UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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):January 5, 2016
CAROLINA FINANCIAL CORPORATION
(Exact Name of Registrant As Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 000-19029 | 57-1039637 |
| (Commission File Number) | (I.R.S. Employer Identification No.) |
| 288 Meeting Street, Charleston, South Carolina | 29401 |
| (Address of Principal Executive Offices) | (Zip Code) |
(843) 723-7700
(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 (see General Instruction A.2. below):
x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On January 5, 2016, Carolina Financial Corporation (“Carolina Financial”), the parent holding company for CresCom Bank, CBAC, Inc. (“Merger Sub”), a wholly-owned subsidiary of the Carolina Financial, and Congaree Bancshares, Inc. (“Congaree”), the parent holding company for Congaree State Bank, entered into an agreement and plan of merger (the “Agreement”), which provides that, subject to the terms and conditions set forth in the Agreement, Carolina Financial will acquire Congaree.
Subject to the terms and conditions of the Agreement, Merger Sub will merge with and into Congaree, and Congaree will then promptly merge with and into Carolina Financial, with Carolina Financial being the surviving corporation in the merger. In addition, as soon as practicable following the merger of Merger Sub with and into Congaree, Congaree State Bank will be merged with and into CresCom Bank.
Subject to the terms and conditions of the Agreement, each share of Congaree common stock will be converted into the right to receive one of the following: (i) $8.10 in cash, (ii) 0.4806 shares of Carolina Financial’s common stock, or (iii) a combination of cash and Carolina Financial common stock, subject to the limitation that, excluding any dissenting shares, the total merger consideration shall be prorated to 40% cash consideration and 60% stock consideration. Cash will also be paid in lieu of fractional shares.
The Agreement contains customary representations and warranties from Carolina Financial and Congaree, and Carolina Financial and Congaree have agreed to customary covenants and agreements, including, among others, covenants and agreements relating to (1) the conduct of their respective businesses during the interim period between the execution of the Agreement and the closing of the acquisition, (2) Congaree’s obligation to facilitate its shareholders’ consideration of, and voting upon, the necessary approval of the Agreement, (3) the recommendation by the board of directors of Congaree in favor of the necessary approval by its shareholders, (4) Congaree’s non-solicitation obligations relating to alternative business combination transactions, and (5) Carolina Financial’s intention to establish an advisory board for the Columbia, South Carolina market consisting of the current directors of Congaree.
The boards of directors of Carolina Financial and Congaree have approved the Agreement. The Agreement and the transactions contemplated thereby are subject to the approval of the shareholders of Congaree, regulatory approvals, and other customary closing conditions.
The Agreement provides certain termination rights for both Carolina Financial and Congaree including, but not limited to, a right by either party to terminate the agreement if (A) the average of the daily closing price of Carolina Financial common stock over a specified period prior to the anticipated closing date is less than 80% of the closing price on the date of the Agreement and (B) the average of the daily closing price of Carolina Financial common stock over the same specified period is down 15% more than any change in the KBW Nasdaq Regional Banking Index (KRX) since the date of the Agreement. In the event that Congaree provides notice of its intent to terminate the Agreement due to these conditions being met, Carolina Financial may, but is not obligated to, increase the exchange ratio. Congaree may elect to accept the increased exchange ratio or proceed with termination of the Agreement. The Agreement further provides that upon termination of the Agreement under certain circumstances, Congaree will be obligated to pay Carolina Financial a termination fee of $750,000.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement, which is set forth below as Exhibit 2.1 hereto and is incorporated herein by reference. Capitalized terms used but not defined herein shall have such meanings as set forth in the Agreement. The Agreement has been attached as an exhibit to this Form 8-K in order to provide investors and security holders with information regarding its terms. It is not intended to provide any other financial information about Carolina Financial, Congaree, or their respective subsidiaries and affiliates. The representations, warranties and covenants contained in the Agreement were made only for purposes of that agreement and as of specific dates, are solely for the benefit of the parties to the Agreement, may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors. Investors should not rely on the representations, warranties, or covenants or any description thereof as characterizations of the actual state of facts or condition of Carolina Financial, Congaree, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after the date of the Agreement, which subsequent information may or may not be fully reflected in public disclosures by Carolina Financial.
In connection with entering into the Agreement, Congaree has agreed to use its reasonable best efforts to cause each of the directors and executive officers of Congaree to enter into a Shareholder Support Agreement (collectively, the “Support Agreements”). The parties to the Support Agreements beneficially own in the aggregate approximately 18.93% of the outstanding shares of Congaree common stock. The Support Agreements generally require that the shareholders party thereto vote all of their shares of Congaree common stock in favor of the acquisition and against alternative transactions and generally prohibit such shareholders from transferring their shares of Congaree common stock prior to the consummation of the acquisition. The Support Agreements will terminate upon the earlier of the consummation of the acquisition and the termination of the Agreement in accordance with its terms.
The foregoing description of the Support Agreements does not purport to be complete and is qualified in its entirety by reference to the Form of Shareholder Support Agreement, which is included as Exhibit E to the Agreement, filed as Exhibit 2.1 to this Form 8-K, and incorporated by reference herein.
Immediately prior to the effective time of the acquisition, all rights with respect to Congaree common stock pursuant to warrants issued by Congaree to directors and executive officers will be cancelled for nominal consideration. Immediately prior to the effective time, all rights with respect to Congaree common stock pursuant to stock options granted by Congaree to directors and executive officers (the “Seller Options”) will be cancelled in exchange for a cash payment at closing equal to the product obtained by multiplying (1) the number of shares of Congaree common stock underlying such person’s Seller Options, by (2) $8.10 less the exercise price per share under such Seller Options, by entering into a Stock Option Cash-Out Agreement in the form included as Exhibit B to the Agreement, filed as Exhibit 2.1 to this Form 8-K and incorporated by reference herein, prior to the effective time. In the event that the product obtained by the prior sentence is zero or a negative number, then the Seller Options will be cancelled for nominal consideration.
FORWARD-LOOKING STATEMENTS
This Form 8-K contains certain forward-looking statements, including certain plans, expectations, goals, and projections, and including statements about the benefits of the acquisition, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those anticipated by such statements for a variety of factors including, without limitation: the businesses of Carolina Financial and Congaree may not be integrated successfully or such integration may take longer to accomplish than expected; the expected cost savings and any revenue synergies from the acquisition may not be fully realized within the expected timeframes; disruption from the acquisition may make it more difficult to maintain relationships with clients, associates, or suppliers; the required governmental approvals of the acquisition may not be obtained on the proposed terms and schedule; Congaree shareholders may not approve the transaction; changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of other business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure; and other factors described in Carolina Financial’s Annual Report on Form 10-K and reports subsequently filed by Carolina Financial with the Securities and Exchange Commission. All forward-looking statements included in this Form 8-K are based on information available at the time of the filing. Carolina Financial assumes no obligation to update any forward-looking statement.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT
Carolina Financial intends to file relevant documents concerning the transaction with the Securities and Exchange Commission, including a registration statement on Form S-4 which will include a proxy statement/prospectus. Shareholders of Congaree will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings by Carolina Financial, at the Securities and Exchange Commission’s internet site (http://www.sec.gov). Copies of the proxy statement/prospectus and the filings with the Securities and Exchange Commission that will be incorporated by reference in the proxy statement/ prospectus can also be obtained, without charge, by directing a request to Carolina Financial Corporation, 288 Meeting Street, Charleston, SC 29401, Attention: William A. Gehman, III, Executive Vice President and Chief Financial Officer.
SHAREHOLDERS OF CONGAREE ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS WHEN THEY ARE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
The directors and executive officers of Congaree and other persons may be deemed to be participants in the solicitation of proxies from Congaree’s shareholders in connection with the proposed acquisition. Information regarding Congaree’s directors and executive officers is available in its definitive proxy statement (DEF 14A) and additional definitive proxy soliciting materials filed with the SEC for Congaree’s 2015 annual shareholder meeting. Other information regarding the participants in the Congaree proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
Item 7.01 Regulation FD Disclosure
On January 6, 2016, Carolina Financial issued a news release announcing that an investor presentation providing supplemental information regarding the Congaree acquisition was available on Carolina Financial’s website. The investor presentation was included as Exhibit 99.2 to the Form 8-K filed by Carolina Financial on January 5, 2016. The complete text of the news release is attached to this Form 8-K as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit Number | Description |
| 2.1 | Agreement and Plan of Merger between Carolina Financial Corporation, CBAC, Inc., and Congaree Bancshares, Inc. dated January 5, 2016. |
| 99.1 | News Release dated January 6, 2016. |
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.
| CAROLINA FINANCIAL CORPORATION, | |||
| Registrant | |||
| By: | /s/ William A. Gehman, III | ||
| Name: | William A. Gehman, III | ||
| Title: | Chief Financial Officer | ||
Dated: January 11, 2016