EXHIBIT 2.1 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER

 

 

 

 

 

 

 

Agreement and Plan of Reorganization and Merger

By and Among

Summit Financial Corporation,

Summit National Bank

and

First Citizens Bank and Trust Company, Inc.

And Joined in By

First Citizens Bancorporation, Inc.

THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the “Agreement”) is entered into as of the 7th day of March, 2005, by and between FIRST CITIZENS BANK AND TRUST COMPANY, INC. (“FCB”), SUMMIT FINANCIAL CORPORATION (“SFC”), and SUMMIT NATIONAL BANK (“SNB”), and is being joined in by FIRST CITIZENS BANCORPORATION, INC. (“Bancorp”) for purposes of its agreement to the terms hereof.

WHEREAS , FCB is a South Carolina bank with its principal office and place of business located in Columbia, South Carolina, and is a wholly-owned bank subsidiary of First Citizens Bancorporation, Inc. (“Bancorp”), a South Carolina business corporation which also has its principal office and place of business in Columbia, South Carolina; and,

WHEREAS, Bancorp is a South Carolina business corporation with its principal office and place of business located in Columbia, South Carolina, is the owner of all the issued and outstanding shares of common stock of FCB and is a financial holding company registered as such with the Board of Governors of the Federal Reserve System; and,

WHEREAS , SFC is a South Carolina business corporation with its principal office and place of business located in Greenville, South Carolina, and, by virtue of its being the owner of all the issued and outstanding shares of common stock of SNB and Freedom Finance, Inc. (“FFI”), is a financial holding company registered as such with the Board of Governors of the Federal Reserve System; and,

WHEREAS , SNB is a national banking association with its principal office and place of business located in Greenville, South Carolina, and is a wholly-owned subsidiary of SFC and the owner of all the issued and outstanding shares of common stock of Summit Investment Services, Inc. (“SIS”), a South Carolina business corporation which has its principal office and place of business in Greenville, South Carolina; and,

WHEREAS , FCB, SFC and SNB have agreed that it is in their mutual best interests and in the best interests of their respective shareholders for SFC and SNB to be merged with and into FCB in the manner and upon the terms and conditions contained in this Agreement and the Plan of Merger attached as an exhibit hereto; and,

WHEREAS , to effectuate the foregoing, FCB, SFC and SNB desire to adopt this Agreement and Plan of Reorganization; and,

WHEREAS , FCB’s and Bancorp’s Boards of Directors have approved this Agreement, and Bancorp has approved this Agreement in its capacity as FCB’s sole shareholder and desires to join in the execution of this Agreement for purposes of evidencing its approval of the transactions described herein and its agreement to the terms hereof; and,

WHEREAS , SNB’s and SFC’s Boards of Directors have approved this Agreement, and SFC’s Board of Directors has approved this Agreement in its capacity as SNB’s sole shareholder.

NOW, THEREFORE , in consideration of the premises, the mutual benefits to be derived from this Agreement, and the representations, warranties, conditions, covenants and promises herein contained, and subject to the terms and conditions hereof, FCB, Bancorp, SFC and SNB hereby adopt and make this Agreement and mutually agree as provided below.

Article I

Definitions

As used in this Agreement, certain of the capitalized terms used throughout this Agreement are listed below with their meanings as used herein.

1.01   Best Knowledge . The term “Best Knowledge of SFC” or “Knowledge,” when used with reference to facts or information known by SFC, SNB, SIS or FFI, refers to facts or information of which J. Randolph Potter, James B. Schwiers, James G. Bagnal III, Blaise B. Bettendorf, James G. Gulledge, Jr., J. Stephen Rush and William E. Covington, Jr. are consciously aware or of which they should have become consciously aware in the ordinary course of business and the performance of their management duties.

The term “Best Knowledge of FCB” or “Knowledge,” when used with reference to certain facts or information known by FCB or Bancorp, refers to facts or information of which executive officers of FCB or Bancorp are consciously aware or of which they should have become consciously aware in the ordinary course of business and the performance of their management duties.

1.02.   Dissenters’ Rights .  The term “Dissenters’ Rights” means the right to dissent from the Merger and receive cash under and in the manner described in Chapter 13 of the South Carolina Business Corporation Act of 1988, as amended.

1.03.   Effective Time .  The term Effective Time means the date and time at which the Merger shall become effective as specified in Articles of Merger executed by FCB and filed by it with the South Carolina Secretary of State in accordance with applicable law in order to effectuate the Merger of SFC and SNB into FCB.

1.04.   Environmental Laws .  The term “Environmental Laws” means (a) all federal, state and local statutes, regulations and ordinances, (b) all common law, and (c) all orders, decrees, and similar provisions having the force or effect of law and to which SFC, SNB, SIS or FFI is subject, which, in the case of any of the above, concern or relate to pollution or protection of the environment; standards of conduct and bases of obligations or liability relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, discharge, release, threatened release, control or clean-up of any “Hazardous Substances” (as defined in subparagraph 1.11 below); public or worker health and safety; wetlands protection, drainage or stormwater management; noise; odor; or indoor air pollution.

1.05.   FCB Material Adverse Change .  The term “FCB Material Adverse Change” means a material adverse change in or affecting FCB and Bancorp considered as one entity, in Bancorp’s

consolidated financial condition or results of operations, in Bancorp’s businesses, investments, Loan portfolio or operations, or in the ability of FCB or Bancorp to consummate the transactions described herein, but shall not include any change resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by any of the SFC Companies or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of FCB or Bancorp, (c)  compliance by FCB or Bancorp with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

1.06.   FCB Material Adverse Effect .  The term “FCB Material Adverse Effect” means a material adverse effect on FCB and Bancorp considered as one entity, on Bancorp’s consolidated financial condition or results of operations, on Bancorp’s or FCB’s business, or on the ability of FCB and Bancorp to consummate the transactions described herein or to carry on its business as presently conducted, or on FCB’s ability to conduct SNB’s business following the Merger, but shall not include any effect resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by any of the SFC Companies or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of FCB or Bancorp, (c) compliance by FCB or Bancorp with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

1.07.   FDIC .  The term “FDIC” means the Federal Deposit Insurance Corporation.

1.08.   FFI Stock .  The term “FFI Stock” means the outstanding $1.00 par value common stock of FFI.

1.09.   FRB .  The term “FRB” means, collectively, the Federal Reserve Board and the Federal Reserve Bank of Richmond.

1.10.   GAAP .  The term “GAAP” means accounting principles generally accepted in the United States.

1.11.   Hazardous Substance .  The term “Hazardous Substance” means any materials, substances, wastes, chemical substances, or mixtures presently listed, defined, designated, classified or otherwise regulated as hazardous, toxic, or dangerous under any Environmental Laws, whether by type or quantity, including without limitation pesticides, pollutants, contaminants, toxic chemicals, oil, or other petroleum products or byproducts, asbestos or materials containing (or presumed to contain) asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, lead, radon, methyl tertiary butyl ether or radioactive material.

1.12.   Loans .  The term “Loans” means any and all loans, lines of credit, letters of credit or other extensions of credit (including all unfunded commitments to make a Loan or issue or extend credit), and all accounts, notes and other receivables of any of the SFC Companies.

1.13.   OCC .  The term “OCC” means the Office of the Comptroller of the Currency.

1.14.   Previously Disclosed .  The terms “Previously Disclosed to FCB” and “Previously Disclosed to SFC” shall mean the disclosure of information by SFC and SNB to FCB and Bancorp, or by FCB and Bancorp to SFC, respectively, as of the last day of the calendar month immediately preceding the date of this Agreement or as of such other date as is specified herein, in the manner described in Paragraph 11.05 of this Agreement.

1.15.   Regulatory Authorities .  The term “Regulatory Authorities” includes each and every federal, state or local governmental, regulatory, or judicial authority having jurisdiction over SFC, SNB,

SIS, FFI, FCB or Bancorp, or any of their respective business operations, properties or assets, or the transactions described herein.

1.16.   SEC .  The term “SEC” means the Securities and Exchange Commission.

1.17.   1934 Act .  The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

1.18.   SFC Audited Financial Statements . The term “SFC Audited Financial Statements” means SFC’s audited consolidated statements of financial condition as of December 31, 2004 and 2003, and its audited consolidated statements of income, shareholders’ equity and cash flows for the three years ended December 31, 2004, 2003 and 2002, together with the notes thereto.

1.19.   SFC Companies .  The term “SFC Companies” refers collectively to SFC, SNB, SIS and FFI.

1.20.   SFC Material Adverse Change .  The term “SFC Material Adverse Change” means a material adverse change in or affecting SFC, SNB, SIS and FFI considered as one entity, in SFC’s consolidated financial condition or results of operations, in the SFC Companies’ respective businesses, investments, Loan portfolio or operations, or in the ability of SFC or SNB to consummate the transactions described herein or to carry on SNB’s business as presently conducted, or in FCB’s ability to conduct SNB’s business following the Merger, but shall not include any change resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by FCB or Bancorp or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of the SFC Companies, (c) compliance by SFC or SNB with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

1.21.   SFC Material Adverse Effect .  The term “SFC Material Adverse Effect” means a material adverse effect on SFC, SNB, SIS and FFI considered as one entity, on SFC’s consolidated financial condition or results of operations, on the SFC Companies’ respective businesses, investments, Loan portfolio or operations, or on the ability of SFC or SNB to consummate the transactions described herein or to carry on SNB’s business as presently conducted, or on FCB’s ability to conduct SNB’s business following the Merger, but shall not include any effect resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by FCB or Bancorp or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of the SFC Companies, (c) compliance by SFC or SNB with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

1.22.   SFC Real Property .  The term “SFC Real Property” means all real property owned or leased by the SFC Companies, including SNB’s and FFI’s office facilities and all other real estate or foreclosed properties, including improvements thereon.

1.23.   SFC Stock .  The term “SFC Stock” means the outstanding $1.00 par value common stock of SFC.

1.24.   SFC Stock Option .  The term “SFC Stock Option” means any and all options to purchase shares of SFC Stock that have been issued prior to the date of this Agreement pursuant to any option plan maintained or provided by SFC or otherwise and that remain outstanding and unexercised on the date of this Agreement.

1.25.   SIS Stock .  The term “SIS Stock” means the outstanding $1.00 par value common stock of SIS.

1.26.   SNB Stock .  The term “SNB Stock” means the outstanding $5.00 par value common stock of SNB.

1.27.   South Carolina Board .  The term “South Carolina Board” means the South Carolina State Board of Financial Institutions.

Article II

The Merger

2.01.   Nature of Transaction; Plan of Merger .  Subject to the provisions of this Agreement, at the Effective Time SFC and SNB each simultaneously will be merged into and with FCB (the “Merger”) as provided in the plan of merger (the “Plan of Merger”) attached as Exhibit A to this Agreement.

2.02.   Effect of Merger; Surviving Corporation .  At the Effective Time, and by reason of the Merger, the separate corporate existences of SFC and SNB shall cease while the corporate existence of FCB as the surviving corporation in the Merger shall continue with all of its purposes, objects, rights, privileges, powers and franchises, all of which shall be unaffected and unimpaired by the Merger. Following the Merger, FCB shall continue to operate as a South Carolina bank and will conduct its business at the then legally established branch and main offices of FCB and SNB. The duration of the corporate existence of FCB, as the surviving corporation, shall be perpetual and unlimited.

2.03.   Assets and Liabilities of SFC and SNB .  At the Effective Time, and by reason of the Merger, and in accordance with applicable law, all of the property, assets and rights of every kind and character of SFC and SNB (including without limitation all real, personal or mixed property, all debts due on whatever account, all other choses in action and every other interest of or belonging to or due to SFC or SNB, whether tangible or intangible) shall be transferred to and vest in FCB, and FCB shall succeed to all the rights, privileges, immunities, powers, purposes and franchises of a public or private nature of SFC and SNB, all without any conveyance, assignment or further act or deed; and FCB shall become responsible for all of the liabilities, duties and obligations of every kind, nature and description of SFC and SNB as of the Effective Time. By virtue of the Merger, SFC’s interest in and ownership of the outstanding shares of FFI Stock, and SNB’s interest in and ownership of the outstanding shares of SIS Stock, shall be transferred to and vest in FCB, and SIS and FFI shall become wholly-owned subsidiaries of FCB.

2.04.   Conversion and Exchange of Stock .

(a)   Conversion of SFC Stock .  Except as otherwise provided in this Agreement, at the Effective Time all rights of SFC’s shareholders with respect to all outstanding shares of SFC Stock shall cease to exist and, as consideration for and to effect the Merger, each such outstanding share (not to exceed an aggregate of the 4,525,855 shares outstanding on the date of this Agreement and up to 664,848 shares for which options to purchase SFC Stock have been issued by SFC and could be exercised before the Closing) shall be converted, without any action by SFC, FCB or any SFC shareholder, into the right to receive cash in the amount of $22.00, all in the manner and subject to the limitations described in this Agreement.

At the Effective Time, and without any action by FCB, SFC or any SFC shareholder, SFC’s stock transfer books shall be closed and there shall be no further transfers of SFC Stock on its stock transfer books or the registration of any transfer of a certificate evidencing SFC Stock (a “SFC Certificate”) by any holder thereof, and the holders of SFC Certificates shall cease to be, and shall have no further rights as, shareholders of SFC other than as provided in this Agreement. Following the Effective Time, SFC Certificates shall evidence only the right of the registered holders thereof to receive the consideration into which their SFC Stock was converted at the Effective Time as provided in this

Paragraph 2.04(a), or, in the case of SFC Stock held by shareholders who properly shall have exercised Dissenters’ Rights, cash as provided in Paragraph 2.04(e) below.

(b)   Cancellation of SNB Stock . At the Effective Time, all outstanding shares of SNB Stock shall be cancelled, and no cash or other consideration shall be issued in exchange for or with respect to those shares.

(c)   Exchange and Payment Procedures; Surrender of Certificates .

(i)   Prior to the Effective Time, FCB shall designate an agent reasonably acceptable to SFC to act as agent for the holders of the SFC Stock in connection with the Merger (the “Paying Agent”) to receive in trust, the aggregate consideration to which holders of SFC Stock shall become entitled pursuant to Paragraph 2.04(a) (the “Merger Consideration”). SFC and SNB agree that FCB’s own trust department, or the corporate trust department of First-Citizens Bank & Trust Company, Raleigh, North Carolina, each shall be acceptable to them as FCB’s Paying Agent.

(ii)   At the Effective Time, FCB shall deposit the Merger Consideration with the Paying Agent. The Merger Consideration shall be held in trust for the benefit of the holders of SFC Stock and such cash shall not be used for any other purposes; provided that FCB may direct the Paying Agent to invest such cash, provided that such investments (A) shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations receiving the highest rating from Standard & Poor’s Corporation, or in certificates of deposit of domestic commercial banks with capital exceeding $250,000,000 (collectively, the “Permitted Investments”) or in money market funds which are invested solely in Permitted Investments, and (B) shall have maturities that will not prevent or delay payments to be made pursuant to Paragraph 2.04(a) and this Paragraph 2.04(c). If for any reason (including losses) the funds held by the Paying Agent are inadequate to pay the amounts to which the holders of SFC Stock shall be entitled under Paragraph 2.04(a), Bancorp and FCB shall be liable for the payment thereof.

(iii)   As promptly as practicable after the Effective Time, FCB and Bancorp shall cause to be mailed to each record holder, as of the Effective Time, whose shares of SFC Stock were converted pursuant to Paragraph 2.04(a) into the right to receive the Merger Consideration, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to a SFC Certificate shall pass, only upon proper delivery of the SFC Certificate to the Paying Agent and shall be in such form and have such other provisions as FCB may reasonably specify) and instructions for effecting the surrender of a SFC Certificate in exchange for the Merger Consideration for the SFC Stock. Upon surrender of a SFC Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by FCB, together with such letter of transmittal duly executed and completed in accordance with the instructions thereto, the holder of such SFC Certificate shall receive promptly in exchange therefor the Merger Consideration for each share of SFC Stock formerly evidenced thereby, and such SFC Certificate shall forthwith be canceled.

(iv)   At any time following the 12 month anniversary of the Effective Time, FCB shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent, and holders shall be entitled to look to FCB (subject to abandoned property, escheat or other similar laws) only as a general creditor thereof with respect to the Merger Consideration payable upon due surrender of their SFC Certificates without any interest thereon. Notwithstanding the foregoing, neither FCB, Bancorp nor the Paying Agent shall be liable to any holder of a SFC Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(d)   Antidilutive Adjustments . If, prior to the Effective Time, SFC shall declare any dividend payable in shares of SFC Stock or shall subdivide, split, reclassify or combine the presently outstanding shares of SFC Stock, then an appropriate and proportionate adjustment shall be made in the

amount of cash into which each share of SFC Stock will be converted at the Effective Time pursuant to this Agreement.

(e)   Dissenters .  Any shareholder of SFC who properly exercises Dissenters’ Rights shall be entitled to receive payment of the fair value of his or her shares of SFC Stock in the manner and pursuant to the procedures provided in Chapter 13 of the South Carolina Business Corporation Act of 1988. Shares of SFC Stock held by persons who exercise Dissenters’ Rights shall not be converted as described in Paragraph 2.04(a). However, if any shareholder of SFC who exercises Dissenters’ Rights shall fail to perfect those rights, or effectively shall waive or lose such rights, then each of his or her shares of SFC Stock shall be deemed to have been converted into the right to receive cash as of the Effective Time as provided in Paragraph 2.04(a) hereof.

(f)   Lost Certificates .   In the event that any SFC Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such SFC Certificate to be lost, stolen or destroyed, the Paying Agent will issue in exchange for such lost, stolen or destroyed SFC Certificate the Merger Consideration deliverable in respect thereof as determined in accordance with this Article II, provided , that the person to whom the Merger Consideration is paid shall, as a condition precedent to the payment thereof, and at the sole discretion of FCB, give FCB a bond in such sum as it may direct or otherwise indemnify FCB and Bancorp in a manner satisfactory to them against any claim that may be made against FCB or Bancorp with respect to shares of SFC Stock represented by the SFC Certificate claimed to have been lost, stolen or destroyed..

2.05   Articles of Incorporation, Bylaws and Management .  The Articles of Incorporation and Bylaws of FCB in effect at the Effective Time shall be the Articles of Incorporation and Bylaws of FCB as the surviving corporation in the Merger. The directors of FCB in office at the Effective Time shall constitute the Board of Directors of FCB as the surviving corporation in the Merger and shall continue to hold such offices until removed as provided by law or until the election or appointment of their respective successors. The officers of FCB in office at the Effective Time shall continue to serve in their same positions as officers of FCB as the surviving corporation in the Merger until removed as provided by law or until the election or appointment of their respective successors.

2.06.   Closing; Effective Time .  The consummation and closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of FCB in Columbia, South Carolina, or at such other place as FCB shall designate, on a date mutually agreeable to FCB and SFC (the “Closing Date”) after the expiration of any and all required waiting periods following the effective date of required approvals of the Merger by governmental or regulatory authorities (but in no event more than five business days following the satisfaction of all conditions to consummation of the Merger as described in Article VIII of this Agreement). At the Closing, FCB, Bancorp, SFC and SNB shall take such actions (including without limitation the delivery of certain closing documents and the execution of Articles of Merger under South Carolina law) as are required in this Agreement and as otherwise shall be required by law to consummate the Merger and cause it to become effective.

Subject to the terms and conditions set forth in this Agreement, the Merger shall become effective on the Effective Time specified in Articles of Merger executed by FCB and filed by it with the South Carolina Secretary of State in accordance with applicable law; provided, however , that the Effective Time shall in no event be more than three business days following the Closing Date.

Article III

Representations and Warranties of SFC and SNB

Except as otherwise specifically described in this Agreement or as Previously Disclosed to FCB, SFC and SNB hereby make the following representations and warranties to FCB.

3.01.   Organization; Standing; Power .   SFC is duly organized and incorporated, validly existing and in good standing as a business corporation under the laws of the State of South Carolina and is a registered financial holding company under the Bank Holding Company Act of 1956, as amended.

SNB is duly organized, validly existing and in good standing as a national banking association under the laws of the United States of America.

SIS and FFI each is duly organized and incorporated, validly existing and in good standing as a business corporation under the laws of the State of South Carolina.

Each of the SFC Companies (i)  has all requisite power and authority (corporate and other) to own, lease and operate its properties and to carry on its business as it now is being conducted; (ii)  is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned, leased or operated by it therein, or in which the transaction of its business, makes such qualification necessary, except where failure so to qualify would not have an SFC Material Adverse Effect; and (iii)  is not transacting business or operating any properties owned or leased by it in violation of any provision of federal, state or local law or any rule or regulation promulgated thereunder, except where such violation would not result in an SFC Material Adverse Effect.

3.02.   Capital Stock and Securities .  SFC’s authorized capital stock consists of 20,000,000 shares of SFC Stock, of which 4,525,855 shares are issued and outstanding as of the date of this Agreement and constitute SFC’s only outstanding equity securities. The outstanding shares of SFC Stock are listed on The Nasdaq SmallCap Market.

SNB’s authorized capital stock consists of 2,000,000 shares of SNB Stock, of which 850,000 shares are issued and outstanding. All of the SNB Stock is held, beneficially and of record, by SFC, and those shares constitute SNB’s only outstanding equity securities.

SIS’s authorized capital stock consists of 100,000 shares of SIS Stock, of which 1,000 shares are issued and outstanding. All of the SIS Stock is held, beneficially and of record, by SNB, and those shares constitute SIS’s only outstanding equity securities.

FFI’s authorized capital stock consists of 100,000 shares of FFI Stock, of which 1,000 shares are issued and outstanding. All of the FFI Stock is held, beneficially and of record, by SFC, and those shares constitute FFI’s only outstanding equity securities.

Each outstanding share of SFC Stock, SNB Stock, SIS Stock and FFI Stock (i)  has been duly authorized and is validly issued and outstanding, and is fully paid and, except with respect to the SNB Stock as provided in 12 USC 55, nonassessable, (ii)  has been legally issued pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, or an available exemption from such registration, and in conformity with applicable state securities laws, and (iii) has not been issued in violation of the preemptive rights of any shareholder. The SFC Stock is registered with the SEC under the 1934 Act, and SFC is subject to the registration and reporting requirements of the 1934 Act. The SNB Stock, SIS Stock and FFI Stock are not registered under, and SNB, SIS and FFI are not subject to the registration and reporting requirements of, the 1934 Act.

3.03.   Principal Shareholders .   To the Best Knowledge of SFC, no person or entity beneficially owns, directly or indirectly, more than 5% of the outstanding shares of SFC Stock.

3.04.   Subsidiaries .   With the exception of SNB, FFI and SIS, SFC has no subsidiaries, direct or indirect; and, except for equity securities included in its investment portfolio and Previously Disclosed to FCB, SFC does not own any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity.

With the exception of SIS, SNB has no subsidiaries, direct or indirect, and, except for equity securities included in its investment portfolio and Previously Disclosed to FCB, SNB does not own any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity.

SIS and FFI have no subsidiaries, direct or indirect; and SIS and FFI do not own any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity.

3.05.   Convertible Securities, Options, Etc .  None of the SFC Companies have any outstanding (a)  securities or other obligations (including debentures or other debt instruments) which are convertible into shares of SFC Stock, SNB Stock, SIS Stock or FFI Stock, or any other securities of any of the SFC Companies, (b)  options, warrants, rights, calls or other commitments of any nature which entitle any person to receive or acquire any shares of SFC Stock, SNB Stock, SIS Stock or FFI Stock or any other securities of any of the SFC Companies, or (c)  plan, agreement or other arrangement pursuant to which shares of SFC Stock, SNB Stock, SIS Stock or FFI Stock or any other securities of any of the SFC Companies, or options, warrants, rights, calls or other commitments of any nature pertaining to any securities of any of the SFC Companies, have been or may be issued.

3.06.   Authorization and Validity of Agreement .   This Agreement has been duly and validly approved by SFC’s and SNB’s respective Boards of Directors and by SFC as the sole shareholder of SNB. Subject only to approval of this Agreement by the shareholders of SFC in the manner required by law and required approvals of Regulatory Authorities (as contemplated by Paragraph 7.01), (a)  SFC and SNB each has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described in this Agreement, (b)  all corporate proceedings and approvals required to authorize SFC and SNB to enter into this Agreement and to perform its obligations and agreements and carry out the transactions described herein have been duly and properly completed or obtained, and (c)  this Agreement constitutes the valid and binding agreement of each of SFC and SNB enforceable in accordance with its terms (except to the extent enforceability may be limited by (i)  applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect which affect creditors’ rights generally, (ii)  legal and equitable limitations on the availability of injunctive relief, specific performance and other equitable remedies, and (iii)  general principles of equity and applicable laws or court decisions limiting the enforceability of indemnification provisions).

3.07.   Validity of Transactions; Absence of Required Consents or Waivers .   Subject to approval of this Agreement by the shareholders of SFC in the manner required by law and receipt of required approvals of Regulatory Authorities, neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, nor compliance by SFC or SNB with any of their respective obligations or agreements contained herein, nor any action or inaction by SFC or SNB required herein, will   conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, the Articles of Incorporation or Association, as applicable, or Bylaws of SFC or SNB or, except where the same could not, individually or in the aggregate, reasonably be expected to have an SFC Material Adverse Effect, (a) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, any contract, agreement, lease, mortgage, note, bond, indenture, license, obligation or understanding (oral or written) to which either of them is bound or to which either of them or their respective businesses, capital stock or properties or assets is subject; (b)  result in the creation or imposition of any lien, claim, interest, charge, restriction or encumbrance upon any of the properties or assets of any of the SFC Companies; (c)  violate any applicable federal or state statute, law, rule or regulation, or any judgment, order, writ, injunction or decree of any court, administrative or regulatory agency or governmental body; or (d)  result in the acceleration of any obligation or indebtedness of any of the SFC Companies.

No further consents, approvals or waivers are required to be obtained from any person or entity in connection with SFC’s or SNB’s execution and delivery of this Agreement, or the performance of their obligations or agreements or the consummation of the transactions described herein, except for required approvals of SFC’s shareholders and of Regulatory Authorities.

3.08.   SFC Books and Records . The SFC Companies’ respective books of account and business records have been maintained in all material respects in compliance with all applicable legal, regulatory and accounting requirements, and such books and records are complete and reflect accurately in all material respects their respective items of income and expense and all of their respective assets, liabilities and stockholders’ equity. The SFC Companies’ minute books are complete and accurately reflect in all material respects all corporate actions which their respective shareholders and boards of directors, and all committees thereof, have taken during the time periods covered by such minute books.

3.09.   SFC Reports .   To the Best Knowledge of SFC, (a) since December 31, 1999, each of the SFC Companies has filed all reports, registrations and statements and other filings, together with any amendments required to be made with respect thereto (“Reports”), that it was required to file with any Regulatory Authority; (b) each such Report filed by the SFC Companies complied in all material respects with all the statutes, rules and regulations enforced or promulgated by the Regulatory Authorities with which it was filed and did 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 therein, in light of the circumstances under which they were made, not misleading; and (c) none of the SFC Companies have been notified by a Regulatory Authority that any such Report filed by any of them was deficient in any material respect as to form or content.

3.10.   SFC Financial Statements .   SFC has Previously Disclosed to FCB a copy of the SFC Audited Financial Statements. The SFC Audited Financial Statements (a) were prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated, (b) are in accordance with the SFC Companies’ books and records, and (c) present fairly in all material respects SFC’s consolidated financial condition, assets and liabilities, results of operations, changes in shareholders’ equity and changes in cash flows as of the dates indicated and for the periods specified therein. The SFC Audited Financial Statements have been audited by KPMG LLP, which serves as SFC’s independent registered public accounting firm.

3.11.   SFC Tax Returns and Other Tax Matters .   Since January 1, 1999, (a) each of the SFC Companies has timely filed or caused to be filed all federal, state and local income tax returns and reports which are required by law to have been filed, and, to the Best Knowledge of SFC, all such returns and reports were true, correct and complete in all material respects and contained all material information required to be contained therein; (b)  all federal, state and local income, profits, franchise, sales, use, occupation, property, excise, withholding, employment and other taxes (including interest and penalties), charges and assessments attributable to periods ending on or before December 31, 2004, which have become due from or been assessed or levied against any of the SFC Companies or their respective properties have been fully paid or, if not yet due, a reserve or accrual, which is adequate in all material respects for the payment of all such taxes to be paid and the obligation for such unpaid taxes, is reflected on the SFC Audited Financial Statements; (c)  none of the SFC Companies have been involved in any audit by or other dispute with the Internal Revenue Service (the “IRS”) or the South Carolina Department of Revenue (the “SCDOR”) or other taxing authority, and none of the SFC Companies have received any notification from the IRS, the SCDOR or other taxing authority of the pendency of any audit or examination in connection with any such tax return or report; (d)  none of the SFC Companies has waived or extended the statute of limitations (or been asked to execute a waiver or extend a statute of limitations) with respect to any tax year, the audit of any such tax return or report, or the assessment or collection of any tax.

3.12.   Absence of Material Adverse Changes or Certain Other Events .

(a)   Since December 31, 2004, (i) each of the SFC Companies has conducted its business only in the ordinary course, (ii) there has occurred no SFC Material Adverse Change, and (iii)  there have occurred no events or developments, and there currently exist no conditions or circumstances, which, individually or in the aggregate, and with the lapse of time or otherwise, reasonably could be expected to cause, create or result in an SFC Material Adverse Change .

(b)   Since December 31, 2004, and except as described in Paragraph 3.13 below, (i) none of the SFC Companies have incurred any material liability, engaged in any material transaction, or entered into any material agreement, (ii) increased the salaries, compensation or general benefits payable or provided to its employees (with the exception of routine increases in the salaries of employees effected at such times and in such amounts as is consistent with their past practices and salary administration and review policies and procedures in effect prior to December 31, 2004), (iii)  suffered any material loss, destruction or damage to any of their properties or assets not reserved for in the SFC Audited Financial Statements, or (iv) made a material acquisition or disposition of any assets or entered into any material contract or lease.

3.13.   Absence of Undisclosed Liabilities .   None of the SFC Companies have any material liabilities or obligations, whether known or unknown, matured or unmatured, accrued, absolute, contingent or otherwise, whether due or to become due (including without limitation tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other than (a)  those reflected in the SFC Audited Financial Statements, (b) increases in SNB’s deposit accounts in the ordinary course of its business since December 31, 2004, or (c)  unfunded commitments to make, issue or extend Loans in amounts which, either individually or in the aggregate, do not exceed the lesser of amounts which are consistent with SNB’s and FFI’s lending practices prior to the date of this Agreement or the maximum amounts permitted by applicable banking regulations.

3.14.   Compliance with Existing Obligations .   Each of the SFC Companies has performed in all material respects all obligations required to be performed by it under, and it is not in default in any material respect under, or in violation in any material respect of, the terms and conditions of, its Articles of Incorporation or Association, as applicable, Bylaws or any material contract, agreement, lease, mortgage, note, bond, indenture, license, obligation, understanding or other undertaking (whether oral or written) by which it is bound or to which its business, operations, capital stock, properties or assets are subject.

3.15.   Litigation and Compliance with Law .

(a)   There are no actions, suits, arbitrations, controversies or other proceedings or investigations (or, to the Best Knowledge of SFC, any facts or circumstances which reasonably could be expected to result in such), including without limitation any such action by any Regulatory Authority, which are pending or, to the Best Knowledge of SFC, threatened, contemplated or probable of assertion, (i) against any of the SFC Companies or any of their respective businesses or assets, or (ii) to the Best Knowledge of SFC, otherwise relating to or affecting any of the SFC Companies or any of their respective businesses or assets.

(b)   Each of the SFC Companies has all licenses, permits, orders, authorizations or approvals (“Permits”) of all federal, state, local or foreign governmental or regulatory agencies that are required for the conduct of its business or to own, lease and operate its properties, all such Permits are in full force and effect, no violations have occurred with respect to any such Permits, and no proceeding is pending or, to the Best Knowledge of SFC, threatened or probable of assertion, to suspend, cancel, revoke or limit any Permit, except where the failure to obtain or maintain any such Permits, or the occurrence of any such violations, suspensions, cancellations, revocations or limitations, individually or in the aggregate, could reasonably be expected to result in an SFC Material Adverse Effect.

(c)   (i) None of the SFC Companies are subject to any supervisory agreement, enforcement order, writ, injunction, capital directive, supervisory directive, memorandum of understanding or other similar agreement, order, directive, memorandum or consent of, with or issued by any Regulatory Authority relating to its financial condition, directors or officers, employees, operations, capital, regulatory compliance or any other matter; (ii) there are no judgments, orders, stipulations, injunctions, decrees or awards against any of the SFC Companies which limit, restrict, regulate, enjoin or prohibit in any material respect any of their present or past businesses or practices; and (iii) none of the SFC Companies have been notified by any Regulatory Authority or any court that it is contemplating, threatening or requesting the issuance of any such agreement, order, writ, injunction, directive, memorandum, judgment, stipulation, decree or award.

(d)   To the Best Knowledge of SFC, none of the SFC Companies are in violation or default in any material respect under, and each of them has complied in all material respects with, all laws, statutes, ordinances, rules, regulations, orders, writs, injunctions or decrees of any Regulatory Authority (including without limitation all provisions of South Carolina law relating to usury, the Consumer Credit Protection Act, and all other federal and state laws and regulations applicable to extensions of credit by SNB and FFI). No person or authority has asserted a claim, and, to the Best Knowledge of SFC, there is no reasonable basis for any claim by any person or authority, for compensation, reimbursement, damages or other penalties or relief for any violations described in this subparagraph (d).

(e)   To the Best Knowledge of SFC, it has complied and is in compliance in all material respects with the requirements, including all corporate governance requirements, of The Nasdaq SmallCap Market for the continued listing of the SFC Stock.

3.16.   Real Properties .

(a)   SFC has Previously Disclosed to FCB a list of all parcels of SFC Real Property owned by one of the SFC Companies. With respect to each such parcel of owned SFC Real Property, the SFC Company owning that parcel has good and marketable fee simple title to that SFC Real Property and owns the same free and clear of all mortgages, liens, leases, encumbrances, title defects and exceptions to title other than (i)  the lien of current taxes not yet due and payable, and (ii)  such imperfections of title and restrictions, covenants and easements (including utility easements) which do not materially and adversely affect the economic value or marketability of that SFC Real Property or materially detract from, interfere with or restrict the present or future use of that SFC Real Property for the purposes for which it currently is used.

(b)   SFC has Previously Disclosed to FCB a list of all parcels of SFC Real Property in which one of the SFC Companies has a leasehold interest, together with true and complete copies of the lease agreement pertaining to each such parcel (the “Lease Agreements”). With respect to each such parcel, (i) the SFC Company-lessee of such parcel has unconditionally accepted occupancy of and currently is occupying that property; (ii) the lease term, commencement date, expiration date, renewal terms, and current rent applicable to that parcel is as set forth in the Lease Agreement pertaining to it; (iii)  the Lease Agreement pertaining to that parcel is in full force and effect and has not been modified or amended; (iv) the terms and conditions of the Lease Agreement pertaining to that parcel will continue without modification notwithstanding the Merger, and the Merger will not be deemed to be a transfer or assignment in violation of or otherwise to violate the Lease Agreement, to require the approval of the landlord under the Lease Agreement, or to prevent the exercise of or result in the loss of any right or option to renew or extend the Lease Agreement or to purchase that parcel; (v)  the SFC Company-lessee of such parcel has performed all of the lessee’s obligations (including the payment of rent) under the Lease Agreement pertaining to that parcel, and no event of default by the lessee exists or has occurred under that Lease Agreement (including without limitation any default that would prevent the exercise of or result in the loss of any right or option to renew or extend the Lease Agreement or to purchase that parcel); and

(vi)  to the Best Knowledge of SFC, the landlord with respect to that parcel has performed all of the landlord’s obligations under the Lease Agreement pertaining to that parcel, and no event of default by the landlord exists or has occurred under that Lease Agreement.

(c)   The SFC Real Property complies in all material respects with all applicable federal, state and local laws, regulations, ordinances or orders of any governmental or regulatory authority, including without limitation those relating to zoning, building and use permits, as well as the Americans with Disabilities Act. The parcels of SFC Real Property upon which SNB’s and FFI’s offices are situated, or which are used by SNB and FFI in conjunction with their respective businesses, may, under applicable zoning ordinances, be used for the purposes for which they currently are used as a matter of right rather than as a conditional or nonconforming use.

(d)   With respect to each parcel of SFC Real Property that currently is used by SNB or FFI as an office, (i) all improvements and fixtures included in or on that SFC Real Property are in satisfactory condition and repair and performing the functions and operations for which they were designed, ordinary wear and tear excepted, and (ii) there does not exist any condition which materially and adversely affects the economic value or marketability of that SFC Real Property or materially detracts from, interferes with or restricts SNB’s or FFI’s present use (or FCB’s use after the Merger) of that SFC Real Property or those improvements and fixtures for the purposes for which they currently are used.

3.17.   Loans, Accounts, Notes and Other Receivables .

(a)   All Loans reflected as assets on the SFC Companies’ respective books and records (i)  have resulted from bona fide business transactions in the ordinary course of their respective operations, (ii)  in all material respects were made in accordance with their respective standard practices and procedures, and (iii)  are owned by them, respectively, free and clear of all liens, encumbrances, assignments, participation or repurchase agreements or other exceptions to title or to the ownership or collection rights of any other person or entity.

(b)   All records of the SFC Companies regarding all outstanding Loans and all other real estate owned, are accurate in all material respects, and, to the Best Knowledge of SFC, each Loan which the SFC Companies’ respective Loan documentation indicates is secured by any real or personal property or property rights (“Loan Collateral”) is secured by valid, perfected and enforceable liens on all such Loan Collateral having the priority described in their records of such Loan.

(c)   To the Best Knowledge of SFC, each Loan reflected as an asset on the SFC Companies’ books, and each guaranty therefor, is the legal, valid and binding obligation of the obligor or guarantor thereon, and no defense, offset or counterclaim has been asserted with respect to any material Loan or guaranty.

(d)   SFC has Previously Disclosed to FCB a written listing of (i) each Loan or other asset of any of the SFC Companies which, as of the last day of the calendar year immediately preceding the date of this Agreement, was classified by any Regulatory Authority, or by any of the SFC Companies themselves, as “Loss,” “Doubtful,” “Substandard” or “Special Mention” (or otherwise by words of similar import), or which any of the SFC Companies otherwise have designated as a special asset, a “potential problem Loan,” or for special handling, or placed on any “watch list” because of concerns regarding the ultimate collectibility or deteriorating condition of such asset or any obligor or Loan Collateral therefor, (ii) each Loan which, as of the last day of the calendar year immediately preceding the date of this Agreement, was past due more than 30 days as to the payment of principal and/or interest, and (iii) each Loan as to which, to the Best Knowledge of SFC, any obligor thereon (including the borrower or any guarantor) was in default (other than as a result of nonpayment of principal or interest), was the subject of a proceeding in bankruptcy, or has indicated any inability or intention not to repay such Loan in accordance with its terms.

(e)   To the Best Knowledge of SFC, each of the Loans (with the exception of those Loans Previously Disclosed to FCB pursuant to Paragraph 3.17(d) above) is collectible in the ordinary course of the SFC Companies’ business in an amount which is not less than the amount at which it is carried on their books and records.

(f)   The SFC Companies’ reserves for possible Loan losses (the “Loan Loss Reserves”) has been established in conformity with GAAP, sound banking practices and all applicable requirements, rules and policies of Regulatory Authorities and, in the best judgment of management and the Boards of Directors of the SFC Companies, is reasonable in view of the size and character of the SFC Companies’ Loan portfolios, current economic conditions and other relevant factors and is adequate in all material respects to provide for losses relating to or the risk of loss inherent in the SFC Companies’ Loan portfolios.

3.18.   Securities Portfolio and Investments .   SFC has Previously Disclosed to FCB a listing of all securities owned, of record or beneficially, by each of the SFC Companies as of the last day of the calendar year immediately preceding the date of this Agreement. All securities owned by each of the SFC Companies are held free and clear of all mortgages, liens, pledges, encumbrances or any other restriction or rights of any other person or entity, whether contractual or statutory (with the exception of customary pledges or sales of securities by SNB in the ordinary course of its business to secure public funds deposits or in connection with “repurchase agreements” entered into by it with its customers), which would materially impair the ability of any of the SFC Companies to dispose freely of any such security and/or otherwise to realize the benefits of ownership thereof at any time. There are no voting trusts or other agreements or undertakings to which any of the SFC Companies are a party with respect to the voting of any such securities. With respect to all “repurchase agreements” under which any of the SFC Companies has “purchased” securities under agreement to resell, it has a valid and, to the Best Knowledge of SFC, perfected, first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt owed to it which is secured by such collateral.

Since December 31, 2004, there has been no material deterioration or adverse change in the quality, or any material decrease in the value, of any of the SFC Companies’ securities portfolios as a whole.

3.19.   Personal Property and Other Assets .   All banking equipment, data processing equipment, vehicles, and other personal property used by each of the SFC Companies and material to the operation of its business are owned by it free and clear of all liens, encumbrances, leases, title defects or exceptions to title. To the Best Knowledge of SFC, all personal property material to the SFC Companies’ respective businesses is in satisfactory operating condition and repair, ordinary wear and tear excepted.

3.20.   Patents and Trademarks .   To the Best Knowledge of SFC, each of the SFC Companies owns, possesses or has the right to use any and all patents, licenses, trademarks, trade names, copyrights, trade secrets and proprietary and other confidential information necessary to conduct its business as now conducted; and, to the Best Knowledge of SFC, none of the SFC Companies have violated, and none of them currently is in conflict with, any patent, license, trademark, trade name, copyright or proprietary right of any other person or entity.

3.21.   Environmental Matters .

(a)   SFC has Previously Disclosed to FCB, and provided FCB with copies of, all written reports, correspondence, notices or other information or materials in the SFC Companies’ possession pertaining to environmental surveys or assessments of any of the SFC Real Property and any improvements thereon, the presence of any Hazardous Substance on any of the SFC Real Property, or any violation or alleged violation of Environmental Laws on, affecting or otherwise involving any of the SFC Real Property or involving any of the SFC Companies.

(b)   To the Best Knowledge of SFC, there has been no presence, use, production, generation, handling, transportation, treatment, storage, disposal, emission, discharge, release or threatened release of any Hazardous Substances by any person on, from or relating to any of the SFC Real Property which constitutes a violation of any Environmental Laws, or any removal, clean-up or remediation of any Hazardous Substances from, on or relating to any of the SFC Real Property.

(c)   None of the SFC Companies have violated any Environmental Laws relating to any of the SFC Real Property and, to the Best Knowledge of SFC, there has been no violation of any Environmental Laws relating to any of the Real Property by any other person or entity for whose liability or obligation with respect to any particular matter or violation any of the SFC Companies are or may become responsible or liable.

(d)   To the Best Knowledge of SFC, none of the SFC Companies are subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon, the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to any of the SFC Real Property, by any person or entity.

(e)   To the Best Knowledge of SFC, no facts, events or conditions relating to any of the SFC Real Property, or the operations of any of the SFC Companies at any of their office locations, will prevent, hinder or limit continued compliance with Environmental Laws or give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws.

(f)   To the Best Knowledge of SFC, (i) there has been no violation of any Environmental Laws with respect to any Loan Collateral by any person or entity for whose liability or obligation with respect to any particular matter or violation any of the SFC Companies are or may become responsible or liable, (ii)  none of the SFC Companies are subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon, the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to any Loan Collateral, by any person or entity, (iii)  there are no facts, events or conditions relating to any Loan Collateral that will give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities pursuant to Environmental Laws; and (iv)  there is no Hazardous Substance on, from, under, at or relating to any Loan Collateral in an amount, volume, or concentration sufficient to invoke or require regulation under any Environmental Laws.

3.22.   Absence of Brokerage or Finders Commissions . Except for SFC’s engagement of Allen C. Ewing & Co. by SFC’s Board of Directors as its financial adviser in connection with the Merger and to provide it with an opinion as to the fairness, from a financial point of view, of the terms of the Merger to SFC’s shareholders, (a)  all negotiations relative to this Agreement and the transactions described herein have been carried on by SFC directly (or through its legal counsel) with FCB, and no person or firm has been retained by or has acted on behalf of, pursuant to any agreement, arrangement or understanding with, or under the authority of, any of the SFC Companies or either of their respective Boards of Directors, as a broker, finder or agent or has performed similar functions or otherwise is or may be entitled to receive or claim a brokerage fee or other commission in connection with or as a result of the transactions described herein; and (b)  none of the SFC Companies have agreed, and none of them have any obligation, to pay any brokerage fee or commission, or, with the exception of its legal counsel and

accountants, any other fee or compensation, to any person or entity in connection with or as a result of the transactions described herein.

SFC has Previously Disclosed to FCB the terms of its Board of Directors’ engagement of Allen C. Ewing & Co. (including fees to be paid to that firm by SFC).

3.23.   Material Contracts .   Other than agreements with customers relating to Loans or other banking services which were made in the ordinary course of their businesses, or as Previously Disclosed to FCB by SFC, none of the SFC Companies are parties to or bound by any agreement (a)  involving money or other property in an amount or with an aggregate cumulative value over its full term in excess of $100,000, (b)  which is not to be performed in full prior to December 31, 2005, (c)  which calls for the provision of goods or services to any of the SFC Companies and cannot be terminated without material penalty upon no more than 30 days notice to the other party thereto, (d)  which otherwise is material to the SFC Companies considered as one enterprise and was not entered into in the ordinary course of business, (e)  which involves hedging, options or any similar trading activity, or interest rate exchanges or swaps, (f)  which commits SNB or FFI to make, issue or extend any Loan other than commitments in the ordinary course of their respective businesses for Loans which do not exceed that amount typically dealt with in the normal course of their respective businesses, (g)  which involves the sale of any assets of any of the SFC Companies which are used in and are material to the operation of their respective businesses, (h)  which involves any purchase or sale of real property, or which involves the purchase or sale of any other assets in the amount of more than $50,000 in the case of any single transaction or $150,000 in the case of all such transactions, (i)  which involves the purchase, sale, issuance, redemption or transfer of any capital stock or other securities of any of the SFC Companies, or (j)  with any director or officer of any of the SFC Companies, or any principal shareholder of SFC (including without limitation any consulting agreement.

None of the SFC Companies are in default in any material respect, and there has not occurred any event which with the lapse of time or giving of notice or both would constitute such a default, under any contract, lease, insurance policy, commitment or arrangement to which they are parties or by which they or their respective properties are bound or affected or under which they or their property receives benefits, where the consequences of such default would have an SFC Material Adverse Effect.

3.24.   Employment Matters; Employee Relations .  SFC has Previously Disclosed to FCB a listing of the names, years of credited service and current base salary or wage rates of all employees of the respective SFC Companies’ as of the last day of the calendar month immediately preceding the date of this Agreement. Each of the SFC Companies (a)  has in all material respects paid in full to or, to the extent required by GAAP, accrued on behalf of all its respective directors, officers and employees all wages, salaries, commissions, bonuses, fees and other direct compensation for all labor or services performed by them, and all vacation pay, sick pay, severance pay, overtime pay and other amounts for which it is obligated under applicable law or its existing agreements, benefit plans, policies or practices, and (b)  is in compliance with all applicable federal, state and local laws, statutes, rules and regulations with regard to employment and employment practices, terms and conditions, wages and hours and other compensation matters. To the Best Knowledge of SFC, no person has asserted that any of the SFC Companies are liable in any amount for any arrearage in wages or employment taxes or for any penalties for failure to comply with any of the foregoing.

There is no action, suit or proceeding by any person pending or, to the Best Knowledge of SFC, threatened, against any of the SFC Companies (or any of their employees), alleging employment discrimination, sexual harassment, wrongful discharge or similar claims involving any of the SFC Companies.

None of the SFC Companies are parties to or bound by any collective bargaining agreement with any of their employees, any labor union or any other collective bargaining unit or organization. There is no pending or, to the Best Knowledge of SFC, threatened labor dispute, work

stoppage or strike involving any of the SFC Companies and any of their respective employees, or any pending or threatened proceeding in which it is asserted that any of the SFC Companies have committed an unfair labor practice; and to the Best Knowledge of SFC, there is no activity involving the employees of any of the SFC Companies seeking to certify a collective bargaining unit or engaging in any other labor organization activity.

3.25.   Employment Agreements; Employee Benefit Plans; Other Arrangements .

(a)   SFC has Previously Disclosed to FCB a true and complete list of all “Plans” maintained by any of the SFC Companies or to which any of them are parties. For purposes of this Agreement, the term “Plans” shall include any and all (i) bonus, incentive compensation, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans maintained or provided by any of the SFC Companies or under which any of them has any obligation to any person; (ii) employment agreements, salary continuation agreements, and severance contracts to which any of the SFC Companies are parties or under which they have any obligation to any person; (iii) medical, dental, health, and life insurance plans maintained or provided by any of the SFC Companies or under which they have any obligation to any person; (iv) vacation, sickness and other leave plans maintained or provided by any of the SFC Companies, (v) disability and death benefit plans maintained or provided by any of the SFC Companies; and (vi) all other employee benefit plans, contracts, or arrangements to which any of the SFC Companies are parties or which are maintained or contributed to by any of them for the benefit of any of their respective current or former employees or directors or any of their beneficiaries.

(b)   True and complete copies of all Plans, including, but not limited to, any trust instruments and/or insurance contracts, if any, forming a part thereof or applicable to the administration of any such Plan or the assets thereof, and all amendments thereto, have been Previously Disclosed to FCB.

(c)   Neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, will (i)  result in any payment to any person (including without limitation any severance compensation or payment, unemployment compensation, “golden parachute” or “change in control” payment, or otherwise) becoming due under any Plan or agreement to any director, officer, employee or consultant, (ii)  increase any benefits otherwise payable under any Plan or agreement, or (iii)  result in any acceleration of the time of payment or vesting of any such benefit.

(d)   Since January 1, 1999, none of the SFC Companies have maintained, sponsored, participated in or contributed to plan (including a multiemployer plan) within the meaning of Section 3(27) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that is or was subject to the provisions of Section 412 of the Internal Revenue Code of 1986, as amended (the “Code”), Title IV of ERISA, or Section 302 of ERISA.

(e)   Since January 1, 1999, SNB’s Section 401(k) plan (referenced in Paragraph 7.09 below) (the “Retirement Plan”) is the sole Plan that is or has been maintained, participated in or contributed to by the SFC Companies that is (i) an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, and (ii) intended to be qualified under Code Section 401(a). The Retirement Plan has received a favorable determination as to its qualification or is utilizing a prototype plan document and is relying on the prototype plan’s national opinion letter. To the Best Knowledge of SFC, there are no circumstances that are reasonably likely to result in the revocation or denial of the Retirement Plan’s qualified status, or any issues relating to the qualification or exemption of the Retirement Plan that are currently pending before the IRS, the United States Department of Labor, or any court or that are threatened.

(f)   All reports and returns with respect to the Plans required to be filed with any governmental department, agency, service or other authority, including without limitation Internal Revenue Service Form 5500 (Annual Report), have been properly and timely filed.

(g)   Each Plan has been established and administered in accordance with its terms and in compliance with the applicable provisions of ERISA. To the Best Knowledge of SFC, there is no pending or threatened litigation relating to any Plan. To the Best Knowledge of SFC, none of the SFC Companies have engaged in a transaction with respect to any Plan that could subject any of them or a Plan to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

(h)   All contributions required to be made pursuant to the terms of each of the Plans (including without limitation the Retirement Plan and any other Plan that is a “pension plan” (as defined in Section 3(2) of ERISA) have been timely made.

(i)   Except as Previously Disclosed to FCB, as of the last day of the most recent plan year ending prior to the date hereof, the current value of assets of each Plan that is a “pension plan” (as defined in Section 3(2) of ERISA) equaled or exceeded the actuarially determined present value of all “benefit liabilities,” within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the applicable Plan’s most recent actuarial valuation). To the Best Knowledge of SFC, there has not been any material adverse change in the financial condition of any such Plan that is a “pension plan” (as defined in Section 3(2) of ERISA) since the last day of the most recent plan year.

(j)   Except as provided in the terms of the Retirement Plan itself, there are no restrictions on the rights of any of the SFC Companies to terminate any Retirement Plan without incurring any liability thereunder.

3.26.   Insurance .   SFC has Previously Disclosed to FCB a listing of each blanket bond, liability insurance, property and casualty, workers’ compensation and employer liability, life or other insurance policy in effect on the last day of the calendar month immediately preceding the date of this Agreement, and in which any of the SFC Companies were insured parties or beneficiaries (the “Policies”). The Policies provide coverage in such amounts and against such liabilities, casualties, losses or risks as is customary or reasonable for entities engaged in the businesses of the SFC Companies or as is required by applicable law or regulation; and, in the reasonable opinion of management of SFC and SNB, the insurance coverage provided under the Policies is reasonable and adequate in all respects for the SFC Companies. To the Best Knowledge of SFC, each of the Policies is in full force and effect and is valid and enforceable in accordance with its terms, and each of the SFC Companies has complied in all material respects with requirements (including the giving of required notices) under each such Policy in order to preserve all material rights thereunder with respect to all matters. None of the SFC Companies are in default under the provisions of, have received notice of cancellation or nonrenewal of, or any material premium increase on, or have failed to pay any premium on, any such Policy, and, to the Best Knowledge of SFC, there has not been any material inaccuracy in any application for any Policy. There are no pending claims with respect to any Policy, and, to the Best Knowledge of SFC, there currently are no conditions, and there has occurred no event, that is reasonably likely to form the basis for any such claim.

3.27.   Insurance of Deposits .   All deposits of SNB are insured by the Bank Insurance Fund of the FDIC to the maximum extent permitted by law, all deposit insurance premiums due from SNB to the FDIC have been paid in full in a timely fashion, SNB has not received any notice that any proceedings to terminate such insurance have been commenced or are contemplated by the FDIC, and, to the Best Knowledge of SFC, no such proceedings are contemplated.

3.28.   Indemnification Obligations . Except to the extent provided by their respective Articles of Incorporation or Association, as applicable, or Bylaws in effect on the date of this Agreement, or as otherwise required by Chapter 8 of the South Carolina Business Corporation Act of 1988 or the National

Bank Act of 1864, as amended, or regulations thereunder, none of the SFC Companies have any obligation to indemnify or hold harmless any of their current or former directors, officers or employees, or any other person, against or from any costs or expenses (including attorneys’ fees), judgments, fines, amounts paid in settlement, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative.

3.29.   Obstacles to Regulatory Approval . To the Best Knowledge of SFC, there exists no fact or condition (including without limitation SNB’s record of compliance with the Community Reinvestment Act) that may reasonably be expected to prevent or materially impede or delay any of the SFC Companies or FCB from obtaining all approvals of Regulatory Authorities required in order to consummate the transactions described in this Agreement; and, if any such fact or condition becomes known to SFC or SNB, it shall promptly (and in any event within three days after obtaining such Knowledge) give notice of such fact or condition to FCB in the manner provided herein.

3.30.   Disclosure .   To the Best Knowledge of SFC, no written statement, certificate, schedule, list or other written information furnished by or on behalf of any of the SFC Companies to FCB or Bancorp or their employees or agents in connection with this Agreement and the transactions described herein, when considered as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

Article IV

Representations and Warranties of FCB and Bancorp

Except as otherwise specifically described in this Agreement or as Previously Disclosed to SFC, FCB and Bancorp hereby make the following representations and warranties to SFC and SNB. Following Bancorp’s completion of the subordinated debt offering described in Paragraphs 8.02(i) and 8.03(d) below, then FCB’s and Bancorp’s representations in Paragraphs 4.05, 4.06 and 4.07 below shall terminate and be of no further force or effect, effective as of the date of this Agreement.

4.01.   Organization; Standing; Power .   Each of FCB and Bancorp, (a)  is duly organized and incorporated, validly existing and in good standing under the laws of South Carolina, (b)  has all requisite power and authority (corporate and other) to own its respective properties and conduct its respective business as it now is being conducted, and (c)  is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein, or in which the transaction of its respective business, makes such qualification necessary, except where failure so to qualify would not have an FCB Material Adverse Effect.

4.02.   Authorization and Validity of Agreement. This Agreement has been duly and validly approved by FCB’s and Bancorp’s Boards of Directors and by Bancorp in its capacity as FCB’s sole shareholder. Subject only to receipt of required approvals of Regulatory Authorities (as contemplated by Paragraph 7.01), (a)  each of FCB and Bancorp has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described herein, (b)  all corporate proceedings required to be taken to authorize each of FCB and Bancorp to enter into this Agreement and to perform its obligations and agreements and carry out the transactions described herein have been duly and properly taken, and (c)  this Agreement constitutes the valid and binding agreement of each of FCB and Bancorp enforceable in accordance with its terms (except to the extent enforceability may be limited by (i)  applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect which affect creditors’ rights generally, (ii)  legal and equitable limitations on the availability of injunctive relief, specific performance and other equitable remedies, and (iii)  general principles of equity and applicable laws or court decisions limiting the enforceability of indemnification provisions).

4.03.   Validity of Transactions; Absence of Required Consents or Waivers .   Subject to receipt of required approvals of Regulatory Authorities, neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, nor compliance by FCB and Bancorp with any of their respective obligations or agreements contained herein, will   conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, FCB’s or Bancorp’s Articles of Incorporation or Bylaws, or, except where the same could not, individually or in the aggregate, reasonably be expected to have an FCB Material Adverse Effect, (a) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, any contract, agreement, lease, mortgage, note, bond, indenture, license, or obligation or understanding (oral or written) to which FCB or Bancorp is bound or by which either of them, or their respective businesses, capital stock or any of their respective properties or assets may be affected; (b)  result in the creation or imposition of any lien, claim, interest, charge, restriction or encumbrance upon any of FCB’s or Bancorp’s properties or assets; (c)  violate any applicable federal or state statute, law, rule or regulation, or any order, writ, injunction or decree of any court, administrative or regulatory agency or governmental body; or (d)  result in the acceleration of any obligation or indebtedness of FCB or Bancorp.

No further consents, approvals or waivers are required to be obtained from any person or entity in connection with FCB’s or Bancorp’s execution and delivery of this Agreement, or the performance of their respective obligations or agreements or the consummation of the transactions described herein, except for required approvals of Regulatory Authorities as described in Paragraph 7.01.

4.04.   Obstacles to Regulatory Approval . To the Best Knowledge of FCB, no fact or condition (including without limitation FCB’s record of compliance with the Community Reinvestment Act) exists that may reasonably be expected to prevent or materially impede or delay FCB, Bancorp or the SFC Companies from obtaining all approvals of Regulatory Authorities required in order to consummate the transactions described in this Agreement; and, if any such fact or condition becomes known to FCB or Bancorp, it shall promptly (and in any event within three days after obtaining such Knowledge) give notice of such fact or condition to SFC in the manner provided herein.

4.05.   Bancorp Financial Statements. Bancorp has Previously Disclosed to SFC a copy of Bancorp’s audited financial statements for the years ended December 31, 2003 and 2002 and Bancorp’s unaudited financial statements for the quarter ended September 30, 2004. Following the date of this Agreement, Bancorp promptly will deliver to SFC all other annual or quarterly financial statements of Bancorp contained in its reports filed under the 1934 Act. Bancorp’s audited financial statements and unaudited financial statements (a) were prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated, (b) are in accordance with the Bancorp’s books and records, and (c)  present fairly in all material respects Bancorp’s consolidated financial condition, assets and liabilities, results of operations, changes in shareholders’ equity and changes in cash flows as of the dates indicated and for the periods specified therein; provided, however , that, to the extent permitted by GAAP and other applicable regulations the unaudited financial statements are subject to normal year-end adjustments (which will not be material individually or in the aggregate) and lack footnotes. Bancorp’s audited financial statements have been audited by Pricewaterhouse Coopers LLP which serves as Bancorp’s independent registered public accounting firm.

4.06.   Absence of Material Adverse Changes or Certain Other Events . Since September 30, 2004,  (a) each of Bancorp and FCB has conducted its business in the ordinary course, (b) there has occurred no FCB Material Adverse Change, and (c) there have occurred no events or developments, and there currently exist no conditions or circumstances, which, individually or in the aggregate, and with the lapse of time or otherwise, reasonably could be expected to cause, create or result in an FCB Material Adverse Effect.

4.07.   Absence of Undisclosed Liabilities . Bancorp and FCB do not have any material liabilities or obligations, whether known or unknown, matured or unmatured, accrued, absolute,

contingent or otherwise, whether due or to become due (including without limitation tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other than (a) those reflected in the Bancorp’s unaudited   financial statements for the quarter ended September 30, 2004, (b) increases in FCB’s deposit accounts in the ordinary course of its business since September 30, 2004, or (c) unfunded commitments to make, issue or extend Loans in amounts which, either individually or in the aggregate, do not exceed the lesser of amounts which are consistent with FCB’s lending practices prior to the date of this Agreement or the maximum amounts permitted by applicable banking regulations.

4.08.   Disclosure .   To the Best Knowledge of FCB, no written statement, certificate, schedule, list or written information furnished by or on behalf of FCB or Bancorp to the SFC Companies or their employees or agents in connection with this Agreement, when considered as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading.

Article V

Covenants of SFC and SNB

5.01.   Affirmative Covenants of SFC and SNB .   SFC and SNB each agrees as follows:

(a)   SFC Shareholders’ Meeting; Proxy Statement; Recommendation . SFC shall cause a meeting of its shareholders (the “SFC Shareholders’ Meeting”) to be duly called and held as soon as practicable after the date of this Agreement for the purpose of voting by SFC’s shareholders on the approval of the Plan of Merger. In connection with the call and conduct of, and all other matters relating to, the SFC Shareholders’ Meeting (including the solicitation of appointments of proxies), SFC will comply in all material respects with all provisions of applicable law and regulations and with its Articles of Incorporation and Bylaws.

SFC will solicit appointments of proxies from its shareholders for use at the SFC Shareholders’ Meeting and, in connection with that solicitation, will prepare and distribute to its shareholders proxy solicitation materials (a “Proxy Statement”) that, in all material respects, shall contain or be accompanied by such information regarding the SFC Shareholders’ Meeting, this Agreement, the parties hereto, the Merger and other transactions described herein, and otherwise be in such form and contain such information, as is required by the 1934 Act and rules and regulations of the SEC thereunder (including without limitation Regulation 14A), or as SFC’s Board of Directors otherwise shall determine.

SFC will mail the Proxy Statement to its shareholders on a date mutually agreed upon by SFC and FCB, but in no event less than 20 days prior to the scheduled date of the SFC Shareholders’ Meeting; provided, however , that no such materials shall be mailed to SFC’s shareholders unless and until the Proxy Statement shall have been filed by SFC with the SEC, the review period applicable thereto shall have expired, and SFC shall have satisfactorily responded to and complied with any comments of the SEC thereon.

SFC covenants that its directors, individually and collecti