Staff Report
Published July 29, 2010

The South Financial Group entered into a memorandum of understanding with shareholders who filed suit challenging its merger with TD Bank Financial Group, the Greenville-based company announced in a Wednesday filing with the Securities and Exchange Commission.

The memorandum contemplates that the parties will enter into a stipulation of settlement in which TD Bank agrees not to purchase any more outstanding common stock in South Financial until shareholders vote on the merger. Additionally, South Financial agrees to release more information on the events that led to this merger agreement, including details on attempts to raise capital and negotiate other potential mergers.

The plaintiffs’ attorneys, from Motley Rice LLC in Mount Pleasant, could not be reached for comment.

TD Bank Financial Group, the Toronto-Dominion Bank and members of South Financial’s board of directors are also named defendants in the case and have also entered into the memorandum of understanding.

Several shareholders filed suit in June, saying South Financial and its board of directors ignored a fiduciary responsibility to shareholders, who would receive 28 cents per share under the current merger agreement. Plaintiffs also say proxy documents filed with the SEC fail to disclose adequate information on the merger, among other complaints.

South Financial maintains that the merger is the best outcome for the bank and its shareholders.

Any settlement must be approved by the court. If approved, defendants are released of all claims. According to the SEC filing, the proposed settlement as contemplated by the memorandum can be terminated.

The Federal Reserve Board approved the merger last week. Shareholders are expected to vote on it in September, though a meeting date hasn’t been set.