Exhibit 2
AGREEMENT AND PLAN OF REORGANIZATION AND SHARE EXCHANGE
by and between
MOUNTAINBANK
and
MOUNTAINBANK FINANCIAL CORPORATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND SHARE EXCHANGE
(hereinafter called "Agreement") is entered into as of the 11th day of January,
2001, by and between MOUNTAINBANK (the "Bank") and MOUNTAINBANK FINANCIAL
CORPORATION (the "Corporation").
WHEREAS, the Bank is a North Carolina banking corporation with its
principal office and place of business located in Hendersonville, North
Carolina, and which is authorized by its Articles of Incorporation to issue
5,000,000 shares of common stock, each of $5.00 par value ("Bank Stock"), of
which there are 1,497,615 shares issued and outstanding; and, the Bank currently
proposes to amend its Articles of Incorporation with the effect that its
outstanding common stock will be split on a five-for-four basis, the par value
of its common stock will be reduced to $4.00 per share, and its total authorized
common stock will be increased to 10,000,000 shares (the "Stock Split"); and,
WHEREAS, the Corporation is a North Carolina business corporation with
its principal office and place of business located in Hendersonville, North
Carolina, which is authorized by its Articles of Incorporation to issue
10,000,000 shares of common stock, each of $4.00 par value ("Corporation
Stock"), (of which there are 100 shares issued and outstanding), and which has
been organized by the Bank at the direction of its Board of Directors for the
purpose of acquiring all of the outstanding shares of the Bank's common stock
and thereby becoming the Bank's parent bank holding company; and,
WHEREAS, it is proposed that the Corporation become the Bank's parent
bank holding company through a statutory share exchange in which, subject to
approval by the Bank's shareholders and required regulatory approvals, the
outstanding shares of the Bank's common stock would be converted into and
exchanged for newly issued shares of common stock of the Corporation and the
Bank would become the wholly-owned subsidiary of the Corporation; and,
WHEREAS, such share exchange is proposed to be effected as provided in
and in accordance with the terms of this Agreement, including the plan of share
exchange contained in Article I below (the "Plan of Share Exchange"), and,
WHEREAS, the Board of Directors of the Bank has approved this
Agreement and will recommend to the Bank's shareholders approval of the Plan of
Share Exchange and transactions described herein, including, among other things,
an exchange of the outstanding shares of Bank Stock for newly issued shares of
Corporation Stock, all in the manner and upon the terms and conditions
hereinafter set forth; and,
WHEREAS, the Board of Directors of the Corporation has approved this
Agreement, the Plan of Share Exchange contained herein, and the transactions
described therein, including the issuance of shares of Corporation Stock to the
Bank's shareholders in exchange for their outstanding shares of Bank Stock, all
as hereinafter set forth.
NOW, THEREFORE, the Bank and the Corporation, for and in consideration
of the
premises and their mutual promises, and subject to the terms and conditions
hereinafter contained, hereby adopt and make this Agreement and mutually agree
as follows:
ARTICLE I. PLAN OF SHARE EXCHANGE
1.1 Corporations Participating in Share Exchange. The names of the
corporations participating in the share exchange (the "Share Exchange")
contemplated by this Plan of Share Exchange (the "Plan") are MOUNTAINBANK (the
"Bank") and MOUNTAINBANK FINANCIAL CORPORATION (the "Corporation"). The
Corporation will be the acquiring corporation in the Share Exchange and will
acquire all of the outstanding shares of the Bank pursuant to the terms and
conditions of this Plan.
1.2 Nature and Effect of Share Exchange.
(a) At the "Effective Time" (as defined in Paragraph 1.6 below), and
pursuant to and with the effect provided for under N.C. Gen. Stat. (S)(S) 55-11-
03 and 55-11-06, each then outstanding share of the Bank's common stock ("Bank
Stock"), including new shares resulting from the Stock Split, will be exchanged
for one (1) newly issued share of common stock of the Corporation ("Corporation
Stock") as more particularly described in Paragraph 1.3 below.
(b) The shares of Corporation Stock which are outstanding immediately
prior to the Effective Time will not be exchanged or altered in any manner as a
result of the Share Exchange, but, following the Effective Time, such
outstanding shares shall be repurchased by the Corporation from the current
holder thereof as described in Paragraph 1.5 below.
(c) As a result, and following consummation, of the Share Exchange,
the Bank shall be and operate as the wholly-owned banking subsidiary of the
Corporation and will continue to conduct the business of a North Carolina
banking corporation under the name "MountainBank" at the main office and then
legally established branch offices of the Bank.
1.3 Conversion and Exchange of Stock.
a. Conversion of Bank Stock. At the Effective Time, all rights of
the shareholders of the Bank with respect to the outstanding shares of Bank
Stock shall cease to exist, and, as consideration for and to effectuate the
Share Exchange, each such outstanding share of Bank Stock, including new shares
resulting from the Stock Split, shall be converted, without any action on the
part of the Bank, the Corporation, or the holder thereof, into one (1) share of
Corporation Stock.
Certificates representing shares of Bank Stock outstanding at the
Effective Time (herein sometimes referred to as "Old Certificates") shall
thereafter evidence only the right of the registered holder thereof to receive,
and following the Effective Time may be exchanged for, either (i) certificates
for the number of whole shares of Corporation Stock to which such holders shall
have become entitled on the basis set forth above, plus cash for any fractional
share interests as provided herein, or (ii) in the case of shareholders
perfecting dissenters' rights, cash as provided in Article 13 of Chapter 55 of
the North Carolina General Statutes.
b. Issuance of Shares by the Corporation and the Bank. At the
Effective Time, the Corporation shall issue and deliver to the transfer agent of
Corporation Stock (the "Transfer Agent"), one certificate representing the
aggregate number of whole shares of Corporation Stock into which the outstanding
shares of Bank Stock have been converted and exchanged as provided above; and
the Bank shall issue and deliver to the Corporation one certificate representing
the number of shares of Bank Stock as were outstanding immediately prior to the
Effective Time and which, at such time, were converted into and exchanged for
shares of Corporation Stock.
The Transfer Agent shall divide the certificate delivered to it by the
Corporation
into certificates evidencing such numbers of shares of Corporation Stock as the
respective shareholders of the Bank shall have become entitled, and the Transfer
Agent shall register such shares in the names of such shareholders and deliver
said certificates to the individual shareholders entitled thereto upon and in
exchange for the delivery to the Transfer Agent by said individual shareholders
of their Old Certificates.
c. Antidilutive Adjustments. If, prior to the Effective Time, the
Corporation or the Bank shall declare any dividend payable in shares of its
respective common stock or shall subdivide, split, reclassify or combine the
presently outstanding shares of its common stock (other than as a result of the
Bank's Stock Split), then an appropriate and proportionate adjustment shall be
made in the number of shares of Corporation Stock to be issued in exchange for
each of the shares of Bank Stock.
d. Treatment of Fractional Shares. No scrip or certificates
representing fractional shares of Corporation Stock will be issued and no right
to vote or to receive any dividend or other distribution shall attach to any
fraction of a share of Corporation Stock resulting from the Share Exchange. In
the event the Share Exchange results in the creation of fractional shares, the
Transfer Agent shall sell the aggregate of such fractional shares at public
auction or by private sale (including a sale to the Corporation), or through a
dealer or by any other reasonable method, at its election, for the best
available price, and remit the net proceeds of such sale(s) to the Bank's
shareholders in accordance with their respective interests therein.
e. Surrender of Certificates. Subject to subparagraph 1.3.g. below,
no certificate for any shares of Corporation Stock or cash for any fractional
share shall be delivered to any shareholder of the Bank unless and until such
shareholder shall have surrendered to the Transfer Agent the Old Certificate(s)
formerly representing his or her shares of Bank Stock. Further, until such Old
Certificate(s) are so surrendered, no dividend or other distribution payable to
holders of record of Corporation Stock as of any date subsequent to the
Effective Time shall be delivered to the holder of such Old Certificate(s);
provided, that, upon surrender of such Old Certificate(s), the holder hereof
shall be entitled to receive the amount of any such dividends or distributions
which have accrued but remain unpaid with respect to the shares of Corporation
Stock represented by such certificate(s).
f. Dissenters. Any shareholder of the Bank perfecting dissenters'
rights with respect to the Share Exchange in the manner required by Article 13
of Chapter 55 of the North Carolina General Statutes shall be entitled to
receive payment of the fair value of his shares of Bank Stock in the manner and
pursuant to the procedures provided therein. Any shares of Corporation Stock
authorized to be issued pursuant to this Plan but not exchanged for shares of
Bank Stock because of the dissent or objection of a shareholder of the Bank and
the receipt by him of cash in lieu of shares, may be sold by the Transfer Agent
at public auction or by private sale (including a sale to the Corporation), or
through a dealer or by any other reasonable method, at its election, for the
best available price, and the net proceeds of any such sale shall be retained by
the Corporation.
g. Lost Certificates. Shareholders of the Bank whose Old
Certificates have been lost, destroyed, stolen, or are otherwise missing shall
be entitled to receive certificates representing the shares of Corporation Stock
to which they are entitled in accordance with and upon compliance with
conditions imposed by the Transfer Agent or the Corporation pursuant to North
Carolina law, including the requirement that such shareholders provide a
indemnification agreement and bond.
h. Stock Options. At the Effective Time, each then current
outstanding option to purchase shares of Bank Stock granted pursuant to the
Bank's 1997 Employee Stock Option Plan and 1997 Director Stock Option Plan, as
amended during 2000 (the "Stock Options"), shall be converted, without any
action on the part of the Bank, the Corporation, or the holder thereof, into an
option purchase one (1) share of Corporation Stock on the same terms and
conditions as then are in effect with respect to those outstanding Stock Options
under the written agreements pertaining thereto and the written plans under
which such options were issued.
1.4. Articles, Bylaws, and Management. The Articles of Incorporation and
Bylaws of the Bank in effect at the Effective Time shall be the Articles of
Incorporation and Bylaws of the Bank as the wholly-owned subsidiary of the
Corporation, and the officers and directors of the Bank in office at the
Effective Time shall continue to hold such offices until removed as provided by
law or until the election
or appointment of their respective successors.
1.5. Repurchase of Currently Outstanding Corporation Stock. At the
Effective Time, the currently outstanding shares of Corporation Stock shall be
repurchased by the Corporation at a price equal to the price originally paid
therefor and such shares shall be cancelled.
1.6. Effective Time. The Share Exchange shall become effective on the date
and at the time (the "Effective Time") so specified in Articles of Share
Exchange which shall include the Plan contained herein and which shall be duly
executed by the Corporation as the acquiring entity and shall be presented to
and filed by the North Carolina Secretary of State in accordance with North
Carolina law.
ARTICLE II. ADDITIONAL AGREEMENTS
2.1. "Blue Sky" Approvals. As soon as practicable following the execution
of this Agreement, the Corporation shall take all such actions under applicable
state securities laws as reasonably shall be necessary to cause the Corporation
Stock to be issued upon consummation of the Share Exchange, at the time of the
issuance thereof, to be duly qualified or registered (unless exempt), to cause
all conditions to any exemptions from qualification or registration under
applicable state securities laws to have been satisfied, and to obtain any and
all required approvals or consents to the issuance thereof.
2.2. Approval of Shareholders. This Agreement and the Plan shall be
submitted for approval, ratification, and confirmation to the shareholders of
the Bank at a special meeting of shareholders to be duly called and held in
accordance with the Bank's Bylaws and all applicable provisions of law following
the date hereof. The Bank will prepare and mail to its shareholders as soon as
practicable and in accordance with law a proxy statement (the "Proxy Statement")
for purposes of the solicitation of appointments of proxy for use at the
meeting. The Proxy Statement will indicate that the Board of Directors of the
Bank considers the Share Exchange to be advisable and to the advantage of the
Bank and its shareholders and, accordingly, that it recommends ratification and
approval of this Agreement and the transactions contemplated hereby.
2.3. Regulatory Approvals. Promptly following the date of this Agreement,
the Bank and the Corporation each shall prepare, submit, and file, or cause to
be prepared, submitted, and filed, all applications for regulatory approvals and
actions as may be required of them, respectively, by applicable law and
regulations with respect to or in connection with the Share Exchange. Each such
party shall cooperate with the other in the preparation of all of the foregoing
applications and shall promptly furnish upon request all documents, information,
financial statements, or other material that may be required to complete such
applications. Should the appearance of any of the officers, directors,
employees, or counsel of any of the parties hereto be requested by any other
party or by any governmental agency at any hearing in connection with any such
application, such party shall promptly use its best efforts to arrange for such
appearance .
2.5. Adoption of Stock Option Plans. Subject to consummation of the Share
Exchange, the Corporation hereby adopts, effective as of the Effective Time, the
Bank's 1997 Employee Stock Option Plan and 1997 Director Stock Option Plan, as
amended during 2000 (the "Plans"), as its own and agrees that the options of the
Corporation into which the Bank's outstanding Stock Options are converted
pursuant to Paragraph 1.3(h) above shall be treated as stock options granted
pursuant to the terms of such Plans.
2.6. Closing. A closing and consummation of the Share Exchange (the
"Closing") shall be held on such date (the "Closing Date") and at such
reasonable time following the satisfaction of all conditions to the Share
Exchange and at such location as shall be specified by the Corporation, but in
no event later than thirty (30) business days after all conditions of the Share
Exchange have been satisfied or effectively waived.
2.7. Further Action. The Bank and the Corporation each represents and
warrants to and covenants with each other such party that it or they will use
its best efforts in good faith to take or cause
to be taken all action required of it hereunder as promptly as practicable so as
to permit the consummation of the Share Exchange at the earliest possible date,
and shall cooperate fully with the other such party in delivering all documents
or instruments reasonably necessary or useful to any party hereto in carrying
out such transactions.
2.8. "Affiliates" of the Bank. The Bank shall, if requested by the
Corporation following the execution and delivery of this Agreement, promptly
deliver to the Corporation a list of persons deemed by it and its counsel to be
"affiliates" of the Bank as that term is defined in Rule 405 promulgated under
the Securities Act of 1933 (which such list shall be subject to the review and
concurrence of the Corporation and its counsel), and, thereafter, the Bank
agrees that, if requested by the Corporation, each such affiliate (as well as
such additional persons as shall be deemed by the Corporation or its counsel to
be affiliates of the Bank, including certain persons, trusts, estates,
corporations, or other entitles related to persons deemed to be affiliates of
the Bank) shall execute and deliver to the Corporation a written agreement
("Affiliates' Agreement") in form and content satisfactory to the Corporation
relating to restrictions on shares of Corporation Stock to be received by such
affiliates pursuant to this Agreement. In such event, certificates for the
shares of Corporation Stock issued to affiliates of the Bank shall bear a
restrictive legend (substantially in the form as shall be set forth in the
Affiliates' Agreement) with respect to the restricted nature of such shares.
ARTICLE III. CONDITIONS PRECEDENT TO SHARE EXCHANGE
The obligations of the parties to this Agreement to consummate the Share
Exchange shall be conditioned upon the satisfaction of the following conditions
precedent on or prior to the Closing Date.
3.1. Material Adverse Change. There shall not have occurred any material
adverse change in the financial condition, business, properties, assets, or
operation of the Bank or the Corporation, nor shall any event have occurred,
which, with the lapse of time or otherwise, may or could cause, create or result
in any such material adverse change.
3.2. Adverse Proceedings, Injunction, Etc. There shall not be any order,
decree, or injunction of any court or agency of competent jurisdiction which
enjoins or prohibits consummation of the Share Exchange or any of the parties
hereto from consummating such transaction, nor any pending or threatened
investigation of such transactions by the United States Department of Justice,
or any suit, action, or proceeding instituted by any governmental,
administrative, or regulatory agency, pending or threatened before any court or
governmental agency, seeking to restrain or prohibit the Bank or the Corporation
from carrying out any of the terms or provisions of this Agreement.
3.3. Approval by Governmental or Regulatory Authorities; No Disadvantageous
Conditions. (i) The Share Exchange shall have been approved, to the extent
required by law, by all governmental or regulatory agencies or authorities
having jurisdiction over such transaction; (ii) no governmental or regulatory
agency or authority shall have withdrawn its approval of such transaction or
imposed any condition on such transaction or conditioned its approval thereof,
which condition is reasonably deemed by the Corporation or the Bank to be
disadvantageous or burdensome; (iii) all required waiting periods required
following necessary approvals by governmental or regulatory agencies or
authorities for review of such transaction by the United States Department of
Justice shall have expired; and (iv) all other consents, approvals, and
permissions and the satisfaction of all of the requirements prescribed by law
necessary to the carrying out of such transaction shall have been procured
(including without limitation any required approval of the Commissioner of Banks
or the FDIC for the payment of cash to shareholders of the Bank, if any, who
perfect dissenters' rights as provided in Article 13, Chapter 55 of the North
Carolina General Statutes).
3.4. Approval by Boards of Directors and Shareholders. The Boards of
Directors of the Bank and the Corporation shall have duly approved and adopted
this Agreement by appropriate resolutions, and the shareholders of the Bank
shall have duly approved, ratified, and confirmed this Agreement to the extent
required by and in accordance with this Agreement and North Carolina law.
3.5. Compliance with Agreements. Unless waived by the other parties hereto
in accordance
with Paragraph 5.1. below, the Bank and the Corporation each shall have
performed in all material respects their respective obligations, covenants, and
agreements hereunder to be performed before or at Closing. Each of the parties
hereto, by and through their respective Presidents or Chief Executive Officers,
shall have executed and delivered to the other parties a certificate, dated as
of the Closing Date, with regard to the foregoing and such other matters as may
be reasonably requested.
3.6. Compliance with "Blue Sky" Requirements. The Corporation Stock to be
issued upon consummation of the Share Exchange shall have been duly qualified or
registered (unless exempt) by the Corporation under applicable state securities
laws, all conditions to any exemptions from qualification or registration shall
have been satisfied, and any and all required approvals or consents to the
issuance of such Corporation Stock shall have been obtained.
3.7. Favorable Federal Tax Aspects of Share Exchange. The parties hereto
shall have received favorable assurances which are satisfactory to the Bank and
the Corporation, either in the form of a favorable opinion of independent
certified public accountants or of legal counsel, to the effect that the Share
Exchange will be treated for tax purposes under the Internal Revenue Code of
1986, as amended, as a tax-free reorganization, and that such related matters as
are customarily covered by such opinions shall be favorably treated for tax
purposes.
3.8. Agreements from Affiliates of the Bank. If requested by the
Corporation, it shall have received the written Affiliates' Agreements in form
and content satisfactory to the Corporation signed by all persons who are deemed
by the Corporation or its counsel to be "affiliates" of the Bank as provided in
Paragraph 2.6. above.
3.9. No Termination or Abandonment. This Agreement shall not have been
terminated by any party hereto.
3.10 Articles of Share Exchange; Other Actions. Articles of Share
Exchange in the form described in Paragraph 1.6. above shall have been duly
executed by the Corporation as provided in that Paragraph.
ARTICLE IV. TERMINATION
At any time prior to the Effective Time, and whether before or after
approval hereof by the shareholders of the Bank, this Agreement may be
terminated by the mutual consent of a majority of the members of each of the
Boards of Directors of the Bank and the Corporation; or, otherwise, by the
majority vote of the Board of Directors of either the Corporation or the Bank in
the event that:
(i) This Agreement and the transactions described herein are not
approved, ratified, and affirmed by the shareholders of the Bank in the manner
required by law at the special meeting of shareholders held for that purpose as
herein provided;
(ii) The Share Exchange shall not have become effective on or before June
30, 2001, unless such date is extended as evidenced by the written mutual
agreement of the parties hereto; or
(iii) Such Board of Directors shall determine that consummation of the
Share Exchange for any reason is not in the best interests of the Bank or its
shareholders.
ARTICLE V. MISCELLANEOUS PROVISIONS
5.1. Waiver. Any term or condition of this Agreement may be waived
(except as to matters of regulatory approvals and approvals required by law),
either in whole or in part, at any time by the party which is, and whose
shareholders are, entitled to the benefits thereof; provided, however, that any
such waiver shall be effective only upon a determination by the waiving party
(through action of its Board of Directors) that such waiver would not adversely
affect the interests of the waiving party or its shareholders; and, provided
further, that no waiver of any term or condition of this Agreement by any party
shall be effective unless such waiver is in writing and signed by the waiving
party, or be construed
to be a waiver of any succeeding breach of the same term or condition. No
failure or delay of any party to exercise any power, or to insist upon a strict
compliance by any other party of any obligation, and no custom or practice at
variance with any terms hereof, shall constitute a waiver of the right of any
party to demand a full and complete compliance with such terms.
5.2. Amendment. This Agreement may be amended, modified, or supplemented
at any time or from time to time prior to the Effective Time, and either before
or after its approval by the shareholders of the Bank, by an agreement in
writing approved by a majority of the Board of Directors of the Corporation and
the Bank and executed in the same manner as this Agreement; provided, however,
that except as authorized herein, no change in the exchange ratio specified
herein may be made following shareholder ratification except with such
shareholder approval of that change.
5.3. Further Assurance. The Bank and the Corporation each agrees to
furnish to the other such further assurances with respect to the matters
contemplated herein and their respective agreements, covenants, representations,
and warranties contained herein, including the opinion of legal counsel, as such
other party may reasonably request.
5.4. Headings and Captions. Headings and captions of the sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part hereof.
5.5. Entire Agreement. This Agreement contains the entire agreement of
the Bank and the Corporation with respect to the transactions contemplated
herein and supersedes any and all other oral or written agreement(s) heretofore
made, and there are no representations or inducements by or to any party hereto
or other provisions other than those contained herein.
5.6. Severability of Provisions. The invalidity or unenforceability of
any term, phrase, clause, paragraph, restriction, covenant, agreement, or other
provision hereof shall in no way affect the validity or enforceability of any
other provision or part hereof.
5.7. Counterparts. Any number of counterparts of this Agreement may be
signed and delivered, each of which shall be considered an original and which
together shall constitute one agreement.
5.8. Governing Law. This Agreement is made in and shall be construed and
enforced in accordance with the laws of North Carolina.
IN WITNESS WHEREOF, the Bank and the Corporation each has caused
this Agreement to be executed in its name by its duly authorized officers as of
the date first above written.
MOUNTAINBANK
ATTEST: By: S/ ▇. ▇. ▇▇▇▇▇
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President and Chief Executive Officer
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Secretary
MOUNTAINBANK FINANCIAL CORPORATION
ATTEST: By: S/ ▇. ▇. ▇▇▇▇▇
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President and Chief Executive Officer
S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Secretary