Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 11th day of December,
2002 (the "Plan" or the "Agreement") by and among FIRST SOUTH BANCORP, INC.
("First South"), FIRST BANK ("First Bank"), the BANK OF MURFREESBORO ("BOM") and
MURFREESBORO BANCORP, INC. ("MBI"). References to the "parties" or a "party" to
this Agreement shall include First South and First Bank on the one hand, and MBI
and BOM on the other.
RECITALS:
A. FIRST SOUTH. First South has been duly incorporated and is an
existing corporation in good standing under the laws of Tennessee, with its
principal executive offices located in Lexington, Tennessee. First South has one
(1) wholly owned banking subsidiary (a "Subsidiary"), First Bank and other
direct or indirect non-banking Subsidiaries as of the date hereof. Each
Subsidiary that is a depository institution is an "insured institution" as
defined in the Federal Deposit Insurance Act and the applicable regulations
thereunder, and the deposits in each such insured institution are insured by the
Federal Deposit Insurance Corporation.
B. MBI. MBI has been duly incorporated and is an existing corporation
in good standing under the laws of Tennessee, with its principal executive
offices located in Murfreesboro, Tennessee. As of the date hereof, MBI had
5,000,000 authorized shares of common stock, par value $5.00 per share ("MBI
Common Stock"), of which 907,609 shares are outstanding as of the date hereof,
and $3,000,000 face amount of Floating Rate Convertible Subordinated Debentures,
due August 31, 2011, which are convertible into shares of MBI Common Stock at a
conversion rate of $12.50 per share (each a "Debenture" and collectively, the
"Debentures"). All of the issued and outstanding shares of MBI Common Stock are
duly and validly issued and outstanding, are fully paid and nonassessable and
have no preemptive rights. Assuming the conversion of the Debentures and the
issuance of all shares upon the exercise of outstanding options, there would be
1,262,359 shares of common stock issued and outstanding. MBI has one wholly
owned banking Subsidiary, BOM. BOM also engages in investment services and
mortgage origination activities through two Subsidiaries. BOM is an "insured
institution" as defined in the Federal Deposit Insurance Act and the applicable
regulations thereunder, and the deposits in such institution are insured by the
Federal Deposit Insurance Corporation.
C. RIGHTS, ETC. MBI has no shares of its capital stock reserved for
issuance, any outstanding option, call or commitment relating to shares of its
capital stock or any outstanding securities, obligations or agreements
convertible into or exchangeable for, or giving any person any right (other
than, in the case of MBI, preemptive rights) to subscribe for or acquire from
it, any shares of its capital stock except as described in filings made with the
Securities and Exchange Commission ("SEC") by MBI ("Public Filings") or except
as otherwise disclosed in the disclosure schedule referred to in Article III
below.
D. BOARD APPROVALS. The respective Boards of Directors of First South
and First Bank and MBI and BOM have unanimously approved and adopted the Plan
and the transactions related thereto and have duly authorized its execution. In
the case of MBI, the Board of Directors has also approved the Plan and the
transactions related thereto as the sole shareholder of BOM, and has unanimously
voted to recommend to its stockholders that the Plan and the transactions
related thereto be approved.
In consideration of their mutual promises and obligations hereunder,
and intending to be legally bound hereby, First South, First Bank, BOM and MBI
adopt the Plan and prescribe the terms and conditions hereof and the manner and
basis of carrying it into effect, which shall be as follows:
I. THE MERGER
(A) STRUCTURE OF THE MERGER. On the Effective Date (as defined in
Article VIII), MBI will merge (the "Merger") with and into First South, with
First South being the surviving corporation (the "Surviving Corporation") under
the name First South Bancorp, Inc. pursuant to the applicable provisions of the
Tennessee Business Corporation Code (the "Tennessee Act"). On the Effective
Date, the charter and bylaws of the Surviving Corporation shall be the charter
and bylaws of First South in effect immediately prior to the Effective Date.
(B) EFFECT ON OUTSTANDING SHARES. By virtue of the Merger,
automatically and without any action on the part of the holder thereof, each
share of MBI Common Stock issued and outstanding on the Effective Date
(including MBI Common Stock to be issued as a result of the conversion of the
Debentures in accordance with Section 4 thereof) shall be converted into the
right to receive cash in the amount of $21.25 (the "Purchase Price"). As of the
Effective Date, each share of MBI Common Stock held as treasury stock of MBI
shall be canceled, retired and cease to exist, and no payment shall be made in
respect thereof.
All of the shares of capital stock of First South issued and
outstanding immediately prior to the Effective Date shall remain outstanding and
unchanged after the Merger.
(C) PROCEDURES. Certificates which represent shares of MBI Common Stock
that are outstanding on the Effective Date (each, a "Certificate") and are
exchanged for the Purchase Price pursuant to the Plan shall be exchangeable by
the holders thereof in the manner provided in the transmittal materials
described below.
On or prior to the Effective Date, First South shall, pursuant to an
escrow agreement to be entered into by and between First South and First Bank
which escrow agreement shall be mutually acceptable to First South and MBI (the
"Escrow Agreement"), deposit or cause to be deposited, in an escrow account, an
amount of cash equal to the aggregate Purchase Price that MBI stockholders shall
be entitled to receive on the Effective Date pursuant to Paragraph I(b) hereof.
Within five (5) business days of the Effective Date, First South shall deliver a
letter of transmittal to each holder of MBI Common Stock with instructions for
exchanging the Certificates for the Purchase Price. Upon surrender of a
Certificate, duly endorsed as First South may require, the holder of such
Certificate shall be entitled to receive in exchange therefor the consideration
set forth in Paragraph I(B), hereof and such Certificate shall forthwith be
canceled. After the Effective Date, there shall be no transfers on the stock
transfer books of MBI of shares of MBI Common Stock which were issued and
outstanding on the Effective Date and converted pursuant to the provisions of
the Plan. If after the Effective Date Certificates are presented for transfer to
MBI, MBI shall forward the Certificates to First South where the Certificates
will be canceled and exchanged in accordance with the procedures
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set forth in this Paragraph. In the case of any lost, mislaid, stolen or
destroyed Certificate, the holder thereof may be required, as a condition
precedent to the delivery to such holder of the consideration described in
Paragraph I(B) hereof, to deliver to First South a bond in such sum as specified
in the Escrow Agreement as indemnity against any claim that may be made against
the parties with respect to the Certificate alleged to have been lost, mislaid,
stolen or destroyed.
After the Effective Date, holders of MBI Common Stock shall cease to
be, and shall have no rights as, stockholders of MBI, other than to receive the
Purchase Price.
Notwithstanding the foregoing, neither First South nor MBI nor any
other person shall be liable to any former holder of shares of MBI Common Stock
for any amounts paid or property delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(D) OPTIONS. At the Effective Date, each option granted by MBI to
purchase shares of MBI Common Stock (an "MBI Option"), as disclosed in Schedule
I(D) of the MBI Disclosure Schedule (which shall set forth the name of each
option holder, the grant date, the vesting date, and the number of shares and
the exercise price of each option), which is issued and outstanding, whether or
not such option is exercisable on the Effective Date, shall, by reason of the
Merger, cease to be outstanding and each holder of an MBI Option shall receive
from MBI or First South, on the Effective Date, a cash payment in an amount
equal to (i) the difference (if a positive number) between (A) the Purchase
Price and (B) the exercise price of each such MBI Option multiplied by (ii) the
number of shares of MBI Common Stock subject to the MBI Option.
(E) DEBENTURES. On or prior to the Effective Date, each outstanding
Debenture, as disclosed in Schedule I(E) of the MBI Disclosure Schedule, shall
be converted into a number of shares of MBI Common Stock equal to the face
amount of the Debenture plus any accrued but unpaid interest, divided by the
$12.50 per share conversion price, as provided in Section 4 of the Debentures,
and as of the Effective Date, shall thereafter be converted into the right to
receive the Purchase Price in accordance with Paragraph I(B) hereof. MBI shall
take such steps as necessary or appropriate to accomplish the conversion of the
Debentures as provided in Section 4 thereof.
(F) DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement to
the contrary, and only to the extent required by Section 00-00-000 et seq. of
the Tennessee Act, shares of MBI Common Stock which are outstanding immediately
prior to the Effective Date and which are held by shareholders who shall not
have voted in favor of the Plan and the transactions related thereto and who
shall have delivered a written demand for appraisal of such shares of MBI Common
Stock (collectively, the "Dissenting Shares") in the manner provided by the
Tennessee Act shall not be entitled to receive the Purchase Price, but the
holders of the Dissenting Shares shall be entitled to the appraised value of
such shares in accordance with the Tennessee Act; provided, however, that (1) if
any holder of Dissenting Shares shall subsequently deliver a written withdrawal
of his or her demand for appraisal of such shares; (2) if any holder fails to
establish his or her entitlement to appraisal rights as provided in the
Tennessee Act; or (3) if any holder of Dissenting Shares has not filed a
petition demanding a determination of the value of the Dissenting Shares within
the time provided in the Tennessee Act, such holder(s) shall forfeit the right
to appraisal of such shares and such shares shall thereupon be deemed to have
been exchangeable for, as of the Effective Date, the right to
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receive the Purchase Price solely in accordance with this Article I. MBI shall
give First South prompt written notice of any demand received from holders of
Dissenting Shares, and First South shall have the right to participate in all
negotiations and proceedings with respect to such dissent. MBI shall not purport
to make any determination of fair value, make any payment with respect to or
settle any matter arising out of a dissent.
(G) THE BANK MERGER. Pursuant to the laws of the United States of
America and the State of Tennessee, as applicable, and subject to the terms and
conditions of this Agreement, BOM shall be merged with and into First Bank,
which shall be the surviving bank, immediately after the completion of the
Merger.
(1) Effect of the Bank Merger. On the Effective Date,
BOM shall be merged with and into First Bank in the manner and
with the effect provided by the laws of the United States of
America and the State of Tennessee, if applicable, and the
separate legal, existence of BOM shall cease except to the
extent provided by the laws of the United States of America or
Tennessee in the case of a bank after its merger into another
bank, and thereupon BOM and First Bank (sometimes referred to
as the "Merging Banks") shall be a single bank. First Bank as
the surviving bank, shall thereupon and thereafter possess all
the rights, privileges, powers and franchises, of a public as
well as a private nature, and shall be subject to all of the
restrictions, disabilities and duties of the Merging Banks;
and all of the rights, privileges, powers, liabilities and
franchises of the Merging Banks on whatever account,
subscriptions for shares and all other things in action or
belonging to the Merging Banks shall be taken and deemed to be
vested in First Bank without further act or deed.
The outstanding shares of capital stock of BOM shall be
converted on the basis, terms and conditions described below.
(a) Articles of Association and Bylaws. The
Articles of Association and Bylaws of First Bank in
effect immediately prior to the Bank Merger shall
govern First Bank after the Bank Merger without
amendment.
(b) Directors. The directors of First Bank
immediately following the Bank Merger shall be those
directors of First Bank immediately prior to the Bank
Merger without change.
(2) Conversion of Shares. At the effective time of
the Bank Merger, each share of First Bank capital stock
outstanding immediately prior to the Bank Merger shall retain
all of its present rights and privileges and shall be
unchanged as the result of the Bank Merger. At the effective
time of the Bank Merger, all of the issued and outstanding
shares of BOM capital stock (all of which are held by MBI)
shall be canceled.
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II. ACTIONS PENDING MERGER
(A) MBI covenants to First South that MBI and its Subsidiaries shall
conduct their business only in the ordinary course and shall not, without the
prior written consent of First South: (1) issue any options to purchase capital
stock or issue any shares of capital stock, other than shares of MBI Common
Stock issued in connection with the exercise of currently outstanding options to
purchase shares of MBI Common Stock and the conversion of the Debentures; (2)
declare, set aside, or pay any dividend or distribution with respect to the
capital stock of MBI except that MBI may continue to pay interest on the
Debentures; (3) directly or indirectly redeem, purchase or otherwise acquire any
capital stock of MBI or its Subsidiaries; (4) effect a split or reclassification
of the capital stock of MBI or its Subsidiaries or a recapitalization of MBI or
its Subsidiaries; (5) amend the charter or by-laws of MBI or any of its
Subsidiaries; (6) grant any increase in the salaries payable or to become
payable by MBI or its Subsidiaries to any employee except as set forth on
Schedule II(A)(6) of the MBI Disclosure Schedule; (7) make any change in any
bonus, group insurance, pension, profit sharing, deferred compensation, or other
benefit plan, payment or arrangement made to, for or with respect to any
employees or directors of MBI or its Subsidiaries except as set forth on
Schedule II(A)(7) of the MBI Disclosure Schedule or to the extent such changes
are required by applicable laws or regulations; (8) enter into, terminate,
modify or amend any contract, lease or other agreement with any officer or
director of MBI or its Subsidiaries or any "associate" of any such officer or
director, as such term is defined in Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other than in the
ordinary course of their banking business; (9) incur or assume any liabilities,
other than in the ordinary course of their business; (10) dispose of any of
their assets or properties, other than in the ordinary course of their business;
(11) solicit, encourage or authorize any individual, corporation or other
entity, including its directors, officers and other employees, to solicit from
any third party any inquiries or proposals relating to the disposition of its
business or assets, or the acquisition of its voting securities, or the merger
of it or its Subsidiaries with any corporation or other entity other than as
provided by this Agreement, or subject to the fiduciary obligations of its Board
of Directors, provide any individual, corporation or other entity with
information or assistance or negotiate with any individual, corporation or other
entity in furtherance of such inquiries or to obtain such a proposal (and MBI
shall promptly notify First South of all of the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters);
(12) take any other action or permit its Subsidiaries to take any action not in
the ordinary course of business of it and its Subsidiaries; or (13) directly or
indirectly agree to take any of the foregoing actions.
(B) First South covenants to MBI that without the prior written consent
of MBI, which consent will not be unreasonably withheld, First South will not
take any action that would: (a) adversely affect the ability of First South to
obtain any necessary approvals of regulatory authorities required for the
transactions contemplated hereby; or (b) adversely affect its ability to perform
its covenants and agreements under this Plan.
III. REPRESENTATIONS AND WARRANTIES OF MBI
MBI and BOM represent and warrant to First South and First Bank that
the statements contained in this Article III are correct and complete as of the
date of this Agreement except as set forth in the MBI Disclosure Schedules
delivered by MBI to First South on or prior to the date hereof.
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MBI and BOM have made a good faith effort to ensure that the disclosure on each
schedule of the MBI Disclosure Schedules corresponds to the section reference
herein. However, for purposes of the MBI Disclosure Schedules, any item
disclosed on any schedule is deemed to be fully disclosed with respect to all
schedules under which such item may be relevant.
(A) the representations set forth in Recitals B through D of the Plan
with respect to MBI and BOM are true and correct and constitute representations
and warranties for the purpose of Article VI, hereof;
(B) the outstanding shares of capital stock of MBI and its Subsidiaries
are duly authorized, validly issued and outstanding, fully paid and
non-assessable, and subject to no preemptive rights of current or past
shareholders;
(C) each of MBI and its Subsidiaries has the power and authority, and
is duly qualified in all jurisdictions (except for such qualifications the
absence of which will not as a whole have an adverse effect on the business,
results of operations or financial condition of it or its Subsidiaries which is
material to it and its Subsidiaries, taken as a whole ("Material Adverse
Effect") provided that "Material Adverse Effect" shall not be deemed to include:
(1) the impact of changes in banking or similar laws of general applicability or
interpretations thereof by courts or governmental authorities; (2) changes in
generally accepted accounting principles applicable to banks and their holding
companies; or (3) any impact of actions taken by MBI or BOM as required by this
Agreement or at the request of First South in connection with the Merger or the
Bank Merger) where such qualification is required to carry on its business as it
is now being conducted, to own all its material properties and assets, and has
all federal, state, local and foreign governmental authorizations necessary for
it to own or lease its properties and assets and to carry on its business as it
is now being conducted, except for such authorizations the absence of which,
either individually or in the aggregate, would not have a Material Adverse
Effect;
(D) all shares of capital stock of each of MBI's Subsidiaries are owned
by MBI free and clear of all liens, claims, encumbrances and restrictions on
transfer;
(E) subject to the receipt of shareholder approval of this Plan, the
Plan has been authorized by all necessary corporate action of MBI and BOM and,
subject to receipt of such approval of shareholders and required regulatory
approvals, is a legal, valid and binding agreement of MBI and BOM enforceable
against MBI and BOM in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles involving specific performance or injunctive relief;
(F) the execution, delivery and performance of the Plan by MBI and BOM
does not, and the consummation of the transactions contemplated hereby by MBI
and BOM will not, constitute: (1) a breach or violation of, or a default under,
any law, rule or regulation or any judgment, decree, order, governmental permit
or license, or agreement, indenture or instrument of MBI or its Subsidiaries or
to which MBI or its Subsidiaries (or any of their respective properties) is
subject which breach, violation or default would have a Material Adverse Effect,
or enable any person to enjoin any of the transactions contemplated hereby; or
(2) a breach or violation of, or a default under,
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the charter or by-laws of MBI or any of its Subsidiaries; and the consummation
of the transactions contemplated hereby will not require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental
permit or license or the consent or approval of any other party to any such
agreement, indenture or instrument, other than the required approvals of
applicable Regulatory Authorities and the approval of the shareholders of MBI,
both of which are referred to in Paragraph (A) of Article VI and any consents
and approvals the absence of which will not have a Material Adverse Effect;
(G) since December 31, 2001, MBI has filed all forms, reports and
documents with the SEC required to be filed by MBI pursuant to the federal
securities laws and SEC rules and regulations thereunder (the "SEC Reports")
each of which complied as to form, at the time such form, report or document was
filed, in all material respects with the applicable requirement of the
Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act and
the applicable rules and regulations thereunder. As of their respective dates,
none of the SEC Reports, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. Each of the balance sheets in or incorporated by
reference into the SEC Reports (including the related notes and schedules)
fairly presents the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations and retained
earnings and of cash flows and changes in financial position or equivalent
statements in or incorporated by reference into the SEC Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings and cash flows and changes in financial position, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles applicable to bank
holding companies consistently applied during the periods involved, except as
may be noted therein. MBI has no material obligations or liabilities (contingent
or otherwise) except as disclosed in the SEC Reports. For purposes of this
Paragraph, material shall have the meaning as defined under the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder;
(H) MBI and BOM have no material liabilities or obligations secured or
unsecured, whether accrued, absolute, contingent or otherwise, known or unknown,
due or to become due, including, but not limited to tax liabilities, that should
have been but are not reflected in or reserved against in its audited financial
statements as of December 31, 2001 or disclosed in the notes thereto;
(I) there has not been the occurrence of one or more events,
conditions, actions or states of facts which, either individually or in the
aggregate, have caused a Material Adverse Effect with respect to MBI or BOM
since December 31, 2001;
(J) all federal, state, local and foreign tax returns required to be
filed by or on behalf of MBI or any of its Subsidiaries have been timely filed
or requests for extensions have been timely filed and any such extension shall
have been granted and not have expired; and all such returns filed are complete
and accurate in all material respects. All taxes shown on returns filed by MBI
have been paid in full or adequate provision has been made for any such taxes on
MBI's balance sheet (in accordance with generally accepted accounting
principles). As of the date of the Plan, there is no
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audit examination, deficiency, or refund litigation with respect to any taxes of
MBI that could result in a determination that would have a Material Adverse
Effect. All taxes, interest, additions, and penalties due with respect to
completed and settled examinations or concluded litigation relating to MBI have
been paid in full or adequate provision has been made for any such taxes on
MBI's balance sheet (in accordance with generally accepted accounting
principles, applied on a consistent basis). MBI has not executed an extension or
waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect. Deferred taxes have been provided
for in MBI's financial statements in accordance with generally accepted
accounting principles applied on a consistent basis. MBI and BOM are in
compliance with, and MBI's and BOM's records contain all information and
documents (including properly completed IRS Forms W-9) necessary to comply with,
all applicable information reporting and tax withholding requirements under
federal, state, and local tax laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code;
(K) (1) no litigation, proceeding or controversy before any court
or governmental agency is pending, and there is no pending claim, action or
proceeding against MBI or any of its Subsidiaries, which could have a Material
Adverse Effect or to prevent consummation of the transactions contemplated
hereby, and, to MBI's knowledge, no such litigation, proceeding, controversy,
claim or action has been threatened or is contemplated; and
(2) neither MBI nor any of its Subsidiaries is subject to any
agreement, memorandum of understanding, commitment letter, board resolution or
similar arrangement with, or transmitted to, any regulatory authority materially
restricting MBI's operations as conducted on the date hereof or requiring that
certain actions be taken in the future;
(L) neither MBI nor its Subsidiaries are in default in any material
respect under any material contract (as defined in Item 601(b)(10)(i) and (ii)
of Regulation S-K); and there has not occurred any event that with the lapse of
time or the giving of notice or both would constitute such a default;
(M) all "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), that cover any of
MBI's or its Subsidiaries' employees, comply in all material respects with all
applicable requirements of ERISA, the Internal Revenue Code of 1986 (as amended)
(the "Code") and other applicable laws; neither MBI nor any of its Subsidiaries
has engaged in a "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any such plan which is likely to
result in any material penalties or taxes under Section 502(i) of ERISA or
Section 4975 of the Code; no material liability to the Pension Benefit Guaranty
Corporation has been or is expected by MBI or its Subsidiaries to be incurred
with respect to any such plan which is subject to Title IV of ERISA ("Pension
Plan"), or with respect to any "single-employer plan" (as defined in Section
4001(a)(15) of ERISA) currently or formerly maintained by MBI, its Subsidiaries
or any entity which is considered one employer with MBI under Section 4001 of
ERISA or Section 414 of the Code; no Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA (whether or not waived) as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each Pension Plan exceeds the
present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under such Pension Plan as of the end of the most recent
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plan year with respect to the respective Plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the most recent
actuarial valuation for such Pension Plan as of the date hereof; to the
knowledge of MBI, there are no pending or anticipated material claims against or
otherwise involving any of MBI's employee benefit plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of activities of such plans) has been brought against or with respect to any
such plan, except for any of the foregoing which would not have a Material
Adverse Effect; no notice of a "reportable event" (as defined in Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived has been
required to be filed for any Pension Plan within the 12-month period ending on
the date hereof; MBI and its Subsidiaries have not contributed to a
"multi-employer plan", as defined in Section 3(37) of ERISA; and MBI and its
Subsidiaries do not have any obligations for retiree health and life benefits
under any benefit plan, contract or arrangement, except as required by Section
4980B of the Code and Part 6 of Subtitle B of Title I of ERISA;
(N) each of MBI and its Subsidiaries has good and marketable title to
its respective properties and assets, tangible or intangible (other than
property as to which it is lessee);
(O) MBI knows of no reason why the regulatory approvals referred to in
Paragraph (A)(2) of Article VI should not be obtained without the imposition of
any condition of the type referred to in the proviso following such Paragraph
(A)(2);
(P) MBI's reserve for possible loan and lease losses as shown in its
audited financial statements as of December 31, 2001 was, and MBI's reserve for
possible loan and lease losses as shown in all Quarterly Reports on Form 10-Q
filed prior to the Effective Date will be, adequate in all material respects
under generally accepted accounting principles applicable to banks and bank
holding companies;
(Q) Each of MBI, BOM and each of their Subsidiaries is in compliance in
all material respects with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable to it, its properties, assets and deposits, its business, and its
conduct of business and its relationship with its employees, including, without
limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act of 1977, the Home Mortgage Disclosure Act, and all
other applicable fair lending laws and other laws relating to discriminatory
business practices and neither MBI nor BOM has received any written notice to
the contrary;
(R) MBI and BOM hold all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their businesses under and,
to their knowledge, have complied in all material respects with, applicable
laws, statutes, orders, rules and regulations of any federal, state or local
governmental authority relating to them including, but not limited to, the
Tennessee Department of Banking and Finance, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System (the "Board of
Governors"), the SEC and the respective staffs thereof ("Regulatory Authority"),
other than where such failure to hold or such noncompliance will neither result
in a limitation in any material respect on the conduct of their businesses nor
otherwise have a Material Adverse Effect on MBI or BOM. Neither MBI or BOM has
received any notification or communication from any Regulatory Authority (i)
asserting that MBI or BOM is not in compliance
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with any of the statutes, regulations or ordinances which such Regulatory
Authority enforces; (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to MBI or BOM; (iii) requiring or
threatening to require MBI or BOM, or indicating that MBI or BOM may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting, or purporting to
restrict or limit, in any manner the operations of MBI or BOM; or (iv)
directing, restricting or limiting, or purporting to direct, restrict or limit,
in any manner the operations of MBI or BOM, including without limitation any
restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither MBI nor BOM is a party to, nor
has consented to any Regulatory Agreement. The most recent regulatory rating
given to BOM as to compliance with the CRA is satisfactory or better;
(S) No consents, waivers or approvals of, or filings or registrations
with, any governmental authority having jurisdiction over MBI or BOM are
necessary, and no consents, waivers or approvals of, or filings or registrations
with, any other third parties are necessary, in connection with (a) the
execution and delivery of this Agreement by MBI and BOM, and (b) the completion
by MBI and BOM of the transactions described in this Agreement, except for the
approval of any Regulatory Authority;
(T) neither MBI nor any of its Subsidiaries is a party to, or is bound
by, any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is MBI or any of its
Subsidiaries the subject of a proceeding asserting that MBI or any such
Subsidiary has committed an unfair labor practice or seeking to compel MBI or
such Subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving MBI or any of its Subsidiaries pending or threatened, nor is MBI or
any of its Subsidiaries aware or any solicitation or organizational activity
involving any labor union, labor organization, bargaining agreement or contract;
(U) other than services provided by The BankersBanc Capital
Corporation, which has been retained by MBI and the arrangements with which,
including fees, have been disclosed to First South prior to the date hereof,
neither MBI nor any of its Subsidiaries, nor any of their respective officers,
directors or employees, has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for MBI
or any of its Subsidiaries, in connection with the Plan or the transactions
contemplated hereby;
(V) the information to be supplied by MBI for inclusion in the proxy
statement to be filed with the SEC under the Exchange Act and distributed in
connection with MBI's meeting of its shareholders to vote upon this Plan (as
amended or supplemented from time to time, the "Proxy Statement") or in any
application or other filing with any regulatory authority in connection with the
Plan or the transactions contemplated hereby, will not at the time such
information is furnished, and in the case of the Proxy Statement at the time it
is mailed and at the time of the meeting of stockholders contemplated under this
Plan, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading;
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(W) for purposes of this section, the following terms shall have the
indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to: (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource); and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
Environmental Law includes without limitation: (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss. 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss. 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss. 7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss. 9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss. 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss. 300f, et seq; all accompanying
federal regulations and all comparable state and local laws; and (2) any common
law (including without limitation common law that may impose strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Substance.
"Hazardous Substance" means any substance or waste presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a component.
Hazardous Substances include without limitation petroleum or any derivative or
by-product thereof, asbestos, radioactive material, and polychlorinated
biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned or operated by MBI or any of its Subsidiaries, but shall not
include any properties where the activities of MBI and any of its Subsidiaries
are limited to operating Automatic Teller Machines on the premises of a third
party.
There are no actions, suits, demands, notices, claims, investigations
or proceedings pending or, to the knowledge of MBI, threatened against MBI or
its Subsidiaries relating to the Loan Portfolio Properties and Other Properties
Owned by MBI or its Subsidiaries under any Environmental Law, including without
limitation any notices, demand letters or requests for information from any
federal or state environmental agency relating to any such liabilities under or
violations of Environmental Law, nor, to the knowledge of MBI, are there any
circumstances which could lead to such actions, suits, demands, notices, claims,
investigations or proceedings; and
(X) all securities issued by MBI (or any other person), or convertible
into MBI Common Stock, except for those shares subject to dissenter's rights as
defined in the Tennessee Act, shall as a result and upon consummation of the
Merger, be subject to the Plan and exchangeable only for the Purchase Price.
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IV. REPRESENTATIONS AND WARRANTIES OF FIRST SOUTH
First South represents and warrants to MBI that:
(A) the representations set forth in Recitals A, C and D of the Plan
with respect to First South and First Bank are true and correct and constitute
representations and warranties for the purpose of Article VI, hereof;
(B) the Plan has been authorized by all necessary corporate action of
First South and First Bank and, subject to receipt of approval of the
shareholders of MBI and required regulatory approvals, is a legal, valid and
binding agreement of First South and First Bank enforceable against First South
and First Bank in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles involving specific performance or injunctive relief;
(C) the execution, delivery and performance of the Plan by First South
and First Bank does not, and the consummation of the transactions contemplated
hereby by First South and First Bank will not, constitute: (1) a breach or
violation of, or a default under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture or
instrument of First South or First Bank or to which First South or First Bank is
subject which breach, violation or default would have a Material Adverse Effect,
or enable any person to enjoin any of the transactions contemplated hereby; or
(2) a breach or violation of, or a default under, the charter or by-laws of
First South or First Bank; and the consummation of the transactions contemplated
hereby will not require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license or the
consent or approval of any other party to any such agreement, indenture or
instrument, other than the required approvals of applicable Regulatory
Authorities and the approval of the shareholders of MBI, both of which are
referred to in Paragraph (A) of Article VI and any consents and approvals the
absence of which will not have a Material Adverse Effect;
(D) First South knows of no reason why the regulatory approvals
referred to in Paragraph (A)(2) of Article VI should not be obtained without the
imposition of any condition of the type referred to in the proviso following
such Paragraph (A)(2);
(E) First South and First Bank hold all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their businesses under
and, to their knowledge, have complied in all material respects with, applicable
laws, statutes, orders, rules and regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their businesses nor otherwise have a Material Adverse
Effect on First South or First Bank. Neither First South nor First Bank has
received any notification or communication from any Regulatory Authority (i)
asserting that First South or First Bank is not in compliance with any of the
statutes, regulations or ordinances which such Regulatory Authority enforces;
(ii) threatening to revoke any license, franchise, permit or governmental
authorization which is material to First South or First Bank; (iii) requiring or
threatening to require First South or First Bank, or indicating that First South
or First Bank may be required, to enter into a cease and desist order, agreement
or memorandum of
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understanding or any other agreement restricting or limiting, or purporting to
restrict or limit, in any manner the operations of First South or First Bank; or
(iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of First South or First Bank, including
without limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither First South nor
First Bank is a party to, nor has consented to any Regulatory Agreement. The
most recent regulatory rating given to First Bank as to compliance with the CRA
is satisfactory or better.;
(F) No consents, waivers or approvals of, or filings or registrations
with, any governmental authority having jurisdiction over First South or First
Bank are necessary, and no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in connection with
(a) the execution and delivery of this Agreement by First South and First Bank,
and (b) the completion by First South and First Bank of the transactions
described in this Agreement; except for the approval of any Regulatory
Authority;
(G) As of the date hereof, and the Effective Date, First South and
First Bank will have funds that are sufficient, under all applicable legal and
regulatory standards, and available to meet its obligations under this Agreement
and to consummate in a timely manner the transactions contemplated hereby and
thereby. Neither First South nor First Bank shall enter into any plan of
reorganization or plan of merger with any party to form a new parent corporation
of either entity without such party assuming all obligations of First South and
First Bank under this Agreement; and
(H) First South has made available to MBI copies of First South's
financial statements for the preceding three (3) fiscal years (the "First South
Financials"). The First South Financials have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered by such
statements, and (including the related notes where applicable) fairly present
the consolidated financial position, results of operations and cash flows of
First South and the First South Subsidiaries as of and for the respective
periods ending on the dates thereof, except as indicated in the notes thereto.
V. COVENANTS
(A) MBI hereby covenants to First South, that:
(1) MBI and/or BOM shall take or cause to be taken all action
necessary or desirable under the Plan on their part as promptly as practicable,
including the filing of all necessary applications, so as to permit the
consummation of the transactions contemplated by the Plan and cooperate fully
with First South to that end;
(2) MBI shall: (1) take all steps necessary to duly call, give
notice of, convene and hold a meeting of MBI's shareholders for the purpose of
approving the Plan as soon as is reasonably practicable; (2) distribute to MBI's
shareholders the Proxy Statement in accordance with applicable federal and state
law and with its charter and by-laws; (3) recommend to its shareholders that
they approve the Plan; and (4) support the Plan in all respects and fully
cooperate and consult with First South with respect to each of the foregoing
matters;
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(3) MBI will cooperate in the preparation and filing of the
Proxy Statement in order to consummate the transactions contemplated by the Plan
as soon as is reasonably practicable;
(4) subject to MBI's disclosure obligations imposed by law,
unless reviewed and agreed to by First South in advance, neither MBI not BOM
will issue any press release or written statement for general circulation
relating to the transactions contemplated hereby; provided however, that nothing
in this Section (4) shall be deemed to prohibit either party from making any
disclosure which MBI's counsel deems necessary or advisable in order to satisfy
such party's disclosure obligations imposed by law;
(5) from and subsequent to the date hereof, MBI and BOM will:
(1) give to First South and its counsel and accountants access to their premises
and books and records during normal business hours for any reasonable purpose
related to the transactions contemplated hereby; and (2) cooperate and instruct
MBI's counsel and accountants to cooperate with First South and with First
South's counsel and accountants with regard to the formulation and production of
all necessary information, disclosures, financial statements, registration
statements and regulatory filings with respect to the transactions encompassed
by the Plan;
(6) MBI shall notify First South as promptly as practicable
of: (1) any breach of any of its or BOM's representations, warranties or
agreements contained herein; (2) any occurrence, or impending occurrence, of any
event or circumstance which could cause or constitute a material breach of any
of the representations, warranties or agreements of it contained herein; and (3)
any material adverse change in MBI's or BOM's financial condition, results of
operations or business; and (4) MBI and BOM shall use their best efforts to
prevent or remedy the same;
(7) MBI and BOM shall cooperate and use their best efforts to
assist First South in the prompt preparation and filing of all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to obtain all necessary permits, consents, approvals
and authorizations of all third parties and governmental bodies or agencies,
including, submission of applications for approval of the Plan and the
transactions contemplated hereby to the Board of Governors of the Federal
Reserve System (the "Board of Governors") in accordance with the provisions of
the Bank Holding Company Act of 1956, as amended (the "BHC Act"), the Tennessee
Department of Banking and Finance ("Tennessee Department"), and to such other
regulatory agencies as required by law, including without limitation, the
Federal Deposit Insurance Corporation ("FDIC");
(8) MBI shall promptly furnish First South with copies of all
documents filed prior to the Effective Date with the SEC and all documents filed
by it or any of its Subsidiaries with other governmental or regulatory agencies
or bodies in connection with the Merger;
(9) Neither MBI nor BOM will directly or indirectly take any
action or omit to take any action to cause any of its representations and
warranties made in this Plan to become untrue;
(10) prior to the Effective Date, MBI and/or BOM will use its
best efforts to take all steps required to exempt the transactions contemplated
by this Agreement from any applicable
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state anti-takeover law or any restrictions contained in their charter or other
organizational documents;
(11) at the request of First South, MBI and BOM shall
immediately prior to the Effective Date establish and take such reserves and
accruals, as First South reasonably shall request to conform MBI's and BOM's
loan, accrual, reserve and other accounting policies to the policies of First
South or its Subsidiaries, provided, however, that MBI shall not be required to
take such action unless First South agrees in writing that all conditions to
closing set forth in Article VI have been satisfied or waived; prior to the
delivery by First South of the writing referred to in the preceding clause, MBI
shall provide First South a written statement, certified without personal
liability by the chief executive officer of MBI and dated the date of such
writing, that the representation made in Section III(P) hereof is true as of
such date or, alternatively, setting forth in detail the circumstances that
prevent such representation from being true as of such date; and no accrual or
reserve made by MBI or any MBI Subsidiary pursuant to this subsection, or any
litigation or regulatory proceeding arising out of any such accrual or reserve,
shall constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or to
constitute a termination event within the meaning of Paragraph VII(A)(2) hereof.
(12) From and after the date hereof until the termination of
this Agreement, neither MBI, nor any MBI Subsidiary, nor any of their respective
officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by MBI or any of its Subsidiaries), will, directly or indirectly,
initiate, solicit or knowingly encourage (including by way of furnishing
non-public information or assistance), or facilitate knowingly, any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal (as defined below), or enter into or maintain
or continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, or authorize or permit any of its officers, directors, or
employees or any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by any of its
subsidiaries to take any such action, and MBI shall notify First South orally
(within one business day) and in writing (as promptly as practicable) of all of
the relevant details relating to all inquiries and proposals which it or any of
its Subsidiaries or any such officer, director, employee, investment banker,
financial advisor, attorney, accountant or other representative may receive
relating to any of such matters, provided, however, that nothing contained in
this Paragraph A(12) shall prohibit the Board of Directors of MBI from (i)
furnishing information to, or entering into discussions or negotiations with any
person or entity that makes an unsolicited written, bona fide proposal to
acquire MBI pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction, if, and only
to the extent that, (a) the Board of Directors of MBI receives an opinion from
its independent financial advisor that such proposal may be superior to the
Merger and the Bank Merger from a financial point-of-view to MBI's stockholders,
(b) the Board of Directors of MBI, after consultation with and after considering
the advice of independent legal counsel, determines in good faith that failure
to take such action may cause the Board of Directors of MBI to breach its
fiduciary duties to stockholders under applicable law (such proposal that
satisfies (a) and (b) being referred to herein as a "Superior Proposal"); and
(c) MBI promptly notifies First South of such inquiries, proposals or offers
received by, any such information requested from, or any such discussions or
negotiations sought to be initiated or continued with MBI or any of its
representatives
-15-
indicating, in connection with such notice, the name of such person and the
material terms and conditions of any inquiries, proposals or offers. For
purposes of this Agreement, "Acquisition Proposal" shall mean any proposal or
offer as to any of the following (other than the transactions contemplated
hereunder) involving MBI or any of its subsidiaries: (i) any merger,
consolidation, share exchange, business combination, or other similar
transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 25% or more of the assets of MBI, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for 25% or more of the outstanding shares of capital stock of MBI or the
filing of a registration statement under the Securities Act in connection
therewith; or (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing;
(13) MBI will, within 30 days after the date hereof, engage a
firm satisfactory to First South to conduct: (a) a phase one environmental
assessment of the banking facilities currently owned by MBI upon which MBI or
any Subsidiary is conducting a banking business, which assessment shall meet the
standards of ASTM E1527-97 and shall include at a minimum a site history,
on-site inspection, asbestos report, evaluation of surrounding properties and
soil tests in the event any underground storage tanks are discovered; and (b) a
transaction screen that meets the standards of ASTM E 1528 for the properties
that MBI or any Subsidiary leases, and in addition, MBI agrees to conduct a
phase one assessment of the leased properties if, in First South's reasonable
judgment, the transaction screen indicates potential environmental liabilities
associated with the leased properties. Notwithstanding the foregoing, no
assessment or transaction screen need be conducted on any properties where the
activities of MBI and any of its Subsidiaries are limited to operating Automatic
Teller Machines on the premises of a third party. First South has requested such
inspection and testing in an effort to reasonably determine whether potential
liabilities exist relating to Environmental Law. Delivery of the phase one
assessments and transaction screens satisfactory to First South is an express
condition precedent to the consummation of the Merger. Within 15 days after
receipt of these reports, First South shall notify MBI in writing whether or
not, in the reasonable judgment of First South, the results of such reports will
have a Material Adverse Effect on MBI. For purposes of this Paragraph V(A)(13),
the results of the reports shall not be considered to have a Material Adverse
Effect on MBI unless they indicate cleanup expenses, or potential liabilities
under the environment laws, in excess of $500,000 individually or in the
aggregate. In the event that First South determines, in its reasonable judgment,
that the results of such reports will have a Material Adverse Effect on MBI,
such written notification shall include a statement by First South regarding
whether or not it intends to terminate this Agreement based upon the results of
such reports. The Parties agree that First South has given MBI good and valuable
consideration for its agreement to obtain and pay the cost of such inspection
and testing, and First South shall be entitled to rely on same; and
(14) prior to the Effective Date, MBI shall purchase for, and
on behalf of, its current and former officers and directors, extended coverage
under the current directors' and officers' liability insurance policy maintained
by MBI to provide for continued coverage of such insurance for a period of five
(5) years following the Effective Date with respect to matters occurring on or
prior to the Effective Date. In the alternative, First South may provide
evidence, satisfactory to MBI, that provision has been made for coverage of
MBI's current and former officers and directors under directors' and officers'
insurance policies maintained by First South with respect to matters occurring
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in their capacity as an officer or director of MBI on or prior to the Effective
Date which coverage shall be no less favorable, in terms of the scope of
coverage and coverage amount, than MBI's current directors' and officers'
policies.
(B) First South hereby covenants to MBI, that:
(1) First South hereby agrees to provide indemnification
on the following terms in connection with the Merger and the Bank Merger:
(a) First South, subject to the conditions set forth
in Paragraph (B)(1)(b) below, for a period of six (6) years after the
Effective Date, shall indemnify, defend and hold harmless each person
entitled to indemnification from MBI and its Subsidiaries (each, an
"Indemnified Party") against all liabilities arising out of actions or
omissions occurring at or prior to the Effective Date (including the
transactions contemplated by this Agreement) to the fullest extent
permitted under Tennessee law and by MBI's and its Subsidiaries'
charters and/or by-laws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of
any litigation. Without limiting the foregoing, in any case in which
approval by First South is required to effectuate any indemnification,
First South shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by
independent counsel mutually agreed upon between First South and the
Indemnified Party;
(b) Any Indemnified Party wishing to claim
indemnification under Paragraph (B)(1) upon learning of any such
liability or litigation, shall promptly notify First South thereof. In
the event of any such litigation (whether arising before or after the
Effective Date), (a) First South shall have the right to assume the
defense thereof, and First South shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any
other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if First South elects
not to assume such defense or counsel for the Indemnified Parties
advises that there are substantive issues which raise conflicts of
interest between First South and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and First
South shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received;
provided, that First South shall be obligated pursuant to this
Paragraph (B)(1)(b) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction, (b) the Indemnified Parties
will cooperate in the defense of any such litigation, and (c) First
South shall not be liable for any settlement effected without its prior
written consent; and provided further, that First South shall not have
any obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall determine, and such determination shall
have become final, that the indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law;
(2) at or before the Effective Date, First South shall enter
into an employment agreement with Xxxxxxx Xxxxxxx and with Xxxxx Xxxxx in the
form attached to Schedule V(B)(2) of the MBI Disclosure Schedules, and shall
make change in control payments as described in Schedule V(B)(2);
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(3) At and following the Effective Date, First South and First
Bank shall honor, and First South and First Bank shall continue to be obligated
to perform, in accordance with their terms, the employment, severance,
split-dollar and revenue neutral plans, arrangements and policies of the Company
which are listed on Schedule V(B)(3) of the MBI Disclosure Schedule. First South
and First Bank shall cause the administrator of the revenue neutral agreements
listed on Schedule V(B)(3) of the MBI Disclosure Schedule to provide individual
benefit statements, within 90 days of each plan year end, to the individuals
entitled to benefits thereunder; and
(4) As of or after the Effective Date, and at First South's
election and subject to the requirements of the Code and ERISA, any MBI and BOM
compensation and benefit plans (other than the agreements referred to in
Paragraph (V)(B)(3)) may be continued and maintained separately, consolidated or
terminated. MBI and BOM employees who continue employment with First South or
First Bank following the Effective Date ("Continuing Employees") shall
participate in all First South and First Bank Employee Plans as of the first
entry date coincident with or following the Effective Date, with recognition of
prior service with MBI or BOM for purposes of eligibility to participate and
vesting, but not benefits accrual;
VI. CONDITIONS TO CONSUMMATION
(A) The respective obligations of First South and First Bank and
of MBI and BOM to effect the Merger and the Bank Merger shall be subject to the
satisfaction prior to the Effective Date of the following conditions:
(1) the Plan and the transactions contemplated hereby shall
have been approved by the requisite vote of the shareholders of MBI in
accordance with applicable law, and MBI shall have furnished to First South
certified copies of resolutions duly adopted by MBI's shareholders evidencing
the same;
(2) the procurement of approval of the Plan and the
transactions contemplated hereby by the Board of Governors, the Tennessee
Department, the FDIC and any other applicable Regulatory Authorities; provided,
however, that no approval or consent in this Paragraph (A)(2) of this Article VI
shall be deemed to have been received if it shall include any conditions or
requirements (other than conditions or requirements that First South increase
its regulatory capital levels (in terms of amount(s) and/or ratio(s)) prior to
consummating the Merger or the Bank Merger, or such other conditions or
requirements which are customarily included in such an approval or consent)
which would have such a material adverse impact on the economic or business
benefits of the transactions contemplated hereby as to render inadvisable the
consummation of the Merger or the Bank Merger in the opinion of the Board of
Directors of First South;
(3) the satisfaction of all other statutory or regulatory
requirements which are necessary to the consummation of the transactions
contemplated by the Plan;
(4) no party hereto shall be subject to any order, decree or
injunction or any other action of a United States federal or state court of
competent jurisdiction permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement; and
-18-
(5) no party hereto shall be subject to any order, decree or
injunction or any other action of a United States federal or state governmental,
regulatory or administrative agency or commission permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement.
(B) The obligation of First South and First Bank to effect the
Merger and the Bank Merger shall be subject to the satisfaction prior to the
Effective Date of the following additional conditions:
(1) Each of the obligations and covenants of MBI and BOM
required by this Agreement to be performed at or prior to the Closing Date shall
have been duly performed and complied with in all material respects;
(2) Each of the representations and warranties of MBI and BOM
contained herein shall be true and correct in all material respects as of the
Effective Date (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date), provided that this
Paragraph (B)(2) shall be deemed satisfied unless the failure of such
representation or warranty to be so true and correct constitute, individually or
in the aggregate, a Material Adverse Effect on MBI or BOM or First South or
First Bank;
(3) First South shall have received a certificate signed by
the Chief Executive Officer of MBI, dated the Effective Date, as to compliance
with Paragraphs (B)(1) and (2);
(4) on the Effective Date, MBI and BOM will have Compliance
Ratings and Community Reinvestment Act Ratings of at least "Satisfactory";
(5) on the Effective Date, MBI and BOM will have a loan loss
reserve of at least 0.90% of loans and which will be adequate in all material
respects under generally accepted accounting principles applicable to banks;
(6) MBI shall have delivered to First South the environmental
reports referenced in Paragraph (A)(13) of Article V;
(7) there shall have been no adverse change in the overall
composite CAMELS Rating of MBI or its Subsidiaries occurring between the date
hereof and the Effective Date;
(8) each of the officers and directors of MBI shall have
delivered a letter to First South to the effect that such person is not aware of
any claims he might have against MBI, except as disclosed therein, other than
routine compensation, benefits and the like as an employee, or ordinary rights
as a customer; and
(9) Xxxxxxx X. Xxxxxxx shall have executed the employment
agreement referenced in Paragraph V(B)(2) (except in the event of his death or
incapacity).
(C) The obligation of MBI and BOM to effect the Merger and the
Bank Merger shall be subject to the satisfaction prior to the Effective Date of
the following additional conditions:
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(1) Each of the obligations and covenants of First South and
First Bank required by this Agreement to be performed at or prior to the Closing
Date shall have been duly performed and complied with in all material respects;
(2) Each of the representations and warranties of First South
and First Bank contained herein shall be true and correct in all material
respects as of the Effective Date (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date),
provided that this Paragraph (C)(2) shall be deemed satisfied unless the failure
of such representation or warranty to be so true and correct constitute,
individually or in the aggregate, a Material Adverse Effect on MBI or BOM or
First South or First Bank;
(3) MBI shall have received from The BankersBanc Capital
Corporation a letter to the effect that, in the opinion of such firm, the
Purchase Price is fair, from a financial point of view, to the holders of MBI
Common Stock; and
(4) First South shall have deposited funds in an escrow
account sufficient to pay the Purchase Price pursuant to the terms of the Escrow
Agreement.
VII. TERMINATION
(A) The Plan may be terminated prior to the Effective Date, either
before or after its approval by the stockholders of MBI:
(1) by the mutual consent of First South and MBI, if the Board
of Directors of each so determines by vote of a majority of the members of its
entire Board;
(2) by First South or MBI upon a material breach of any
representation, covenant or warranty set forth in Plan on the part of the other
party such that the condition to Closing in Article VI would not be satisfied,
which breach by its nature cannot be cured prior to the Effective Date or shall
not have been cured within 30 days after written notice by First South to MBI
(or by MBI to First South) of such breach;
(3) by First South in accordance with the terms of Paragraph
V(A)(13);
(4) by First South or MBI if MBI has received a Superior
Proposal and, in accordance with Paragraph V(A)(12) of this Agreement, MBI has
entered into an acquisition agreement with respect to the Superior Proposal or
withdraws its recommendation in support of this Agreement, fails to make such
recommendation or modifies or qualifies its recommendation in a manner adverse
to the consummation of the Merger or the Bank Merger; or
(5) by First South or MBI if its Board of Directors so
determines by vote of a majority of the members in the event that the Merger is
not consummated by September 30, 2003, unless the failure to so consummate by
such time is due to the breach of the Plan by the party seeking to terminate,
provided that First South may not rely on this termination provision if the
delay beyond September 30, 2003 is primarily caused by its inability to meet a
regulatory condition relating to regulatory capital ratios or amounts necessary
to consummate the Merger of the Bank Merger; and
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(6) by either First South or MBI if the stockholders of MBI
shall have voted at the MBI stockholders meeting on the transactions
contemplated by this Agreement and such vote shall not have been sufficient to
approve such transactions;
(7) by either First South or MBI if (i) final action has been
taken by a Regulatory Authority whose approval is required in connection with
this Agreement and the transactions contemplated hereby, which final action (x)
has become unappealable and (y) does not approve this Agreement or the
transactions contemplated hereby, (ii) any Regulatory Authority whose approval
or nonobjection is required in connection with this Agreement and the
transactions contemplated hereby has stated in writing that it will not issue
the required approval or nonobjection, or (iii) any court of competent
jurisdiction or other governmental authority shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable;
(B)(1) Except as otherwise provided in this Paragraph (B), if this
Agreement is terminated pursuant to Paragraph VII(A) hereof, this Agreement
shall forthwith become void (other than this Paragraph (B) and Paragraphs (E)
and (F) of Article IX, which shall remain in full force and effect), and there
shall be no further liability on the part of MBI, BOM, First South or First Bank
to the other, except that no party shall be relieved or released from any
liabilities or damages arising out of its willful or fraudulent breach of any
provision of this Agreement.
(2) In the event that this Agreement is terminated by (i) First South
or MBI in accordance with the terms of Paragraph (A)(4) of Article VII, then MBI
shall pay First South a cash amount, within two business days of termination,
of $2,500,000, or (ii) by MBI in accordance with the terms of Paragraph (A)(5)
due to First South's inability to meet a regulatory condition relating to
regulatory capital ratios or amounts necessary to consummate the Merger of the
Bank Merger, then First South shall pay MBI a cash amount, within two business
days of termination, of $2,500,000. The $2,500,000 cash payment required in
either (i) or (ii) is referred to as the Termination Fee. Upon payment of the
Termination Fee, then neither party will have any other rights or claims against
the other, its subsidiaries, or its officers and directors, under this
Agreement, it being agreed that the payment of the Termination Fee under this
Paragraph (B)(2) will constitute the sole and exclusive remedy of the party
receiving the fee, its subsidiaries and its respective officers and directors.
VIII. EFFECTIVE DATE
The "Effective Date" shall be the date on which the Merger becomes
effective as specified in the Certificate of Merger to be filed with the
Secretary of State of Tennessee and the Secretary of State of Tennessee
approving the Merger. The Effective Date shall be no later than five (5)
business days after the last condition precedent pursuant to this Agreement has
been fulfilled or waived (including the expiration of any applicable waiting
period), or such other date as to which the parties shall mutually agree;
provided that, at First South's election, the Effective Date may occur within
the first ten (10) days of the month following the month in which the last
condition precedent is fulfilled or waived.
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IX. OTHER MATTERS
(A) All representations, warranties and, except to the extent
specifically provided otherwise herein, agreements and covenants, other than
those covenants set forth in Paragraph (A)(4) of Article V, Paragraph (B) of
Article VII and Paragraphs (E) and (F) of this Article, which will survive the
Merger, shall terminate on the Closing Date.
(B) Prior to the Effective Date, any provision of the Plan may be: (1)
waived by the party benefited by the provision or by both parties; or (2)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto approved by their respective
Boards of Directors (to the extent allowed by law) or by their respective Boards
of Directors.
(C) This Plan may be executed in multiple and/or facsimile originals,
and each copy of the Plan bearing the manually executed, facsimile transmitted
or photocopied signature of each of the parties hereto shall be deemed to be an
original.
(D) The Plan shall be governed by, and interpreted in accordance with,
the laws of the State of Tennessee.
(E) Except as provided in Paragraph (B) of Article VII, each party
hereto will bear all expenses incurred by it in connection with the Plan and the
transactions contemplated hereby, including, but not limited to, the fees and
expenses of its respective counsel and accountants.
(F) Each of the parties and its respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed unless it is advised
by counsel that any such information is required by law to be disclosed.
(G) All notices, requests, acknowledgments and other communications
hereunder to a party shall be in writing and shall be deemed to have been duly
given when delivered by hand, telecopy, by overnight courier or sent by
registered or certified mail, postage paid, to such party at its address set
forth below or such other address as such party may specify by notice to the
other party hereto.
If to First South or First Bank: Xx. Xxxxxxx Xxxxxxxxxxxx
President and Chief Executive Officer
First South Bancorp, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
with a copy to: Ms. Xxxx Xxxx Xxxxx, Esq.
Xxxxxx & Xxxxxx, LLP
1200 One Nashville Place
000 0xx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
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If to MBI or BOM: Xx. Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
000 Xxxxxxxx Xxxx.
Xxxxxxxxxxxx, Xxxxxxxxx 00000
With a copy to: Xxxx X. Xxxxxx, Esq.
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C.
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
(H) All terms and provisions of the Plan shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, provided, however, except as expressly provided for in Paragraphs
V(B)(1) and (5), IX(E) and IX(F), that nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors, any rights, remedies, obligations or liabilities.
(I) The Plan represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made.
(J) This Plan may not be assigned by any party hereto without the
written consent of the other parties.
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In Witness Whereof, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers as of the day and
year first above written.
FIRST SOUTH BANCORP, INC.
Attest: /s/ Xxxx Xxxx Xxxxx By: /s/ Xxxxxxx Xxxxxxxxxxxx
------------------------- -------------------------
Title: Legal Counsel Title: President and Chief
------------------------- Executive Officer
----------------------
FIRST BANK
Attest: /s/ Xxxx Xxxx Xxxxx By: /s/ Xxxxxxx Xxxxxxxxxxxx
------------------------- -------------------------
Title: Legal Counsel Title: President and Chief
------------------------- Executive Officer
----------------------
MURFREESBORO BANCORP, INC.
Attest: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxxx
------------------------- -------------------------
Title: Senior Vice President and Title: President and Chief
Chief Financial Officer Executive Officer
------------------------- ----------------------
BANK OF MURFREESBORO
Attest: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxxx
------------------------- -------------------------
Title: Senior Vice President and Title: President and Chief
Chief Financial Officer Executive Officer
------------------------- ----------------------
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