AGREEMENT AND PLAN OF MERGER
between
THE SOUTH FINANCIAL GROUP, INC.
and
MOUNTAINBANK FINANCIAL CORPORATION
Dated as of May 14, 2003
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 14,
2003, between The South Financial Group, Inc., a South Carolina corporation
("TSFG") and MountainBank Financial Corporation, a North Carolina corporation
("MBFC").
Recitals
The Boards of Directors of TSFG and MBFC have determined that it is in
the best interests of their respective companies and their shareholders to
consummate the business combination transaction provided for herein in which
MBFC will, subject to the terms and conditions set forth herein, merge (the
"Merger") with and into TSFG.
The parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
Agreement
In consideration of the mutual covenants, representations, warranties
and agreements contained herein, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. The following terms shall have the indicated definitions.
Acquisition Proposal. Any tender offer or exchange offer or any
proposal for a merger, reorganization, consolidation, share exchange,
recapitalization, liquidation, dissolution or other business combination
involving MBFC or any proposal or offer to acquire a substantial equity interest
in, or a substantial portion of the assets of, MBFC, other than the transaction
contemplated by this Agreement.
Articles of Merger. The articles of merger complying with the NCBCA and
the SCBCA reflecting the merger of MBFC with and into TSFG.
BHC Act. The Bank Holding Company Act of 1956, as amended.
Common Exchange Ratio. The Per Common Share Merger Consideration
expressed as a ratio (rounded to three decimals) of TSFG Common Stock to MBFC
Common Stock.
DPC Shares. Shares held by MBFC, TSFG or any of TSFG's Subsidiaries in
respect of a debt previously contracted.
Effective Time. The effective time of the Merger, specified in the
Articles of Merger.
Environmental Laws. Applicable federal, state and local laws, including
common law, regulations and ordinances, and all applicable decrees, orders and
contractual obligations relating to pollution or the discharge of, or exposure
to, Hazardous Materials in the environment or workplace.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
Exchange Act. The Securities Exchange Act of 1934, as amended.
Exchange Agent. Registrar & Transfer Company or the successor stock
transfer agent of TSFG, which shall be responsible for the exchange of the
Merger Consideration for the MBFC Capital Stock.
Exchange Ratio. In the case of MBFC Common Stock, the Common Exchange
Ratio and in the case of Series A Preferred Stock, the Preferred Exchange Ratio.
Fair Market Value. The Ten Trading Day Average, unless (1) the Ten
Trading Day Average is less than $21.00, in which case it will be deemed to be
$21.00 or (2) the Ten Trading Day Average is greater than $25.00, in which case
it will be deemed to be $25.00.
FDIC. The Federal Deposit Insurance Corporation.
Federal Reserve Board. The Board of Governors of the Federal Reserve
System.
1
Federal Reserve Consent. The consent of the Federal Reserve Board
necessary to consummation of the Merger.
GAAP. Generally accepted accounting principles consistently applied
during the periods involved.
Governmental Entity. Any court, administrative agency or commission or
other governmental authority or instrumentality.
Hazardous Materials. Any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or materials.
IRS. The Internal Revenue Service.
Loan Property. Any property in which MBFC holds a security interest,
and, where required by the context, such term means the owner or operator of
such property.
MBFC Capital Stock. The MBFC Common Stock and the Series A Preferred
Stock.
MBFC Common Stock. The common stock, par value $4.00 per share, of
MBFC.
MBFC Option Plans. The 1997 Employee Stock Option Plan, as amended, the
1997 Director Stock Option Plan, as amended, the First Western Bank, the 1998
Nonstatutory Stock Option Plan, and the First Western Bank 1999 Nonstatutory
Stock Option Plan, all as referenced in MBFC's SEC filings.
MBFC Stock Certificate. A certificate, which previous to the Merger
represented any shares of MBFC Capital Stock.
Material Adverse Effect. With respect to TSFG or MBFC, as the case may
be, a material adverse effect on (i) the business, results of operations or
financial condition of such party and its Subsidiaries taken as a whole, other
than any such effect attributable to or resulting from (t) any c hange in
banking or similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (u) any change
in GAAP or regulatory accounting principles applicable to banks, thrifts or
their holding companies generally, (v) any action or omission of the parties
taken with the prior written consent of the other parties hereto, (w) any
events, conditions or trends in business or financial conditions affecting the
banking industry, (x) any change or development in financial or securities
markets or the economy in general, including changes in interest rates, or (y)
the announcement or execution of this Agreement, including any impact on
relationships with customers or employees, or (ii) the ability of the parties
to consummate the transactions contemplated hereby.
Merger Consideration. The aggregate number of shares of TSFG Common
Stock issuable by TSFG upon conversion of the MBFC Capital Stock as provided
herein, which shall be equal to the sum of (1) the Per Common Share Merger
Consideration multiplied by the number of shares of MBFC Common Stock
outstanding at Closing and (2) the Per Preferred Share Merger Consideration
multiplied by the number of shares of Series A Preferred outstanding at Closing.
MountainBank. MountainBank, a state-chartered, non-member bank and
wholly-owned subsidiary of MBFC.
NCBCA. The North Carolina Business Corporation Act, as amended.
Participation Facility. Any facility in which MBFC participates in the
management and, where required by the context, such term means the owner or
operator of such facility.
Per Common Share Merger Consideration. A number of shares of TSFG
Common Stock equal to $32.50 divided by the Fair Market Value.
Per Preferred Share Merger Consideration. A number of shares of TSFG
Common Stock equal to $39.00 divided by the Fair Market Value.
Per Share Merger Consideration. In the case of MBFC Common Stock, the
Per Common Share Merger Consideration, and in the case of Series A Preferred
Stock, the Per Preferred Share Merger Consideration.
Preferred Exchange Ratio. The Per Preferred Share Merger Consideration
expressed as a ratio (rounded to three decimals) of TSFG Common Stock to Series
A Preferred Stock.
Regulatory Agencies. The Federal Reserve Board, the FDIC, any
applicable state banking commissions or any other state bank regulatory
authority and any applicable self-regulatory organization with jurisdiction over
the parties hereto or transactions contemplated herein.
Rights. Subscriptions, options, warrants, calls, commitments or
agreements of any character to purchase capital stock.
SCBCA. The South Carolina Business Corporation Act, as amended.
SEC. The Securities and Exchange Commission.
2
Series A Preferred Stock. The Series A Preferred Stock, no par value
per share, of MBFC.
Subsidiary. The word "Subsidiary" (1) when used with respect to MBFC
shall mean any corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes, and (2) when used with respect to TSFG shall mean
each Subsidiary of TSFG that is a "Significant Subsidiary" within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
Superior Proposal. With respect to MBFC, any written Acquisition
Proposal made by a person other than TSFG which is for (i) (a) a merger,
reorganization, consolidation, share exchange, business combination,
recapitalization or similar transaction involving MBFC, (b) a sale, lease,
exchange, transfer, or other disposition of at least 50% of the assets of MBFC,
in a single transaction or a series of related transactions, or (c) the
acquisition, directly or indirectly, by a person of beneficial ownership of 50%
or more of MBFC Common Stock whether by merger, consolidation, share exchange,
business combination, tender, or exchange offer or otherwise, and (ii) which is
otherwise on terms which the Board of Directors of MBFC in good faith concludes
(after consultation with its financial advisors and outside counsel) would, if
consummated, result in a transaction that is more favorable to its stockholders
(in their capacities as stockholders), from a financial point of view, than the
transactions contemplated by this Agreement.
Surviving Corporation. The surviving corporation to the Merger, which
shall be TSFG.
Taxes. Taxes shall mean all taxes, charges, fees, levies, penalties or
other assessments imposed by any United States federal, state, local or foreign
taxing authority, including, but not limited to income, excise, property, sales,
transfer, franchise, payroll, withholding, social security or other taxes,
including any interest, penalties or additions attributable thereto.
Tax Return. Any return, report, information return or other document
(including any related or supporting information) with respect to Taxes.
Ten Trading Day Average. The average of the last reported sale price
per share of the TSFG Common Stock as reported on the NASDAQ/NMS (as reported in
the Wall Street Journal or another mutually agreeable authoritative source) for
the ten consecutive trading days immediately subsequent to the date of the
Federal Reserve Consent.
Trust Account Shares. Shares of MBFC Capital Stock or TSFG Common Stock
held directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity for the benefit of third parties.
TSFG Common Stock. The common stock, par value $1.00 per share, of
TSFG.
1.2 Terms Defined Elsewhere. The capitalized terms set forth below are
defined in the following sections:
"Agreement" Preamble
"Benefit Agreements" Section 7.8(c)
"Closing" Section 10.1
"Closing Date" Section 10.1
"Code" Section 2.3
"Company Director" Section 7.11
"Dissenting Shareholder" Section 2.10
"Dissenting Shares" Section 2.10
"ERISA Affiliate" Section 4.13(a)
"Exchange Fund" Section 2.8
"Injunction" Section 8.1(e)
"Loans" Section 4.21(a)
"MBFC" Preamble
"MBFC Contract" Section 4.16(a)
"MBFC Director" Section 7.12
"MBFC Disclosure Schedule" Section 3.1
"MBFC Financial Statements" Section 4.8
"MBFC Reports" Section 4.6
"Maximum Amount" Section 7.9
"Merger" Recitals
3
"Plans" Section 4.13(a)
"Proxy Statement/Prospectus" Section 4.4
"Regulatory Agreement" Section 4.17
"Representatives" Section 7.3(a)
"Requisite Regulatory Approvals" Section 8.1(c)
"S-4" Section 4.14
"Securities Act" Section 2.11(b)
"State Banking Approvals" Section 4.4
"TSFG" Preamble
"TSFG's Counsel" Section 8.2(d)
"TSFG Disclosure Schedule" Section 3.1
"TSFG Financial Statements" Section 5.7
"TSFG Preferred Stock" Section 5.2
"TSFG Reports" Section 5.5
"Termination Fee Amount" Section 9.2(b)
"The Xxx Group" Section 4.9
1.3 Interpretation. When a reference is made iement to Sections, Exhibits
or Schedules, such reference shall be to a Section of or Exhibit or Schedule to
this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The phrases "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date of this Agreement. No provision of this Agreement shall be
construed to require MBFC, TSFG or any of their respective affiliates to take
any action that would violate any applicable law (including common law), rule or
regulation.
ARTICLE II
PLAN OF MERGER
2.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the NCBCA and SCBCA, at the Effective Time, MBFC shall merge
with and into TSFG. TSFG shall be the Surviving Corporation, and shall continue
its corporate existence under the laws of the State of South Carolina. The name
of the Surviving Corporation shall continue to be "The South Financial Group,
Inc." Upon consummation of the Merger, the separate corporate existence of MBFC
shall terminate.
2.2 Effective Time and Effects of the Merger. Subject to the provisions of
this Agreement, on the Closing Date, the Articles of Merger shall be duly
prepared, executed and delivered for filing with the Secretaries of State of the
State of North Carolina and the State of South Carolina. The Merger shall become
effective at the Effective Time. At and after the Effective Time, the Merger
shall have the effects set forth in the NCBCA and SCBCA.
2.3 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and that this Agreement shall constitute a plan
of reorganization for the purposes of Sections 354 and 361 of the Code.
2.4 Conversion of MBFC Capital Stock.
(a) (1) At the Effective Time, subject to Section 2.9(e), each share of
MBFC Common Stock issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares and shares of MBFC Common Stock held directly or
indirectly by MBFC, TSFG or any of TSFG's Subsidiaries (except for Trust Account
Shares and DPC Shares)) shall, by virtue of this Agreement and without any
4
action on the part of the holder thereof, be converted into and exchangeable for
the right to receive, the Per Common Share Merger Consideration.
(2) At the Effective Time, subject to Section 2.9(e), each
share of Series A Preferred Stock issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares and shares of Series A
Preferred Stock held directly or indirectly by MBFC, TSFG or any of TSFG's
Subsidiaries (except for Trust Account Shares and DPC Shares)) shall, by virtue
of this Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for the right to receive, the Per Preferred
Share Merger Consideration.
(b) All of the shares of MBFC Capital Stock converted into the Per
Share Merger Consideration pursuant to this Article II shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and
each holder of MBFC Stock Certificates shall thereafter cease to have any rights
with respect to such securities, except the right to receive for each share (i)
the Per Share Merger Consideration, (ii) any dividends and other distributions
in accordance with Section 2.9(b) hereof, and (iii) any cash in lieu of
fractional shares pursuant to Section 2.9(e).
(c) If, between the date hereof and the Effective Time, (i) the shares
of TSFG Common Stock shall be changed (or TSFG establishes a record date for
changing such shares which is prior to the Effective Time) into a different
number or class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, (ii) a stock dividend
shall be declared (or TSFG establishes a record date for such dividend which is
prior to the Effective Time) in respect of TSFG Common Stock, or (iii) any
distribution is made (or TSFG establishes a record date for such distribution
which is prior to the Effective Time) in respect of TSFG Common Stock other than
a regular quarterly cash dividend consistent with past practice, proportionate
adjustments shall be made to the Exchange Ratio.
(d) At the Effective Time, all shares of MBFC Capital Stock that are
owned directly or indirectly by MBFC, TSFG or any of TSFG's Subsidiaries (other
than Trust Account Shares and DPC Shares) shall be cancelled and shall cease to
exist and no stock of TSFG, cash or other consideration shall be delivered in
exchange therefor. All shares of TSFG Common Stock that are owned by MBFC (other
than Trust Account Shares and DPC Shares) shall be cancelled.
2.5 TSFG Common Stock. Except for shares of TSFG Common Stock owned by MBFC
(other than Trust Account Shares and DPC Shares), which shall be cancelled as
contemplated by Section 2.4 hereof, the shares of TSFG Common Stock issued and
outstanding immediately prior to the Effective Time shall be unaffected by the
Merger and such shares shall remain issued and outstanding.
2.6 Articles of Incorporation and Bylaws. At the Effective Time, the
Articles of Incorporation of TSFG, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation. At the Effective Time, the Bylaws of TSFG, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
2.7 Directors and Executive Officers. At and after the Effective Time, the
directors of TSFG shall consist of all of the directors of TSFG serving
immediately prior to the Effective Time and the additional person who shall
become a director of TSFG in accordance with Section 7.11 hereof, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified. The executive officers of TSFG immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
2.8 TSFG to Make Shares Available. As of the Effective Time, TSFG shall
deposit, or shall cause to be deposited with the Exchange Agent, for exchange in
accordance with this Article II, (i) certificates representing the shares of
TSFG Common Stock to be issued pursuant to Section 2.4 and Section 2.9(a) in
exchange for outstanding shares of MBFC Capital Stock, and (ii) the cash in lieu
of fractional shares to be paid in accordance with Section 2.9(e) hereof. Such
5
cash and certificates for shares of TSFG Common Stock, together with any
dividends or distributions with respect thereto, are hereinafter referred to as
the "Exchange Fund."
2.9 Exchange of Shares.
(a) As soon as practicable after the Effective Time, and in any event
within seven business days after the Effective Time, or otherwise as may be
agreed upon by the parties, the Exchange Agent shall mail to each holder of
record of MBFC Stock Certificates at the Effective Time, a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the MBFC Stock Certificates shall pass, only upon delivery of
the MBFC Stock Certificates, to the Exchange Agent) and instructions for use in
effecting the surrender of the MBFC Stock Certificates in exchange for Merger
Consideration. MBFC shall have the right to review both the letter of
transmittal and the instructions prior to the Effective Time and provide
reasonable comments thereon. Upon surrender of MBFC Stock Certificates for
exchange and cancellation to the Exchange Agent, together with a properly
executed letter of transmittal, the holder of such MBFC Stock Certificates shall
be entitled to receive in exchange therefor (x) a certificate representing that
number of whole shares of TSFG Common Stock which such holder of MBFC Capital
Stock became entitled to receive pursuant to the provisions of Article II hereof
and (y) a check representing the amount of cash in lieu of fractional shares, if
any, which such holder has the right to receive in respect of the MBFC Stock
Certificates, as provided in Section 2.9(e), and the MBFC Stock Certificates so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the cash in lieu of fractional shares or the unpaid dividends and distributions,
if any, payable to holders of MBFC Stock Certificates.
(b) No dividends or other distributions declared after the Effective
Time with respect to TSFG Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered MBFC Stock Certificate
until the holder thereof shall surrender such MBFC Stock Certificate in
accordance with this Article II. After the surrender of a MBFC Stock Certificate
in accordance with this Article II, the record holder thereof shall be entitled
to receive any such dividends or other distributions, without any interest
thereon, which theretofore had become payable with respect to shares of TSFG
Common Stock represented by such MBFC Stock Certificate.
(c) If any certificate representing shares of TSFG Common Stock is to
be issued in a name other than that in which the MBFC Stock Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the MBFC Stock Certificate so surrendered shall be
properly endorsed (or accompanied by an appropriate instrument of transfer) and
otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of TSFG
Common Stock in any name other than that of the registered holder of the MBFC
Stock Certificate surrendered, or required for any other reason, or shall
establish to the reasonable satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of MBFC of the shares of MBFC Capital Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, MBFC Stock Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of TSFG Common Stock, as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of TSFG Common Stock shall
be issued upon the surrender for exchange of MBFC Stock Certificates, no
dividend or distribution with respect to TSFG Common Stock shall be payable on
or with respect to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
shareholder of TSFG. In lieu of the issuance of any such fractional share, TSFG
shall pay to each former stockholder of MBFC who otherwise would be entitled to
receive a fractional share of TSFG Common Stock an amount in cash determined by
multiplying (i) the Fair Market Value by (ii) the fraction of a share of TSFG
Common Stock which such holder would otherwise be entitled to receive pursuant
to Section 2.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of MBFC for twelve months after the Effective Time shall be paid to
TSFG. Any stockholders of MBFC who have not theretofore complied with this
Article II shall thereafter look only to TSFG for payment of the Per Share
Merger Consideration and/or the unpaid dividends and distributions on the TSFG
6
Common Stock deliverable in respect of each share of MBFC Capital Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of TSFG, MBFC,
the Exchange Agent or any other person shall be liable to any former holder of
shares of MBFC Capital Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any MBFC Stock Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such MBFC Stock Certificate to be lost, stolen or destroyed and the
posting by such person of a bond in such amount as the Exchange Agent may direct
as indemnity against any claim that may be made against it with respect to such
MBFC Stock Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed MBFC Stock Certificate the Per Share Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
2.10 Dissenter's Rights. Any holder of shares of MBFC Capital Stock who
shall have exercised rights to dissent with respect to the Merger in accordance
with the NCBCA and who has properly exercised such shareholder's rights to
demand payment of the "fair value" of the shareholder's shares (the "Dissenting
Shares") as provided in the NCBCA (the "Dissenting Shareholder") shall
thereafter have only such rights, if any, as are provided a Dissenting
Shareholder in accordance with the NCBCA and shall have no rights to receive the
Per Share Merger Consideration under Section 2.4 (provided, that nothing
contained herein shall limit such Dissenting Shareholder's rights to the payment
of all declared and unpaid dividends); provided, however, that if a Dissenting
Shareholder shall fail to properly demand payment (in accordance with the NCBCA)
in conjunction with such appraisal or shall become ineligible for such
appraisal, then such Dissenting Shareholder's Dissenting Shares automatically
shall cease to be Dissenting Shares and shall be converted into and represent
only the right to receive, upon surrender of the certificate representing the
Dissenting Shares, the Per Share Merger Consideration provided for in Section
2.4 and declared and unpaid dividends as provided in Section 2.9(b).
2.11 Stock Options.
(a) At the Effective Time, each option granted by MBFC under the MBFC
Option Plans, which is outstanding and unexercised immediately prior thereto
shall cease to represent a right to acquire shares of MBFC Common Stock and
shall be converted automatically into a fully-vested option to purchase shares
of TSFG Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the applicable MBFC Option
Plan), the agreements evidencing grants thereunder, and any other agreements
between MBFC and an optionee regarding MBFC Options):
(1) the number of shares of TSFG Common Stock to be subject to
the new option shall be equal to the product of the number of shares of MBFC
Common Stock subject to the original option and the Common Exchange Ratio,
provided that any fractional shares of TSFG Common Stock resulting from such
multiplication shall be rounded to the nearest whole share (and .5 of a share
shall be rounded up); and
(2) the exercise price per share of TSFG Common Stock under
the new option shall be equal to the exercise price per share of MBFC Common
Stock under the original option divided by the Common Exchange Ratio, provided
that such exercise price shall be rounded to the nearest cent (and .5 of a cent
shall be rounded down).
(b) Prior to the Effective Time, TSFG shall reserve for issuance the
number of shares of TSFG Common Stock necessary to satisfy TSFG's obligations
under this Section. TSFG shall file with the SEC no later than five business
days after the Effective Time, a registration statement on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of TSFG Common Stock subject to options to acquire TSFG
Common Stock issued pursuant to this Section, and shall use its best efforts to
maintain the current status of the prospectus contained therein, as well as
comply with applicable state securities or "blue sky" laws, for so long as such
options remain outstanding; provided, however, that TSFG shall only be required
to file and maintain the effectiveness of such registration statement with
respect to options that are eligible to be registered on a Form S-8.
(c) Prior to the Effective Time, TSFG and MBFC shall take all such
steps as may be required to cause any acquisitions of TSFG equity securities
(including derivative securities with respect to any TSFG equity securities) and
dispositions of MBFC equity securities (including derivative securities with
7
respect to any MBFC equity securities) resulting from the transactions
contemplated by this Agreement by each individual who is anticipated to be
subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to TSFG or who is subject to the reporting requirements of Section 16(a)
of the Exchange Act with respect to MBFC, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS FOR REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Schedules. Prior to the execution and delivery of this
Agreement, MBFC has delivered to TSFG, and TSFG has delivered to MBFC, a
schedule (in the case of MBFC, the "MBFC Disclosure Schedule," and in the case
of TSFG, the "TSFG Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more of such party's representations or warranties contained
in Article IV, in the case of MBFC, or Article V, in the case of TSFG, or to one
or more of such party's covenants contained in Article VI (it being understood
and agreed that (i) if an item is properly set forth in one MFBC Disclosure
Schedule, it shall be deemed to be set forth in any other relevant MBFC
Disclosure Schedule, and (ii) if an item is properly set forth in one TSFG
Disclosure Schedule, it shall be deemed to be set forth in any other relevant
TSFG Disclosure Schedule); provided, however, that notwithstanding anything in
this Agreement to the contrary (a) no such item is required to be set forth in
the Disclosure Schedule as an exception to a representation or warranty if its
absence would not result in the related representation or warranty being deemed
untrue or incorrect under the standard established by Section 3.2, and (b) the
mere inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or material fact, event or circumstance or
that such item has had or would have a Material Adverse Effect with respect to
either MBFC or TSFG, respectively.
3.2 Standards. No representation or warranty of MBFC contained in Article
IV or of TSFG contained in Article V shall be deemed untrue or incorrect for any
purpose under this Agreement, and no party hereto shall be deemed to have
breached a representation or warranty for any purpose under this Agreement, in
any case as a consequence of the existence or absence of any fact, circumstance
or event unless such fact, circumstance or event, individually or when taken
together with all other facts, circumstances or events inconsistent with any
representations or warranties contained in Article IV, in the case of MBFC, or
Article V, in the case of TSFG, has had or would have a Material Adverse Effect
with respect to MBFC or TSFG, respectively. Notwithstanding the foregoing, the
representation set forth in 4.13(e) shall be deemed to have been breached if it
is materially inaccurate.
3.3 Subsidiaries. Where the context permits, "TSFG" shall refer to TSFG and
each of its Subsidiaries and "MBFC" shall refer to MBFC and each of its
Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, MBFC hereby represents and warrants to TSFG as
follows:
4.1 Corporate Organization. (a) MBFC is a bank holding company duly
organized, validly existing and in good standing under the laws of the State of
North Carolina. MBFC has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary. The Articles of Incorporation and Bylaws of MBFC,
8
copies of which have previously been made available to TSFG, are true and
correct copies of such documents as in effect as of the date hereof.
(b) Each Subsidiary of MBFC is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. Each Subsidiary of MBFC has the corporate power and authority to
own or lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The deposit accounts of each
Subsidiary of MBFC that is a bank are insured by the FDIC through the Bank
Insurance Fund or the Savings Association Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid when due.
(c) MBFC has no, and since December 31, 1997 MBFC has not had any,
Subsidiaries other than those listed in Section 4.1(c) of the MBFC Disclosure
Schedule, all of which are 100% owned. MBFC neither owns nor controls, directly
or indirectly 5% or more of the outstanding equity securities, either directly
or indirectly, of any Person.
(d) The minute books of MBFC contain true and correct records of all
meetings and other corporate actions held or taken since December 31, 2000 of
its stockholders and Board of Directors (including committees of the Board of
Directors).
4.2 Capitalization. The authorized capital stock of MBFC consists of
10,000,000 shares of common stock, par value $4.00 per share and 3,000,000
shares of Series A Preferred Stock. As of the date hereof, (1) there are
3,200,882 shares of MBFC Common Stock issued and outstanding, (2) there are
450,000 shares of Series A Preferred Stock authorized, 419,243 shares of which
are issued and outstanding, and (3) no shares of MBFC Common Stock held by MBFC
as treasury stock. Except as set forth on Section 4.2 of the MBFC Disclosure
Schedule, as of the date hereof, there were no shares of MBFC Capital Stock
reserved for issuance for any reason or purpose. A maximum of 282,834 shares of
MBFC Common Stock shall become issuable in connection with CNB Holdings, Inc.
(including MBFC shares issuable in respect of options to purchase CNB Holdings,
Inc. common stock). All of the issued and outstanding shares of MBFC Capital
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as set forth on the MBFC Disclosure
Schedule, MBFC does not have and is not bound by any outstanding Rights calling
for the purchase or issuance of any shares of MBFC Capital Stock or any other
equity security of MBFC or any securities representing the right to purchase or
otherwise receive any shares of MBFC Capital Stock or any other equity security
of MBFC. On the date hereof, MBFC has approximately 2,012 shareholders of
record.
4.3 Authority. MBFC has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of MBFC. The Board of Directors of MBFC has directed that
this Agreement and the transactions contemplated hereby be submitted to MBFC's
stockholders for approval at a meeting of such stockholders and, except for the
adoption of this Agreement by the requisite vote of MBFC's stockholders, no
other corporate proceedings on the part of MBFC are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by MBFC and (assuming due
authorization, execution and delivery by TSFG) this Agreement constitutes a
valid and binding obligation of MBFC, enforceable against MBFC in accordance
with its terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
4.4 Consents and Approvals. Except for (a) the filing with the SEC of the
S-4, including the proxy statement/prospectus therein relating to the meeting of
MBFC's stockholders to be held in connection with the transactions contemplated
herein (the "Proxy Statement/Prospectus") and the SEC's declaration of the
effectiveness of the S-4, (b) the approval of this Agreement by the requisite
vote of the stockholders of MBFC, (c) the filing of applications and notices, as
9
applicable, with the Federal Reserve Board under the BHC Act and with the FDIC
under the Bank Merger Act, Federal Deposit Insurance Act and the rules and
regulations of the FDIC, and approval of such applications and notices, (d) the
filing of such applications, filings, authorizations, orders and approvals as
may be required under applicable state law (the "State Banking Approvals") and
(e) any consents or approvals listed in Section 4.4 of the MBFC Disclosure
Schedule, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are required to be made by MBFC in
connection with (1) the execution and delivery by MBFC of this Agreement or (2)
the consummation by MBFC of the Merger and the other transactions contemplated
hereby.
4.5 No Violations. Except as may be set forth in Section 4.5 of the MBFC
Disclosure Schedule, neither the execution and delivery of this Agreement by
MBFC, nor the consummation by MBFC of the transactions contemplated hereby, nor
compliance by MBFC with any of the terms or provisions hereof, will (i) violate
any provision of the Articles of Incorporation or Bylaws of MBFC, or (ii)
assuming that the consents and approvals referred to in Section 4.4 hereof are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to MBFC or any of its
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
properties or assets of MBFC under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which MBFC is a party, or by which it or
its properties or assets may be bound or affected.
4.6 SEC Reports. MBFC has previously made available to TSFG a true and
correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since December 31, 2000 by MBFC
with the SEC pursuant to the Securities Act or the Exchange Act (the "MBFC
Reports") and (b) communication mailed by MBFC to its shareholders since
December 31, 2000, and no such MBFC Report (when filed and at their respective
effective time, if applicable) or communication (when mailed) contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier date. MBFC has timely filed all MBFC Reports and other
documents required to be filed by it under the Securities Act and the Exchange
Act since December 31, 2000, and each such MBFC Report and other documents
complied in all material respects with the rules and regulations applicable
thereto when filed.
4.7 Regulatory Reports. MBFC has timely filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that it was required to file since December 31, 2000 with the
Regulatory Agencies and has paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of MBFC, no Regulatory Agency has
initiated any proceeding or, to the knowledge of MBFC, investigation into the
business or operations of MBFC since December 31, 2000. There is no unresolved
violation or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of MBFC.
4.8 Financial Statements. MBFC has previously made available to TSFG (1)
copies of the balance sheets of MBFC as of December 31 for the fiscal years 2001
and 2002, and the related statements of earnings, stockholders' equity and cash
flows for the fiscal years 2000 through 2002, inclusive, as reported in MBFC's
Annual Report on Form 10-K for the fiscal year ended December 31, 2002 with the
SEC under the Exchange Act, accompanied by the audit report of Xxxxxxx &
Company, PLL, independent public accountants with respect to MBFC, and (2)
copies of unaudited balance sheets and the related statements of earnings,
stockholders' equity and cash flows of MBFC at and for the quarter ended March
31, 2003, as reported in MBFC's Quarterly Report on Form 10-Q for such quarter
10
filed with the SEC under the Exchange Act, and will make available on or before
August 14, 2003 copies of unaudited balance sheets and the related statements of
earnings, stockholders' equity and cash flows of MBFC at and for the quarter
ended June 30, 2003 (collectively, the "MBFC Financial Statements"). Subject, in
the case of the unaudited statements, to audit adjustments reasonable in nature
and amount, the MBFC Financial Statements fairly present the financial position
of MBFC as of the dates indicated therein, and when included in the Proxy
Statement/Prospectus will fairly present the results of the operations and
financial position of MBFC for the respective fiscal periods or as of the
respective dates therein set forth. Subject, in the case of the unaudited
statements, to audit adjustments reasonable in nature and amount, each of the
MBFC Financial Statements (including the related notes, where applicable)
complies, and MBFC's Financial Statements to be included in the Proxy
Statement/Prospectus after the date hereof will comply, with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been, and MBFC's Financial Statements to be included in
the Proxy Statement/Prospectus will be, prepared in accordance with GAAP, except
as indicated in the notes thereto or, in the case of unaudited statements, as
permitted by the SEC. The books and records of MBFC have been, and are being,
maintained in accordance with GAAP and any other applicable legal and accounting
requirements.
4.9 Broker's Fees. Neither MBFC nor any of its officers or directors has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement, except that MBFC has engaged, and will pay a fee
or commission to The Xxx Group ("The Xxx Group") in accordance with the terms of
a letter agreement between The Xxx Group and MBFC, a true and correct copy of
which has been previously made available by MBFC to TSFG.
4.10 Absence of Certain Changes or Events. (a) Except as disclosed in any
MBFC Report filed with the SEC prior to the date hereof, since December 31,
2002, (i) there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had a Material Adverse
Effect on MBFC, and (ii) MBFC has carried on its business in the ordinary course
of business consistent with past practices.
(b) Except as may be set forth in Section 4.10(b) of the MBFC Disclosure
Schedule, since December 31, 2002 and solely with respect to executive officers
(senior vice president or above) and directors, MBFC has not (1) increased the
wages, salaries, compensation, pension, or other fringe benefits or perquisites
payable to any such person from the amount thereof in effect as of December 31,
2002, (2) granted any severance or termination pay to such person or entered
into any contract to make or grant any severance or termination pay to such
person, (3) paid any bonus to such person or (4) entered into any employment- or
compensation-related agreement with such person.
4.11 Legal Proceedings. Except as disclosed in any MBFC Report, (a) MBFC is
not a party to any, and there are no pending or, to MBFC's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against MBFC
or challenging the validity or propriety of the transactions contemplated by
this Agreement and (b) there is no injunction, order, judgment or decree imposed
upon MBFC or its assets.
4.12 Taxes. Except as may be set forth in Section 4.12 of the MBFC
Disclosure Schedule, MBFC has (i) duly and timely filed (including applicable
extensions granted without penalty) all material Tax Returns required to be
filed at or prior to the Effective Time, and all such Tax Returns are true and
correct, and (ii) paid in full or made adequate provision in the financial
statements of MBFC (in accordance with GAAP) for all material Taxes shown to be
due on such Tax Returns. Except as set forth in Section 4.12 of the MBFC
Disclosure Schedule, (i) as of the date hereof MBFC has not requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, and (ii) as of the date hereof,
with respect to each taxable period of MBFC, the federal and state income Tax
Returns of MBFC have not been audited by the IRS or appropriate state tax
authorities.
11
4.13 Employees. (a) Section 4.13(a) of the MBFC Disclosure Schedule sets
forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of section 3(1) of ERISA; "pension" plan, fund or program
(within the meaning of section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by MBFC, any of its Subsidiaries
or by any trade or business, whether or not incorporated (an "ERISA Affiliate"),
all of which together with MBFC would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of MBFC, any Subsidiary or any ERISA Affiliate (the "Plans").
(b) MBFC has heretofore made available to TSFG with respect to each of the
Plans true and correct copies of each of the following documents, if applicable:
(i) the Plan document; (ii) the actuarial report for such Plan for each of the
last two years, (iii) the most recent determination letter from the IRS for such
Plan and (iv) the most recent summary plan description and related summaries of
material modifications.
(c) Except as may be set forth in Section 4.13(c) of the MBFC Disclosure
Schedule: each of the Plans is in compliance with the applicable provisions of
the Code and ERISA; each of the Plans intended to be "qualified" within the
meaning of section 401(a) of the Code has received a favorable determination
letter from the IRS; no Plan has an accumulated or waived funding deficiency
within the meaning of section 412 of the Code; neither MBFC nor any ERISA
Affiliate has incurred, directly or indirectly, any liability to or on account
of a Plan pursuant to Title IV of ERISA (other than PBGC premiums); to the
knowledge of MBFC, no proceedings have been instituted to terminate any Plan
that is subject to Title IV of ERISA; no "reportable event," as such term is
defined in section 4043(c) of ERISA, has occurred with respect to any Plan
(other than a reportable event with respect to which the thirty day notice
period has been waived); and no condition exists that presents a material risk
to MBFC of incurring a liability to or on account of a Plan pursuant to Title IV
of ERISA; no Plan is a multiemployer plan within the meaning of section
4001(a)(3) of ERISA and no Plan is a multiple employer plan as defined in
Section 413 of the Code; and there are no pending, or to the knowledge of MBFC,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto.
(d) Except as may be set forth in Section 4.13(d) of the MBFC Disclosure
Schedule, since December 31, 2002, MBFC has not (i) suffered any strike, work
stoppage, slow-down, or other labor disturbance, (ii) been a party to a
collective bargaining agreement, contract or other agreement or understanding
with a labor union or organization, or (iii) had any union organizing
activities.
(e) MBFC has disclosed to TSFG all employment contracts, plans, programs,
agreements or other benefits which could be subject to Section 280G of the Code.
Section 4.13(e) of the MBFC Disclosure Schedule sets forth the "Primary Normal
Retirement Benefit" and the present value of the "Secondary Normal Retirement
Benefit" (as each of those terms are defined in the currently-effective
Executive Indexed Retirement Agreements to which MountainBank is a party) for
each of Xxxxxxx Xxxx, X. X. Xxxxx and Xxxx Xxxxxx.
4.14 MBFC Information. The information relating to MBFC which is provided
to TSFG by MBFC for inclusion in the registration statement on Form S-4 (the
"S-4") in which the Proxy Statement/Prospectus will be included as a prospectus,
or in any other document filed with any other regulatory agency in connection
herewith, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Proxy
Statement/Prospectus (to the extent it relates to MBFC) will comply with the
provisions of the Exchange Act and the rules and regulations thereunder.
4.15 Compliance with Applicable Law. MBFC holds all licenses, franchises,
permits and authorizations necessary for the lawful conduct of its businesses
under and pursuant to all, and has complied with and is not in default in any
12
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity relating to MBFC, and MBFC has not
received notice of any violations of any of the above.
4.16 Certain Contracts. (a) Except as set forth in Section 4.16(a) of the
MBFC Disclosure Schedule, MBFC is not a party to or bound by any contract
(whether written or oral) (i) with respect to the employment of any directors,
officers, employees or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in any payment or benefits
(whether of severance pay or otherwise) becoming due, or the acceleration or
vesting of any rights to any payment or benefits, from TSFG, MBFC, the Surviving
Corporation or any of their respective Subsidiaries to any officer, director,
employee or consultant of MBFC, (iii) which is a material contract (as defined
in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date
hereof, (iv) which is a consulting agreement (including data processing,
software programming and licensing contracts) not terminable on 90 days or less
notice involving the payment of more than $50,000 per annum, or (v) which
materially restricts the conduct of any line of business by MBFC. Each contract,
arrangement, commitment or understanding of the type described in this Section
4.16(a), whether or not set forth in Section 4.16(a) of the MBFC Disclosure
Schedule, is referred to herein as a "MBFC Contract." MBFC has previously
delivered or made available to TSFG true and correct copies of each contract,
arrangement, commitment or understanding of the type described in this Section
4.16(a).
(b) Except as set forth in Section 4.16(b) of the MBFC Disclosure Schedule,
(i) each MBFC Contract is valid and binding and in full force and effect, (ii)
MBFC has performed all obligations required to be performed by it to date under
each MBFC Contract, (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a default on the part
of MBFC under any MBFC Contract, and (iv) no other party to any MBFC Contract
is, to the knowledge of MBFC, in default in any respect thereunder.
4.17 Agreements with Regulatory Agencies. Except as may be set forth in
Section 4.17 of the MBFC Disclosure Schedule, MBFC is not subject to any
cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of (each, whether or not set
forth on Section 4.17 of the MBFC Disclosure Schedule, a "Regulatory
Agreement"), any Regulatory Agency that restricts the conduct of its business or
that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has MBFC been advised by any Regulatory Agency
that it is considering issuing or requesting any Regulatory Agreement.
4.18 Environmental Matters. Except as may be set forth in Section 4.18 of
the MBFC Disclosure Schedule:
(a) MBFC and, to the knowledge of MBFC, each of the Participation
Facilities and the Loan Properties, are in compliance with all Environmental
Laws.
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of MBFC, threatened, before any Governmental Entity or other forum in
which MBFC, any Participation Facility or any Loan Property, has been or, with
respect to threatened proceedings, may be, named as a defendant (x) for alleged
noncompliance (including by any predecessor) with any Environmental Laws, or (y)
relating to the release, threatened release or exposure to any Hazardous
Material whether or not occurring at or on a site owned, leased or operated by
MBFC, any Participation Facility or any Loan Property.
(c) To the knowledge of MBFC, during the period of (x) MBFC's ownership or
operation of any of its current or former properties, (y) MBFC's participation
in the management of any Participation Facility, or (z) MBFC's interest in a
Loan Property, there has been no release of Hazardous Materials in, on, under or
affecting any such property. To the knowledge of MBFC, prior to the period of
(x) MBFC's ownership or operation of any of its current or former properties,
(y) MBFC's participation in the management of any Participation Facility, or (z)
MBFC's interest in a Loan Property, there was no release of Hazardous Materials
in, on, under or affecting any such property, Participation Facility or Loan
Property.
13
4.19 Opinion. Prior to the execution of this Agreement, MBFC has received
an opinion from The Xxx Group to the effect that, as of the date thereof and
based upon and subject to the matters set forth therein, the Merger
Consideration to be received by the stockholders of MBFC is fair to such
stockholders from a financial point of view. Such opinion has not been amended
or rescinded as of the date hereof.
4.20 Approvals. As of the date hereof, MBFC knows of no fact or condition
relating to MBFC that would prevent all regulatory approvals required for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) from being obtained.
4.21 Loan Portfolio. (a) Except as may be set forth in Section 4.21 of the
MBFC Disclosure Schedule, MBFC is not a party to any written or oral (i) loan
agreement, note or borrowing arrangement (including, without limitation, leases,
credit enhancements, commitments, guarantees or interest-bearing assets)
(collectively, "Loans"), other than Loans the unpaid principal balance of which
does not exceed $100,000, under the terms of which the obligor was, as of April
30, 2003, over 90 days delinquent in payment of principal or interest or in
default of any other provision, or (ii) Loan with any director, executive
officer or 5% or greater stockholder of MBFC, or to the knowledge of MBFC, any
person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing. Section 4.21 of the MBFC Disclosure Schedule
sets forth (i) all of the Loans of MBFC that as of April 30, 2003, were
classified by any bank examiner (whether regulatory or internal) as "Other Loans
Specially Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss,"
"Classified," "Criticized," "Credit Risk Assets," "Concerned Loans," "Watch
List" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the borrower
thereunder, and (ii) each asset of MBFC that as of April 30, 2003, was
classified as "Other Real Estate Owned" and the book value thereof.
(b) Each Loan in original principal amount in excess of $100,000 (i) is
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
4.22 Property. Except as set forth in Section 4.22 of the MBFC Disclosure
Schedule, MBFC has good and marketable title free and clear of all liens,
encumbrances, mortgages, pledges, charges, defaults or equitable interests to
all of the properties and assets, real and personal, tangible or intangible,
which are reflected on the consolidated balance sheet of MBFC as of December 31,
2002 or acquired after such date, except (i) liens for taxes not yet due and
payable or contested in good faith by appropriate proceedings, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of business,
(iii) such imperfections of title, easements and encumbrances, if any, as do not
interfere with the use of the respective property as such property is used on
the date hereof, (iv) for dispositions of or encumbrances on such properties or
assets in the ordinary course of business or (v) mechanics', materialmen's,
workmen's, repairmen's, warehousemen's, carrier's and other similar liens and
encumbrances arising in the ordinary course of business. All leases pursuant to
which MBFC, as lessee, leases real or personal property are valid and
enforceable in accordance with their respective terms and MBFC is not, nor, to
the knowledge of MBFC, is any other party thereto, in default thereunder.
4.23 Reorganization. As of the date hereof, MBFC has no reason to believe
that the Merger will fail to qualify as a reorganization under Section 368(a) of
the Code.
4.24 State Takeover Laws and Charter Provisions. MBFC has taken all
necessary action to exempt the transactions contemplated by this Agreement from
any restrictive provision of (i) any applicable moratorium, control share, fair
price, business combination, or other anti-takeover laws and regulations, or
(ii) the Articles of Incorporation or Bylaws of MBFC.
14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TSFG
Subject to Article III, TSFG hereby represents and warrants to MBFC as
follows:
5.1 Corporate Organization. (a) TSFG is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Carolina. TSFG has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. TSFG is duly registered as a bank holding company under
the BHC Act. The Articles of Incorporation and Bylaws of TSFG, copies of which
have previously been made available to MBFC, are true and correct copies of such
documents as in effect as of the date hereof.
(b) Each Subsidiary of TSFG is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. Each Subsidiary of TSFG has the corporate power and authority to
own or lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The deposit accounts of each
Subsidiary of TSFG that is a bank are insured by the FDIC through the Bank
Insurance Fund or the Savings Association Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid when due.
(c) The minute books of TSFG contain true and correct records of all
meetings and other corporate actions held or taken since December 31, 2000 of
its stockholders and Board of Directors (including committees of its Board of
Directors).
5.2 Capitalization. The authorized capital stock of TSFG consists of
100,000,000 shares of TSFG Common Stock and 10,000,000 shares of preferred
stock, no par value per share ("TSFG Preferred Stock"). As of the date hereof,
there were approximately 46,644,784 shares of TSFG Common Stock and no shares of
TSFG Preferred Stock issued and outstanding, and no shares of TSFG Common Stock
held in TSFG's treasury. All of the issued and outstanding shares of TSFG Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. The shares of TSFG Common Stock to be issued
pursuant to the Merger will be duly authorized and validly issued and, at the
Effective Time, all such shares will be fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof.
5.3 Authority; No Violation. (a) TSFG has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of TSFG, and no other corporate
proceedings on the part of TSFG are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by TSFG and (assuming due authorization,
execution and delivery by MBFC) this Agreement constitutes a valid and binding
obligation of TSFG, enforceable against TSFG in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by TSFG, nor the
consummation by TSFG of the transactions contemplated hereby, nor compliance by
TSFG with any of the terms or provisions hereof, will (i) violate any provision
of the Articles of Incorporation or Bylaws of TSFG, or the articles of
incorporation or bylaws or similar governing documents of any of its
Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 5.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to TSFG or
any of its Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
15
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the respective properties or assets of
TSFG or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which TSFG or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected.
5.4 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act, and
approval of such applications and notices, (b) the filing with the SEC and
declaration of effectiveness of the S-4, (c) the filing of the Articles of
Merger with the North Carolina Secretary of State and the South Carolina
Secretary of State, (d) the filing of applications and notices, as applicable,
with the FDIC under the Bank Merger Act, Federal Deposit Insurance Act and the
rules and regulations of the FDIC, and approval of such applications and
notices, (e) the State Banking Approvals, (f) such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of TSFG Common
Stock pursuant to this Agreement, and (g) approval of the listing of the TSFG
Common Stock to be issued in the Merger on the NASDAQ/NMS, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are required to be made by TSFG in connection with (1) the
execution and delivery by TSFG of this Agreement and (2) the consummation by
TSFG of the Merger and the other transactions contemplated hereby.
5.5 SEC Reports. TSFG has previously made available to MBFC a true and
correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since December 31, 2000 by TSFG
with the SEC pursuant to the Securities Act or the Exchange Act (the "TSFG
Reports") and (b) communication mailed by TSFG to its shareholders since
December 31, 2000, and no such TSFG Report (when filed and at their respective
effective time, if applicable) or communication (when mailed) contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier date. TSFG has timely filed all TSFG Reports and other
documents required to be filed by it under the Securities Act and the Exchange
Act since December 31, 2000, and each such TSFG Report and other documents
complied in all material respects with the rules and regulations applicable
thereto when filed.
5.6 Regulatory Reports. TSFG has timely filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that it was required to file since December 31, 2000 with the
Regulatory Agencies and has paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of TSFG, no Regulatory Agency has
initiated any proceeding or, to the knowledge of TSFG, investigation into the
business or operations of TSFG since December 31, 2000. There is no unresolved
violation or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of TSFG.
5.7 Financial Statements. TSFG has previously made available to MBFC (1)
copies of the consolidated balance sheets of TSFG and its Subsidiaries as of
December 31 for the fiscal years 2002 and 2001 and the related consolidated
statements of income, changes in shareholders' equity and comprehensive income,
and cash flows for the fiscal years 2000 through 2002, inclusive, as reported in
TSFG's Annual Report on Form 10-K for the fiscal year ended December 31, 2002
filed with the SEC under the Exchange Act, accompanied by the audit report of
KPMG LLP, independent public accountants with respect to TSFG, and (2) copies of
unaudited consolidated balance sheets and the related consolidated statements of
earnings, stockholders' equity and cash flows of TSFG at and for the quarter
ended March 31, 2003, as reported in TSFG's Quarterly Report on Form 10-Q for
such quarter filed with the SEC under the Exchange Act, and will make available
16
on or before August 14, 2003 copies of unaudited consolidated balance sheets and
the related consolidated statements of earnings, stockholders' equity and cash
flows of TSFG at and for the quarter ended June 30, 2003 (collectively, the
"TSFG Financial Statements"). Subject, in the case of the unaudited statements,
to audit adjustments reasonable in nature and amount, the TSFG Financial
Statements fairly present the financial position of TSFG as of the dates
indicated therein, and when included in the Proxy Statement/Prospectus will
fairly present the results of the operations and financial position of TSFG for
the respective fiscal periods or as of the respective dates therein set forth.
Subject, in the case of the unaudited statements, to audit adjustments
reasonable in nature and amount, each of the TSFG Financial Statements
(including the related notes, where applicable) complies, and TSFG's Financial
Statements to be included in the Proxy Statement/Prospectus after the date
hereof will comply, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been, and
TSFG's Financial Statements to be included in the Proxy Statement/Prospectus
will be, prepared in accordance with GAAP, except as indicated in the notes
thereto or, in the case of unaudited statements, as permitted by the SEC. The
books and records of TSFG have been, and are being, maintained in accordance
with GAAP and any other applicable legal and accounting requirements.
5.8 Broker's Fees. TSFG has not employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement.
5.9 Absence of Certain Changes or Events. Except as disclosed in any TSFG
Report filed with the SEC prior to the date hereof, since December 31, 2002,
there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had a Material Adverse
Effect on TSFG.
5.10 Legal Proceedings. (a) Except as disclosed in any TSFG Report, neither
TSFG nor any of its Subsidiaries is a party to any and there are no pending or,
to TSFG's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against TSFG or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment or decree imposed upon TSFG,
any of its Subsidiaries or the assets of TSFG or any of its Subsidiaries.
5.11 TSFG Information. The information relating to TSFG and its
Subsidiaries to be contained in the Proxy Statement/Prospectus and the S-4, or
in any other document filed with any other regulatory agency in connection
herewith, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Proxy
Statement/Prospectus (except for such portions thereof that relate to MBFC) will
comply with the provisions of the Exchange Act and the rules and regulations
thereunder. The S-4 will comply with the provisions of the Securities Act and
the rules and regulations thereunder.
5.12 Compliance with Applicable Law. TSFG and each of its Subsidiaries
holds all licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to all, and
have complied with and are not in default in any respect under any, applicable
law, statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to TSFG or any of its Subsidiaries and neither TSFG
nor any of its Subsidiaries has received notice of any violations of any of the
above.
5.13 Ownership of MBFC Capital Stock. Except for TSFG's ownership of
approximately 41,666 shares of Series A Preferred Stock, neither TSFG nor any of
its affiliates or associates (as such terms are defined under the Exchange Act)
17
(i) beneficially owns, directly or indirectly, or (ii) is a party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of capital stock of MBFC (other than Trust
Account Shares).
5.14 Approvals. As of the date hereof, TSFG knows of no fact or condition
relating to TSFG that would prevent all regulatory approvals required for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) from being obtained.
5.15 Reorganization. As of the date hereof, TSFG has no reason to believe
that the Merger will fail to qualify as a reorganization under Section 368(a) of
the Code.
5.16 Taxes. TSFG has (i) duly and timely filed (including applicable
extensions granted without penalty) all material Tax Returns required to be
filed at or prior to the Effective Time, and all such Tax Returns are true and
correct, and (ii) paid in full or made adequate provision in the financial
statements of TSFG (in accordance with GAAP) for all material Taxes shown to be
due on such Tax Returns. As of the date hereof (i) TSFG has not requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, and (ii) with respect to each
taxable period of TSFG, the federal and state income Tax Returns of TSFG have
not been audited by the IRS or appropriate state tax authorities.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Covenants of MBFC. During the period from the date hereof and
continuing until the Effective Time, except as expressly contemplated or
permitted by this Agreement or with the prior written consent of TSFG, MBFC
shall carry on its business in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, and except as set
forth in Section 6.1 of the MBFC Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by TSFG, MBFC shall
not:
(a) except for regular quarterly dividends consistent with past practice
and regular dividends on the Series A Preferred Stock, declare or pay any
dividends on, or make other distributions in respect of, any of its capital
stock;
(b) (i) repurchase, redeem or otherwise acquire (except for the acquisition
of Trust Account Shares and DPC Shares) any shares of the capital stock of MBFC,
or any securities convertible into or exercisable for any shares of the capital
stock of MBFC, (ii) split, combine or reclassify any shares of its capital stock
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iii)
except pursuant to Rights referenced on the MBFC Disclosure Schedule, issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or any securities convertible into or exercisable
for, or any rights, warrants or options to acquire, any such shares, or enter
into any agreement with respect to any of the foregoing (including additional
Rights similar to those set forth on the MBFC Disclosure Schedule;
(c) amend its Articles of Incorporation, Bylaws or other similar governing
documents;
(d) make any capital expenditures other than those which (i) are made in
the ordinary course of business or are necessary to maintain existing assets in
good repair and (ii) in any event are in an amount of no more than $100,000 in
the aggregate;
(e) enter into any new line of business;
(f) acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire any assets, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructurings or in the ordinary
course of business consistent with past practices;
18
(g) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied;
(h) change its methods of accounting in effect at December 31, 2002, except
as required by changes in GAAP or regulatory accounting principles as concurred
to by MBFC's independent auditors;
(i) (i) except as required by applicable law, as set forth in Section 7.8,
or as required to maintain qualification pursuant to the Code, adopt, amend, or
terminate any employee benefit plan (including, without limitation, any Plan) or
any agreement, arrangement, plan or policy between MBFC or one or more of its
current or former directors, officers or employees or any "affiliate" of any
such person (as such term is used in Rule 12b-2 under the Exchange Act), or (ii)
except for normal increases in the ordinary course of business consistent with
past practice or except as required by applicable law, increase in any manner
the compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any Plan or agreement as in effect as of the date
hereof (including, without limitation, the granting of any stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares);
(j) other than activities in the ordinary course of business consistent
with past practice, sell, lease, encumber, assign or otherwise dispose of, or
agree to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements;
(k) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(l) file any application to relocate or terminate the operations of any of
its banking offices;
(m) create, renew, amend or terminate or give notice of a proposed renewal,
amendment or termination of, any contract, agreement or lease for goods,
services or office space, involving payments thereunder by MBFC in excess of
$100,000 per year, to which MBFC is a party or by which MBFC or its properties
is bound, other than the renewal in the ordinary course of business of any lease
the term of which expires prior to the Closing Date;
(n) take or cause to be taken any action which would or could reasonably be
expected to prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code; or
(o) agree to do any of the foregoing.
6.2 Covenants of TSFG. Except as otherwise contemplated by this Agreement
or consented to in writing by MBFC, TSFG shall not, and shall not permit any of
its Subsidiaries to:
(a) except for regular quarterly dividends consistent with past practice,
declare or pay any dividends on or make any other distributions in respect of
any of its capital stock;
(b) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied;
(c) take any action or enter into any agreement that could reasonably be
expected to jeopardize or materially delay the receipt of any Requisite
Regulatory Approval (as defined in Section 8.1(c));
(d) take or cause to be taken any action which would or could reasonably be
expected to prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code;
(f) sell or otherwise dispose of any business segment; or
(g) agree to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters. TSFG, with the cooperation of MBFC, shall promptly
prepare and file with the SEC the S-4. Each of MBFC and TSFG shall use its
reasonable best efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing, and MBFC shall thereafter mail
the Proxy Statement/Prospectus to its stockholders. TSFG shall also use its
19
reasonable best efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). MBFC and TSFG shall have
the right to review in advance, and to the extent practicable each will consult
the other on, in each case subject to applicable laws relating to the exchange
of information, all the information relating to MBFC or TSFG, as the case may
be, and any of TSFG's Subsidiaries, which appears in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) TSFG and MBFC shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement/Prospectus, the S-4 or any other
statement, filing, notice or application made by or on behalf of TSFG, MBFC or
their Subsidiaries to any Governmental Entity in connection with the Merger and
the other transactions contemplated by this Agreement.
(d) TSFG and MBFC shall promptly furnish each other with copies of written
communications received by TSFG or MBFC, as the case may be, or any of their
respective Affiliates or Associates (as such terms are defined in Rule 12b-2
under the Exchange Act as in effect on the date hereof) from, or delivered by
any of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
7.2 Access to Information. (a) MBFC and TSFG will each keep the other
advised of all material developments relevant to their respective businesses,
and to the consummation of the Merger, and each shall provide to the other, upon
request, reasonable details of any such development. Upon reasonable notice,
each party shall afford to representatives of the other party reasonable access,
during normal business hours during the period prior to the Effective Time, to
all of their respective properties, books, contracts, commitments and records,
and during such period, shall make available all information concerning their
respective businesses as may be reasonably requested (except that the parties
shall take into account in determining the reasonableness of due diligence
requests and the fact that TSFG is a public company which is substantially
larger than MBFC). The other provisions of this Section notwithstanding, neither
party nor any of its Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights of its customers, jeopardize any attorney-client privilege or
contravene any law (including without limitation laws regarding exchange of
information), rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date hereof.
(b) All non-public information furnished to TSFG or MBFC by the other party
hereto pursuant to Section 7.2(a) (other than (i) information already in the
receiving party's possession, or (ii) information that is or becomes generally
available to the public other than as a result of a disclosure by the receiving
party or any of its directors, officers, employees, agents or advisors, or (iii)
information that becomes available to the receiving party on a non-confidential
basis from a source other than the disclosing party or its advisors, provided
that such source is not known by the receiving party after due inquiry to be
bound by a confidentiality agreement with or other obligation of secrecy to the
disclosing party) shall be kept confidential, and the parties shall maintain,
and shall cause each of their respective directors, officers, attorneys and
advisors to maintain, the confidentiality of all information obtained hereunder
which is not otherwise publicly disclosed by the other party, said undertakings
with respect to confidentiality to survive any termination of this Agreement. In
the event of the termination of this Agreement, each party shall return to the
other party upon request all confidential information previously furnished in
connection with the transactions contemplated by this Agreement.
20
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
7.3 Certain Actions. (a) Except with respect to this Agreement and the
transactions contemplated hereby, neither MBFC nor any of its directors,
officers, agents, affiliates (as such term is used in Rule 12b-2 under the
Exchange Act) or representatives (collectively, "Representatives") shall,
directly or indirectly, initiate, solicit, encourage or knowingly facilitate
(including by way of furnishing information) any inquiries with respect to or
the making of any Acquisition Proposal.
(b) Notwithstanding anything herein to the contrary, MBFC and its Board of
Directors and Representatives shall be permitted (i) to comply with Rule 14d-9
and Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal, (ii) to engage in any discussions or negotiations with, or provide any
information to, any person in response to an unsolicited written Acquisition
Proposal by any such person, if and only to the extent that (a) MBFC's Board of
Directors concludes in good faith and consistent with its fiduciary duties to
MBFC's stockholders under applicable law that such Acquisition Proposal would
reasonably be expected to result in a Superior Proposal, (b) prior to providing
any information or data to any person in connection with such Acquisition
Proposal by any such person, MBFC's Board of Directors receives from such person
an executed confidentiality agreement, and (c) prior to providing any
information or data to any person or entering into discussions or negotiations
with any person, MBFC's Board of Directors notifies TSFG promptly of any
inquiries, proposals, or offers respecting such Acquisition Proposal received
by, any such information requested from, or any such discussions or negotiations
sought to be initiated or continued with, any of its Representatives indicating,
in connection with such notice, the name of such person and the material terms
and conditions of any inquiries, proposals or offers respecting such Acquisition
Proposal.
(c) MBFC agrees that it will, and will cause its Representatives to,
immediately cease and cause to be terminated any activities, discussions, or
negotiations existing as of the date hereof with any parties conducted
heretofore with respect to any Acquisition Proposal.
7.4 Stockholder Meeting. MBFC shall take all steps necessary to duly call,
give notice of, convene and hold a meeting of its stockholders to be held as
soon as is reasonably practicable after the date on which the S-4 becomes
effective for the purpose of (1) voting upon the approval of this Agreement and
the consummation of the transactions contemplated hereby and (2) amending its
articles of incorporation to provide that the Series A Preferred Stock shall be
convertible into the Per Preferred Share Merger Consideration as provided
herein. MBFC shall, through its Board of Directors, subject to the fiduciary
duties of such board (including those with respect to a Superior Proposal),
recommend to its stockholders approval of this Agreement and the transactions
contemplated hereby and such other matters as may be submitted to its
stockholders in connection with this Agreement.
7.5 Legal Conditions to Merger. Each of TSFG and MBFC shall, and shall
cause its Subsidiaries to, use their reasonable best efforts (a) to take, or
cause to be taken, all actions necessary, proper or advisable to comply promptly
with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VIII hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by MBFC or TSFG in connection with the Merger and the other transactions
contemplated by this Agreement, and to comply with the terms and conditions of
such consent, authorization, order or approval.
7.6 Affiliates. MBFC shall use its reasonable best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act) of MBFC to deliver to TSFG, as soon as
practicable after the date hereof, a written agreement, in the form of Exhibit A
hereto.
7.7 Nasdaq Listing. TSFG shall use its best efforts to cause the shares of
TSFG Common Stock to be issued in the Merger to be approved for listing on the
NASDAQ/NMS as of the Effective Time.
21
7.8 Employee Benefit Plans; Existing Agreements. (a) As of the Effective
Time, the employees of MBFC shall be eligible to participate in employee benefit
plans and severance plans of TSFG or its Subsidiaries in which similarly
situated employees of TSFG or its Subsidiaries participate, to the same extent
that similarly situated employees of TSFG or its Subsidiaries participate (it
being understood that inclusion of MBFC's employees in TSFG's employee benefit
plans may occur at different times with respect to different plans).
(b) With respect to each TSFG Plan for which length of service is taken
into account for any purpose (including TSFG's severance plan), service with
MBFC (or predecessor employers to the extent MBFC provides past service credit)
shall be treated as service with TSFG for purposes of determining eligibility to
participate, vesting, and entitlement to benefits, including for severance
benefits and vacation entitlement (but not for accrual of defined benefit
pension benefits); provided however, that such service shall not be recognized
to the extent that such recognition would result in a duplication of benefits.
Such service also shall apply for purposes of satisfying any waiting periods,
evidence of insurability requirements, or the application of any preexisting
condition limitations. Each TSFG Plan shall waive pre-existing condition
limitations to the same extent waived under the applicable MBFC Plan. MBFC's
employees shall be given credit for amounts paid under a corresponding benefit
plan during the same period for purposes of applying deductibles, co-payments
and out-of-pocket maximums as though such amounts had been paid in accordance
with the terms and conditions of the TSFG Plan.
(c) As of the Effective Time, TSFG shall assume and honor and shall cause
the appropriate Subsidiaries of TSFG to assume and to honor in accordance with
their terms all written agreements listed in Section 4.13(a) of the MBFC
Disclosure Schedule (the "Benefit Agreements"). TSFG acknowledges and agrees
that the Merger will constitute a merger, sale or a change in control of MBFC
for all purposes under such agreements. The provisions of this Section 7.8(c)
are intended to be for the benefit of, and shall be enforceable by, each
director, officer or employee that is a party to any Benefit Agreement.
7.9 Indemnification of MBFC Directors and Officers. TSFG or a TSFG
Subsidiary shall provide and keep in force for a period of six years after the
Effective Time directors' and officers' liability insurance providing coverage
to directors and officers of MBFC for acts or omissions occurring prior to the
Effective Time. Such insurance shall provide at least the same coverage and
amounts as contained in MBFC's policy on the date hereof; provided, that in no
event shall the annual premium on such policy exceed 200% of the annual premium
payments on MBFC's policy in effect as of March 31, 2003 (the "Maximum Amount").
If the amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, TSFG shall use its reasonable best efforts
to maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount and MBFC shall
cooperate with TSFG in such efforts in all reasonable respects. Notwithstanding
the foregoing, TSFG further agrees to indemnify all individuals who are or have
been officers, directors or employees of MBFC prior to the Effective Time from
any acts or omissions in such capacities prior to the Effective Time, to the
extent that such indemnification is provided pursuant to the Articles of
Incorporation or Bylaws of MBFC on the date hereof and is permitted under the
NCBCA and SCBCA.
7.10 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement shall take all such necessary action as may be reasonably requested by
TSFG or MBFC.
7.11 Appointment of Director. Effective as of the Effective Time, TSFG
shall cause its Board of Directors to be expanded by one member, and shall
appoint X.X. Xxxxx (the "MBFC Director") to fill the vacancy created by such
increase.
7.12 MountainBank Board. For at least three years following Closing, TSFG
shall cause each individual who is currently serving as a director of MBFC
(other than the MBFC Director) and such other persons listed on Section 7.12 of
the MBFC Disclosure Schedule, if such persons are willing to so serve, to be
elected or appointed as members of MountainBank's board of directors (and in the
22
event that MountainBank is merged into another TSFG banking subsidiary, to be
elected or appointed as members of either the corporate board or the North
Carolina state advisory board of that banking subsidiary). For such service,
each member of the MountainBank Board shall receive (1) at Closing (which shall
be deemed the date of grant) an option to purchase 6,000 shares of TSFG common
stock in accordance with TSFG's existing Director Stock Option Plan, and (2)
regular director's fees for Board service consistent with TSFG compensation
policy in effect from time to time with respect to its South Carolina and
Florida bank boards except that such persons will not be entitled to receive
option or restricted stock grants.
7.13 Headquarters. For at least two years following the Closing Date, TSFG
shall cause MountainBank's headquarters (or the headquarters of TSFG's North
Carolina operations) to be maintained in Hendersonville, North Carolina.
7.14 Accounting Matters. MBFC shall cooperate with TSFG concerning (i)
accounting and financial matters necessary or appropriate to facilitate the
Merger (taking into account TSFG's policies, practices and procedures),
including, without limitation, issues arising in connection with record keeping,
loan classification, valuation adjustments, levels of loan loss reserves and
other accounting practices, and (ii) MBFC's lending, investment or
asset/liability management policies; provided, that any action taken pursuant to
this Section 7.14 shall not be deemed to constitute or result in the breach of
any representation or warranty of MBFC contained in this Agreement.
7.15 Employment Agreements. At Closing, TSFG shall offer an employment
contract to the individual listed in Section 7.15 of the MBFC Disclosure
Schedule substantially in the form provided by TSFG to MBFC on the date hereof.
TFSG shall assume and honor and shall cause the appropriate Subsidiaries of TFSG
to assume and honor in accordance with their terms all written agreements listed
on Section 7.15 of the MBFC Disclosure Schedule.
7.16 Tax Opinion. TSFG and MBFC shall use their respective reasonable best
efforts to obtain the tax opinion contemplated by Section 8.1(g).
7.17 Exemption from Section 16. Prior to the Effective Time, the Board of
Directors of TSFG, or an appropriate committee of non-employee directors
thereof, shall adopt a resolution consistent with the interpretive guidance of
the SEC so that the acquisition by any officer or director of MBFC who may
become a covered person of TSFG for purposes of Section 16 of the Exchange Act
and the rules and regulations thereunder ("Section 16") of TSFG Common Stock or
options to acquire TSFG Common Stock pursuant to this Agreement and the Merger
shall be an exempt transaction for purposes of Section 16.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the holders of the outstanding shares of MBFC
Capital Stock under applicable law.
(b) Listing of Shares. The shares of TSFG Common Stock which shall be
issued to the stockholders of MBFC upon consummation of the Merger shall have
been authorized for listing on the NASDAQ/NMS.
(c) Other Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby (including the Merger) shall have been obtained
and shall remain in full force and effect and all statutory waiting periods in
23
respect thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the S-4 shall have been issued and
no proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger (an
"Injunction") shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or enforced
by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(f) Employment Agreements. TSFG shall have entered into the employment and
noncompetition agreement referenced in Section 7.15.
(g) Federal Tax Opinion. TSFG and MBFC shall have received a written
opinion from Wachtell, Lipton, Xxxxx & Xxxx, counsel to MBFC ("MBFC's counsel"),
in form and substance reasonably satisfactory to TSFG and MBFC, dated the
Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, MBFC's Counsel may require and rely upon representations
and covenants, including those contained in certificates of officers of TSFG,
MBFC and others, reasonably satisfactory in form and substance to such counsel.
8.2 Conditions to Obligations of TSFG. The obligation of TSFG to effect the
Merger is also subject to the satisfaction or waiver by TSFG at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of MBFC set forth in this Agreement (other than
those set forth in Section 4.2) shall be true and correct as of the date hereof
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date; and (ii) the representations and warranties of MBFC set forth in Section
4.2 of this Agreement shall be true and correct in all material respects
(without giving effect to Section 3.2 of this Agreement) as of the date hereof
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date. TSFG shall have received a certificate signed on behalf of MBFC by the
Chief Executive Officer or the Chief Financial Officer of MBFC to the foregoing
effect.
(b) Performance of Obligations of MBFC. MBFC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and TSFG shall have received a
certificate signed on behalf of MBFC by the Chief Executive Officer or the Chief
Financial Officer of MBFC to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
8.3 Conditions to Obligations of MBFC. The obligation of MBFC to effect the
Merger is also subject to the satisfaction or waiver by MBFC at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of TSFG set forth in this Agreement (other than
those set forth in Section 5.2) shall be true and correct as of the date hereof
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date; and (ii) the representations and warranties of TSFG set forth in Section
5.2 of this Agreement shall be true and correct in all material respects
(without giving effect to Section 3.2 of this Agreement) as of the date hereof
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date. MBFC shall have received a certificate signed on behalf of TSFG by the
Chief Executive Officer or the Chief Financial Officer of TSFG to the foregoing
effect.
(b) Performance of Obligations of TSFG. TSFG shall have performed in all
material respects all obligations required to be performed by it under this
24
Agreement at or prior to the Closing Date, and MBFC shall have received a
certificate signed on behalf of TSFG by the Chief Executive Officer or the Chief
Financial Officer of TSFG to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of MBFC:
(a) by mutual consent of MBFC and TSFG in a written instrument, if the
Board of Directors of each so determines by a vote of a majority of the members
of its entire Board;
(b) by either TSFG or MBFC upon written notice to the other party (i) 30
days after the date on which any request or application for a Requisite
Regulatory Approval shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 30-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity, provided, however, that no party shall
have the right to terminate this Agreement pursuant to this Section 9.1(b)(i) if
such denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth herein or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either TSFG or MBFC if the Merger shall not have been consummated on
or before the later of (i) October 31, 2003, or (ii) if the S-4 is given a full
review by the SEC, December 31, 2003, unless the failure of the Closing to occur
by such date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(d) by either TSFG or MBFC if the approval of the stockholders of MBFC
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of such
stockholders or at any adjournment or postponement thereof;
(e) by either TSFG or MBFC (provided that the terminating party is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
representations or warranties set forth in this Agreement on the part of the
other party, which breach is not cured within 30 days following written notice
to the party committing such breach, or which breach, by its nature, cannot be
cured prior to the Closing; provided, however, that neither party shall have the
right to terminate this Agreement pursuant to this Section 9.1(e) unless the
breach of representation or warranty, together with all other such breaches,
would entitle the party receiving such representation not to consummate the
transactions contemplated hereby under Section 8.2(a) (in the case of a breach
of representation or warranty by MBFC) or Section 8.3(a) (in the case of a
breach of representation or warranty by TSFG);
(f) by either TSFG or MBFC (provided that the terminating party is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the other
party, which breach shall not have been cured within 30 days following receipt
by the breaching party of written notice of such breach from the other party
hereto, or which breach, by its nature, cannot be cured prior to the Closing;
(g) by MBFC, in the event that the Board of Directors of MBFC determines in
good faith, after consultation with outside counsel, that in light of a Superior
Proposal it is necessary to terminate this Agreement in order to comply with its
fiduciary duties to MBFC and to MBFC's shareholders under applicable law;
provided, however, that the Board of Directors of MBFC may terminate this
Agreement pursuant to this Section 9.1(g) solely in order to concurrently enter
into a letter of intent, agreement in principle or an acquisition agreement or
other similar agreement related to a Superior Proposal; provided further,
however, that this Agreement may be terminated pursuant to this Section 9.1(g)
25
only after the fifth day following TSFG's receipt of written notice advising
TSFG that the Board of Directors of MBFC is prepared to accept a Superior
Proposal, and only if, during such five-day period, if TSFG so elects, MBFC and
its advisors shall have negotiated in good faith with TSFG to make such
adjustments in the terms and conditions of this Agreement as would enable MBFC
to proceed with the transactions contemplated herein on such adjusted terms;
(h) by either party if, during the ten business days following the
determination of Fair Market Value, the Ten Trading Average is less than $17.00,
provided that such termination shall not be available, however, if TSFG agrees
to value the TSFG common stock for merger consideration purposes at the Ten
Trading Day Average; or
(i) by either party, if during the ten business days following the
determination of Fair Market Value, the Ten Trading Average is greater than
$29.00, provided that such termination shall not be available, however, if MBFC
agrees to value the TSFG common stock for merger consideration purposes at the
Ten Trading Day Average.
9.2 Effect of Termination.
(a) In the event of termination of this Agreement by either TSFG or MBFC as
provided in Section 9.1, this Agreement shall forthwith become void and have no
effect except (i) Sections 7.2(b), 9.2 and 10.3 shall survive any termination of
this Agreement and (ii) that, notwithstanding anything to the contrary contained
in this Agreement, no party shall be relieved or released from any liabilities
or damages arising out of its willful breach of any provision of this Agreement.
(b) If MBFC terminates this Agreement pursuant to Section 9.1(g), MBFC
shall pay to TSFG a termination fee equal to $4 million (the "Termination Fee
Amount") by wire transfer of same day funds on the date of termination.
(c) In the event that an Acquisition Proposal with respect to MBFC shall
have been made known to MBFC and shall have been publicly announced or otherwise
become public, or shall have been made to the shareholders of MBFC, and
thereafter (x) this Agreement is terminated by either TSFG or MBFC pursuant to
either (i) Section 9.1(c) hereof and prior to such termination the stockholders
of MBFC shall not have previously approved the Merger, or (ii) Section 9.1(d)
hereof as a result of the failure of the stockholders of MBFC to approve the
Merger, and (y) within twelve months of such termination (A) MBFC consummates a
transaction described in clause (i)(a) or clause (i)(b) of the definition of
"Superior Proposal.," other than any such transaction involving a merger,
consolidation or similar transaction as to which the common stockholders of MBFC
immediately prior thereto own in the aggregate more than 50% of the common stock
of the surviving or transferee corporation or its publicly-held parent
corporation immediately following consummation thereof, or (B) any person shall
acquire beneficial ownership of or the right to acquire 50% or more of the
outstanding shares of MBFC Common Stock, then upon the first occurrence of
either of the events contemplated by clause (y) MBFC shall pay TSFG a
termination fee equal to the Termination Fee Amount by wire transfer of same day
funds.
(d) MBFC agrees that the agreements contained in Section 9.2(b) and 9.2(c)
are integral parts of the transactions contemplated by this Agreement and
constitute liquidated damages and not a penalty.
9.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of either
MBFC or TSFG; provided, however, that after any approval of the transactions
contemplated by this Agreement by MBFC's stockholders, there may not be, without
further approval of such stockholders, any amendment of this Agreement which
reduces the amount or changes the form of the consideration to be delivered to
MBFC stockholders hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, each of the
parties hereto, by action taken or authorized by its Board of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any
26
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
GENERAL PROVISIONS
10.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on the first
business day after all conditions set forth in Article VIII have either been
satisfied or waived (other than those conditions which relate to actions to be
taken at the Closing) (the "Closing Date") at TSFG's principal executive
offices, unless another time, date or place is agreed to in writing by the
parties hereto; provided, however, that the Closing Date shall not be prior to
October 3, 2003.
10.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for those covenants and agreements contained herein and therein
which by their terms apply in whole or in part after the Effective Time provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive TSFG or MBFC (or any director,
officer or controlling person thereof) of any defense at law or in equity which
otherwise would be available against the claims of any third party, including,
without limitation, any shareholder or former shareholder of either TSFG or
MBFC.
10.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied, mailed by
registered or certified mail (return receipt requested) or delivered by an
express courier to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to TSFG, to:
The South Financial Group, Inc.
000 X. Xxxx Xx.
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.,
Executive Vice President
and
(b) if to MBFC, to:
MountainBank Financial Corporation
000 Xxxx Xxxxx
Xxxxxxxxxxxxxx, XX 00000
Attention: X. X. Xxxxx, Chief Executive Officer
27
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxx, Esq.
10.5 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
10.6 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
10.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of South Carolina, without regard to any
applicable conflicts of law, except to the extent that various matters under
this Agreement must be necessarily governed by North Carolina corporate law.
10.8 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.9 Publicity. Except as expressly permitted by this Agreement or
otherwise required by law or the rules of the Nasdaq Stock Market so long as
this Agreement is in effect, neither TSFG nor MBFC shall, or shall permit any of
its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of the other party, which consent shall not be unreasonably
withheld.
10.10 Assignment; No Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
28
IN WITNESS WHEREOF, TSFG and MBFC have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
THE SOUTH FINANCIAL GROUP, INC.
By: Xxxxxxx X. Hummers III
-------------------------------
Name: Xxxxxxx X. Hummers III
Title: Executive Vice President
MOUNTAINBANK FINANCIAL CORPORATION
By: X. X. Xxxxx
-----------------------------
Name: X. X. Xxxxx
Title: Chief Executive Officer
29
EXHIBIT A
_________________, 2003
The South Financial Group, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
MountainBank Financial Corporation, a North Carolina corporation (the
"Company"), for purposes of paragraphs (c) and (d) of Rule 145 promulgated by
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Act").
The South Financial Group, Inc., a South Carolina corporation ("TSFG")
and the Company have entered into an Agreement and Plan of Merger, dated as of
May ___, 2003 (the "Merger Agreement"), pursuant to which, among other things,
the Company will merge with and into TSFG (the "Transaction"). Upon consummation
of the Transaction, I will receive shares of common stock, $1.00 par value per
share, of TSFG ("TSFG Common Stock"). This agreement is hereinafter referred to
as the "Letter Agreement."
A. I represent and warrant to, and agree with, TSFG as follows:
1. I have read this Letter Agreement and the Merger Agreement
and have discussed their requirements and other applicable limitations upon my
ability to sell, pledge, transfer or otherwise dispose of shares of TSFG Common
Stock, to the extent I felt necessary, with my counsel or counsel for the
Company.
2. I shall not make any offer, sale, pledge, transfer or other
disposition in violation of the Act or the rules and regulations of the SEC
thereunder of the shares of TSFG Common Stock I receive pursuant to the
Transaction.
B. I understand and agree that:
1. I have been advised that any issuance of shares of TSFG
Common Stock to me pursuant to the Transaction will be registered with the SEC.
I have also been advised, however, that, because I maybe an "affiliate" of the
Company at the time the Transaction will be submitted for a vote of the
stockholders of the Company and my disposition of such shares has not been
registered under the Act, I must hold such shares indefinitely unless (i) such
disposition of such shares is subject to an effective registration statement and
to the availability of a prospectus under the Act, (ii) a sale of such shares is
made in conformity with the provisions of Rule 145(d) under the Act or (iii) in
an opinion of counsel, in form and substance reasonably satisfactory to TSFG,
some other exemption from registration is available with respect to any such
proposed disposition of such shares.
2. Stop transfer instructions will be given to the transfer
agent of TSFG with respect to the shares of TSFG Common Stock I receive pursuant
to the Transaction in connection with the restrictions set forth herein, and
there will be placed on the certificate representing shares of TSFG Common Stock
I receive pursuant to the Transaction, or any certificates delivered in
substitution therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a transaction to
which Rule 145 under the Securities Act of 1933, as amended (the "Act"), applies
and may only be sold or otherwise transferred in compliance with the
requirements of Rule 145 or pursuant to a registration statement under the Act
or an exemption from such registration."
30
3. Unless a transfer of my shares of TSFG Common Stock is a
sale made in conformity with the provisions of Rule 145(d), or made pursuant to
an effective registration statement under the Act, TSFG reserves the right to
put an appropriate legend on the certificates issued to my transferee.
4. I recognize and agree that the foregoing provisions also
apply to (i) my spouse, (ii) any relative of mine or my spouse occupying my
home, (iii) any trust or estate in which I, my spouse or any such relative owns
at least 10% beneficial interest or of which any of us serves as trustee,
executor or in any similar capacity and (iv) any corporation or other
organization in which I, my spouse or any such relative owns at least 10% of any
class of equity securities or of the equity interest.
5. I agree that at the time that I make an offer to or
otherwise sell, pledge transfer or dispose of any TSFG Common Stock that I own
after the Transaction, I will notify my broker, dealer or nominee in whose name
my shares are held or registered that such TSFG Common Stock is subject to this
Letter Agreement.
6. Execution of this Letter Agreement should not be construed
as an admission on my part that I am an "affiliate" of the Company as described
in the first paragraph of this letter or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
letter.
It is understood and agreed that this Letter Agreement shall terminate
and be of no further force and effect if the Merger Agreement is terminated in
accordance with its terms. It is also understood and agreed that this Letter
Agreement shall terminate and be of no further force and effect and the stop
transfer instructions set forth in Paragraph B.2. above shall be lifted and the
legend set forth in Paragraph B.2 above shall be removed forthwith from the
certificate or certificates representing my shares of TSFG Common Stock upon the
delivery by the undersigned to TSFG of a copy of a letter from the staff of the
SEC, an opinion of counsel in form and substance reasonably satisfactory to
TSFG, or other evidence reasonably satisfactory to TSFG, to the effect that a
transfer of my shares of TSFG Common Stock will not violate the Act or any of
the rules and regulations of the SEC thereunder.
This Letter Agreement shall be binding on my heirs, legal
representative and successors.
Very truly yours,
--------------------------------
Name:
Accepted this_____ day of____________ , 2003
The South Financial Group, Inc.
By_____________________________
Name:
Title:
31
[Schedules are omitted but will be provided upon request of Securities and
Exchange Commission]
i