Additional Proxy Soliciting Materials (definitive) (defa14a)
15 Juin 2017 - 10:01PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 9, 2017
FIRST
SOUTH BANCORP, INC.
(Exact Name of Registrant as Specified in
Its Charter)
VIRGINIA
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0-22219
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56-1999749
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(State or other jurisdiction of
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(Commission
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(IRS Employer
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incorporation)
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File Number)
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Identification No.)
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1311 Carolina Avenue, Washington, North Carolina
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27889
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(Address of principal executive offices)
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(Zip Code)
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(252) 946-4178
(Registrant’s telephone number, including
area code)
Not Applicable
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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¨
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Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
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x
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Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
☐
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Item 1.01
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger and
Reorganization
On June 9, 2017, First
South Bancorp, Inc. (the “Registrant”), the holding company for First South Bank, Washington, North Carolina, entered
into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Carolina Financial Corporation
(“CARO”), the holding company for CresCom Bank, Charleston, South Carolina. Under the Merger Agreement, the Registrant
will merge with and into CARO (the “Merger”) and First South Bank will merge with and into CresCom Bank.
Subject to the terms
and conditions of the Merger Agreement, the Registrant’s shareholders will receive 0.52 shares of CARO common stock for each
share of the Registrant’s common stock. The aggregate merger consideration equals $162 million as of June 9, 2017. The parties
anticipate closing the Merger during the fourth quarter of 2017.
The Merger Agreement
has been unanimously approved by the boards of directors of each of the Registrant and CARO. The closing of the Merger is subject
to the required approval of the Registrant’s and CARO’s shareholders, requisite regulatory approvals, the effectiveness
of the registration statement to be filed by CARO with respect to the CARO common stock to be issued in the Merger, and other customary
closing conditions.
The Merger Agreement
contains usual and customary representations and warranties that the Registrant and CARO made to each other as of specific dates.
The assertions embodied in those representations and warranties were made solely for purposes of the contract between the Registrant
and CARO, and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating
its terms. Moreover, certain representations and warranties are subject to a contractual standard of materiality that may be different
from what may be viewed as material to shareholders, and the representations and warranties may have been used to allocate risk
between the Registrant and CARO rather than establishing matters as facts.
The Merger Agreement
also provides that prior to the closing of the Merger, CARO will appoint two members of the Registrant’s board of directors,
mutually agreed upon by the Registrant and CARO, to the board of directors of CARO to be effective immediately following the closing
of the Merger. In addition, CresCom Bank will appoint Bruce W. Elder to its board of directors prior to the closing of the merger
between CresCom Bank and First South Bank and effective immediately following the merger.
The Merger Agreement
may be terminated in certain circumstances, including: (i) by mutual written agreement of the parties; (ii) by either party in
the event of a breach by the other party of any representation or warranty contained in the Merger Agreement which has not been
cured within thirty days and where such breach is reasonably likely to permit such party to refuse to consummate the Merger; (iii)
by either party in the event that any consent of any required regulatory authority is denied by final action or any law or order
prohibiting the Merger shall become final and nonappealable; (iv) by either party if the requisite approval of the other party’s
shareholders is not obtained; (v) by either party in the event that the Merger shall not have been consummated by March 31, 2018;
(vi) by CARO in the event that the Registrant’s board of directors has not recommended for approval the Merger Agreement
to its shareholders except as permitted by the Merger Agreement; (vii) by CARO in the event that the Registrant’s board of
directors fails to duly convene and hold a meeting of the Registrant’s shareholders for the purpose of voting on the Merger
Agreement; (vii) by the Registrant, if after a shareholders’ meeting where the requisite approval of the Registrant’s
shareholders is not obtained and Registrant received a superior penalty when certain events occur related to a decrease in CARO’s
stock price. Upon termination of the Merger Agreement by (i) CARO if the Registrant’s board of directors has not recommended
for approval the Merger Agreement to its shareholders due to an alternate superior proposal, or (ii) by the Registrant to enter
into a superior proposal, the Registrant may be required to pay to CARO a termination fee of $5.75 million.
In connection with
entering into the Merger Agreement, the Registrant has agreed to offer each of the current option holders of its stock options
the opportunity to cancel, effective upon and subject to the Merger, all of their respective stock options covering shares of the
Registrant’s common stock having an exercise price per share less than the per share value of the merger consideration in
exchange for a cash payment equal to the per share value of the merger consideration minus the exercise price for each share of
the Registrant’s subject to such stock option. Any stock option not cancelled will convert into an option to acquire shares
of CARO common stock.
The foregoing summary
of the Merger Agreement is qualified in its entirety by reference to the complete text of such document, which is filed as Exhibit
2.1 to this Current Report on Form 8-K and which is incorporated herein by reference. The related press release is filed as Exhibit
99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Support Agreements
In connection with
entering into the Merger Agreement, each of the directors and certain executive officers of the Registrant have entered into a
Shareholder Support Agreement (collectively, the “Support Agreements”). The Support Agreements generally require that
the shareholder party thereto vote all of his or her shares of the Registrant’s common stock in favor of the Merger and against
alternative transactions and generally prohibit such shareholder from transferring his or her shares of the Registrant’s
common stock prior to the consummation of the Merger. The Support Agreements will terminate upon the earlier of the consummation
of the Merger and the termination of the Agreement in accordance with its terms.
Agreements with Bruce W. Elder and Cornelius F. Sullivan
Simultaneously with
the execution of the Merger Agreement, Bruce W. Elder and Cornelius F. Sullivan each entered into an Employment Agreement with
CARO and CresCom Bank. Mr. Elder is the Registrant’s president and chief executive officer and Mr. Sullivan is a senior vice
president and area executive of the Registrant.
Director Non-Compete Agreements
Simultaneously with
the execution of the Merger Agreement, each of the Registrant’s non-employee directors entered into a Non-Employee Director
Non-Competition Agreement with CARO. The Non-Employee Director Non-Competition Agreements contain provisions related to non-disclosure
of confidential information, non-recruitment of employees, non-solicitation of customers, and non-competition.
Participants in the Merger Solicitation.
The Registrant and
CARO, and certain of their respective directors, executive officers and other members of management and employees may be deemed
to be participants in the solicitation of proxies from the shareholders of the Registrant in respect of the Merger. Information
regarding the directors and executive officers of the Registrant and CARO and other persons who may be deemed participants in the
solicitation of the Registrant’s shareholders in connection with the Merger will be included in the joint proxy statement/prospectus
for the Registrant’s special meeting of shareholders, which will be filed with the SEC. Information about the Registrant’s
directors and executive officers can also be found in the Registrant’s definitive proxy statement in connection with its
2017 annual meeting of shareholders, as filed with the SEC on June 2, 2017, and other documents subsequently filed by the Registrant
with the SEC. Information about CARO’s directors and executive officers can also be found in CARO’s definitive proxy
statement in connection with its 2017 annual meeting of stockholders, as filed with the SEC on March 20, 2017, and other documents
subsequently filed by CARO with the SEC. Additional information regarding the interests of such participants will be included in
the joint proxy statement/prospectus and other relevant documents regarding the Merger filed with the SEC when they become available.
Item 8.01 Other Events.
On June 12, 2017, the
Registrant issued a press release announcing the execution of the Merger Agreement with CARO. The complete text of the press release
is attached to this report as Exhibit 99.1.
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Item 9.01
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Financial Statements and Exhibits.
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Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger and Reorganization, dated June 9, 2017, by and between Carolina Financial Corporation and First South Bancorp, Inc.
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99.1
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Press release dated June 12, 2017 announcing the Merger Agreement with Carolina Financial Corporation
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Cautionary Statements Regarding Forward-Looking Information.
This Current Report
contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. In general,
forward-looking statements usually use words such as “may,” “believe,” “expect,” “anticipate,”
“intend,” “will,” “should,” “plan,” “estimate,” “predict,”
“continue” and “potential” or the negative of these terms or other comparable terminology, including statements
related to the expected timing of the closing of the Merger, the expected returns and other benefits of the Merger, to shareholders,
expected improvement in operating efficiency resulting from the Merger, estimated expense reductions resulting from the transactions
and the timing of achievement of such reductions, the impact on and timing of the recovery of the impact on tangible book value,
and the effect of the Merger on regulatory capital ratios. Forward-looking statements represent management’s beliefs, based
upon information available at the time the statements are made, with regard to the matters addressed; they are not guarantees of
future performance. Forward-looking statements are subject to numerous assumptions, risks and uncertainties that change over time
and could cause actual results or financial condition to differ materially from those expressed in or implied by such statements.
Factors that could
cause or contribute to such differences include, but are not limited to, the possibility that expected benefits may not materialize
in the time frames expected or at all, or may be more costly to achieve; that the Merger may not be timely completed, if at all;
that prior to completion of the Merger or thereafter, the parties’ respective businesses may not perform as expected due
to transaction-related uncertainties or other factors; that the parties are unable to implement successful integration strategies;
that the required regulatory, shareholder, or other closing conditions are not satisfied in a timely manner, or at all; reputational
risks and the reaction of the parties’ customers to the Merger; diversion of management time to Merger-related issues; and
other factors and risk influences contained in the cautionary language included under the headings “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in the Registrant’s Form 10-K for the year ended December
31, 2016 and other documents subsequently filed by the Company with the SEC. Consequently, no forward-looking statement can be
guaranteed. Neither the Registrant nor CARO undertakes any obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. For any forward-looking statements made in this Current Report on Form
8-K, the exhibits hereto or any related documents, the Registrant and CARO claim protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
Additional Information and Where to Find It.
This communication
is being made in respect of the Merger involving the Registrant and CARO. This communication does not constitute an offer to sell
or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the Merger,
CARO will file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 that will
include a joint proxy statement/prospectus for the Registrant’s shareholders. The Registrant and CARO also plan to file other
documents with the SEC regarding the Merger. The Registrant will mail the final joint proxy statement/prospectus to its shareholders.
BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS
REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. The joint proxy statement/prospectus, as well as other filings containing information
about the Registrant and CARO, will be available without charge, at the SEC’s website (
http://www.sec.gov
). Copies
of the joint proxy statement/prospectus and other documents filed with the SEC in connection with the Merger can also be obtained,
when available, without charge, from the Registrant’s website (
http://www.firstsouthnc.com
) and CARO’s website
(
http://www.haveanicebank.com
).
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized
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First South Bancorp, Inc.
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By:
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/s/ Scott C. McLean
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Scott C. McLean
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Executive Vice President
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Chief Financial Officer
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Date: June 15, 2017
INDEX TO EXHIBITS
Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger and Reorganization, dated June 9, 2017, by and between Carolina Financial Corporation and First South Bancorp, Inc.
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99.1
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Press release dated June 12, 2017 announcing the Merger Agreement with Carolina Financial Corporation
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