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Exhibit 2.1
AGREEMENT AND PLAN OF
REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION
(the " Agreement ") is made and entered into as of this 5
th day of February,
2007, by and between GWINNETT COMMERCIAL GROUP,
INC. , a Georgia business corporation
(" GCG " and, unless the
context otherwise requires, the term "GCG" shall include GCG and
its wholly-owned subsidiary bank, FIRST BANK OF THE
SOUTH , a Georgia bank with its main office
in Lawrenceville, Georgia (the " Bank "
)), and UNITED COMMUNITY BANKS,
INC. , a Georgia business corporation
(" United ").
WHEREAS , the respective boards
of directors of GCG and United deem it advisable and in the best
interests of each such entity and their respective shareholders
that GCG merge with United (the " Merger
"), with United being the surviving corporation, in
a transaction valued at $216.6 million based on the thirty (30) day
average closing price for United’s common stock, $1.00 par
value per share, (" United Stock ") of $32.35 as of February 2, 2007, consisting of a
combination of United Stock and cash. The Merger is conditioned
upon the terms and conditions hereinafter set forth (including,
without limitation, the purchase price adjustment provision of
Article XI ) and as set forth in the Agreement and Plan of
Merger attached hereto as Exhibit A and incorporated herein
by reference (the " Merger Agreement
"); and
WHEREAS, the respective boards
of directors of GCG and United deem it advisable and in the best
interests of each such entity and their respective shareholders
that the Bank merge with United’s Georgia banking subsidiary,
United Community Bank (" UCB Georgia
"), with UCB Georgia being the surviving bank (the
" Bank Merger "), all upon
the terms hereinafter set forth and as set forth in the Agreement
and Plan of Merger attached hereto as Exhibit B and
incorporated herein by reference (the " Bank Merger
Agreement "); and
WHEREAS, the boards of directors
of the respective entities believe that the merger of GCG and
United and their subsidiary banks and the operating effectiveness
and synergies produced thereby will enhance and strengthen the
franchises and future prospects of both companies and each of the
banks;
NOW, THEREFORE , for and in
consideration of the premises and the mutual covenants and
agreements herein contained, and other good and valuable
consideration, the receipt and adequacy of which as legally
sufficient consideration are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
CLOSING
The transactions contemplated herein shall be
consummated (the " Closing ")
at the offices of Kilpatrick Stockton LLP, Suite 2800, 1100
Peachtree Street, Atlanta, Georgia, on the first business day
following receipt of all approvals from any governmental
authorities having jurisdiction over the transactions contemplated
by this Agreement, the Merger Agreement and the Bank Merger
Agreement, and the expiration of any waiting or similar period
required by applicable law (the " Closing
Date "), or at such other time and place as
may be mutually satisfactory to the parties hereto.
ARTICLE II
MERGER
2.1 The Merger
. Pursuant to the terms and conditions provided
herein or otherwise in the Merger Agreement, on the Closing Date
GCG shall be merged with and into United. The surviving corporation
following the Merger will operate under the articles of
incorporation of United. The Bank shall be merged with and into UCB
Georgia in accordance with and in the manner set forth in the Bank
Merger Agreement.
2.2 Payment of Purchase
Price .
Pursuant to the terms and conditions provided herein
or otherwise in the Merger Agreement, United shall make available
on or before the Closing Date for delivery to the holders of issued
and outstanding shares of voting common stock, no par value per
share, of GCG (" GCG Stock "), outstanding options to acquire GCG Stock (the "
GCG Stock Options ") and outstanding
GCG stock appreciation rights (the " GCG
SARs "): (a) a sufficient number of shares
of United Stock to be issued upon conversion of the shares of GCG
Stock for stock elections in the Merger, and (b) sufficient funds
to make cash election payments in the Merger (such cash election
payments and the stock election payments described in (a) above,
the " Merger Consideration "), cash payments for outstanding GCG Stock Options and GCG
SARs and payments in lieu of the issuance of fractional shares, as
provided in the Merger Agreement; provided, however
, that no more than 306,137 shares of GCG Stock may
be exchanged for cash (the " Maximum Cash
Election ") and no more than 2,524,764
shares of GCG Stock may be exchanged for United Stock (the "
Maximum Stock Election "). If any
GCG Stock certificate, option or right shall have been lost, stolen
or destroyed, United may, in its reasonable discretion and as a
condition precedent to the issuance of any United Stock or cash
payment, require the owner of such lost, stolen or destroyed GCG
Stock certificate to provide a bond and an appropriate affidavit
and indemnity agreement (reasonably satisfactory to United) as
indemnification against any claim that may be made against United
with respect to such GCG Stock certificate, option or
right.
ARTICLE III
OTHER AGREEMENTS
3.1 Registration and Listing
of United Stock . (a) United agrees to
file with the Securities and Exchange Commission (the "
SEC ") as soon as reasonably
practicable a registration statement (the " United
Registration Statement ") under the
Securities Act of 1933, as amended (the " 1933
Act "), on Form S-4 or some other
appropriate form covering the issuance of the shares of United
Stock to the shareholders of GCG pursuant to this Agreement and the
Merger Agreement and to use its reasonable best efforts to cause
the United Registration Statement to become effective and to remain
effective through the Closing Date. United agrees to take any
action required to be taken under the applicable state securities
laws in connection
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with the issuance of shares of United Stock upon
consummation of the Merger. GCG agrees to provide United reasonable
assistance as necessary in the preparation of the United
Registration Statement, including, without limitation, providing
United with all material facts regarding the operations, business,
assets, liabilities and personnel of GCG, together with the audited
financial statements of GCG, all as and to the extent required by
the 1933 Act and the rules, regulations and practices of the SEC,
for inclusion in the United Registration Statement. The United
Registration Statement shall not cover resales of United Stock by
any of the shareholders of GCG, and United shall have no obligation
to cause the United Registration Statement to continue to be
effective after the Closing or to prepare or file any
post-effective amendments to the United Registration Statement
after the Closing.
(b) United agrees to list
on the Nasdaq Global Select Market, by the Closing Date, the shares
of United Stock to be issued to the shareholders of GCG pursuant to
this Agreement and the Merger Agreement.
3.2 Meeting of GCG
Shareholders . GCG shall call a special
meeting of its shareholders (the " Special
Meeting ") to be held not more than thirty
(30) days after the United Registration Statement becomes effective
under the 1933 Act for the purpose of submitting the Merger
Agreement to such shareholders for their approval. In connection
with the Special Meeting, United and GCG shall prepare and submit
to the GCG shareholders a notice of meeting, proxy statement and
proxy (the " GCG Proxy Materials "), which shall include the final prospectus from the United
Registration Statement in the form filed with the SEC.
3.3 Access to Properties,
Books, Etc. GCG shall allow the United
and its authorized representatives full access during normal
business hours from and after the date hereof and prior to the
Closing Date to all of GCG’s properties, books, contracts,
commitments and records and those of its subsidiaries and shall
furnish the United and its authorized representatives such
information concerning its affairs and the affairs of its
subsidiaries as United may reasonably request provided that such
request shall be reasonably related to the transactions
contemplated by this Agreement and shall not interfere unreasonably
with normal operations. GCG shall cause its and its
subsidiaries’ personnel, employees and other representatives
to assist United in making any such investigation. During such
investigation, United and its authorized representatives shall have
the right to make copies of such records, files, tax returns and
other materials as it may deem advisable and shall advise GCG of
those items of which copies are made. No investigation made
heretofore or hereafter by either party and its authorized
representatives shall affect the representations and warranties of
either such party hereunder.
3.4
Confidentiality . Prior to
consummation of the Merger, the parties to this Agreement will
provide one another with information which may be deemed by the
party providing the information to be confidential. Each party
agrees that it will hold confidential and protect all information
provided to it by the other party to this Agreement or such
party’s affiliates, except that the obligations contained in
this Section 3.4 shall not in any way restrict the rights of
any party or person to use information that: (a) was known to such
party prior to the disclosure by the other party; (b) is or becomes
generally available to the public other than by breach of this
Agreement; (c) is provided by one party for disclosure concerning
such party in
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the United Registration Statement; or (d)
otherwise becomes lawfully available to a party to this Agreement
on a non-confidential basis from a third party who is not under an
obligation of confidence to the other party to this Agreement. If
this Agreement is terminated prior to the Closing, upon request
each party hereto agrees to return all documents, statements and
other written materials, whether or not confidential, and all
copies thereof, provided to it by or on behalf of the other party
to this Agreement. The provisions of this Section 3.4 shall
survive termination, for any reason whatsoever, of this Agreement,
and, without limiting the remedies of the parties hereto in the
event of any breach of this Section 3.4 , the parties hereto
will be entitled to seek injunctive relief against the other party
in the event of a breach or threatened breach of this Section
3.4 .
3.5 Full
Cooperation . The parties shall
cooperate fully with each other in connection with any acts or
actions required to be taken as part of their respective
obligations under this Agreement.
3.6 Expenses
. All of the expenses incurred by United in
connection with the authorization, preparation, execution and
performance of this Agreement and the Merger Agreement including,
without limitation, all fees and expenses of its agents,
representatives, counsel and accountants and the fees and expenses
related to filing the United Registration Statement and all
regulatory applications with state and federal authorities in
connection with the transactions contemplated hereby and thereby,
(the " United Expenses ")
shall be paid by United. All expenses incurred by GCG in connection
with the authorization, preparation, execution and performance of
this Agreement, the Merger Agreement and the Bank Merger Agreement,
including, without limitation, all fees and expenses of its agents,
representatives, counsel and accountants (the " GCG
Expenses "), shall be paid by GCG. The cost
of reproducing and mailing the GCG Proxy Materials shall be shared
by the parties, with each party paying 50 percent (50%).
3.7 Preservation of
Goodwill . Each party hereto shall use
its best efforts to preserve its business organization and the
business organization of its subsidiaries, to keep available the
services of its present employees and of the present employees of
its subsidiaries, and to preserve the goodwill of customers and
others having business relations with such party or its
subsidiaries.
3.8 Approvals and
Consents . Each party hereto represents
and warrants to and covenants with the other that it will use its
best efforts, and will cause its officers, directors, employees and
agents and its subsidiaries and any subsidiary’s officers,
directors, employees and agents to use their best efforts, to
obtain as soon as is reasonably practicable all approvals and
consents of state and federal departments or agencies required or
deemed necessary for consummation of the transactions contemplated
by this Agreement and the Merger Agreement.
3.9 Agreements by GCG
Executive Officers, Directors and Shareholders
. (a) Each of the
directors and executive officers of GCG will, contemporaneously
with the execution of this Agreement, execute and deliver to United
an agreement, the form of which is attached hereto as Exhibit
C , pursuant to which each of them agrees: (a) to recommend,
subject to any applicable fiduciary duty, to GCG shareholders
approval of the Merger; (b) to vote the
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capital stock of GCG owned or controlled by them
in favor of the Merger; (c) to transfer or assign shares of United
Stock received by them in connection with the Merger only in
compliance with the 1933 Act, applicable state securities laws and
the rules and regulations promulgated under either; and (d) with
respect to directors only, to not compete with United for a period
of two (2) years after the Closing Date. GCG agrees that it will
use its reasonable best efforts to obtain an agreement in the form
attached hereto as Exhibit C from any beneficial owner of 5%
or more of the issued and outstanding shares of GCG Stock who is
not an officer or director.
3.10 Press
Releases . Prior to the Closing Date,
United and GCG shall each approve the form and substance of any
press release or other public disclosure materially related to this
Agreement or any other transaction contemplated hereby;
provided, however, that nothing in this
Section 3.10 shall be deemed to prohibit any party from
making any disclosure which its counsel deems necessary or
advisable in order to satisfy such party’s disclosure
obligations imposed by law.
3.11 Employee
Benefits . (a) Following the Closing
Date, United shall provide generally to employees of GCG who
continue employment with United (" GCG
Employees ") medical, dental and long-term
disability benefits, medical and dependent care flexible spending
accounts and life insurance (collectively, " Employee
Benefits "), on terms and conditions which,
when taken as a whole, are substantially similar to those then
currently provided by United to its other similarly situated
employees. No GCG Employee shall be provided vacation benefits at a
level less than he or she had attained with GCG immediately prior
to the Closing Date. For purposes of eligibility to participate and
any vesting determinations (but not benefit accruals) in connection
with the provision of any such Employee Benefits by United to the
GCG Employees, service with GCG prior to the Closing Date shall be
counted. The GCG Employees’ prior service with GCG shall also
be credited for purposes of all waiting periods for participation
in any of such Employee Benefits; provided
, however , that
United shall not impose a waiting period greater in duration than
that in effect immediately prior to the Closing Date under
GCG’s applicable Employee Benefit plans with respect to those
GCG Employees whose waiting periods had commenced under any such
plans prior to the Closing Date. United shall also waive all
restrictions and limitations for preexisting conditions under
United’s Employee Benefit plans, to the extent such
restrictions or limitations would not apply to the GCG Employees
under GCG’s existing Employee Benefit plans.
(b) From the Closing Date
through December 31, 2007, United shall provide Employee Benefits
to GCG Employees by maintaining GCG’s existing Employee
Benefit plans, subject to United’s right to amend such plans
as may be required by law and except as provided in Section
3.12 below. Thereafter, the GCG Employees shall be permitted to
enroll in United’s Employee Benefit plans.
3.12 401(k) Plan
. Subject to applicable legal requirements,
United and GCG shall take such other actions prior to the Closing
Date as may be reasonably necessary to enable the employees of GCG
as soon as reasonably practicable after the Closing Date to
transfer the amount credited to their accounts under the Gwinnett
Commercial Group, Inc. 401(k) and
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Employee Stock Ownership Plan ("
GCG 401(k) Plan ") through a
rollover contribution into either the United Community Banks, Inc.
Profit Sharing Plan (the " United 401(k)
Plan ") or a separate third party
individual retirement account, or to take a cash distribution from
the GCG 401(k) Plan, provided, that GCG’s Board of Directors shall adopt resolutions to
terminate the GCG 401(k) Plan prior to the Closing Date. For
purposes of any vesting determinations (but not benefit accruals)
in connection with the United 401(k) Plan, service with GCG prior
to the Closing Date shall be counted. For purposes of eligibility
to participate in any "Profit Sharing Contribution" or receive any
"Matching Contribution" (each as defined in the United 401(k) Plan)
under the United 401(k) Plan, the one (1) year waiting period in
the United 401(k) Plan shall be applied to all GCG Employees and
only compensation earned for periods after the Closing Date shall
be counted; provided, that the GCG
Employees’ prior service with GCG shall also be credited for
purposes of such waiting periods under the United 401(k) Plan. For
calendar year 2007, prior to the Closing Date GCG shall make any
necessary employer contributions to the GCG 401(k) Plan due such
GCG Employees for compensation paid by GCG during calendar year
2007.
3.13 Directors and Officers
Insurance Coverage .
Prior to Closing, GCG
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 GCG to provide for continued coverage of such
insurance for a period of three (3) years from the Closing Date,
unless United’s directors’ and officers’
liability insurance policy provides for coverage for such former
officers and directors for actions taken prior to the
Merger.
3.14 Governance of
United .
Following the Closing Date, United shall take all
action necessary to (i) increase the size of United’s
Board of Directors from 11 members to 12 members, and
(ii) cause John D. Stephens to be named as a director of
United.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
GCG
As an inducement to United to enter into this
Agreement and to consummate the transactions contemplated hereby,
GCG represents, warrants, covenants and agrees as
follows:
4.1 Disclosure
Memorandum . GCG has delivered to
United a memorandum (the " Disclosure
Memorandum ") containing certain
information regarding GCG as indicated at various places in this
Agreement. All information set forth in the Disclosure Memorandum
or in documents incorporated by reference in the Disclosure
Memorandum is true, correct and complete, does not omit to state
any fact necessary in order to make the statements therein not
misleading, and shall be deemed for all purposes of this Agreement
to constitute part of the representations and warranties of GCG
under this Article IV . The information contained in the
Disclosure Memorandum shall be deemed to be part of and qualify all
representations and warranties contained in this Article IV
and the covenants in Article V to the extent applicable. All
information in each of the documents and other writings furnished
to United pursuant to this Agreement or the Disclosure Memorandum
is or will be true, correct and complete and does not and will not
omit to state any fact necessary in order to make the statements
therein not misleading. GCG shall promptly provide United with
written notification of any event, occurrence or other information
necessary to maintain the Disclosure Memorandum and all other
documents and writings furnished to United pursuant to this
Agreement as true, correct and complete at all times prior to and
including the Closing.
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4.2 Corporate and
Financial .
4.2.1 Corporate
Status .
GCG is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Georgia and has no direct or indirect subsidiaries other than the
Bank. The Bank is a bank duly organized, validly existing, and in
good standing under the laws of the State of Georgia. GCG and the
Bank have all of the requisite corporate power and authority and
are entitled to own or lease their respective properties and assets
and to carry on their businesses as and in the places where such
properties or assets are now owned, leased or operated and such
businesses are now conducted.
4.2.2 Authority
. Except as set forth in the Disclosure Memorandum
and subject to the required regulatory approvals, as stated in
Section 4.6.1 and the approval of GCG shareholders, the
execution, delivery and performance of this Agreement and the other
transactions contemplated or required in connection herewith will
not, with or without the giving of notice or the passage of time,
or both:
(a) violate any
provision of federal or state law applicable to GCG, the violation
of which could be reasonably expected to have an adverse effect on
the business, operations, properties, assets, financial condition
or prospects of GCG;
(b) violate any
provision of the articles of incorporation or bylaws of
GCG;
(c) conflict with or
result in a breach of any provision of, or termination of, or
constitute a default under any instrument, license, agreement, or
commitment to which GCG is a party, which, singly or in the
aggregate, could reasonably be expected to have an adverse effect
on the business, operations, properties, assets, financial
condition or prospects of GCG; or
(d) constitute a
violation of any order, judgment or decree to which GCG is a party,
or by which GCG or any of its assets or properties are
bound.
Assuming this Agreement constitutes the valid and
binding obligation of United, this Agreement constitutes the valid
and binding obligation of GCG, and is enforceable in accordance
with its terms, except as limited by laws affecting
creditors’ rights generally and by the discretion of courts
to compel specific performance.
4.2.3 Capital
Structure . (a) As of the date of this
Agreement, GCG has authorized capital stock consisting solely of
(i) 12,000,000 shares of GCG Stock, of which 2,830,901 shares are
issued and outstanding as of the date hereof, exclusive of 208,321
shares reserved for issuance upon exercise of outstanding GCG Stock
Options, and (ii) 2,000,000 shares
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of nonvoting common stock, no par value, none of
which is issued and outstanding. The Bank has authorized capital
stock consisting solely of 12,000,000 shares of common stock, $5.00
par value per share (" Bank Stock
"), 1,060,000 of which are issued and outstanding as
of the date hereof. All of the issued and outstanding shares of GCG
Stock and Bank Stock are duly and validly issued, fully paid and
non-assessable and were offered, issued and sold in compliance with
all applicable federal and state securities laws. No person has any
right of rescission or claim for damages under federal or state
securities laws with respect to the issuance of any shares GCG
Stock or Bank Stock previously issued. None of the shares of GCG
Stock or Bank Stock has been issued in violation of any preemptive
or other rights of its respective shareholders. All of the issued
and outstanding shares of the Bank Stock are owned by
GCG.
(b) Except for the
GCG Stock Options and as otherwise described in the Disclosure
Memorandum, GCG does not have outstanding any securities which are
either by their terms or by contract convertible or exchangeable
into capital stock of GCG, or any other securities or debt of GCG,
or any preemptive or similar rights to subscribe for or to
purchase, or any options or warrants or agreements or
understandings for the purchase or the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character
relating to, its capital stock or securities convertible into its
capital stock. Except as otherwise described in the Disclosure
Memorandum, GCG is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire, or to
register, any shares of its capital stock.
(c) Except as
disclosed in the GCG Disclosure Memorandum and other than
restrictions required by applicable federal and state securities
laws, there is no agreement, arrangement or understanding to which
GCG is a party restricting or otherwise relating to the transfer of
any shares of capital stock of GCG.
(d) All shares of
common stock or other capital stock, or any other securities or
debt, of GCG, which have been purchased or redeemed by GCG have
been purchased or redeemed in accordance with all applicable
federal, state and local laws, rules, and regulations, including,
without limitation, all federal and state securities laws and rules
and regulations of any securities exchange or system on which such
stock, securities or debt are, or at such time were, traded, and no
such purchase or redemption has resulted or will, with the giving
of notice or lapse of time, or both, result in a default or
acceleration of the maturity of, or otherwise modify, any
agreement, note, mortgage, bond, security agreement, loan agreement
or other contract or commitment of GCG.
(e) Except as set
forth on the Disclosure Memorandum, no person beneficially owns
more than 5% of the issued and outstanding shares of GCG
Stock.
4.2.4 Corporate
Records . The stock records and minute
books of GCG: (a) fully and accurately reflect all issuances,
transfers and redemptions of the Common Stock; (b) correctly show
the record addresses and the number of shares of such stock issued
and outstanding on the date hereof held by the shareholders of GCG;
(c) correctly show all corporate action taken by the directors and
shareholders of GCG (including actions taken by consent without a
meeting); and (d) contain true and correct copies or originals of
the respective articles of incorporation or association and all
amendments thereto, bylaws as amended and currently in
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force, and the minutes of all meetings or consent
actions of its directors and shareholders. No resolutions,
regulations or bylaws have been passed, enacted, consented to or
adopted by such directors or shareholders except those contained in
the minute books. All corporate records have been maintained in
accordance with all applicable statutory requirements and are
complete and accurate.
4.2.5 Tax Returns;
Taxes . (a) GCG has duly filed: (i) all
required federal and state tax returns and reports; and (ii) all
required returns and reports of other governmental units having
jurisdiction with respect to taxes imposed upon its income,
properties, revenues, business, franchises, operations or other
assets or taxes imposed which might create a material lien or
encumbrance on any of such assets. Such returns or reports were
true, complete and correct, and GCG has paid, to the extent such
taxes or other governmental charges required to be have become due,
all taxes and other governmental charges set forth in such returns
or reports. All unpaid federal, state and local taxes and other
governmental charges payable by GCG have been accrued or reserved
on its books in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods
(" GAAP "). Adequate reserves
for the payment of taxes have been established on the books of GCG
for all periods through the date hereof, whether or not due and
payable and whether or not disputed. Until the Closing Date, GCG
shall continue to provide adequate reserves for the payment of
expected tax liabilities in accordance with GAAP. GCG has not
received any notice of a tax deficiency or assessment of additional
taxes of any kind and, to the knowledge of GCG, there is no
threatened claim against GCG or any basis for any such claim, for
payment of any additional federal, state, local or foreign taxes
for any period prior to the date of this Agreement in excess of the
accruals or reserves with respect to any such claim shown in the
GCG Financial Statements (as defined in Section 4.2.6 ) or
disclosed in the notes thereto. There are no waivers or agreements
by GCG for the extension of time for the assessment of any taxes.
No federal or state income, employment or property tax return is
currently the subject of an audit or other governmental
investigation or inquiry.
(b) Except as set
forth in the Disclosure Memorandum, proper and accurate amounts
have been withheld by GCG from its employees for all periods in
full and complete compliance with the tax withholding provisions of
applicable federal, state and local tax laws, and proper and
accurate federal, state and local tax returns have been filed by
GCG for all periods for which returns were due with respect to
withholding, social security and unemployment taxes, and the
amounts required to be shown thereon to be due and payable have
been paid in full.
4.2.6 Financial
Statements . (a) GCG has delivered to
United true, correct and complete copies, including notes, of the
financial statements of GCG for the years ended December 31, 2006,
2005, 2004 and 2003, including consolidated balance sheets,
consolidated statements of earnings, consolidated statements of
cash flows, consolidated statements of comprehensive income and
consolidated statements of changes in shareholders’ equity
(the financial statements for the years ended December 31, 2006,
2005, 2004 and 2003 being herein referred to as the "
GCG Financial Statements "). All of
such financial statements have been prepared in accordance with
GAAP, and present fairly the assets, liabilities and financial
condition of GCG as of the dates indicated therein and the results
of its operations for the respective periods indicated therein and
the results of operations for the respective periods indicated
therein.
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(b) GCG has
maintained a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in
accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets, (iii) access to assets
is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. No
changes have been made to GCG’s internal control over
financial reporting, as defined in Rule 13a-15(f) and Rule
15d-15(f) of the Securities Exchange Act of 1934, as amended (the
" 1934 Act "), since December
31, 2006 that materially affected, or are reasonably likely to
materially affect, its internal control over financial
reporting.
4.2.7 Regulatory
Reports . GCG has made available to
United for review and inspection the year-end and quarterly Reports
of Condition and Income filed by the Bank with the Federal Deposit
Insurance Corporation (the " FDIC
") and the Forms F.R. Y-6 and F.R. Y-9C
filed by GCG with the Board
of Governors of the Federal Reserve System (the "
Federal Reserve ") for each of the
three (3) years ended December 31, 2006, 2005 and 2004, together
with all such other reports filed by GCG and the Bank for the same
three-year period with the Georgia Department of the Banking and
Finance (the " Georgia Department
"), if any,
and with any other applicable regulatory or
governmental agencies (collectively, the " GCG
Reports "). All of the GCG Reports have
been prepared in accordance with applicable rules and regulations
applied on a basis consistent with prior periods and contain all
information required to be presented therein in accordance with
such rules and regulations.
4.2.8 Accounts
. The Disclosure Memorandum contains a list of each
and every bank and other institution in which GCG maintains an
account or safety deposit box, the account numbers, and the names
of all persons who are presently authorized to draw thereon, have
access thereto or give instructions regarding distribution of funds
or assets therein.
4.2.9 Notes and
Obligations . (a) Except as set forth
in the Disclosure Memorandum or as provided for in the loss reserve
described in subsection (b) below, all notes receivable or other
obligations owned by GCG or due to it shown in the GCG Financial
Statements and any such notes receivable and obligations on the
date hereof and on the Closing Date are and will be genuine, legal,
valid and collectible obligations of the respective makers thereof
and are not and will not be subject to any offset or counterclaim.
Except as set forth in subsection (b) below, all such notes and
obligations are evidenced by written agreements, true and correct
copies of which will be made available to United for examination
prior to the Closing Date. All such notes and obligations were
entered into by GCG in the ordinary course of its business and in
compliance with all applicable laws and regulations.
(b) GCG has
established a loss reserve in the GCG Financial Statements and as
of the date of this Agreement and will establish a loss reserve as
of the Closing Date which is adequate to cover losses reasonably
anticipated to result from such items as the insolvency or default
of borrowers or obligors on such loans or obligations, defects in
the notes
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or evidences of obligation (including losses of
original notes or instruments), offsets or counterclaims properly
chargeable to such reserve, or the availability of legal or
equitable defenses which might preclude or limit the ability of GCG
to enforce the note or obligation, and the representations set
forth in subsection (a) above are qualified in their entirety by
the aggregate of such loss reserve. At the Closing Date, the ratio
of the loss reserve to total loans outstanding at such time shall
not exceed the ratio of the loan loss reserve to the total loans
outstanding as reflected in the December 31, 2006 GCG Financial
Statements.
4.2.10
Liabilities . GCG has no debt,
liability or obligation of any kind required to be shown pursuant
to GAAP on the consolidated balance sheet of GCG, whether accrued,
absolute, known or unknown, contingent or otherwise, including, but
not limited to: (a) liability or obligation on account of any
federal, state or local taxes or penalty, interest or fines with
respect to such taxes; (b) liability arising from or by virtue of
the distribution, delivery or other transfer or disposition of
goods, personal property or services of any type, kind or variety;
(c) unfunded liabilities with respect to the GCG 401(k) Plan or any
other any pension, profit sharing or employee stock ownership plan,
whether operated by GCG or any other entity covering employees of
GCG; or (d) environmental liabilities, except: (i) those reflected
in the GCG Financial Statements; and (ii) as disclosed in the
Disclosure Memorandum.
4.2.11 Absence of
Changes . Except as specifically
provided for in this Agreement or specifically set forth in the
Disclosure Memorandum, since December 31, 2006:
(a) there has been no
change in the business, assets, liabilities, results of operations
or financial condition of GCG, or in any of its relationships with
customers, employees, lessors or others, other than changes in the
ordinary course of business, none of which individually or in the
aggregate has had, or which could reasonably be expected to have,
an adverse effect on such businesses or properties;
(b) there has been no
damage, destruction or loss to the assets, properties or business
of GCG, whether or not covered by insurance, which has had, or
which may reasonably be expected to have, an adverse effect
thereon;
(c) the business of GCG
has been operated in the ordinary course, and not
otherwise;
(d) the properties and
assets of GCG used in its business have been maintained in good
order, repair and condition, ordinary wear and tear
excepted;
(e) the books, accounts
and records of GCG have been maintained in the usual, regular and
ordinary manner;
(f) there has been no
declaration, setting aside or payment of any dividend or other
distribution on or in respect of the capital stock of
GCG;
(g) there has been no
increase in the compensation or in the rate of compensation or
commissions payable or to become payable by GCG to any director
or
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executive officer, or to any employee earning
$50,000 or more per annum, or any general increase in the
compensation or in the rate of compensation payable or to become
payable to employees of GCG earning less than $50,000 per annum
(" general increase " for the
purpose hereof meaning any increase generally applicable to a class
or group of employees, but not including increases granted to
individual employees for merit, length of service, change in
position or responsibility or other reasons applicable to specific
employees and not generally to a class or group thereof), or any
increase in any payment of or commitment to pay any bonus, profit
sharing or other extraordinary compensation to any
employee;
(h) there has been no
change in the charter or bylaws of GCG or the Bank;
(i) there has been no
labor dispute, unfair labor practice charge or employment
discrimination charge, nor, to the knowledge of GCG, any
organizational effort by any union, or institution or threatened
institution, of any effort, complaint or other proceeding in
connection therewith, involving GCG, or affecting its
operations;
(j) there has been no
issuance, sale, repurchase, acquisition, or redemption by GCG of
any of its capital stock except as set forth on the Disclosure
Memorandum, bonds, notes, debt or other securities, and there has
been no modification or amendment of the rights of the holders of
any outstanding capital stock, bonds, notes, debt or other
securities thereof;
(k) there has been no
mortgage, lien or other encumbrance or security interest (other
than liens for current taxes not yet due or purchase money security
interests arising in the ordinary course of business) created on or
in (including without limitation, any deposit for security) any
asset or assets of GCG or assumed by it with respect to any asset
or assets;
(l) there has been no
indebtedness or other liability or obligation (whether absolute,
accrued, contingent or otherwise) incurred by GCG which would be
required to be reflected on a balance sheet of GCG prepared as of
the date hereof in accordance with GAAP, except as incurred in the
ordinary course of business;
(m) no obligation or
liability of GCG has been discharged or satisfied, other than in
the ordinary course of business;
(n) there have been no
sales, transfers or other dispositions of any asset or assets of
GCG, other than sales in the ordinary course of business;
and
(o) there has been no
amendment, termination or waiver of any right of GCG under any
contract or agreement or governmental license, permit or permission
which has had, or could reasonably be expected to have, an adverse
effect on its business or properties.
4.2.12
Litigation and Proceedings . Except
as set forth on the Disclosure Memorandum, there are no actions,
decrees, suits, counterclaims, claims, proceedings or
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governmental actions or investigations, pending
or, to the knowledge of GCG, threatened against, by or affecting
GCG, or any officer, director, employee or agent in such
person’s capacity as an officer, director, employee or agent
of GCG or relating to the business or affairs of GCG, in any court
or before any arbitrator or governmental agency, and no judgment,
award, order or decree of any nature has been rendered against or
with respect thereto by any agency, arbitrator, court, commission
or other authority, nor does GCG have, to the knowledge of GCG, any
unasserted contingent liabilities which are reasonably likely to
have an adverse effect on its assets or on the operation of its
businesses or which could reasonably be expected to prevent or
impede the consummation of the transactions contemplated by this
Agreement.
4.2.13
Proxy Materials .
Neither the GCG Proxy
Materials nor other materials furnished by GCG to the GCG
shareholders in connection with the transactions contemplated by
this Agreement or the Merger Agreement, or in any amendments
thereof or supplements thereto, will, at the times such documents
are distributed to the holders of shares of GCG Stock and through
the acquisition of shares of GCG Stock by United pursuant to the
Merger, contain with respect to GCG any untrue statement of a
material fact or omit to state any information required to be
stated therein or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
4.2.14
No Adverse Change . Since December
31, 2005, there has not been any change in the condition of GCG,
any contracts entered into by GCG, or other changes in the
operations of GCG which, in any case, has had, or is reasonably
likely to have, an adverse effect on GCG on a consolidated basis
taken as a whole.
4.3 Business
Operations .
4.3.1 Customers
. To the knowledge of GCG, there are no presently
existing facts which could reasonably be expected to result in the
loss of any borrower or depositor or in GCG’s inability to
collect amounts due therefrom or to return funds deposited thereby,
except as set forth on the Disclosure Memorandum.
4.3.2 Permits; Compliance
with Law . (a) GCG has all
permits, licenses, approvals, authorizations and registrations
under all federal, state, local and foreign laws required for GCG
to carry on its business as presently conducted, and all of such
permits, licenses, approvals, authorizations and registrations are
in full force and effect, and no suspension or cancellation of any
of them is pending or, to the knowledge of GCG,
threatened.
(b) GCG has complied
with all laws, regulations, ordinances, rules, and orders
applicable to it or its business, except for any non-compliance
which could not reasonably be expected to have a material adverse
effect on GCG. The Disclosure Memorandum contains a list of any
known violations of such laws, regulations, ordinances, rules or
orders by any present officer, director, or employee of GCG, and
which resulted in any order, proceeding, judgment or decree which
would be required to be disclosed pursuant to Item 401(f) of
Regulation S-K promulgated by the SEC. No past violation of any
such law, regulation, ordinance, rule or order has occurred which
could impair the right or ability of GCG to conduct its
business.
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(c) Except as set
forth in the Disclosure Memorandum, no notice, inquiry or warning
from any governmental authority with respect to any failure or
alleged or possible failure of GCG to comply in any respect with
any law, regulation, ordinance, rule or order has been received,
nor, to the knowledge of GCG, is any such notice or warning
proposed or threatened.
4.3.3
Environmental . (a) Except as set
forth in the Disclosure Memorandum:
(i) GCG
has not caused or permitted the generation, manufacture, use, or
handling or the release or presence of, any Hazardous Material (as
defined below) on, in, under or from any properties or facilities
currently owned or leased by GCG or adjacent to any properties so
owned or leased that requires notification, investigation or
remediation pursuant to any environmental law;
(ii) to the
knowledge of GCG, there are no non-compliance orders, warning
letters or notices of violations, actions, suits or other claims
asserted or threatened against GCG or administrative or judicial
investigations arising from or relating to the environmental
condition of any property currently owned or leased by GCG or the
generation, manufacture, use, or handling or the release or
presence of, any Hazardous Material at any property currently owned
or leased by GCG;
(iii)
GCG has complied in all material respects with, and has kept all
records and made all filings or reports required by, a
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