AGREEMENT AND PLAN OF REORGANIZATION

 

shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective Boards of Directors of GB&T and Mountain.

 

1.2                                  Time and Place of Closing .  The Closing will take place at 10:00 a.m. on the date that the Effective Time occurs (or the immediately preceding day if the Effective Time is earlier than 10:00 a.m.), or at such other time as the Parties, acting through their Designated Officers may mutually agree. The place of Closing shall be at the offices of Hulsey, Oliver & Mahar, LLP, Gainesville, Georgia, or such other place as may be mutually agreed upon by the Parties.

 

1.3                                  Effective Time . The Merger and the other transactions contemplated by this Agreement shall become effective on the date and at the time the Articles of Merger reflecting the Merger shall become effective with the Secretary of State of the State of Georgia (the “Effective Time”).  Subject to the terms and conditions hereof, unless otherwise mutually agreed upon in writing by the Designated Officer of each Party, the Parties shall use their reasonable efforts to cause the Effective Time to occur on the last business day of the month in which occurs the last to occur of (a) the effective date (including expiration of any applicable waiting period) of the last required Consent of any Regulatory Authority having authority over and approving or exempting the Merger, (b) the date on which the shareholders of Mountain approve this Agreement to the extent such approval is required by applicable Law; or such later date as may be mutually agreed upon in writing by the Designated Officer of each Party.

 

1.4                                  Execution of Support Agreements .  Within ten (10) calendar days of the execution of this Agreement and as a condition hereto, each of the directors of Mountain will execute and deliver to GB&T a Support Agreement, in substantially the form of Exhibit 6 to this Agreement.

 

ARTICLE II

TERMS OF MERGER

 

2.1                                  Articles of Incorporation . The Articles of Incorporation of GB&T in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation from and after the Effective Time until otherwise amended or repealed.

 

2.2                                  Bylaws .   The Bylaws of GB&T in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation from and after the Effective Time until otherwise amended or repealed.

 

 

2.3                                  Directors and Officers .

 

(a)                                   The officers and directors of the Surviving Corporation from and after the Effective Time shall consist of the officers and directors of GB&T immediately preceding the Effective Time, together with a director from the present Mountain board of directors to be selected by and approved by the GB&T board of directors after consultation with the Mountain board of directors. Such officers and directors shall serve in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation.

 

(b)                                  The directors of MSB from and after the Effective Time shall consist of the directors of MSB immediately preceding the Effective Time, except for Don Boggus, together with a director from the GB&T board of directors as selected by the GB&T board of directors. Such directors shall serve in accordance with the Articles of Incorporation and Bylaws of MSB.

 

ARTICLE III

MANNER OF CONVERTING SHARES

 

3.1                                  Conversion of Shares .    Subject to the provisions of this Article III, at the Effective Time, by virtue of the Merger and without any action on the part of GB&T or Mountain, or the shareholders of either of the foregoing, the shares of the constituent corporations shall be converted as follows:

 

(a)                                   Each share of GB&T Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time.

 

(b)                                  Each share of Mountain Common Stock (excluding shares held by GB&T or Mountain or any of their respective Subsidiaries, in each case other than in a fiduciary capacity or as a result of debts previously contracted) issued and outstanding at the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive (1) cash, and (2) shares of GB&T Common Stock, as stated hereinafter.  Individual shareholders of Mountain will be given cash in the amount of $8.40 for each share of Mountain stock and 0.8911 shares of GB&T Common Stock for each share of Mountain stock (“the Exchange Ratio”).

 

(c)                                   If on the Effective Time, the average closing price of GB&T Common Stock (adjusted proportionately for any stock split, stock dividend, recapitalization, reclassification, or similar transaction that is effected, or for which a record date occurs) for the twenty (20) preceding trading days as reported in the NASDAQ (corrected for any typographical errors) (the “Average Closing Price”) is less than $19.00 per share Mountain may demand re-negotiation of the exchange rate and if such 20-day average is

 

 

greater than $26.00 per share, GB&T may demand re-negotiation of the exchange rate, and if such re-negotiation is unsuccessful after fifteen (15) days of good faith discussions, the dissatisfied party may withdraw and declare the agreement terminated, without penalty to either party.  Each side will be responsible for paying its own expenses in the event that the deal is terminated.

 

3.2                                  Anti-Dilution Provisions .  In the event GB&T or Mountain changes the number of shares of GB&T Common Stock or Mountain Common Stock, respectively, issued and outstanding prior to the Effective Time as a result of a stock split, reverse stock split, stock dividend or similar recapitalization with respect to such stock and the record date therefor (in the case of a stock dividend) or the effective date therefor (in the case of a stock split or similar recapitalization) shall be after the date hereof and prior to the Effective Time, the Exchange Ratio shall be proportionately adjusted.

 

3.3                                  Shares Held by GB&T or Mountain .   Each of the shares of Mountain Common Stock held by any GB&T Company or by any Mountain Company, in each case other than in a fiduciary capacity or as a result of debts previously contracted, shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefor.

 

3.4                                  Conversion of Stock Options; Restricted Stock .

 

(a)                                   Each option or warrant to purchase Mountain Common Stock (either, a “Mountain Option”) outstanding at the Effective Time shall be converted into and become rights with respect to GB&T Common Stock and GB&T shall assume each such option in accordance with the terms of the stock option plan under which it was issued and the stock option or other agreement by which it is evidenced.  From and after the Effective Time (all subject to appropriate adjustment for any transactions described in Section 3.2 if the record date with respect to such transaction is on or after the Effective Time), (i) each Mountain Option assumed by GB&T may be exercised solely for GB&T Common Stock, (ii) the number of shares of GB&T Common Stock subject to each Mountain Option shall be equal to the number of shares of Mountain Common Stock subject to each such Mountain Option immediately prior to the Effective Time, multiplied by 1.273 (the “Option Exchange Ratio”) and (iii) the per share exercise price of the GB&T Common Stock subject to the Mountain Options shall be determined by dividing the per share exercise price of the Mountain Common Stock subject to each such Mountain Option by the Option Exchange Ratio and rounding down to the nearest cent.  It is intended that the foregoing assumption of Mountain Options shall be undertaken in a manner that will not constitute a “modification” as defined in Section 424 of the Internal Revenue Code as to any Mountain Option which is an incentive stock option as defined in Section 422 of the Internal Revenue

 

 

Code.  GB&T will modify each stock option that it assumes (as long as in the opinion of counsel for Mountain such “modification” will not constitute a modification as defined in Section 424 of the Internal Revenue Code for options which are incentive stock options) to provide that the options may be exercised, in addition to the other payment methods set out in the relevant option plan, by the reduction of the number of shares subject to the option so that the difference between the option exercise price for such shares and the fair market value of such shares on the option exercise date shall equal the option exercise price of the total number of shares for which the option is being exercised.

 

(b)                                  At all times after the Effective Time, GB&T shall reserve for issuance such number of GB&T Common Stock as shall be necessary to permit the exercise of Mountain Options in the manner contemplated by this Agreement.  At or prior to, or at the election of GB&T within a reasonable time (not to exceed 30 days) after, the Effective Time, GB&T shall file a Registration Statement on Form S-3 or Form S-8, as the case may be (or any successor or other appropriate form), with respect to the GB&T Common Stock subject to the Mountain Options and shall use its best efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as any of the Mountain Options remain outstanding.  GB&T shall make any filings required under any applicable state securities laws to qualify the GB&T Common Stock subject to such Mountain Options for resale thereunder.

 

3.5                                  Dissenting Shareholders .  Any holder of shares of Mountain Common Stock who perfects such holder’s dissenters’ rights of appraisal in accordance with and as contemplated by Article 13 of the GBCC shall be entitled to receive the value of such shares in cash as determined pursuant to such provision of the GBCC; provided, that no such payment shall be made to any dissenting shareholder unless and until such dissenting shareholder has complied with the applicable provisions of the GBCC and has surrendered to GB&T the certificate or certificates representing shares for which payment is being made. In the event that after the Effective Time a dissenting shareholder of Mountain fails to perfect, or effectively withdraws or loses, such holder’s right to appraisal and of payment for such holder’s shares, GB&T shall issue and deliver the consideration to which such holder of shares of Mountain Common Stock is entitled under this Article III (without interest) upon surrender by such holder of the certificate or certificates representing shares of Mountain Common Stock held by such holder.

 

3.6                                  Fractional Shares .  Notwithstanding any other provision of this Agreement, each holder of shares of Mountain Common Stock exchanged pursuant to the Merger, or of options to purchase shares of Mountain Common Stock, who would otherwise have been entitled to receive a fraction of a share of GB&T Common Stock or the right to purchase a fraction of a share (after taking into account all

 

 

certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of GB&T Common Stock multiplied by $22.00.  No such holder will be entitled to dividends, voting rights, or any other rights as a stockholder in respect of any fractional shares.

 

ARTICLE IV

EXCHANGE OF SHARES

 

4.1                                  Exchange Procedures .  Promptly after the Effective Time, GB&T and Mountain shall cause the exchange agent selected by GB&T (the “Exchange Agent”) to mail to the former holders of Mountain Common Stock appropriate transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the certificates theretofore representing shares of Mountain Common Stock shall pass, only upon proper delivery of such certificates to the Exchange Agent).  After the Effective Time, each holder of shares of Mountain Common Stock (other than shares to be canceled pursuant to Section 3.3 of this Agreement or shares as to which dissenters’ rights have been perfected as provided in Section 3.5 of this Agreement) issued and outstanding at the Effective Time, shall surrender the certificate or certificates representing such shares to the Exchange Agent and shall promptly upon surrender thereof receive in exchange therefor the consideration provided in Section 3.1 and 3.6 of this Agreement, together with all undelivered dividends or distributions in respect of such shares (without interest thereon)pursuant to Section 4.2 of this Agreement.  Neither GB&T nor the Exchange Agent shall be obligated to deliver the consideration to which any former holder of Mountain Common Stock is entitled as a result of the Merger until such holder surrenders his or her certificate or certificates representing the shares of Mountain Common Stock for exchange, as provided in this Section 4.1 or appropriate affidavits and indemnity agreements in the event such share certificates have been lost, mutilated, or destroyed.  The certificate or certificates of Mountain Common Stock so surrendered shall be duly endorsed as GB&T may require. Any other provision of this Agreement notwithstanding, neither GB&T nor the Exchange Agent shall be liable to a holder of Mountain Common Stock for any amounts paid or property delivered in good faith to a public official pursuant to any applicable abandoned property Law.

 

4.2                                  Rights of Former Mountain Shareholders .  The stock transfer books of Mountain shall be closed as to holders of Mountain Common Stock immediately prior to the Effective Time and no transfer of Mountain Common Stock by any such holder shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 4.1 of this Agreement, each certificate theretofore representing shares of Mountain Common Stock (other than shares to be canceled pursuant to Section 3.3 or shares as to which dissenters’ rights have been perfected as provided in Section 3.5 of this Agreement) shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in Section 3.1 and 3.6 of this Agreement in exchange therefor.  To the extent permitted by Law, former holders

 

 

of record of Mountain Common Stock shall be entitled to vote after the Effective Time at any meeting of GB&T shareholders the number of whole shares of GB&T Common Stock into which their respective shares of Mountain Common Stock are converted, regardless of whether such holders have exchanged their certificates representing Mountain Common Stock for certificates representing GB&T Common Stock in accordance with the provisions of this Agreement.  Whenever a dividend or other distribution is declared by GB&T on the GB&T Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares issuable pursuant to this Agreement, but no dividend or other distribution payable to the holders of record of GB&T Common Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any certificate representing shares of Mountain Common Stock issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in Section 4.1 of this Agreement. However, upon surrender of such Mountain Common Stock certificate, both GB&T Common Stock certificate (together with all such undelivered dividends or other distributions without interest) and any undelivered cash payments to be paid for fractional share interests (without interest) shall be delivered and paid with respect to each share represented by such certificate.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF MOUNTAIN

 

Mountain hereby represents and warrants to GB&T as follows:

 

5.1                                  Organization, Standing, and Power .   Mountain is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Georgia and is duly registered as a bank holding company under the BHC Act and under Georgia law.  Mountain has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets.  Mountain is duly qualified or licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

5.2                                  Authority; No Breach By Agreement .

 

(a)                                   Mountain has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Mountain, subject to the approval of this Agreement by the

 

 

holders of a majority of the outstanding shares of Mountain Common Stock, which is the only shareholder vote required for approval of this Agreement and consummation of the Merger by Mountain. Subject to such requisite shareholder approval, this Agreement represents a legal, valid and binding obligation of Mountain, enforceable against Mountain in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

 

(b)                                  Neither the execution and delivery of this Agreement by Mountain, nor, except as described in Section 5.2 of the Mountain Disclosure Memorandum,  the consummation by Mountain of the transactions contemplated hereby, nor compliance by Mountain with any of the provisions hereof will (i) conflict with or result in a breach of any provision of Mountain’s Articles of Incorporation or Bylaws, or (ii) to the Knowledge of Mountain subject to the receipt of the requisite approvals referred to in Section 9.1(b) of this Agreement, constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Mountain Company under, any Contract or Permit of any Mountain Company, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, or (iii) to the Knowledge of Mountain subject to receipt of the requisite approvals referred to in Section 9.1 (b) of this Agreement, violate any Law or Order applicable to any Mountain Company or any of their respective Assets.

 

(c)                                   Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, and other than Consents, filings or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, no notice to, filing with, or Consent of any public body or authority is necessary for the consummation by Mountain of the Merger and the other transactions contemplated in this Agreement.

 

5.3                               Capital Stock .

 

(a)                                   The authorized capital stock of Mountain consists of 10,000,000 shares of Mountain Common Stock, of which 1,222,000 shares are issued and outstanding as of the date of this Agreement and not more than 1,565,000

 

 

shares will be issued and outstanding at the Effective Time. All of the issued and outstanding shares of capital stock of Mountain are duly and validly issued and outstanding and are fully paid and nonassessable under the GBCC. None of the outstanding shares of capital stock of Mountain have been issued in violation of any preemptive rights of the current or past shareholders of Mountain.

 

(b)                                  Except as set forth in Section 5.3 of this Agreement, or as disclosed in Section 5.3 of the Mountain Disclosure Memorandum, there are no shares of capital stock or other equity securities of Mountain outstanding and no outstanding Rights relating to the capital stock of Mountain.

 

5.4                                  Mountain Subsidiaries .  Mountain has disclosed in Section 5.4 of the Mountain Disclosure Memorandum all of the Mountain Subsidiaries as of the date of this Agreement.  Except as disclosed in Section 5.4 of the Mountain Disclosure Memorandum, Mountain or one of its Subsidiaries owns all of the issued and outstanding shares of capital stock of each Mountain Subsidiary.  No equity securities of any Mountain Subsidiary are or may become required to be issued (other than to another Mountain Company) by reason of any Rights, and there are no Contracts by which any Mountain Subsidiary is bound to issue (other than to another Mountain Company) additional shares of its capital stock or Rights, or by which any Mountain Company is or may be bound to transfer any shares of the capital stock of any Mountain Subsidiary (other than to another Mountain Company).  There are no Contracts relating to the rights of any Mountain Company to vote or to dispose of any shares of the capital stock of any Mountain Subsidiary. All of the shares of capital stock of each Mountain Subsidiary held by a Mountain Company are fully paid and nonassessable under the applicable Law of the jurisdiction in which such Subsidiary is incorporated or organized and are owned by a Mountain Company free and clear of any Lien except as disclosed by the Mountain Disclosure Memorandum. Each Mountain Subsidiary is either a bank, a savings association or a corporation and is duly organized, validly existing, and (as to corporations) in good standing under the Laws of the jurisdiction in which it is organized and has the corporate power and authority necessary for it to own, lease and operate its Assets and to carry on its business as now conducted. Each Mountain Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain. Each Mountain Subsidiary that is a depository institution is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and the deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund, as appropriate.

 

 

5.5                                  Financial Statements .  Mountain has included in Section 5.5 of the Mountain Disclosure Memorandum copies of all Mountain Financial Statements for periods ended prior to the date hereof and will deliver to GB&T copies of all Mountain Financial Statements prepared subsequent to the date hereof.  The Mountain Financial Statements (as of the dates thereof and for the periods covered thereby) (a) are, or if dated after the date of this Agreement will be, in accordance with the books and records of the Mountain Companies, which are or will be, as the case may be, complete and correct in all Material respects and which have been or will have been, as the case may be, maintained in accordance with good business practices, and (b) present or will present, as the case may be and in all Material respects, fairly the consolidated financial position of the Mountain Companies as of the dates indicated and the consolidated results of operations, changes in shareholders’ equity, and cash flows of the Mountain Companies for the periods indicated, in accordance with GAAP (subject to any exceptions as to consistency specified therein or as may be indicated in the notes thereto or, in the case of interim financial statements, to normal recurring year-end adjustments that are not Material in amount or effect).

 

5.6                                  Absence of Undisclosed Liabilities .    No Mountain Company has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain except (i) Liabilities which are accrued or reserved against in the consolidated balance sheets of Mountain as of November 30, 2005, included in the Mountain Financial Statements or reflected in the notes thereto.  No Mountain Company has incurred or paid any Liability since November 30, 2005 except for such Liabilities incurred or paid in the ordinary course of business consistent with past business practice and which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

5.7                                  Absence of Certain Changes or Events .  Since November 30, 2005, except as disclosed in Section 5.7 of the Mountain Disclosure Memorandum and to the Knowledge of Mountain, (a) there have been no events, changes or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, and (b) the Mountain Companies have not taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Mountain provided in Article VII of this Agreement and which would likely have a Material Adverse Effect on Mountain.

 

5.8                               Tax Matters .

 

(a)                                   All Tax returns required to be filed by or on behalf of any of the Mountain Companies have been timely filed or requests for extensions have been timely filed, granted, and have not expired, except to the extent that all

 

 

such failures to file, taken together, are not reasonably likely to have a Material Adverse Effect on Mountain and all returns filed are complete and accurate in all Material respects to the Knowledge of Mountain. All Taxes shown on filed returns have been paid or adequate provision for the payment thereof has been made. As of the date of this Agreement, to the Knowledge of Mountain, there is no audit examination, deficiency or refund Litigation with respect to any Taxes that is reasonably likely to result in a determination that would have, individually or in the aggregate, a Material Adverse Effect on Mountain, except as reserved against in the Mountain Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 5.8(a) of the Mountain Disclosure Memorandum.  All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid.

 

(b)                                  Except as disclosed in Section 5.8(b) of the Mountain Disclosure Memorandum, none of the Mountain Companies has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due that is currently in effect, and no unpaid tax deficiency has been asserted in writing against or with respect to any Mountain Company, which deficiency is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

(c)                                   Adequate provision for any Taxes due or to become due for any of the Mountain Companies for the period or periods through and including the date of the respective Mountain Financial Statements has been made and is reflected on such Mountain Financial Statements.

 

(d)                                  Deferred Taxes of the Mountain Companies have been provided for in accordance with GAAP.

 

(e)                                   To the Knowledge of Mountain, each of the Mountain Companies is in compliance with, and its records contain all information and documents (including, without limitation, 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, except for such instances of noncompliance and such omissions as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

5.9                                  Allowance for Possible Loan Losses . The allowance for possible loan or credit losses (the “Allowance”) shown on the balance sheet of MSB included in the most recent Mountain Financial Statements dated prior to the date of this Agreement was, and the Allowance shown on the balance sheet of MSB included in the

 

 

Mountain Financial Statements as of dates subsequent to the execution of this Agreement will be, as of the dates thereof, adequate to the Knowledge of Mountain (within the meaning of GAAP and applicable regulatory requirements or guidelines) to provide for losses relating to or inherent in the loan and lease portfolios (including accrued interest receivables) of MSB and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by MSB as of the dates thereof except where the failure of such Allowance to be so adequate is not reasonably likely to have a Material Adverse Effect on Mountain.

 

5.10                            Assets .   Except as disclosed in Section 5.10 of the Mountain Disclosure Memorandum or as disclosed or reserved against in the Mountain Financial Statements, the Mountain Companies have good and marketable title, and to the Knowledge of Mountain, free and clear of all Liens, to all of their respective Assets indicated as owned by the respective Company as of the date of the respective Mountain Statement.  To the Knowledge of Mountain, all Material tangible properties used in the businesses of the Mountain Companies are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Mountain’s past practices.  All Assets which are Material to the business of the Mountain Companies and held under leases or subleases by any of the Mountain Companies are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect.  The policies of fire, theft, liability and other insurance maintained with respect to the Assets or businesses of the Mountain Companies provide adequate coverage under current industry practices against loss or Liability, and the fidelity and blanket bonds in effect as to which any of the Mountain Companies is a named insured are reasonably sufficient.  The Assets of the Mountain Companies include all assets required to operate the business of the Mountain Companies as presently conducted.

 

5.11                            Environmental Matters .  Except as disclosed in Section 5.11 of the Mountain Disclosure Memorandum:

 

(a)                                   To the Knowledge of Mountain, each Mountain Company, its Participation Facilities and its Loan Properties are, and have been, in compliance with all Environmental Laws, except for noncompliance which is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

 

(b)                                  There is no Litigation pending or to the Knowledge of Mountain threatened before any court, governmental agency or authority or other forum in which any Mountain Company, or to the Knowledge of Mountain, any of its Loan Properties or Participation Facilities has been or, with respect to threatened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance with any Environmental Law or (ii) relating to the release into the Environment of any Hazardous Material, whether or not occurring at, on, under or involving a site owned, leased or operated by any Mountain Company or any of its Loan Properties or Participation Facilities, except for such Litigation pending or threatened the resolution of which is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, and to the Knowledge of Mountain, there is no reasonable basis for any such Litigation.

 

(c)                                   To the Knowledge of Mountain, there have been no releases of Hazardous Material in, on, under or affecting any Participation Facility or Loan Property, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

5.12                            Compliance with Laws .  To the Knowledge of Mountain, each Mountain Company has in effect all Permits necessary for it to own, lease or operate its Assets and to carry on its business as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, and, to the Knowledge of Mountain, there has occurred no Default under any such Permit, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.  Except as disclosed in Section 5.12 of the Mountain Disclosure Memorandum, no Mountain Company:

 

(a)                                   to the Knowledge of Mountain, is in violation of any Laws, Orders or Permits applicable to its business or employees conducting its business, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain; and

 

(b)                                  to the Knowledge of Mountain, has received any notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Mountain Company is not in compliance with any of the Laws or Orders which such governmental authority or Regulatory Authority enforces, where such noncompliance is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, (ii) threatening to revoke any Permits, the revocation of which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, or (iii) requiring any Mountain Company to enter into or consent to the issuance of a cease and desist order, formal

 

 

agreement, directive, commitment or memorandum of understanding, or to adopt any Board resolution or similar undertaking, which restricts materially the conduct of its business, or in any manner relates to its capital adequacy, its credit or reserve policies, its management, or the payment of dividends.

 

5.13                            Labor Relations .   No Mountain Company is the subject of any Litigation asserting that it or any other Mountain Company has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel it or any other Mountain Company to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving any Mountain Company, pending or, to its Knowledge, threatened, nor, to its Knowledge, is there any activity involving any Mountain Company’s employees seeking to certify a collective bargaining unit or engaging in any other organization activity.

 

5.14                            Employee Benefit Plans .

 

(a)                                   Mountain has disclosed in Section 5.14 of the Mountain Disclosure Memorandum and delivered or made available to GB&T prior to the execution of this Agreement copies in each case of all pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus, or other incentive plans, all other written employee programs, arrangements, or agreements, all medical, vision, dental, or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including, without limitation, “employee benefit plans” as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or contributed to by any Mountain Company or Affiliate thereof for the benefit of employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries and under which employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries are eligible to participate (collectively, the “Mountain Benefit Plans”).  Any of the Mountain Benefit Plans which is an “employee pension benefit plan,” as that term is defined in Section 3(2) of ERISA, is referred to herein as a “Mountain ERISA Plan.”  Each Mountain ERISA Plan which is also a “defined benefit plan” (as defined in Section 414(j) of the Internal Revenue Code) is referred to herein as a “Mountain Pension Plan.”  No Mountain Pension Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA.

 

(b)                                  To the Knowledge of Mountain, all Mountain Benefit Plans are in compliance with the applicable terms of ERISA, the Internal Revenue Code, and any other applicable Laws the breach or violation of which are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain. Each Mountain ERISA Plan which is

 

 

intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service, and to the Knowledge of Mountain, there are no circumstances likely to result in revocation of any such favorable determination letter.  To the Knowledge of Mountain, no Mountain Company nor any other party has engaged in a transaction with respect to any Mountain Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject any Mountain Company to a tax or penalty imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

(c)                                   Neither Mountain nor any ERISA Affiliate of Mountain maintains an “employee pension benefit plan,” within the meaning of Section 3(2) of ERISA that is or was subject to Title IV of ERISA.

 

(d)                                  Neither Mountain nor any ERISA Affiliate of Mountain has any past, present or future obligation or liability to contribute to any multi-employer plan, as defined in Section 3(37) of ERISA.

 

(e)                                   Except as disclosed in Section 5.14(e) of the Mountain Disclosure Memorandum, (i) no Mountain Company has any obligations for retiree health and life benefits under any of the Mountain Benefit Plans, except as required by Section 601 of ERISA and Section 4980B of the Code; (ii)there are no restrictions on the rights of any Mountain Company to amend or terminate any such Plan; and (iii) any amendment or termination of any such Plan will not cause any Mountain Company to incur any Liability that is reasonably likely to have a Material Adverse Effect on Mountain.

 

(f)                                     Except as disclosed in Section 5.14(f) of the Mountain Disclosure Memorandum, neither the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby will (i) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any employee of any Mountain Company from any Mountain Company under any Mountain Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Mountain Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit.

 

(g)                                  The actuarial present values of all accrued deferred compensation entitlements (including, without limitation, entitlements under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of any Mountain

 

 

Company and their respective beneficiaries have been fully reflected on the Mountain Financial Statements to the extent required by and in accordance with GAAP, in all Material respects.

 

(h)                                  To the Knowledge of Mountain, Mountain and each ERISA Affiliate of Mountain has complied with the continuation of coverage requirements of Section 1001 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608 in a manner that will not cause any Mountain Company to incur any Liability that is reasonably likely to have a Material Adverse Effect on Mountain.

 

(i)                                      Except as disclosed in Section 5.14(i) of the Mountain Disclosure Memorandum, neither Mountain nor any ERISA Affiliate of Mountain is obligated, contingently or otherwise, under any agreement to pay any amount which would be treated as a “parachute payment,” as defined in Section 280G(b) of the Internal Revenue Code (determined without regard to Section 280G(b)(2)(A)(ii) of the Internal Revenue Code).

 

(j)                                      Other than routine claims for benefits, to the Knowledge of Mountain, there are no actions, audits, investigations, suits or claims pending against any Mountain Benefit Plan, any trust or other funding agency created thereunder, or against any fiduciary of any Mountain Benefit Plan or against the assets of any Mountain Benefit Plan.

 

5.15                            Material Contracts .   Except as disclosed in Section 5.15 of the Mountain Disclosure Memorandum or otherwise reflected in the Mountain Financial Statements, none of the Mountain Companies, nor any of their respective Assets, businesses or operations, is a party to, or is bound or affected by, or receives benefits under, (a) any employment, severance, termination, consulting or retirement Contract providing for aggregate payments to any Person in any calendar year in excess of $25,000, excluding “at will” employment arrangements, (b) any Contract relating to the borrowing of money by any Mountain Company or the guarantee by any Mountain Company of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, Federal Home Loan Bank advances, fully-secured repurchase agreements, trade payables, and Contracts relating to borrowings or guarantees made in the ordinary course of business), (c) any Contracts between or among Mountain Companies, and (d) any other Contract (excluding this Agreement) or amendment thereto that is required to be filed as an Exhibit to Form 10-KSB or Form 10-QSB filed by Mountain with the SEC as of the date of this Agreement that has not been filed as an exhibit to any Mountain Form 10-KSB or 10-QSB filed with the SEC (together with all Contracts referred to in Sections 5.10 and 5.14(a) of this Agreement, the “Mountain Contracts”).  None of the Mountain Companies is in Default under any Mountain Contract, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain. All of the indebtedness of any Mountain Company for money borrowed is prepayable at

 

 

any time by such Mountain Company without penalty or premium except as disclosed in Mountain Disclosure Memorandum.

 

5.16                            Legal Proceedings .  Except as disclosed in Section 5.16 of the Mountain Disclosure Memorandum, there is no Litigation instituted or pending, or, to the Knowledge of Mountain, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome) against any Mountain Company, or against any Asset, interest, or right of any of them, that is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain, nor are there any Orders of any Regulatory Authorities, other governmental authorities, or arbitrators outstanding against any Mountain Company, that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain.

 

5.17                            Reports .   Since January 1, 2003, each Mountain Company has timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with (a) the Regulatory Authorities, and (b) any applicable federal and state securities or banking authorities (except, in the case of state securities authorities, failures to file which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Mountain).  As of their respective dates, each of such reports and documents, including the financial statements, Exhibits, and schedules thereto, complied in all Material respects with all applicable Laws.  As of its respective date, each such report and document to Mountain’s Knowledge did not, in any Material respect, contain any untrue statement of a Material fact or omit 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.

 

5.18                            Statements True and Correct .  To the Knowledge of Mountain, no statement, certificate, instrument or other writing furnished or to be furnished by any Mountain Company or any Affiliate thereof to GB&T pursuant to this Agreement or any other document, agreement or instrument referred to herein contains or will contain any untrue statement of Material fact or will omit to state a Material fact necessary to make the statements therein, in light of the circumstances under which they were made, not Materially misleading.  To the Knowledge of Mountain, none of the information supplied or to be supplied by any Mountain Company or any Affiliate thereof for inclusion in the Registration Statement to be filed by GB&T with the SEC will, when the Registration Statement becomes effective, be false or misleading with respect to any Material fact, or omit to state any Material fact necessary to make the statements therein not misleading.  To the Knowledge of Mountain, none of the information supplied or to be supplied by any Mountain Company or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Mountain’s shareholders in connection with the Mountain Shareholders’ Meeting, and any other documents to be filed by a Mountain Company or any Affiliate thereof with the SEC or any other Regulatory Authority in connection with the transactions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Proxy Statement,

 

 

when first mailed to the shareholders of Mountain, be false or misleading with respect to any Material fact, or omit to state any Material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the Mountain Shareholders’ Meeting, be false or misleading with respect to any Material fact, or omit to state any Material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Mountain Shareholders’ Meeting.  All documents that any Mountain Company or any Affiliate thereof are responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all Material respects with the provisions of applicable Law.

 

5.19                            Tax and Regulatory Matters .   No Mountain Company, to the Knowledge of Mountain, or any Affiliate thereof has taken any action, or agreed to take any action, or has any Knowledge of any fact or circumstance that is reasonably likely to (a) prevent the transactions contemplated hereby, including the Merger, from qualifying for treatment as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (b) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this Agreement or result in the imposition of a condition or restriction of the type referred to in the second sentence of such Section.  To the Knowledge of Mountain, there exists no fact, circumstance, or reason why the requisite Consents referred to in Section 9.1(b) of this Agreement cannot be received in a timely manner without the imposition of any condition or restriction of the type described in the second sentence of such Section 9.1(b).

 

5.20                            Charter Provisions .   Each Mountain Company has taken all action so that the entering into of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement do not and will not result in the grant of any rights to any Person under the Articles of Incorporation, Bylaws or other governing instruments of any Mountain Company or restrict or impair the ability of GB&T to vote, or otherwise to exercise the rights of a shareholder with respect to, shares of any Mountain Company that may be acquired or controlled by it.

 

5.21                            State Anti-Takeover Laws .  Each Mountain Company has taken all necessary action to exempt the transactions contemplated by this Agreement from any applicable “moratorium,” “control share,” “fair price,” “business combination,” or other anti-takeover laws and regulations of the State of Georgia including those laws contained within Sections 14-2-1110 et seq. and 14-2-1131 et seq. of the GBCC.

 

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF GB&T

 

GB&T hereby represents and warrants to Mountain as follows:

 

6.1                                  Organization, Standing, and Power .  GB&T is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Georgia, and is duly registered as a bank holding company under the BHC Act and under Georgia law.  GB&T has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets.  GB&T is duly qualified or licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on GB&T.

 

6.2                                  Authority; No Breach By Agreement .

 

(a)                                   Subject to the actions required for listing by NASDAQ of the shares to be issued to Mountain shareholders, which GB&T shall promptly undertake, GB&T has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of GB&T.  Subject to the approval of this Agreement by the holders of a majority of the outstanding shares of GB&T, this Agreement represents a legal, valid and binding obligation of GB&T, enforceable against GB&T in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

 

(b)                                  Except as described in Section 6.2 of the GB&T Disclosure Memorandum, neither the execution and delivery of this Agreement by GB&T, nor the consummation by GB&T of the transactions contemplated hereby, nor compliance by GB&T with any of the provisions hereof will (i) conflict with or result in a breach of any provision of GB&T’s Articles of Incorporation or Bylaws, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any GB&T Company under, any Contract or Permit of any GB&T Company, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on GB&T, or (iii) subject to receipt of the requisite approvals referred to in Section 9.1(b) of this Agreement,

 

 

violate any Law or Order applicable to any GB&T Company or any of their respective Assets.

 

(c)                                   Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and rules of the NASDAQ, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, and other than Consents, filings or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on GB&T, no notice to, filing with, or Consent of, any public body or authority is necessary for the consummation by GB&T of the Merger and the other transactions contemplated in this Agreement.

 

6.3                                  Capital Stock .

 

(a)                                   The authorized capital stock of GB&T consists of 20,000,000 shares of GB&T Common Stock, of which 12,782.397 shares were issued and outstanding as of the date of this Agreement.  All of the issued and outstanding shares of GB&T Common Stock are, and all of the shares of GB&T Common Stock to be issued in exchange for shares of Mountain Common Stock upon consummation of the Merger, when issued in accordance with the terms of this Agreement, will be, duly and validly issued and outstanding and fully paid and nonassessable under the GBCC or otherwise.  None of the outstanding shares of GB&T Common Stock have been, and none of the shares of GB&T Common Stock to be issued in exchange for shares of Mountain Common Stock upon consummation of the Merger will be, issued in violation of any preemptive rights of the current or past shareholders of GB&T or any other party.

 

(b)                                  [Reserved]

 

(c)                                   Except as set forth in Sections 6.3(a) of this Agreement, or as disclosed in Section 6.3(c) of the GB&T Disclosure Memorandum, there are no other shares of capital stock or other equity securities of GB&T outstanding and no outstanding Rights relating to the capital stock of GB&T.

 

6.4                                  GB&T Subsidiaries .  GB&T has disclosed in Section 6.4 of the GB&T Disclosure Memorandum all of the GB&T Subsidiaries as of the date of this Agreement.  Except as disclosed in Section 6.4 of the GB&T Disclosure Memorandum, GB&T owns all of the issued and outstanding shares of capital stock of each GB&T Subsidiary.  No equity securities of any GB&T Subsidiary are or may become required to be issued (other than to another GB&T Company) by reason of any Rights, and there are no Contracts by which any GB&T Subsidiary is bound to issue (other than to another GB&T Company) additional

 

 

shares of its capital stock or Rights, or by which any GB&T Company is or may be bound to transfer any shares of the capital stock of any GB&T Subsidiary (other than to another GB&T Company). There are no Contracts relating to the rights of any GB&T Company to vote or to dispose of any shares of the capital stock of any GB&T Subsidiary. All of the shares of capital stock of each GB&T Subsidiary held by a GB&T Company are fully paid and nonassessable under the applicable Law of the jurisdiction in which such Subsidiary is incorporated or organized and are owned by GB&T free and clear of any Lien.  Each GB&T Subsidiary is either a bank, a savings association, a corporation or a limited liability company and is duly organized, validly existing, and (as to corporations) in good standing under the Laws of the jurisdiction in which it is organized and has the corporate power and authority necessary for it to own, lease and operate its Assets and to carry on its business as now conducted.  Each GB&T Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on GB&T.  Each GB&T Subsidiary that is a depository institution is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and the deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund, as appropriate.

 

6.5                                  Financial Statements .  GB&T has included in Section 6.5 of the GB&T Disclosure Memorandum copies of all GB&T Financial Statements for periods beginning January 1, 2001 and ending prior to the date hereof and will deliver to Mountain copies of all GB&T Financial Statements prepared subsequent to the date hereof.  The GB&T Financial Statements (as of the dates thereof and for the periods covered thereby) (a) are, or if dated after the date of this Agreement will be, in accordance with the books and records of the GB&T Companies, which are or will be, as the case may be, complete and correct and which have been or will have been, as the case may be, maintained in accordance with good business practices, and (b) present or will present, as the case may be, fairly the consolidated financial position of the GB&T Companies as of the dates indicated and the consolidated results of operations, changes in shareholders’ equity, and cash flows of the GB&T Companies for the periods indicated, in accordance with GAAP (subject to exceptions as to consistency specified therein or as may be indicated in the notes thereto or, in the case of interim financial statements, to normal recurring year-end adjustments that are not Material in amount or effect).

 

6.6                                  Absence of Undisclosed Liabilities .   No GB&T Company has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on GB&T, except Liabilities which are accrued or reserved against in the consolidated balance sheets of GB&T as of September 30, 2005, included in the GB&T Financial Statements or re