Exhibit 99.2
LETTER OF INTENT
By And Between
The South Financial Group, Inc. And RHBT Financial Corporation
This Letter of Intent relates to a proposed transaction between RHBT
Financial Corporation ("RFC") and The South Financial Group, Inc. ("TSFG").
Except as otherwise expressly set forth herein, this Letter of Intent is not
binding on either party hereto.
A. NON-BINDING PROPOSAL
1. Purchase and Assumption Transaction. The transaction contemplated
herein (the "Transaction") shall be structured as a purchase and assumption
transaction between Carolina First Bank (a wholly owned banking subsidiary of
TSFG, referred to herein as "CFB") and Rock Hill Bank & Trust (a wholly owned
banking subsidiary of RFC, referred to herein as "RHBT"). In the Transaction,
RHBT would transfer substantially all of its assets and certain specified
liabilities (primarily deposit liabilities). In particular, excluded liabilities
that will not be transferred would include tax liabilities and contingent
liabilities unless otherwise specified (e.g. loan commitments), including any
third-party claims or other liabilities associated with conduct of the business
prior to closing or actual or alleged breaches of fiduciary duty or law. These
acquired assets and liabilities would be operated by CFB as part of its banking
operations upon consummation of the Transaction.
2. Consideration. In connection with the Transaction, TSFG would issue
to RHBT an aggregate of 430,017 shares of its common stock which, if valued at
$20.01 (the closing price of TSFG stock on August 21, 2002), would represent
value equivalent to $5.00 per RFC share (based on 1,720,928 shares of RFC common
stock outstanding). In addition, TSFG would agree to earnout provisions
requiring that it issue, at specified times following the closing, to RHBT (or
its assignees) shares of TSFG common stock equal to the following amounts:
A. An amount equal to 30% of the Loss Recovery.
B. An amount equal 50% of the net amounts collected by RHBT
(or CFB as successor) under RHBT's blanket bond or other insurance policies as
they relate to the Designated Loans. Out of pocket expenses paid to third
parties (such as attorneys) would be netted against any bond or insurance
proceeds prior to making payments to RHBT.
"Loss Recovery" shall be equal to the excess of (A) the aggregate book
value of the Designated Loans at December 31, 2005, minus the aggregate of any
loan reserves generally or specifically allocated to one or more of the
Designated Loans at December 31, 2005 plus the aggregate principal collections
with respect to the Designated Loans during the period from August 31, 2002
through December 31, 2005, over (B) the aggregate book value of the Designated
Loans at August 31, 2002, minus the aggregate of any loan reserves generally or
specifically allocated to one or more of the Designated Loans at August 31,
2002.
"Designated Loans" shall mean those loans classified by the FDIC as
substandard, doubtful, or loss during the period of time from July 1, 2002
through the date hereof and any related credits, as shall be agreed upon by the
parties.
Amounts payable under Clauses (A) and (B) above are referred to as
"Earnout Amounts." Earnout Amounts will become payable within 60 days following
December 31, 2005 in the case of Clause (A) and 10 business days following the
end of any calendar quarter in which Earnout Amounts under Clause (B) are
received. For purposes of paying Earnout Amounts, shares of TSFG common stock
will be valued based on the average of the last five trading days in the
calendar quarter immediately preceding payment. In the event that amounts become
payable under Clause (B) with respect to a Designated Loan, appropriate steps
shall be taken to cause such Designated Loan to be removed from the calculations
associated with Clause (A).
In this structure, TSFG, as a shareholder of RFC, would be treated as
any other shareholder (and, accordingly, would be entitled to its pro rata share
of any distributions made to RFC shareholders).
The issuance of the shares of TSFG common stock in connection with the
Transaction shall be registered with the Securities and Exchange Commission and
with any necessary state securities commissions.
Outstanding options to purchase RFC common stock would not be affected
by the Transaction.
3. Tax-Free Reorganization. The Transaction shall be structured as a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended (except the parties acknowledge that individuals will be taxed to the
extent that they receive cash), and the parties shall agree to take all
reasonable efforts to effect the Transaction as a tax-free reorganization.
4. Definitive Agreement. The parties contemplate entering into a
definitive purchase and assumption agreement to document the Transaction, which
shall provide for the following:
(a) The definitive agreement shall contain the standard representations
and warranties typical of transactions of this type.
(b) The definitive agreement shall contain the standard covenants of
the parties typical of transactions of this type, including:
(i) a covenant by CFB to pay up to $100,000 to cause the
existing Travelers directors and officers liability insurance to remain
in full force and effect for such period of time following closing as
shall be available (not to exceed 5 years).
(c) The definitive agreement shall contain standard conditions to
closing typical of transactions of this type, including:
(i) that the approval of all necessary regulatory agencies be
obtained without the imposition of any conditions that, in the reasonable
judgment of TSFG, render the consummation of the Transaction unduly burdensome;
(ii) that the books and records of TSFG, RFC and RHBT
accurately reflecting, in all material respects, their respective financial
conditions;
(iii) that RFC shall have received a fairness opinion
reasonably satisfactory to RFC and CFB which is rendered by a reputable
investment banking firm regarding the Transaction;
(iv) that any necessary shareholder and board approvals be
obtained;
(v) that the RFC directors and executive officers execute
waivers and releases with respect to any requirement under RFC's or RHBT's
charter documents or otherwise that CFB or TSFG succeed to any indemnification
or hold-harmless obligations of RFC or RHBT (except for the provisions regarding
D&O liability insurance specifically set forth above);
(vi) that the business of RHBT and RFC be conducted in the
usual and customary manner;
(vii) that no material adverse change with respect to RHBT's
business occur from the date hereof through the closing date of the Transaction.
Except as otherwise expressly set forth below under "B. Binding
Covenants," the parties acknowledge that they shall have no obligations to
pursue or complete, or otherwise with respect to, a transaction except as may be
set forth in such definitive documentation as they may enter into.
5. Due Diligence Investigation. Each party shall have the right at its
expense to make reasonable inspections of the other party's business and
generally exercise due diligence with respect thereto.
6. RFC Directors. The directors of RFC shall agree to serve as advisory
board members of CFB for York County for at least two years following
consummation of the Transaction, and shall receive advisory board fees in
accordance with TSFG's policy.
7. Termination Fee. The definitive agreement would provide that in the
event that it is terminated by RFC without the Transaction being consummated
(other than as a result of a breach by TSFG), and RFC enters into a definitive
agreement providing for a "change of control transaction" with any party other
than TSFG on or before June 30, 2003, RFC shall, subject to receipt of any
necessary regulatory approvals, pay to TSFG a termination fee of $500,000.
B. BINDING COVENANTS
1. Confidentiality. (a) For purposes of this Letter of Intent, the term
"Confidential Information" shall mean all information acquired by a party from
the other party with respect to the business of the other party other than
information in the public domain (through no fault of such acquiring party) and
information already known to such acquiring party prior to the date hereof or
which hereafter becomes known to such party from another source, provided that
such source is not known by the acquiring party after due inquiry to be bound by
a confidentiality agreement or other obligation of secrecy with respect to such
information.
(b) All Confidential Information, as defined above, acquired by either
party with respect to the business of the other party shall (unless the other
party expressly consents in writing) (i) be maintained in strict confidence,
(ii) be used only for the purpose of and in connection with consummating the
Transaction, (iii) be disclosed only to employees and duly authorized agents and
representatives of the parties who have been informed of the obligations of the
parties under this paragraph and who have a need to know the information in
connection with consummating the Transaction (and each party agrees to be
responsible for any breach of this provision by any of the foregoing persons).
(c) In the event that any party or persons to whom they have disclosed
Confidential Information are requested in any proceeding or are required by
applicable law to disclose any Confidential Information, such party shall give
the other party prompt notice of such request or requirement so that the other
party may seek an appropriate protective order or other appropriate remedy. If,
in the absence of a protective order or other appropriate remedy, the party or
person is nonetheless compelled by law to disclose Confidential Information,
such party or person may disclose such information (but only to the extent so
required) without liability hereunder; provided, however, that such party must
give the other party written notice of the information to be disclosed as far in
advance of its disclosure as is reasonably practicable.
(d) In addition, except as required by law, without the prior written
consent of the other party, no party or person to whom Confidential Information
has been disclosed shall disclose to any other person that Confidential
Information has been made available or that discussions or negotiations are
taking place concerning the Transaction.
(e) Within a reasonable period of time following the termination of
this Letter of Intent (assuming that the Transaction is not consummated), each
party shall redeliver to the other party all written Confidential Information
and any other written material containing or reflecting any information in the
Confidential Information (regardless of who prepared such information) and will
not retain any copies, extracts or other reproductions in whole or in part of
such written material. All documents, memoranda, notes and other writings
whatsoever prepared by either party (or persons to whom they disclosed
Confidential Information) based on or including any of the information in the
Confidential Information shall be destroyed, and, if so requested, such
destruction shall be certified in writing to the other party by an authorized
officer supervising such destruction. For this purpose, a "writing" includes
data in computer format.
2. Public Disclosure. Without limiting the substance of subparagraph
(d) of the Confidentiality section above, this Letter of Intent and the
information herein shall be deemed "Confidential Information" and the parties
shall coordinate any public disclosure regarding the Transaction or this Letter
of Intent.
3. Fees and Expenses. The parties shall pay their own fees and expenses
(including legal and accounting fees) incurred in connection with this
Transaction.
4. Termination. This Letter of Intent shall terminate upon notice of
either party to the other party, except that the Binding Covenants set forth
herein shall survive such termination. Subject to the foregoing sentence, this
Letter of Intent shall terminate on September 30, 2002, regardless of whether
notice of termination is given.
END OF PAGE -- NEXT PAGE IS SIGNATURE PAGE
IN WITNESS WHEREOF the parties have executed this Letter of Intent as
of this 22nd day of August, 2002.
RHBT FINANCIAL CORPORATION THE SOUTH FINANCIAL GROUP, INC.
By: /s/ Xxxxxx X. Hunneycutt By: /s/ Xxxx X. Xxxxxxx, Xx.
Xxxxxx X. Hunneycutt Xxxx X. Xxxxxxx, Xx.
Chief Executive Officer Chief Executive Officer
