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): October 16, 1999
Carolina Fincorp, Inc.
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(Exact name of registrant as specified in its charter)
North Carolina 000-21701 56-1978449
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
115 South Lawrence Street
Rockingham, North Carolina 28380
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(Address of principal executive offices)
Registrant's telephone number, including area code: (910) 997-6245
N/A
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(Former name or former address, if changed since last report)
Item 5. Other Events
On October 16, 1999, FNB Corp. ("FNB") and Carolina Fincorp, Inc.
("Carolina") entered into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which FNB will acquire Carolina. The Boards of
Directors of FNB and Carolina approved the Merger Agreement and the transactions
contemplated thereby at separate meetings held on October 15, 1999 and October
16, 1999, respectively.
In accordance with the terms of the Merger Agreement, a yet to be formed,
wholly owned subsidiary of FNB will merge with and into Carolina (the "Merger"),
and Carolina will be the surviving corporation resulting from the Merger and a
wholly owned subsidiary of FNB.
Upon consummation of the Merger, each share of common stock, no par value,
of Carolina ("Carolina Stock") issued and outstanding as of the effective time
of the Merger (excluding shares held by FNB or Carolina or any of their
subsidiaries, in each case other than in a fiduciary capacity or as a result of
debts previously contracted) shall be converted into .79 (subject to possible
adjustment as described below, the "Exchange Ratio") of a share of common stock,
par value $2.50, of FNB ("FNB Stock"), with cash being paid in lieu of any
fractional shares. In addition, outstanding options to purchase Carolina Stock
under its existing stock option plan will be assumed by FNB except that FNB
Stock will be substituted for Carolina Stock on a basis that reflects the
Exchange Ratio. Restricted stock that has been granted to employees of
Carolina's subsidiaries under its existing management recognition plan will be
converted into FNB Stock under the terms of the Merger Agreement.
The Merger is intended to constitute a tax-free transaction under the
Internal Revenue Code of 1986, as amended, and be accounted for as a pooling of
interests.
Two members of Carolina's Board of Directors will join the Board of
Directors of FNB following the Merger and the other Carolina Directors will be
appointed to a local advisory board of First National Bank and Trust Company,
FNB's wholly-owned national bank subsidiary.
Consummation of the Merger is subject to various conditions, including: (i)
receipt of the approvals of the shareholders of FNB and Carolina; (ii) receipt
of certain federal and state regulatory approvals; (iii) receipt of opinion of
counsel as to the tax-free nature of the Merger; (iv) receipt of letters from
the independent accountants of FNB to the effect that the Merger will qualify
for pooling-of-interests accounting treatment and from the independent
accountants of Carolina that such accountants are not aware of any matters
relating to Carolina or its subsidiaries that would preclude the Merger from
qualifying for pooling-of-interests accounting treatment; and (v) satisfaction
of certain other conditions.
Under the Merger Agreement, Carolina has the right to terminate the Merger
Agreement if the Average Closing Price (as defined below) of FNB Stock (i) is
less than 0.80 times the Starting Price (as defined below) and (ii) reflects a
decline, on the Determination Date (as defined below), of more than 15% below a
weighted index of the stock prices of a group of ten bank holding companies
designated in the Merger Agreement. In the event Carolina gives notice of its
intention to terminate the Merger Agreement based on this provision, FNB has the
right to elect to adjust the Exchange Ratio in accordance with the terms of the
Merger Agreement, which would preclude a termination of the Merger Agreement.
For purposes of the Merger Agreement, "Average Closing Price" means the
average of the daily last sales prices of FNB Stock as reported on the Nasdaq
National Market System (as reported by The Wall
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Street Journal or, if not reported thereby, by another authoritative source as
chosen by FNB) for the ten consecutive full trading days in which such shares
are traded on Nasdaq ending at the close of trading on the Determination Date.
"Determination Date" means the later of the dates on which both (i) all
requisite consents or approvals of applicable federal and state regulatory
authorities having jurisdiction over the Merger are obtained (without regard to
any waiting periods) and (ii) the shareholders of both Carolina and FNB shall
have approved the Merger. "Starting Price" means the last sale price per share
of FNB Stock as reported on Nasdaq (as reported by The Wall Street Journal or,
if not reported thereby, by another authoritative source as chosen by FNB) on
October 18, 1999.
In connection and concurrently with the execution of the Merger Agreement,
Carolina and FNB entered into an option agreement pursuant to which Carolina
granted to FNB an option to purchase up to 19.9% of the outstanding shares of
Carolina Stock at a purchase price of $10.50 per share upon the occurrence of
certain events and conditions (the "Option Agreement"). Under the terms of the
Option Agreement, the total profit that FNB may realize under the option may not
exceed $1.2 million.
The Merger Agreement and the Merger will be submitted for approval at
separate meetings of the shareholders of FNB and Carolina (the "Shareholders'
Meetings"). Prior to the Shareholders' Meetings, FNB will file a registration
statement with the Securities and Exchange Commission (the "SEC") registering
the shares of FNB Stock to be issued in connection with the Merger. In
connection with the Shareholders' Meetings, FNB and Carolina will prepare and
file with the SEC a joint proxy statement and mail such joint proxy statement to
their respective shareholders.
A copy of the joint press release (the "Press Release") relating to the
Merger is being filed as Exhibit 99.1 to this report and is incorporated herein
by reference. The Press Release contains forward-looking statements, including
estimates of future operating results and other forward-looking financial
information for FNB and Carolina. These estimates constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. As such, the estimates involve significant risks and uncertainties.
Actual results may differ materially due to such factors as: (1) expected cost
savings from the Merger not materializing within the expected time frame; (2)
revenues following the Merger not meeting expectations; (3) competitive
pressures among financial institutions increasing significantly; (4) costs or
difficulties related to the integration of the businesses of FNB and Carolina
being greater than expected; (5) general economic conditions being less
favorable than anticipated; and (6) legislation or regulatory changes adversely
affecting the business in which FNB and Carolina will engage after the Merger.
Item 7. Financial Statements and Exhibits
(99)(a) Press Release.
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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 FINCORP, INC.
Date: October 22, 1999 By: /s/ R. Larry Campbell
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R. Larry Campbell, President
and Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Description
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99(a) Press Release dated October 18, 1999
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