corporate action is taken or the restrictions are released under
Section 33-13-260.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SS. 33-13-250. PAYMENT.
(a) Except as provided in Section 33-13-270, as soon as the
proposed corporate action is taken, or upon receipt of a payment demand,
the corporation shall pay each dissenter who substantially complied with
Section 33-13-230 the amount the corporation estimates to be the fair
value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen months before the date of payment,
an income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial statements,
if any;
(2) a statement of the corporation's estimate of the fair
value of the shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement or the dissenter's right to demand
additional payment under Section 33-13-280; and
(5) a copy of this chapter.
SS. 33-13-260. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty
days after the date set for demanding payment and depositing share
certificates, the corporation, within the same sixty-day period, shall
return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13-220 and repeat the payment demand
procedure.
SS. 33-13-270. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by section
33-13-250 from a dissenter as to any shares of which he (or the beneficial
owner on whose behalf he is asserting dissenters' rights) was not the
beneficial owner on the date set forth in the dissenters' notice as the
date of the first announcement to news media or to shareholders of the
terms of the proposed corporate action, unless the beneficial ownership
of the shares devolved upon him by operation of law from a person who
was the beneficial owner on the date of the first announcement.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this
B-4
<PAGE>
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The corporation shall send with its offer a statement of its estimate
of the fair value of the shares, an explanation of how the fair value and
interest were calculated, and a statement of the dissenter's right to demand
additional payment under Section 33-13-280.
SS. 33-13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in
writing of his own estimate of the fair value of his shares and amount of
interest due and demand payment of his estimate (less any payment under Section
33-13-250) or reject the corporation's offer under Section 33-13-270 and demand
payment of the fair value of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section
33-13-250 or offered under Section 33-13-270 is less than the fair value of his
shares or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or
to offer payment under Section 33-13-270 within sixty days after the date set
for demanding payment; or
(3) corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand additional payment under this
section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
SS. 33-13-300. COURT ACTION.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty days after
receiving the demand for additional payment and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court
of the county where the corporation's principal office (or, if none in this
State, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this State, it shall commence the
proceeding in the county in this State where the principal office (or, if none
in this State, the registered office) of the domestic corporation merged with
or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this State) whose demands remain unsettled parties to the proceeding as in
an action against their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint persons
as appraisers to receive evidence and recommend decisions on the question of
fair value. The appraisers have the powers described in the order appointing
them or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
B-5
<PAGE>
SS. 33-13-310. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section
33-13-300 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters
if the court finds the corporation did not comply substantially with the
requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
(d) In a proceeding commenced by dissenters to enforce the liability
under Section 33-13-300(a) of a corporation that has failed to commence an
appraisal proceeding within the sixty-day period, the court shall assess the
costs of the proceeding and the fees and expenses of dissenters' counsel
against the corporation and in favor of the dissenters.
B-6
<PAGE>
<PAGE>
APPENDIX C
OPINION OF
THE CARSON MEDLIN COMPANY
January 8, 1998
Board of Directors
Pee Dee Bankshares, Inc.
Pee Dee State Bank
115 W. Main Street
Timmonsville, SC 29161
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the shareholders of Pee Dee
Bankshares, Inc. ("Bankshares") and Pee Dee State Bank ("Pee Dee"), under the
terms of a certain Agreement and Plan of Reorganization dated as of December 30,
1997 (the "Agreement"), by and between Pee Dee Bankshares, Inc. and Centura
Banks, Inc. ("Centura") pursuant to which Bankshares and Pee Dee will merge with
and into Centura (the "Merger"). Under the terms of the Agreement, the
shareholders of Pee Dee State Bank will receive $40 million in Centura Stock
based on the closing price for Centura's Common Stock on January 7, 1998, and
the stockholders of Pee Dee Bankshares, Inc. will receive their pro rata share
of the consideration. The foregoing summary of the Merger is qualified in its
entirety by reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers, Inc.
(NASD) member investment banking firm which specializes in the securities of
southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in South Carolina and the Southeast and the major
commercial banks operating in that market. We have been retained by Pee Dee in a
financial advisory capacity to render our opinion hereunder, for which we will
receive compensation.
In reaching our opinion, we have analyzed the respective financial positions,
both current and historical, of Bankshares, Pee Dee and Centura. We have
reviewed: (i) the Agreement; (ii) the annual reports to stockholders of
Bankshares, including audited financial statements, for the four years ended
December 31, 1996; (ii) the Uniform Bank Performance Report for Pee Dee as of
September 30, 1997; (iii) the Call Report for Pee Dee as of September 30, 1997;
(iv) the annual reports to stockholders of Centura, including audited financial
statements, for the five years ended December 31, 1996; (xii) the Report of Form
10-Q of Centura, dated September 30, 1997 (xiii) monthly unaudited interim
financial statements of Pee Dee through November 30, 1997; (xiv) a preliminary
copy of this Proxy Statement/Prospectus prepared in connection with a special
meeting of the shareholders of Bankshares and Pee Dee to consider the Merger and
the Bank Merger; and (xv) certain other financial and operating information with
respect to the business, operations and prospects of Bankshares, Pee Dee and
Centura. We also: (i) held discussions with members of the senior management of
Bankshares, Pee Dee and Centura regarding their respective historical and
current business operations, financial conditions and future
<PAGE>
prospects; (ii) reviewed the historical market prices and trading activity
for the common stock of Centura and compared them with those of certain publicly
traded companies which we deemed to be relevant; (iii) compared the results of
operations of Pee Dee and Centura with those of certain banking companies which
we deemed to be relevant; (iv) compared the proposed financial terms of the
Merger with the financial terms, to the extent publicly available, of certain
other recent business combinations of commercial banking organizations; (v)
analyzed the pro forma financial impact of the Merger on Centura; and (vi)
conducted such other studies, analyses, inquiries and examinations as we deemed
appropriate.
We have relied upon and assumed, without independent verification, the accuracy
and completeness of all information provided to us. We have not performed or
considered any independent appraisal or evaluation of the assets of Bankshares,
Pee Dee or Centura. The opinion we express herein is necessarily based upon
market, economic and other relevant considerations as they exist and can be
evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the consideration provided for
in the Agreement is fair, from a financial point of view, to the stockholders of
Pee Dee Bankshares, Inc. and Pee Dee State Bank.
Very truly yours,
THE CARSON MEDLIN COMPANY
C-1
<PAGE>
APPENDIX D
ADDITIONAL FINANCIAL INFORMATION
The additional condensed financial information that follows is included solely
for the purpose of complying with South Carolina Code Section 33-11-103(d). It
should be read in conjunction with the other financial statements, including the
notes thereto, included or incorporated by reference in this Proxy Statement.
D-1
<PAGE>
CENTURA BANK AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
--------------------------------
1997 1996
---- ----
(unaudited)
Assets:
Cash and due from banks $270,424 $284,234
Due from banks, interest-bearing 14,175 19,073
Federal funds sold and securities 29,250 13,595
purchased under agreements to
resell
Investment securities 1,732,648 1,577,880
Loans - net 4,511,281 4,049,086
Premises and equipment 115,378 112,054
Other assets 308,086 198,814
------- -------
Total assets $6,981,242 $6,254,736
========== ==========
Liabilities:
Deposits 5,373,304 4,756,636
Federal funds purchased and 477,300 385,118
securities sold under agreement
to repurchase
Other liabilities 580,652 620,779
Total liabilities 6,431,256 5,762,533
Stockholder's equity 549,986 492,203
------- -------
Total liabilities and
stockholder's equity $6,981,242 $6,254,736
========== ==========
D-2
<PAGE>
<TABLE>
<CAPTION>
CENTURA BANK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
Year ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Interest income $509,882 $469,465 $380,392
Interest expense 239,675 216,816 176,396
------- ------- -------
Net interest income 270,207 252,649 203,996
Provision for loan losses 13,418 9,596 7,400
Noninterest income 115,198 105,493 63,140
Noninterest expense 250,921 241,361 169,770
------- ------- -------
Income before income taxes 121,179 107,185 89,966
Income taxes 41,819 39,178 31,825
------ ------ ------
Net income $79,360 $68,007 $58,141
======= ======= =======
D-3
<PAGE>
CENTURA BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
--------------------------------
1997 1996
---- ----
(unaudited) (audited)
Assets:
Cash and due from banks $268,248 $283,224
Due from banks, interest-bearing 13,873 11,254
Federal funds sold 29,552 21,413
Investment securities 1,828,056 1,577,880
Loans - net 4,522,303 4,050,739
Premises and equipment 115,464 112,198
Other assets 347,934 237,264
------- -------
Total assets $7,125,430 $6,293,972
========== ==========
Liabilities:
Deposits 5,364,925 4,733,069
Borrowed funds and long-term debt 1,115,321 996,093
Other liabilities 106,848 89,575
Total liabilities 6,587,094 5,818,737
Shareholders'equity 538,336 475,235
------- -------
Total liabilities $7,125,430 $6,293,972
shareholders' equity ========== ==========
D-4
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
CENTURA BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
Year ended December 31,
------------------------------------------------------
1997 1996 1995
---- ---- ----
(unaudited) (audited) (audited)
<S> <C> <C> <C>
Interest income $515,089 $469,760 $417,635
Interest expense 247,184 219,676 192,990
------- ------- -------
Net interest income 267,905 250,084 224,645
Provision for loan losses 13,418 9,596 7,904
Noninterest income 117,221 100,847 80,110
Noninterest expense 246,230 233,981 195,777
------- ------- -------
Income before income taxes 125,478 107,354 101,074
Income taxes 42,420 39,203 36,421
------ ------ ------
Net income $83,058 $68,151 $64,653
======= ======= =======
</TABLE>
D-5
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks $ 4,353
Federal funds sold and securities purchased
under agreements to resell 29,649
Investment securities 9,000
Loans - net 90,327
Premises and equipment 2,470
Deferred income taxes 54
Other assets 2,315
-------
Total assets 138,168
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $118,718
Federal funds purchased and securities 3,376
sold under agreement to repurchase
Other liabilities 1,567
------
Total liabilities 123,661
Stockholders' equity 14,507
------
Total liabilities and stockholders' equity 138,168
=======
</TABLE>
D-6
<PAGE>
PEE DEE BANKSHARES, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Income:
Interest and fees on loans $ 9,801
Lease financing 177
Interest on investment 1,690
Interest on federal funds sold and repurchase agreements 375
Other Income 1,958
------
Total income 14,001
Expenses:
Salaries and employee benefits $ 3,219
Interest on deposits 4,346
Other interest expense 231
Provision for loan losses 650
Other expenses 2,625
------
Total expenses 11,071
Income before income taxes 2,930
Income taxes 1,031
Income before minority interest 1,899
Less, minority interest in earnings of subsidiary 82
------
Net income 1,817
======
</TABLE>
D-7
<PAGE>
PEE DEE STATE BANK
CONDENSED BALANCE SHEET (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks $ 4,353
Federal funds sold and securities purchased
under agreements to resell 9,000
Investment securities 29,649
Loans - net 90,327
Premises and equipment 2,470
Deferred income taxes 54
Other assets 2,315
-------
Total assets 138,168
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $118,735
Federal funds purchased and securities
sold under agreement to repurchase 3,376
-------
Other liabilities 2,140
Total liabilities 124,251
Stockholders' equity 13,917
Total liabilities and stockholders' equity 138,168
=======
</TABLE>
D-8
<PAGE>
PEE DEE STATE BANK
CONDENSED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Income:
<S> <C>
Interest and fees on loans $ 9,801
Lease financing 177
Interest on investment 1,690
Interest on federal funds sold and repurchase agreements 375
Other Income 1,958
------
Total income 14,001
Expenses:
Salaries and employee benefits $ 3,219
Interest on deposits 4,346
Other interest expense 231
Provision for loan losses 650
Other expenses 2,621
------
Total expenses 11,067
======
Income before income taxes 2,934
Income taxes 1,031
------
Net income 1,903
======
</TABLE>
D-9
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 55-8-50 through 55-8-58 of the General States of North Carolina provide
for indemnification of directors, officers, employees, and agents of a North
Carolina corporation. Subject to certain exceptions, a corporation may indemnify
an individual made a party to a proceeding because he is or was a director
against liability incurred in the proceeding if (i) he conducted himself in good
faith; and (ii) he reasonably believed (a) in the case of conduct in his
official capacity with the corporation, that his conduct was in its best
interests, and (b) in all other cases, that his conduct was at least not opposed
to its best interests; and (iii) in the case of any criminal proceeding, he had
no reasonable cause to believe his conduct was unlawful. Moreover, unless
limited by its articles of incorporation, a corporation must indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with the
proceeding. Expenses incurred by a director in defending a proceeding may be
paid by the corporation in advance of the final disposition of such proceeding
as authorized by the board of directors in the specific case or as authorized or
required under any provision in the articles of incorporation or bylaws or by
any applicable resolution or contract upon receipt of an undertaking by or on
behalf of a director to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation against such
expenses. A director may also apply for court-ordered indemnification under
certain circumstances.
Unless a corporation's articles of incorporation provide otherwise, (i) an
officer of a corporation is entitled to mandatory indemnification and is
entitled to apply for court-ordered indemnification to the same extent as a
director, (ii) the corporation may indemnify or advance expenses to an officer,
employee, or agent of a corporation to the same extent as to a director, and
(iii) a corporation may also indemnify or advance expenses to an officer,
employee, or agent who is not a director to the extent, consistent with public
policy, that may be provided by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.
In addition, and separate and apart from the indemnification rights discussed
above, the above-cited statutes further provide that a corporation may, in its
articles of incorporation or bylaws, or by contract or resolution, indemnify or
agree to indemnify any one of its directors, officers, employees, or agents
against liability and expenses in any proceeding (including without limitation a
proceeding brought by or on behalf of the corporation itself) arising out of
their status as such or their activities in any of the foregoing capacities;
provided, however, that a corporation may not indemnify or agree to indemnify a
person against liability or expenses he may incur on account of his activities
which were at the time taken known or believed by him to be clearly in conflict
with the best interests of the corporation. A corporation may likewise and to
the same extent indemnify or agree to indemnify any person who, at the request
of the corporation, is or was serving as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise or as a trustee or administrator under
an employee benefit plan. Any such provision for indemnification may also
include provisions for recovery from the corporation of reasonable costs,
expenses, and attorneys' fees in connection with the enforcement of rights to
indemnification and may further include provisions establishing reasonable
procedures for determining and enforcing the rights granted therein.
As permitted by the North Carolina statutory provisions explained above, Article
IX, Section 4 of the Bylaws of the Registrant provides as follows:
Any person who at any time serves or has served as a director or officer
of the Corporation, or at the request of the Corporation is or was
serving as an officer, director, agent, partner, trustee, or employee for
any other foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise, shall be indemnified
by the Corporation to the fullest extent from time to time permitted by
law in the event he is made, or is threatened to be made, a party to any
threatened pending or completed civil, criminal, administrative,
investigative or arbitrative action, suit, or proceeding and any appeal
therein (and any inquiry or investigation that could lead to such action,
suit or proceeding), whether or not brought by or on behalf of the
Corporation, seeking to hold him liable by reason of the fact that he is
or was acting in such capacity. In addition, the board may provide such
indemnification for other employees and agents of the Corporation as it
deems appropriate.
The rights of those receiving indemnification hereunder shall, to the
fullest extent from time to time permitted by law, cover (i) reasonable
expenses, including without limitation all attorney's fee's actually and
necessarily incurred by him in connection with any such action, suit or
proceeding, (ii) all reasonable payments made by him in satisfaction of
any judgment, money decree, fine (including an excise tax assessed with
respect to an employee benefit plan), penalty, or settlement for which he
may have become liable in such action, suit, or proceeding; and (iii) all
reasonable expenses incurred in enforcing the indemnification rights
provided herein.
Expenses incurred by anyone entitled to receive indemnification under
this section in defending a proceeding may be paid by the Corporation in
advance of the final disposition of such proceeding as authorized by the
board of directors in the specific case or as authorized or required
under any provision in the bylaws or by any applicable resolution or
contracts upon receipt of an undertaking by or on behalf of the director
to repay such amount unless it shall ultimately be determined that be is
entitled to be indemnified by the Corporation against such expenses.
II-1
<PAGE>
The board of directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this bylaw, including without limitation, to
the extent needed, making a good faith evaluation of the manner in which
the claimant for indemnify acted and of the reasonable amount of
indemnity due him.
Any person who at any time serves or has served in any of the aforesaid
capacities for or on behalf of the Corporation shall be deemed to be
doing or to have done so in reliance upon, and as consideration for, the
right of indemnification provided herein. Any repeal or modification of
these indemnification provisions shall not affect any rights or
obligations existing at the time of such repeal or modification. The
rights provided for herein shall inure to the benefit of the legal
representatives of any such person and shall not be exclusive of any
other rights to which such person may be entitled apart from the
provisions of this bylaw.
The rights granted herein shall not be limited by the provisions
contained in N.C. Gen. Stat. 55-8-51 (or its successor).
As permitted by applicable statutes, the Registrant has purchased a standard
directors' and officers' liability policy that will, subject to certain
limitations, indemnify the Registrant and its officers and directors for damages
they become legally obligated to pay as a result of any negligent act, error, or
omission committed by directors or officers while acting in their capacities as
such.
The indemnification provisions in the Bylaws may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities
arising under the 1933 Act.
ITEM 21. EXHIBITS
The following exhibits are filed herewith or have been, as noted, previously
filed:
<TABLE>
<CAPTION>
Exhibit No. Description Reference
<S> <C> <C>
2.1 Agreement and Plan of Reorganization, dated as of December 30, 1997, by and among (1)
Centura Banks, Inc. and Pee Dee Bankshares, Inc.
5.1 Opinion of Poyner & Spruill, L.L.P. as to the validity of the shares of Centura x Filed herewith
Stock to be registered hereby
8.1 Opinion of Sinkler & Boyd, P.A. as to certain federal income tax consequences of x Filed herewith
the Merger and the Bank Merger
8.2 Opinion of Poyner & Spruill, L.L.P. as to certain federal income tax consequences x Filed herewith
of the Merger and the Bank Merger
23.1 Consent of KPMG Peat Marwick LLP, independent certified public accountants for x Filed herwith
Centura Banks, Inc., dated January 23, 1998
23.2 Consent of J. W. Hunt and Company, LLP, independent certified public accountants *
for Pee Dee Bankshares, Inc. and Pee Dee State Bank, dated January 9, 1998
23.3 Consent of Poyner & Spruill, L.L.P. (contained in Exhibits 5.1 and 8.2) x Filed herewith
23.4 Consent of Sinkler & Boyd, P.A. (contained in Exhibit 8.1) x Filed herewith
23.5 Consent of The Carson Medlin Company, dated January 8, 1998 *
24.1 Powers of Attorney from certain signatory directors and officers of *
Centura Banks, Inc.
99.1 Form of Letter to Shareholders of Pee Dee Bankshares, Inc. Filed herewith
99.2 Form of Letter to Shareholders of Pee Dee State Bank Filed herewith
99.3 Form of Proxy solicited by the Board of Directors of Pee Dee Bankshares, Inc. Filed herewith
99.4 Form of Proxy solicited by the Board of Directors of Pee Dee State Bank Filed herewith
99.5 Form of Notice of Special Meeting of Stockholders of Pee Dee Bankshares, Inc. Filed herewith
99.6 Form of Notice of Special Meeting of Stockholders of Pee Dee State Bank Filed herewith
99.7 Fairness Opinion of The Carson Medlin Company, dated January 8, 1998 (2)
* Previously filed.
(1) Included as Appendix A to the Proxy Statement-Prospectus filed as part of this Registration Statement.
(2) Included as Appendix C to the Proxy Statement-Prospectus filed as part of this Registration Statement.
</TABLE>
ITEM 22. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
II-2
<PAGE>
(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) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(2) That, for the purposes 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.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. 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.
D. (1) The undersigned Registrant hereby undertakes as follows:
that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a
part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such prospectus will
contain the information called for by the applicable
registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(3) of
the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes 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.
E. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
F. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Rocky Mount,
State of North Carolina on this the 23rd day of January, 1998.
REGISTRANT
CENTURA BANKS, INC.
By: /s/ Cecil W. Sewell, Jr.
---------------------
Cecil W. Sewell, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ CECIL W. SEWELL, JR. Director, Chairman of the Board January 23, 1998
- -----------------------------------
CECIL W. SEWELL, JR.
/s/ FRANK L. PATTILLO Director, Group Executive Officer January 23, 1998
- -----------------------------------
FRANK L. PATTILLO
/s/ WILLIAM H. WILKERSON Director, and Group Executive Officer January 23, 1998
- -------------------------------
WILLIAM H. WILKERSON
/s/ H. KEL LANDIS III Director, and Executive Vice President January 23, 1998
- --------------------------------------
H. KEL LANDIS III
/s/ STEVEN J. GOLDSTEIN Chief Financial Officer January 23, 1998
- ---------------------------------
STEVEN J. GOLDSTEIN
/s/ ANN K. LAWSON Principal Accounting Officer January 23, 1998
- ------------------------------------
ANN K. LAWSON
*/s/ RICHARD H. BARNHARDT Director January __, 1998
- ------------------------------
RICHARD H. BARNHARDT
Director January __, 1998
- ------------------------------------
C. WOOD BEASLEY
*/s/ THOMAS A. BETTS, JR. Director January __, 1998
- -----------------------------------
THOMAS A. BETTS, JR.
*/s/ H. TATE BOWERS Director January __, 1998
- ------------------------------------
H. TATE BOWERS
*/s/ ERNEST L. EVANS Director January __, 1998
- ------------------------------------
ERNEST L. EVANS
*/s/ J. RICHARD FUTRELL, JR. Director January __, 1998
- ---------------------------------
J. RICHARD FUTRELL, JR.
Director January __, 1998
- ---------------------------------
JOHN H. HIGH
*/s/ MICHAEL K. HOOKER Director January __, 1998
- ---------------------------------
MICHAEL K. HOOKER
*/s/ WILLIAM D. HOOVER Director January __, 1998
- ----------------------------------
WILLIAM D. HOOVER
II-4
<PAGE>
*/s/ ROBERT L. HUBBARD Director January __, 1998
- ----------------------------------
ROBERT L. HUBBARD
*/s/ WILLIAM H. KINCHELOE Director January __, 1998
- --------------------------------
WILLIAM H. KINCHELOE
*/s/ CHARLES T. LANE Director January __, 1998
- ------------------------------------
CHARLES T. LANE
*/s/ ROBERT R. MAULDIN Director January __, 1998
- ----------------------------------
ROBERT R. MAULDIN
*/s/ JOSEPH H. NELSON Director January __, 1998
- ------------------------------------
JOSEPH H. NELSON
*/s/ DEAN E. PAINTER, JR. Director January __, 1998
- -----------------------------------
DEAN E. PAINTER, JR.
*/s/ O. TRACY PARKS III Director January __, 1998
- -------------------------------------
O. TRACY PARKS III
*/s/ WILLIAM H. REDDING, JR. Director January __, 1998
- --------------------------------
WILLIAM H. REDDING, JR.
*/s/ CHARLES M. REEVES III Director January __, 1998
- ----------------------------------
CHARLES M. REEVES III
*/s/ GEORGE T. STRONACH III Director January __, 1998
- ---------------------------------
GEORGE T. STRONACH III
*/s/ ALEXANDER P. THORPE III Director January __, 1998
- --------------------------------
ALEXANDER P. THORPE III
*/s/ JOSEPH L. WALLACE, JR. Director January __, 1998
- ---------------------------------
JOSEPH L. WALLACE, JR.
*/s/ CHARLES P. WILKINS Director January __, 1998
- -----------------------------------
CHARLES P. WILKINS
*By: /s/ JOSEPH A. SMITH, JR. January 23, 1998
--------------------
JOSEPH A. SMITH, JR.,
AS ATTORNEY-IN-FACT
PURSUANT TO
POWER OF ATTORNEY
</TABLE>
II-5
<PAGE>
Exhibit 5.1
January 23, 1998
Centura Banks, Inc.
134 North Church Street
Rocky Mount, North Carolina 27804
Gentlemen:
This opinion is rendered for use in connection with the Registration
Statement on Form S-4 (Registration No. 33-44013), initially filed on January 9,
1998 (the "Registration Statement"), as amended, as prescribed pursuant to the
Securities Act of 1933 by Centura Banks, Inc. (the "Company") with the
Securities and Exchange Commission, pursuant to which up to approximately
793,335 shares of the Company's common stock, no par value per share (the
"Common Stock"), are to be registered.
As counsel to the Company, we have examined and are familiar with
originals or copies certified or otherwise identified to our satisfaction, of
such statutes, documents, corporate records, certificates of public officials,
and other instruments as we have deemed necessary for the purpose of this
opinion, including the Company's Restated Articles of Incorporation and Bylaws
and the record of proceedings of the shareholders and directors of the Company.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing and
in good standing as a corporation under the laws of the State of North Carolina.
2. When the Registration Statement shall have become effective and up
to approximately 793,335 shares of the Common Stock to be originally issued for
exchange shall have been originally issued and exchanged under the terms set
forth in the Registration Statement, such shares will be legally and validly
issued, fully paid, and nonassessable.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement and to the reference to our firm contained therein.
Very truly yours,
/s/ Poyner & Spruill, L.L.P.
<PAGE>
Exhibit 8.1
[FORM OF TAX OPINION]
January 24, 1998 Draft
Pee Dee Bankshares, Inc.
110 West Main Street
Timmonsville, South Carolina 29161
Re: Proposed Merger of Pee Dee Bankshares, Inc. with and into
Centura Banks, Inc. and of Pee Dee State Bank with and into
Centura Bank
Ladies and Gentlemen:
We have acted as counsel to Pee Dee Bankshares, Inc., a corporation
organized and existing under the laws of the State of South Carolina, in
connection with the proposed merger (the "Merger") of Pee Dee with and into
Centura Banks, Inc., a corporation organized and existing under the laws of the
State of North Carolina ("Centura"). We have also acted as counsel to Pee Dee
State Bank, a bank corporation organized and existing under the laws of the
State of South Carolina and the subsidiary of Pee Dee ("State Bank"), in
connection with the proposed merger (the "Bank Merger") of State Bank with and
into Centura Bank, a bank corporation organized and existing under the laws of
the State of North Carolina a wholly-owned subsidiary of Centura ("Centura
Bank"), immediately following the Merger. The Merger and the Bank Merger will be
effected pursuant to the Agreement and Plan of Reorganization by and between
Centura and Pee Dee, dated as of December 30, 1997, which together with the
Exhibits thereto shall be referred to as "the Agreement." You have requested our
opinion with respect to certain federal income tax consequences of the Merger
and the Bank Merger.
In rendering this opinion, we have examined (1) the Internal Revenue
Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated
thereunder, (2) judicial decisions interpreting the Code and Regulations, and
(3) rulings and other documents issued by the Internal Revenue Service
interpreting the Code and Regulations. In addition, we have relied upon certain
information made known to us as more fully described below. All capitalized
terms used herein without definition will have the respective meanings specified
for such terms in the Agreement.
In rendering the opinions expressed herein, we examined such documents
as we have deemed appropriate, including (1) the Agreement; (2) the Registration
Statement on Form S-4 filed by Centura with the Securities and Exchange
Commission under the Securities Act of 1933 (the "Act") on January 9, 1998,
including the Prospectus/Proxy Statement for the special meeting of the
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 2
shareholders of Pee Dee and the special meeting of the shareholders of Pee Dee
Bank (the "Registration Statement"); and (3) such additional documents as we
have deemed relevant.
In our examination of such documents, we have assumed that all
documents delivered to us as photocopies faithfully reproduce the originals
thereof, that such originals are authentic, that all such documents have been or
will be duly executed to the extent required, and that all statements set forth
in such documents are accurate.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through certificates provided by the
management of Pee Dee and the management of Centura.
MERGER
Structure of Transaction
In connection with the Merger, the following will occur pursuant to the
Agreement:
(1) Subject to the terms and conditions of the Agreement, at the
Effective Time, Pee Dee will be merged with and into Centura pursuant to the
provisions of, and with the effect provided in, Sections 55-11-01 and 55-11-06
of the North Carolina General Statutes (the "North Carolina Code") and Sections
33-11-106 and 33-11-107 of the Code of Laws of South Carolina 1976, as amended
(the "South Carolina Code"). Centura will be the surviving corporation of the
Merger and will continue to be governed by the laws of the State of North
Carolina. The Merger will be consummated pursuant to the terms of the Agreement,
which has been approved and adopted by the boards of directors of Centura and
Pee Dee.
(2) Subject to the provisions of the Agreement, at the Effective Time,
by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations will be converted as
follows:
(a) Each share of Centura Common Stock issued and outstanding
immediately prior to the Effective Time will remain issued and outstanding from
and after the Effective Time.
(b) Each share of Pee Dee Common Stock issued and outstanding
at the Effective Time (other than shares held by shareholders of Pee Dee who
exercise dissenters' rights) will cease to be outstanding and will be converted
into and exchanged for the number of shares of Centura Common Stock determined
in accordance with Section 3.1 of the Agreement (the "Merger Exchange Formula").
(3) If Centura changes the number of shares of Centura Common Stock
issued and outstanding as a result of any consolidation, split up, other
subdivision or combination of Centura Common Stock, any dividend payable in
Centura Common Stock or any capital reorganization involving the
reclassification of Centura Common Stock after the date of the Agreement, the
Merger Exchange Formula will be accordingly adjusted.
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 3
(4) Any holder of shares of Centura who perfects such shareholder's
dissenters' rights of appraisal in accordance with Sections 33-13-101 et seq. of
the South Carolina Code will be entitled to receive the value of such shares in
cash as determined pursuant to such provisions of the South Carolina Code ;
provided, however, that no such payment will be made to any dissenting
shareholder unless and until such dissenting shareholder has complied with the
applicable provisions of the South Carolina Code and deposited in accordance
with the Dissenters' Notice the certificate or certificates representing the
shares for which payment is made.
(5) Each holder of Pee Dee Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of Centura Common Stock will receive, in lieu thereof, cash in an amount equal
to such fractional part of the share of Centura Common Stock multiplied by the
lesser of (i) the Average Share Price or (ii) $69.32.
Assumptions
We have also assumed that the following statements are true on the date
hereof and will be true as of the Effective Time:
(1) The fair market value of the Centura Common Stock (and other
consideration, if any) received by each Pee Dee shareholder will be
approximately equal to the fair market value of the Pee Dee Common Stock
surrendered in exchange therefor.
(2) There is no plan or intention on the part of the shareholders of
Pee Dee to sell, exchange or otherwise dispose of a number of shares of Centura
Common Stock received in the Merger that would reduce the Pee Dee shareholders'
ownership of Centura Common Stock to a number of shares having a value, as of
the Effective Time, of less than 50% of the value of all of the shares of Pee
Dee Common Stock outstanding immediately prior to the Effective Time. For
purposes of this assumption, shares of Pee Dee Common Stock exchanged for cash
or other property, surrendered by dissenters or exchanged for cash in lieu of
fractional shares of Centura Common Stock will be treated as outstanding Pee Dee
Common Stock immediately prior to the Effective Time. Moreover, shares of Pee
Dee Common Stock and shares of Centura Common Stock held by Pee Dee shareholders
and otherwise sold, redeemed or disposed of prior or subsequent to the Effective
Time will be considered in making this assumption.
(3) Centura has no plan or intention to reacquire any of the Centura
Common Stock issued in the Merger, except that Centura's board of directors has
approved the repurchase in the open market of shares of Centura Common Stock
equal in number up to 9.9% of the shares of Centura Common Stock to be issued in
the Merger and the Bank Merger.
(4) Centura has no plan or intention to sell or otherwise dispose of
any of the assets of Pee Dee acquired in the transaction, except for
dispositions made in the ordinary course of business and the Bank Merger.
(5) The liabilities of Pee Dee assumed by Centura and the liabilities
to which the transferred assets of Pee Dee are subject were incurred by Pee Dee
in the ordinary course of its business.
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 4
(6) Following the Merger, Centura or Centura Bank will continue the
historic business of Pee Dee or use a significant portion of Pee Dee's historic
business assets in a business.
(7) Centura, Pee Dee and the shareholders of Pee Dee will pay their
respective expenses incurred in connection with the Merger, except that Centura
will pay the filing fees payable in connection with the Registration Statement
and printing costs incurred in connection with the printing of the Registration
Statement.
(8) There is no intercorporate indebtedness existing between Pee Dee
and Centura or between Pee Dee and Centura Bank that was issued, acquired or
will be settled at a discount.
(9) Neither Centura nor Pee Dee is an investment company. For purposes
of the preceding sentence and paragraph (12) under "Assumptions" in the
discussion of the Bank Merger, an "investment company" is a corporation that is
a regulated investment company, a real estate investment trust or a corporation
50% or more of the value whose total assets are stock and securities and 80% or
more of the value of whose total assets are assets held for investment. In
making the 50% and 80% determinations of the preceding sentence, stock and
securities in any subsidiary corporation will be disregarded and the parent
corporation will be deemed to own a ratable share of the subsidiary's assets,
and a corporation will be considered a subsidiary if the parent owns 50% or more
of the combined voting power of all classes of stock entitled to vote or 50% or
more of the total value of shares of all classes of stock outstanding.
(10) Pee Dee is not under the jurisdiction of a court in a case under
Title 11 of the United State Code or a receivership, foreclosure, or similar
proceeding in a federal or state court.
(11) Both the fair market value and the total adjusted basis of the
assets of Pee Dee transferred to Centura will equal or exceed the sum of (i) the
liabilities assumed by Centura plus (ii) the amount of the liabilities (if any)
to which the transferred assets are subject.
(12) The payment of cash to Pee Dee shareholders in lieu of fractional
shares of Centura Common Stock is solely for the purpose of avoiding the expense
and inconvenience to Centura of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that will
be paid in the transaction to Pee Dee shareholders instead of issuing fractional
shares of Centura Common Stock will not exceed 1% of the total consideration
that will be issued in the Merger to the Pee Dee shareholders in exchange for
their shares of Pee Dee Common Stock. The fractional share interests of each Pee
Dee shareholder will be aggregated, and no Pee Dee shareholder will receive cash
in an amount equal to or greater than the value of one full share of Centura
Common Stock.
(13) None of the compensation received by any shareholder-employee of
Pee Dee will be separate consideration for, or allocable to, any of such
shareholder-employee's shares of Pee Dee Common Stock; none of the shares of
Centura Common Stock received by any shareholder-employee of Pee Dee will be
separate consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder-employee of Pee Dee will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arms
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 5
length for similar services.
(14) At all times during the five-year period ending at the Effective
Time, the fair market value all of Pee Dee's United States real property
interests was and will have been less than 50% of the fair market value of the
total of (a) its United States real property interests, (b) its interests in
real property located outside the United States and (c) its other assets used or
held for use in a trade or business. For purposes of the preceding sentence, (i)
United States real property interests include all interests (other than an
interest solely as a creditor) in real property and associated personal property
located in the United States or the Virgin Islands and interests in any domestic
corporation (other than a controlled corporation) owning any United States real
property interest, (ii) Pee Dee is treated as owning its proportionate share
(based on the relative fair market value of its ownership interest to all
ownership interests) of the assets owned by any controlled corporation or any
partnership, trust or estate in which Pee Dee is a partner or beneficiary, and
(iii) any such entity in turn is treated as owning its proportionate share of
the assets owned by any controlled corporation or any partnership, trust or
estate in which the entity is a partner or beneficiary. As used in this
paragraph, "controlled corporation" means any corporation at least 50% of the
fair market value of the stock of which is owned by Pee Dee (in the case of a
first-tier subsidiary of Pee Dee) or by a controlled corporation (in the case of
lower-tier subsidiary).
(14) The Agreement represents the entire understanding of Pee Dee and
Centura with respect to the Merger.
Opinions
Based solely on the information submitted and the assumptions set forth
above and assuming that the Merger will take place as described in the Agreement
and that the representations made by Pee Dee and Centura are true and correct at
the time of the consummation of the Merger, we are of the opinion that:
(1) If the Merger qualifies as a statutory merger under the South
Carolina Code and the North Carolina Code, then notwithstanding the Bank Merger,
the Merger will be a reorganization for federal income tax purposes within the
meaning of Code ss. 368(a), and Pee Dee and Centura will each be "a party to a
reorganization" within the meaning of Code ss. 368(b).
(2) A shareholder of Pee Dee will recognize no gain or loss for federal
income tax purposes upon the exchange of all of such shareholder's Pee Dee
Common Stock solely for shares of Centura Common Stock.
(3) For federal income tax purposes, the basis of the Centura Common
Stock received by a Pee Dee shareholder in the Merger will be the same as the
basis of the Pee Dee Common Stock surrendered by such shareholder in exchange
therefor, less the basis of any fractional share of Centura Common Stock settled
by cash payment.
(4) For federal income tax purposes, the holding period of the Centura
Common Stock received by a Pee Dee shareholder includes the period during which
the Pee Dee Common Stock surrendered in exchange therefor was held by such
shareholder, provided that the Pee Dee Common
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 6
Stock was held by such shareholder as a capital asset at the Effective Time.
(5) The payment of cash to Pee Dee shareholders in lieu of fractional
share interests of Centura Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the Merger and
then were redeemed by Centura. These cash payments will be treated as having
been received as distributions in full payment in exchange for the shares
redeemed as provided in Code ss. 302(a).
(6) Neither Centura nor Pee Dee will recognize gain or loss for federal
income tax purposes as a result of the Merger.
BANK MERGER
Description of Transaction
In connection with the Bank Merger, the following will occur pursuant
to the Agreement:
(1) Subject to the terms and conditions of the Agreement, immediately
following the Merger, at the Effective Time, State Bank will be merged with and
into Centura Bank in accordance with the provisions of, and with the effect
provided in, Sections 53-2 and 53-13 of the North Carolina Code and Sections
33-11-106 and 33-11-107 of the South Carolina Code. Centura Bank will be the
surviving corporation of the Bank Merger and will continue to be governed by the
laws of the State of North Carolina. The Bank Merger will be consummated
pursuant to the terms of the Agreement, which has been approved and adopted by
the boards of directors of Centura, Centura Bank and State Bank.
(2) Subject to the provisions of the Agreement, at the Effective Time,
by virtue of the Bank Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations will be converted as
follows:
(a) Each share of Centura Bank stock and each share of Centura
Common Stock issued and outstanding immediately prior to the Effective Time will
remain issued and outstanding from and after the Effective Time.
(b) Each share of State Bank Common Stock (other than those
shares acquired by Centura as a result of the Merger and other than those shares
held by shareholders of State Bank who exercise dissenters' rights) issued and
outstanding at the Effective Time will be converted into and exchanged for the
number of shares of Centura Common Stock determined in accordance with Section
3.1 of the Agreement (the "Bank Merger Exchange Formula").
(3) If Centura changes the number of shares of Centura Common Stock
issued and outstanding as a result of a consolidation, split up, other
subdivision or combination of Centura Common Stock, any dividend payable in
Centura Common Stock or any capital reorganization involving the
reclassification of Centura Common Stock after the date of the Agreement, the
Bank Merger Exchange Formula will be accordingly adjusted.
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 7
(4) Each of the shares of State Bank Common Stock acquired by Centura
as a result of the Merger will be cancelled at the Effective Time and no
consideration will be issued in exchange therefor.
(5) Any holder of shares of State Bank Common Stock who perfects such
shareholder's dissenters' rights of appraisal in accordance with Sections
33-13-101 et seq. of the South Carolina Code will be entitled to receive the
value of such shares in cash as determined pursuant to such provisions of the
South Carolina Code; provided, however, that no such payment will be made to any
dissenting shareholder unless and until such dissenting shareholder has complied
with the applicable provisions of the South Carolina Code and has deposited in
accordance with the Dissenters' Notice the certificate or certificates
representing the shares for which payment is being made.
(6) Each holder of shares of State Bank Common Stock exchanged pursuant
to the Bank Merger who would otherwise have been entitled to receive a fraction
of a share of Centura Common Stock will receive, in lieu thereof, cash in an
amount equal to such fractional part of a share of Centura Common Stock
multiplied by the lesser of (i) the Average Share Price or (ii) $69.32.
Assumptions
We have also assumed that the following statements are true on the date
hereof and will be true as of the Effective Time:
(1) The fair market value of the Centura Common Stock (and other
consideration, if any) received by each State Bank shareholder will be
approximately equal to the fair market value of the State Bank Common Stock
surrendered by such shareholder in exchange therefor.
(2) There is no plan or intention on the part of the shareholders of
State Bank to sell, exchange or otherwise dispose of a number of shares of
Centura Common Stock received in the Bank Merger that would reduce the State
Bank shareholders' ownership of Centura Common Stock to a number of shares
having a value, as of the Effective Time, of less than 50% of the value of all
State Bank Common Stock outstanding immediately prior to the Effective Time. For
purposes of this assumption, shares of State Bank Common Stock exchanged for
cash or other property, surrendered by dissenters or exchanged for cash in lieu
of fractional shares of Centura Common Stock will be treated as outstanding
State Bank Common Stock immediately prior the Effective Time. Moreover, shares
of State Bank Common Stock and shares of Centura Common Stock held by State Bank
shareholders and otherwise sold, redeemed or disposed of prior or subsequent to
the Bank Merger will be considered in making this assumption.
(3) Centura Bank will acquire at least 90% of the fair market value of
the net assets held by State Bank immediately prior to the Effective Time and at
least 70% of the fair market value of the gross assets held by State Bank
immediately prior to the Effective Time. For purposes of this assumption,
amounts paid by State Bank to dissenters, amounts paid by State Bank to
shareholders who receive cash or other property, State Bank assets used to pay
its reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by State Bank
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 8
preceding the Effective Time will be included as assets of State Bank held
immediately prior to the Effective Time.
(4) As of the Effective Time, Centura will be in control of Centura
Bank within the meaning of Code ss. 368(c). For purposes of this assumption and
the immediately following assumption, the term "control" means the ownership of
stock possessing at least 80% of the total combined voting power of all classes
of Centura Bank stock entitled to vote and at least 80% of the total number of
shares of all other classes of stock of Centura Bank.
(5) Centura Bank has no plan or intention to issue additional shares of
its stock that would result in Centura losing control (within the meaning of
Section 368(c)) of Centura Bank after the Effective Time.
(6) Centura has no plan or intention to reacquire any of the Centura
Common Stock issued in the Bank Merger, except that Centura's board of directors
has approved the purchase in the open market of shares of Centura Common Stock
equal in number up to 9.9% of the shares of Centura Common Stock to be issued in
the Bank Merger and the Merger.
(7) Centura has no plan or intention to liquidate Centura Bank; to
merge Centura Bank with and into another corporation; to sell or otherwise
dispose of the stock of Centura Bank; or to cause Centura Bank to sell or
otherwise dispose of any of the assets of State Bank acquired in the Bank
Merger, except for dispositions made in the ordinary course of business.
(8) The liabilities of State Bank assumed by Centura Bank and the
liabilities to which the transferred assets of State Bank are subject were
incurred by State Bank in the ordinary course of its business.
(9) Following the Bank Merger, Centura Bank will continue the historic
business of State Bank or use a significant portion of State Bank's business
assets in a business.
(10) Centura, Centura Bank, State Bank and the shareholders of State
Bank will pay their respective expenses incurred in connection with the Bank
Merger, except that Centura will pay the filing fees payable in connection with
the Registration Statement and printing costs incurred in connection with the
printing of the Registration Statement.
(11) There is no intercorporate indebtedness existing between Centura
and State Bank or between Centura Bank and State Bank that was issued, acquired
or will be settled at a discount.
(12) No party to the transaction is an investment company.
(13) Pee Dee Bank is not under the jurisdiction of a court in a case
under Title 11 of the United States Code or a receivership, foreclosure or
similar proceeding in a federal or state court.
(14) Both the fair market value and the basis of the assets of State
Bank transferred to Centura Bank will equal or exceed the sum of the liabilities
assumed by Centura Bank plus the amount of liabilities (if any) to which the
transferred assets are subject.
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 9
(15) No stock of Centura Bank will be issued in connection with the
Bank Merger.
(16) The payment of cash to State Bank shareholders in lieu of
fractional shares of Centura Common Stock is solely for the purpose of avoiding
the expense and inconvenience to Centura of issuing fractional shares and does
not represent separately bargained-for consideration. The total cash
consideration that will be paid in the Bank Merger to the shareholders of State
Bank instead of issuing fractional shares of Centura Common Stock will not
exceed 1% of the total consideration that will be issued in the Bank Merger to
the shareholders of State Bank in exchange for their shares of State Bank Common
Stock. The fractional share interests of each shareholder of State Bank will be
aggregated, and no State Bank shareholder will receive cash in an amount equal
to or greater than the value of one full share of Centura Common Stock.
(17) None of the compensation received by any shareholder-employee of
State Bank will be separate consideration for, or allocable to, any of such
shareholder-employee's State Bank Common Stock; none of the shares of Centura
Common Stock received by any shareholder-employee will be separate consideration
for, or allocable to, any employment agreement; and the compensation paid to any
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to third parties bargained at arms length for
similar services.
(18) At all time during the five-year period ending at the Effective
Time, the fair market value of all of State Bank's United States real property
interests was and will have been less than 50% of the fair market value of (a)
its United States real property interests, (b) its interests in real property
located outside the United States, and (c) its other assets used or held for use
in a trade or business. For purposes of the preceding sentence, (i) United
States real property interests include all interests (other than an interest
solely as a creditor) in real property and associated personal property located
in the United States or the Virgin Islands and interests in any domestic
corporation (other than a controlled corporation) owning any United States real
property interests, (ii) State Bank is treated as owning its proportionate share
(based on the relative fair market value of its ownership interest to all
ownership interests) of the assets owned by any controlled corporation or any
partnership, trust or estate in which State Bank is a partner or beneficiary,
and (iii) any such entity in turn is treated as owning its proportionate share
of the assets owned by any controlled corporation or any partnership, trust or
estate in which the entity is a partner or beneficiary. As used in this
paragraph, "controlled corporation" means any corporation at least 50% of the
fair market value of the stock of which is owned by State Bank (in the case of a
first-tier subsidiary of State Bank) or by a controlled corporation (in the case
of a lower-tier subsidiary).
(19) The Agreement represents the entire understanding of Centura and
Pee Dee with respect to the Bank Merger.
Opinions
Based solely on the information submitted and the representations set
forth above and assuming that the Bank Merger will take place as described in
the Agreement and that the representations made by Pee Dee and Centura are true
and correct at the time of consummation of
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 10
Bank Merger, we are of the opinion that:
(1) If the Bank Merger qualifies as a statutory merger under the North
Carolina Code and the South Carolina Code, then notwithstanding the Merger, the
Bank Merger will be a reorganization for federal income tax purposes within the
meaning of Code ss. 368(a), and Centura, Centura Bank and State Bank will each
be "a party to a reorganization" within the meaning of Code ss. 368(b).
(2) A shareholder of State Bank will recognize no gain or loss for
federal income tax purposes upon the exchange of all of such shareholder's State
Bank Common Stock solely for shares of Centura Common Stock.
(3) For federal income tax purposes, the basis of the Centura Common
Stock received by a State Bank shareholder in the Bank Merger will be the same
as the basis of the State Bank Common Stock surrendered by such shareholder in
exchange therefor, less the basis of any fractional share of Centura Common
Stock settled by cash payment.
(4) For federal income tax purposes, the holding period of the Centura
Common Stock received by a State Bank shareholder will include the period during
which the State Bank Common Stock surrendered in exchange therefor was held by
such shareholder, provided that the State Bank Common Stock was held by such
shareholder as a capital asset at the Effective Time.
(5) The payment of cash to State Bank shareholders in lieu of
fractional share interests of Centura Common Stock will be treated for federal
income tax purposes as if the fractional shares were distributed as part of the
Bank Merger and then were redeemed by Centura. These cash payments will be
treated as having been received as distributions in full payment in exchange for
the shares redeemed as provided in Code ss. 302(a).
(6) Neither Centura, Centura Bank nor State Bank will recognize gain or
loss for federal income tax purposes as a result of the Bank Merger.
* * * *
The opinions expressed herein are based upon existing statutory,
regulatory and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined and the statements set out herein, which we have assumed
and you have confirmed to be true on the date hereof and will be true on the
date on which the proposed transactions are consummated. Our opinions cannot be
relied upon if any of the facts contained in such documents is, or later
becomes, inaccurate or if any of the statements set out herein is, or later
becomes, inaccurate. Finally, our opinions are limited to the federal income tax
matters specifically covered thereby, and we have not addressed any other tax
consequences of the proposed transactions.
<PAGE>
Pee Dee Bankshares, Inc.
January 24, 1998
Page 11
The opinion is being provided solely for the benefit of Pee Dee, State
Bank and their respective shareholders. No other person or party is entitled to
rely on this opinion.
We consent to be named in the Registration Statement as attorneys who
will pass upon certain legal matters in connection with the offering described
in the Registration Statement, and to the filing of a copy of this opinion as an
exhibit to the Registration Statement. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Yours truly,
[SINKLER & BOYD, P.A.]
<PAGE>
<PAGE>
Exhibit 8.2
[LETTERHEAD OF POYNER & SPRUILL, L.L.P.]
[Date Blank}
Centura Banks, Inc.
Centura Bank
134 North Church Street
Rocky Mount, NC 27804
Gentlemen:
Centura Banks, Inc. ("Centura"), a North Carolina bank holding
corporation, and Pee Dee Bankshares, Inc. ("Pee Dee"), a South Carolina bank
holding corporation, have entered into an agreement and plan of reorganization
(the "Agreement") under the terms of which Pee Dee will be merged with and into
Centura, and each share of Pee Dee common stock issued and outstanding shall
cease to be outstanding and shall be converted into and exchanged for Centura
common stock in a transaction that qualifies as a merger under Section 368(a) of
the Internal Revenue Code of 1986 as amended (the "Code"). Also under the terms
of the Agreement, Pee Dee State Bank ("State Bank"), a subsidiary of Pee Dee,
will merge with and into Centura Bank, a North Carolina bank corporation
subsidiary of Centura in a transaction that qualifies as a merger under Section
368(a) of the Code. Each share of State Bank common stock issued and outstanding
(other than shares held by shareholders of State Bank who exercise dissenter's
rights) shall cease to be outstanding and each such share, except those owned by
Pee Dee, shall be converted into and exchanged for Centura common stock to be
issued by Centura pursuant to the reorganization.
Under the terms of the Agreement, we have been asked to opine that no
gain or loss will be recognized by Centura as a result of the issuance of
Centura common stock in connection with the merger or the bank merger and
accordingly, our opinion is limited thereto. For purposes of our opinion, we
have assumed that the reorganizations are consummated in strict accordance with
all the terms and conditions of the Agreement and constitute one or more
reorganizations within the meaning of Section 368(a) of the Code.
In rendering the opinion set forth below, we have considered the
Agreement, applicable case law and applicable provisions of (i) the Code as
presently in effect, (ii) the regulations adopted under the Code, (iii) the
revenue rulings and revenue procedures published under and with respect to the
Code, and (iv) the North Carolina General Statutes as presently in effect and
regulations promulgated thereunder. No assurance can be given that legislative,
administrative,
<PAGE>
Centura Banks, Inc.
Centura Bank
[Date Blank]
Page 2
or judicial decisions or interpretations may not be forthcoming
that would significantly change the opinions set forth herein. Any such changes
may retroactively and adversely affect such opinions. In addition, it should be
noted that an opinion of counsel represents only that counsel's best legal
judgment and has no binding effect on the Internal Revenue Service or North
Carolina Department of Revenue, nor has official status of any kind.
Based upon the matters and resources we have considered, we are of the
opinion that, upon consummation of the reorganizations in strict accordance with
all the terms and conditions of the Agreement, neither Centura nor Centura Bank
will recognize gain or loss for federal or State of North Carolina income tax
purposes on the exchange of Centura common stock for the assets of Pee Dee and
State Bank in the merger of Pee Dee into Centura and the merger of State Bank
into Centura Bank.
Except to the extent specifically provided herein, no opinion is
expressed or implied concerning the federal income tax consequences of the
transactions described in the Agreement or the consequences under any other
federal, State, or local tax laws.
The opinions expressed herein are for the exclusive benefit of Centura
and Centura Bank and in connection with the transactions described in the
Agreement, and may not be relied upon by them for any other purpose, or use,
circulated, quoted or relied upon by any other person or entity for any purpose
without our prior consent. We consent to the filing of this letter as an exhibit
to the Registration Statement.
This opinion is specifically limited to those matters expressed herein,
effective as of the date hereof. We assume no duty to inform you of any changes
in our opinion hereafter due to any change in law or facts that may hereafter
occur or come to our attention.
Very truly yours,
[POYNER & SPRUILL, L.L.P.]
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Centura Banks, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Raleigh, North Carolina
January 23, 1998
<PAGE>
January 27, 1998
To the Stockholders of
Pee Dee Bankshares, Inc.:
You are cordially invited to attend a Special Meeting of the Stockholders (the
"Special Meeting") of Pee Dee Bankshares, Inc. ("Bankshares") to be held at the
offices of Pee Dee State Bank ("Pee Dee Bank"), 110 West Main Street,
Timmonsville, South Carolina, at 4:00 P.M., local time, on Tuesday, March 3,
1998, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a proposal to
approve an Agreement and Plan of Reorganization, dated as of December 30, 1997
(the "Agreement"), which provides for the merger (the "Merger") of Bankshares
with and into Centura Banks, Inc. ("Centura"), with Centura the surviving
corporation resulting from the Merger, and the merger (the "Bank Merger") of Pee
Dee Bank with and into Centura Bank, a wholly-owned subsidiary of Centura, with
Centura Bank the surviving corporation resulting from the Bank Merger. Upon
consummation of the Merger and the Bank Merger, each share of Bankshares common
stock and each share of Pee Dee Bank common stock (except those owned by
Bankshares) issued and outstanding will be exchanged for a number of shares of
Centura common stock determined in the manner described in the accompanying
Proxy Statement/Prospectus, with cash being paid in lieu of issuing fractional
shares.
Enclosed are (i) the Notice of Special Meeting, (ii) the Proxy
Statement/Prospectus, and (iii) a Proxy for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the Agreement and the proposed
Merger and Bank Merger, including a description of the conditions to
consummation of the Merger and the Bank Merger and the effects of the Merger and
the Bank Merger on the rights of Bankshares and Pee Dee Bank stockholders.
Please read these materials carefully and consider thoughtfully the information
set forth in them.
The Board of Directors has unanimously approved the Agreement and consummation
of the Merger and the Bank Merger contemplated thereby, and unanimously
recommends that you vote FOR approval of the Agreement.
It is important to understand that approval of the Agreement will require the
affirmative vote of two-thirds of the votes entitled to be cast at the Special
Meeting by the holders of the issued and outstanding shares of Bankshares common
stock. Accordingly, whether or not you plan to attend the Special Meeting, you
are urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, you may vote in person if you wish, even if you
previously have returned your proxy card. The proposed Merger with Centura and
the proposed Bank Merger with Centura Bank are significant steps for Bankshares
and Pee Dee Bank and your vote on this matter is of great importance.
On behalf of the Board of Directors, I urge you to vote FOR approval of the
Agreement by marking the enclosed proxy card "FOR" Proposal 1.
We look forward to seeing you at the Special Meeting.
Sincerely,
R. B. SCARBOROUGH
PRESIDENT
<PAGE>
January 27, 1998
To the Stockholders of
Pee Dee State Bank:
You are cordially invited to attend a Special Meeting of the Stockholders (the
"Special Meeting") of Pee Dee State Bank ("Pee Dee Bank") to be held at the
offices of Pee Dee Bank, 110 West Main Street, Timmonsville, South Carolina, at
4:00 P.M., local time, on Tuesday, March 3, 1998, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a proposal to
approve an Agreement and Plan of Reorganization, dated as of December 30, 1997
(the "Agreement"), which provides for the merger (the "Merger") of Pee Dee
Bankshares, Inc. ("Bankshares") with and into Centura Banks, Inc. ("Centura"),
with Centura the surviving corporation resulting from the Merger, and the merger
(the "Bank Merger") of Pee Dee Bank with and into Centura Bank, a wholly-owned
subsidiary of Centura, with Centura Bank the surviving corporation resulting
from the Bank Merger. Upon consummation of the Merger and the Bank Merger, each
share of Bankshares common stock and each share of Pee Dee Bank common stock
(except those owned by Bankshares) issued and outstanding will be exchanged for
a number of shares of Centura common stock determined in the manner described in
the accompanying Proxy Statement/Prospectus, with cash being paid in lieu of
issuing fractional shares.
Enclosed are (i) the Notice of Special Meeting, (ii) the Proxy
Statement/Prospectus, (iii) a Proxy for the Special Meeting, and (iv) certain
financial information related to Bankshares, Pee Dee Bank, Centura and Centura
Bank. The Proxy Statement/Prospectus describes in more detail the Agreement and
the proposed Merger and Bank Merger, including a description of the conditions
to consummation of the Merger and the Bank Merger and the effects of the Merger
and the Bank Merger on the rights of Bankshares and Pee Dee Bank stockholders.
Please read these materials carefully and consider thoughtfully the information
set forth in them.
The Board of Directors has unanimously approved the Agreement and consummation
of the Merger and the Bank Merger contemplated thereby, and unanimously
recommends that you vote FOR approval of the Agreement.
It is important to understand that approval of the Agreement will require the
affirmative vote of two-thirds of the votes entitled to be cast at the Special
Meeting by the holders of the issued and outstanding shares of Pee Dee Bank
common stock. Accordingly, whether or not you plan to attend the Special
Meeting, you are urged to complete, sign, and return promptly the enclosed proxy
card. If you attend the Special Meeting, you may vote in person if you wish,
even if you previously have returned your proxy card. The proposed Merger with
Centura and the proposed Bank Merger with Centura Bank are significant steps for
Bankshares and Pee Dee Bank and your vote on this matter is of great importance.
On behalf of the Board of Directors, I urge you to vote FOR approval of the
Agreement by marking the enclosed proxy card "FOR" Proposal 1.
We look forward to seeing you at the Special Meeting.
Sincerely,
R. B. SCARBOROUGH
PRESIDENT
<PAGE>
EXHIBIT 99.3
PEE DEE BANKSHARES, INC.
REVOCABLE PROXY
The undersigned hereby constitutes and appoints J. B. Scarborough and R. B.
Scarborough, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of Pee Dee
Bankshares, Inc. ("Bankshares") which the undersigned would be entitled to vote
if personally present at the Special Meeting of Bankshares Shareholders to be
held at the offices of Pee Dee State Bank, 110 West Main Street, Timmonsville,
South Carolina, at 4:00 P.M., local time, on Tuesday, March 3, 1998, and at any
adjournment or postponement thereof (the "Special Meeting") upon the proposals
described in the Proxy Statement/Prospectus and the Notice of Special Meeting
of Shareholders, both dated January 27, 1998, the receipt of which is
acknowledged in the manner specified below.
1. MERGER. To consider and vote upon a proposal to approve an Agreement and
Plan of Reorganization, dated as of December 30, 1997 (the "Agreement"),
by and between Bankshares and Centura Banks, Inc., a North Carolina
corporation ("Centura"), pursuant to which (i) Bankshares will merge
(the "Merger") with and into Centura, (ii) Pee Dee State Bank ("Pee Dee
Bank") will merge with and into Centura Bank, a wholly-owned subsidiary
of Centura ("Centura Bank"), and (iii) each share of the $1.00 par value
common stock of Bankshares ("Bankshares Stock") and each share of the
$5.00 par value common stock of Pee Dee Bank (except shares owned by
Bankshares) issued and outstanding at the effective time of the Merger
will be exchanged for a number of shares of no par value common stock of
Centura determined in accordance with the terms and conditions of the
Agreement, and cash in lieu of any fractional share, all as more fully
described in the accompanying Proxy Statement/Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
(continued on other side)
<PAGE>
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held jointly, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED: , 1998
Signature
Signature if held jointly
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
PEE DEE BANKSHARES, INC.,
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
<PAGE>
EXHIBIT 99.4
PEE DEE STATE BANK
REVOCABLE PROXY
The undersigned hereby constitutes and appoints J. B. Scarborough, and R. B.
Scarborough, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of Pee Dee State Bank
("Pee Dee Bank") which the undersigned would be entitled to vote if personally
present at the Special Meeting of Pee Dee Bank Shareholders to be held at the
offices of Pee Dee Bank, 110 West Main Street, Timmonsville, South Carolina,
at 4:00 P.M., local time, on Tuesday, March 3, 1998, and at any adjournment or
postponement thereof (the "Special Meeting") upon the proposals described in the
Proxy Statement/Prospectus and the Notice of Special Meeting of Shareholders,
both dated January 27, 1998, the receipt of which is acknowledged in the manner
specified below.
1. MERGER. To consider and vote upon a proposal to approve an Agreement and
Plan of Reorganization, dated as of December 30, 1997 (the "Agreement"),
by and between Pee Dee Bankshares, Inc. ("Bankshares") and Centura Banks,
Inc., a North Carolina corporation ("Centura"), pursuant to which
(i) Bankshares will merge with and into Centura, (ii) Pee Dee Bank will
merge (the "Bank Merger") with and into Centura Bank, a wholly-owned
subsidiary of Centura ("Centura Bank") and (iii) each share of the $1.00
par value common stock of Bankshares ("Bankshares Stock") and each share
of the $5.00 par value common stock of Pee Dee Bank (except that owned by
Bankshares) ("Pee Dee Bank Stock") issued and outstanding at the
effective time of the Bank Merger will be exchanged for a number of
shares of no par value common stock of Centura determined in accordance
with the terms and conditions of the Agreement, and cash in lieu of any
fractional share, all as more fully described in the accompanying Proxy
Statement/Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
(continued on other side)
<PAGE>
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held jointly, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED: , 1998
Signature
Signature if held jointly
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
PEE DEE STATE BANK AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
<PAGE>
<PAGE>
PEE DEE BANKSHARES, INC.
110 West Main Street
Timmonsville, South Carolina 29161
(803) 665-6400
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT 4:00 P.M. ON MARCH 3, 1998
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders (the "Special
Meeting") of Pee Dee Bankshares, Inc. ("Bankshares") will be held at the offices
of Pee Dee State Bank, 110 West Main Street, Timmonsville, South Carolina, on
Tuesday, March 3, 1998, at 4:00 P.M., local time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve an Agreement and Plan
of Reorganization, dated as of December 30, 1997 (the "Agreement"), by and among
Bankshares and Centura Banks, Inc., a North Carolina corporation ("Centura"),
pursuant to which (i) Bankshares will merge (the "Merger") with and into
Centura, and Pee Dee State Bank ("Pee Dee Bank") will merge (the "Bank Merger")
with and into Centura Bank, a wholly-owned subsidiary of Centura ("Centura
Bank"), and (ii) each share of the $1.00 par value common stock of Bankshares
("Bankshares Stock") issued and outstanding at the effective time of the Merger
and each share of $5.00 par value common stock of Pee Dee Bank ("Pee Dee Bank
Stock") issued and outstanding at the effective time of the Bank Merger, except
those owned by Bankshares, will be exchanged for a number of shares of the no
par value common stock of Centura determined in the manner described in the
accompanying Proxy Statement/Prospectus, and cash in lieu of any fractional
share, all as more fully described in the accompanying Proxy
Statement/Prospectus. A copy of the Agreement is set forth as Appendix A to the
accompanying Proxy Statement/Prospectus and is hereby incorporated by reference
herein.
2. OTHER BUSINESS. To transact such other business as may come properly before
the Special Meeting or any adjournments or postponements of the Special Meeting.
NOTICE OF APPRAISAL RIGHTS. If Proposal 1 above is approved and the Merger
contemplated thereby is consummated, each holder of shares of Bankshares Stock
would have the right to demand appraisal of such holder's shares of Bankshares
Stock and would be entitled to the rights and remedies set forth in Chapter 13
of Title 33 of the South Carolina Code] (the "South Carolina Code"). The right
of any such stockholder to any such rights and remedies is contingent upon
consummation of the Merger. In addition, the right of any such stockholder to
such rights and remedies is contingent upon strict compliance with the
requirements set forth in Chapter 13 of Title 33 of the South Carolina Code, the
full text of which is attached as Appendix B to the accompanying Proxy
Statement/Prospectus. For a summary of the requirements of Chapter 13 of Title
33 of the South Carolina Code, see "DESCRIPTION OF THE MERGER -- Dissenters'
Rights" in the accompanying Proxy Statement/Prospectus.
Only stockholders of record at the close of business on January 15, 1998, will
be entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. Approval of the Agreement requires the
affirmative vote of two-thirds of the votes entitled to be cast at the Special
Meeting by holders of the issued and outstanding shares of Bankshares Stock.
THE BOARD OF DIRECTORS OF BANKSHARES UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
R. B. SCARBOROUGH
PRESIDENT
Timmonsville, South Carolina
January 27, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE,
AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING.
<PAGE>
PEE DEE STATE BANK
110 West Main Street
Timmonsville, South Carolina 29161
(803) 665-6400
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT 4:00 P.M. ON MARCH 3, 1998
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders (the "Special
Meeting") of Pee Dee State Bank ("Pee Dee Bank") will be held at the offices of
Pee Dee Bank, 110 West Main Street, Timmonsville, South Carolina, on Tuesday,
March 3, 1998, at 4:00 P.M., local time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve an Agreement and Plan
of Reorganization, dated as of December 30, 1997 (the "Agreement"), by and among
Pee Dee Bankshares, Inc. ("Bankshares") and Centura Banks, Inc., a North
Carolina corporation ("Centura"), pursuant to which (i) Bankshares will merge
(the "Merger") with and into Centura, and Pee Dee Bank will merge (the "Bank
Merger") with and into Centura Bank, a wholly-owned subsidiary of Centura
("Centura Bank"), and (ii) each share of the $1.00 par value common stock of
Bankshares ("Bankshares Stock") issued and outstanding at the effective time of
the Merger and each share of $5.00 par value common stock of Pee Dee Bank ("Pee
Dee Bank Stock") issued and outstanding at the effective time of the Bank
Merger, except those owned by Bankshares, will be exchanged for a number of
shares of the no par value common stock of Centura determined in the manner
described in the accompanying Proxy Statement/Prospectus, and cash in lieu of
any fractional share, all as more fully described in the accompanying Proxy
Statement/Prospectus. A copy of the Agreement is set forth as Appendix A to the
accompanying Proxy Statement/Prospectus and is hereby incorporated by reference
herein.
2. OTHER BUSINESS. To transact such other business as may come properly before
the Special Meeting or any adjournments or postponements of the Special Meeting.
NOTICE OF APPRAISAL RIGHTS. If Proposal 1 above is approved and the Bank Merger
contemplated thereby is consummated, each holder of shares of Pee Dee Bank Stock
would have the right to demand appraisal of such holder's shares of Pee Dee Bank
Stock and would be entitled to the rights and remedies set forth in Chapter 13
of Title 33 of the South Carolina Code] (the "South Carolina Code"). The right
of any such stockholder to any such rights and remedies is contingent upon
consummation of the Merger. In addition, the right of any such stockholder to
such rights and remedies is contingent upon strict compliance with the
requirements set forth in Chapter 13 of Title 33 of the South Carolina Code, the
full text of which is attached as Appendix B to the accompanying Proxy
Statement/Prospectus. For a summary of the requirements of Chapter 13 of Title
33 of the South Carolina Code, see "DESCRIPTION OF THE MERGER -- Dissenters'
Rights" in the accompanying Proxy Statement/Prospectus.
Only stockholders of record at the close of business on January 15, 1998, will
be entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. Approval of the Agreement requires the
affirmative vote of two-thirds of the votes entitled to be cast at the Special
Meeting by holders of the issued and outstanding shares of Pee Dee Bank Stock.
THE BOARD OF DIRECTORS OF PEE DEE BANK UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
R. B. SCARBOROUGH
PRESIDENT
Timmonsville, South Carolina
January 27, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE,
AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING.
