Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FLAG FINANCIAL CORPORATION
AND
FIRST HOGANSVILLE BANKSHARES, INC.
Dated as of June 1, 1999
TABLE OF CONTENTS
LIST OF EXHIBITS..............................................................IV
AGREEMENT AND PLAN OF MERGER...................................................1
ARTICLE 1. TRANSACTIONS AND TERMS OF THE MERGER.........................1
1.1 MERGER................................................................1
1.2 TIME AND PLACE OF CLOSING.............................................2
1.3 EFFECTIVE TIME........................................................2
ARTICLE 2. TERMS OF MERGER..............................................2
2.1 ARTICLES OF INCORPORATION.............................................2
2.2 BYLAWS................................................................2
2.3 DIRECTORS AND OFFICERS................................................2
ARTICLE 3. MANNER OF CONVERTING SHARES..................................3
3.1 CONVERSION OF SHARES..................................................3
3.2 ANTI-DILUTION PROVISIONS..............................................3
3.3 SHARES HELD BY HOGANSVILLE OR FLAG....................................3
3.4 DISSENTING SHAREHOLDERS...............................................3
3.5 FRACTIONAL SHARES.....................................................4
ARTICLE 4. EXCHANGE OF SHARES...........................................4
4.1 EXCHANGE PROCEDURES...................................................4
4.2 RIGHTS OF FORMER SHAREHOLDERS OF HOGANSVILLE..........................5
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF HOGANSVILLE................6
5.1 ORGANIZATION, STANDING, AND POWER.....................................6
5.2 AUTHORITY OF HOGANSVILLE; NO BREACH BY AGREEMENT......................6
5.3 CAPITAL STOCK.........................................................7
5.4 HOGANSVILLE SUBSIDIARIES..............................................7
5.5 FINANCIAL STATEMENTS..................................................8
5.6 ABSENCE OF UNDISCLOSED LIABILITIES....................................8
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS..................................9
5.8 TAX MATTERS...........................................................9
5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES...................................10
5.10 ASSETS...............................................................11
5.11 INTELLECTUAL PROPERTY................................................11
5.12 ENVIRONMENTAL MATTERS................................................12
5.13 COMPLIANCE WITH LAWS.................................................13
5.14 IMMIGRATION MATTERS..................................................13
5.15 LABOR RELATIONS......................................................14
5.16 EMPLOYEE BENEFIT PLANS...............................................14
5.17 MATERIAL CONTRACTS...................................................16
5.18 LEGAL PROCEEDINGS....................................................17
5.19 REPORTS..............................................................17
5.20 STATEMENTS TRUE AND CORRECT..........................................17
5.21 ACCOUNTING, TAX AND REGULATORY MATTERS...............................18
5.22 CHARTER PROVISIONS...................................................18
5.23 BOARD RECOMMENDATION.................................................18
5.24 Y2K..................................................................18
i
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF FLAG......................19
6.1 ORGANIZATION, STANDING, AND POWER....................................19
6.2 AUTHORITY OF FLAG; NO BREACH BY AGREEMENT............................19
6.3 CAPITAL STOCK........................................................20
6.4 FLAG SUBSIDIARIES....................................................20
6.5 SEC FILINGS, FINANCIAL STATEMENTS....................................21
6.6 ABSENCE OF UNDISCLOSED LIABILITIES...................................22
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.................................22
6.8 TAX MATTERS..........................................................22
6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES...................................24
6.10 ASSETS...............................................................24
6.11 INTELLECTUAL PROPERTY................................................25
6.12 ENVIRONMENTAL MATTERS................................................25
6.13 COMPLIANCE WITH LAWS.................................................26
6.14 LABOR RELATIONS......................................................26
6.15 EMPLOYEE BENEFIT PLANS...............................................27
6.16 MATERIAL CONTRACTS...................................................28
6.17 LEGAL PROCEEDINGS....................................................29
6.18 REPORTS..............................................................29
6.19 STATEMENTS TRUE AND CORRECT..........................................30
6.20 ACCOUNTING TAX AND REGULATORY MATTERS................................30
6.21 CHARTER PROVISIONS...................................................30
6.22 BOARD RECOMMENDATION.................................................30
6.23 Y2K..................................................................30
ARTICLE 7. CONDUCT OF BUSINESS PENDING CONSUMMATION....................31
7.1 AFFIRMATIVE COVENANTS OF HOGANSVILLE.................................31
7.2 NEGATIVE COVENANTS OF HOGANSVILLE....................................31
7.3 AFFIRMATIVE COVENANTS OF FLAG........................................33
7.4 NEGATIVE COVENANTS OF FLAG...........................................34
7.5 ADVERSE CHANGES IN CONDITION.........................................34
7.6 REPORTS..............................................................34
ARTICLE 8. ADDITIONAL AGREEMENTS.......................................34
8.1 REGISTRATION STATEMENT...............................................34
8.2 NASDAQ LISTING.......................................................35
8.3 SHAREHOLDER APPROVAL.................................................35
8.4 APPLICATIONS.........................................................35
8.5 FILINGS WITH STATE OFFICES...........................................35
8.6 AGREEMENT AS TO EFFORTS TO CONSUMMATE................................35
8.7 INVESTIGATION AND CONFIDENTIALITY....................................36
8.8 PRESS RELEASES.......................................................36
8.9 CERTAIN ACTIONS......................................................36
8.10 ACCOUNTING AND TAX TREATMENT.........................................37
8.11 CHARTER PROVISIONS...................................................37
8.12 AGREEMENTS OF AFFILIATES.............................................37
8.13 EMPLOYEE BENEFITS AND CONTRACTS......................................38
8.14 INDEMNIFICATION......................................................38
ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE...........39
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY..............................39
9.2 CONDITIONS TO OBLIGATIONS OF FLAG....................................41
9.3 CONDITIONS TO OBLIGATIONS OF HOGANSVILLE.............................42
ARTICLE 10. TERMINATION.................................................43
ii
10.1 TERMINATION..........................................................43
10.2 EFFECT OF TERMINATION................................................44
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS........................44
ARTICLE 11. MISCELLANEOUS...............................................44
11.1 DEFINITIONS..........................................................44
11.2 EXPENSES.............................................................52
11.3 BROKERS AND FINDERS..................................................52
11.4 ENTIRE AGREEMENT.....................................................52
11.5 AMENDMENTS...........................................................53
11.6 WAIVERS..............................................................53
11.7 ASSIGNMENT...........................................................53
11.8 NOTICES..............................................................53
11.9 GOVERNING LAW........................................................54
11.10 COUNTERPARTS.........................................................54
11.11 CAPTIONS, ARTICLES AND SECTIONS......................................54
11.12 INTERPRETATIONS......................................................54
11.13 ENFORCEMENT OF AGREEMENT.............................................55
11.14 SEVERABILITY.........................................................55
SIGNATURES TO AGREEMENT AND PLAN OF MERGER......................................
iii
LIST OF EXHIBITS
Exhibit
Number Description
------ -----------
1. Form of Agreement of Affiliates of FIRST HOGANSVILLE BANKSHARES,
INC.. (ss. 8.12,ss. 9.2(f)).
2. Matters as to which Xxxxxxxxxx Xxxxxxxx LLP will opine. (ss. 9.2(d)).
3. Form of Claims Letter (ss. 9.2(g)).
4. Matters as to which Powell, Goldstein, Xxxxxx & Xxxxxx LLP will opine.
(ss. 9.3(d)).
iv
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of June 1, 1999, by and between FLAG FINANCIAL CORPORATION ("FLAG"), a
Georgia corporation located in LaGrange, Georgia, and FIRST HOGANSVILLE
BANKSHARES, INC.("HOGANSVILLE"), a Georgia corporation located in Hogansville,
Georgia.
Preamble
--------
The respective Boards of Directors of HOGANSVILLE and FLAG are of the
opinion that the transactions described herein are in the best interests of the
Parties to this Agreement and their respective shareholders. This Agreement
provides for the acquisition of HOGANSVILLE by FLAG, pursuant to the merger of
HOGANSVILLE with and into FLAG. At the effective time of such merger, the
outstanding shares of the capital stock of HOGANSVILLE shall be converted into
the right to receive shares of the common stock of FLAG (except as provided
herein). As a result, shareholders of HOGANSVILLE shall become shareholders of
FLAG, and FLAG shall conduct the business and operations of HOGANSVILLE. The
transactions described in this Agreement are subject to (a) approval of the
shareholders of HOGANSVILLE, (b) approval of the Georgia Department of Banking
and Finance, (c) approval of the Board of Governors of the Federal Reserve, and
(d) satisfaction of certain other conditions described in this Agreement. It is
the intention of the Parties to this Agreement that the merger, for federal
income tax purposes, shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and, for accounting purposes, shall
qualify for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section 11.1
hereof.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1.
TRANSACTIONS AND TERMS OF THE MERGER
------------------------------------
1.1 Merger.
-----------
Subject to the terms and conditions of this Agreement, at the Effective
Time, HOGANSVILLE will merge with and into FLAG in accordance with the
provisions of Section 14-2-1101 of the GBCC and with the effect provided in
Section 14-2-1106 of the GBCC (the "Merger"). FLAG shall be the Surviving
Corporation resulting from the Merger and shall continue to be governed by the
Laws of the State of Georgia. The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of HOGANSVILLE and FLAG, as set forth herein.
1
1.2 Time and Place of Closing.
------------------------------
The closing of the transactions contemplated hereby (the "Closing") will
take place at 9:00 A.M. on the date that the Effective Time occurs (or the
immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or
at such other time as the Parties, acting through their authorized officers, may
mutually agree. The Closing shall be held at such location as may be mutually
agreed upon by the Parties.
1.3 Effective Time.
---------------------
The Merger and other transactions contemplated by this Agreement shall
become effective on the date and at the time the Certificate 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 authorized
officers of each Party, the Parties shall use their reasonable efforts to cause
the Effective Time to occur on the fifth business day following the last to
occur of (i) 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, and (ii) the earliest date
on which the shareholders of HOGANSVILLE have approved this Agreement to the
extent such approval is required by applicable Law; provided, however, that the
date of the Effective Time shall not extend past the termination date set forth
in ss. 10.1(e) hereof.
ARTICLE 2.
TERMS OF MERGER
---------------
2.1 Articles of Incorporation.
-------------------------------
The Articles of Incorporation of FLAG in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until duly amended or repealed.
2.2 Bylaws. The Bylaws of FLAG in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation until duly amended or repealed.
2.3 Directors and Officers.
---------------------------
(a) The directors of the Surviving Corporation shall be (i) the directors
of FLAG immediately prior to the Effective Time and (ii) Xxxx X. Xxxxx, Xx.,
together with such additional persons as may thereafter be elected. Such persons
shall serve as the directors of the Surviving Corporation from and after the
Effective Time in accordance with the Bylaws of the Surviving Corporation.
(b) The executive officers of the Surviving Corporation shall be (i) the
executive officers of the Surviving Corporation immediately prior to the
Effective Time and (ii) such additional persons as may thereafter be elected.
Such persons shall serve as the executive officers of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
2
ARTICLE 3.
MANNER OF CONVERTING SHARES
---------------------------
3.1 Conversion of Shares.
--------------------------
Subject to the provisions of this Article 3, at the Effective Time, by
virtue of the Merger and without any action on the part of HOGANSVILLE, or the
shareholders of the foregoing, the shares of HOGANSVILLE shall be converted as
follows:
(a) Each share of capital stock of FLAG issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and after
the Effective Time.
(b) Each share of HOGANSVILLE Common Stock (excluding shares held by any
HOGANSVILLE Entity or any FLAG Entity, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 3.4) issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive 6.08466 shares of FLAG Common Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions.
------------------------------
In the event FLAG changes the number of shares of FLAG Common Stock issued
and outstanding prior to the Effective Time as a result of a 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 thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) and prior to the Effective Time, the Exchange Ratio
shall be proportionately adjusted.
3.3 Shares Held by HOGANSVILLE or FLAG.
---------------------------------------
Each of the shares of HOGANSVILLE Common Stock held by any HOGANSVILLE
Entity or by any FLAG Entity, 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 Dissenting Shareholders.
-----------------------------
Any holder of shares of HOGANSVILLE Common Stock who perfects his
dissenters' rights in accordance with and as contemplated by Article 13, Part 2
of Title 14 of the GBCC, shall be entitled to receive the value of such shares
in cash as determined pursuant to such provision of law; 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 surrendered to FLAG the certificates or certificates representing the shares
for which payment is being made. In the event that after the Effective Time, a
dissenting shareholder of HOGANSVILLE fails to perfect, or effectively withdraws
or loses, his right to appraisal of and payment for his shares, FLAG shall issue
and deliver the consideration to which such holder of shares of HOGANSVILLE
Common Stock is entitled under this Article 3 (without interest) upon surrender
by such holder of the certificate or certificates representing shares of
HOGANSVILLE Common Stock held by him. Upon satisfaction of all claims of
dissenting shareholders, the remaining escrowed amount, reduced by payment of
the fees and expenses of the escrow agent, will be returned to FLAG.
3
3.5 Fractional Shares.
----------------------
Notwithst xxxxxx any other provision of this Agreement, each holder of
shares of HOGANSVILLE Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of FLAG Common
Stock (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 FLAG Common Stock multiplied by the market
value of one share of FLAG Common Stock at the Effective Time. The market value
of one share of FLAG Common Stock at the Effective Time shall be the last sale
price of such common stock on the Nasdaq National Market (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative source
selected by FLAG) on the last trading day preceding the Effective Time. No such
holder will be entitled to dividends, voting rights, or any other rights as a
shareholder in respect of any fractional shares.
ARTICLE 4.
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures.
------------------------
Promptly after the Effective Time, FLAG shall cause the exchange agent
selected by FLAG (the "Exchange Agent") to mail to each holder of record of a
certificate or certificates which represented shares of HOGANSVILLE Common Stock
immediately prior to the Effective Time (the "Certificates") appropriate
transmittal materials and instructions (which shall specify that delivery shall
be effected, and risk of loss and title to such Certificates shall pass, only
upon proper delivery of such Certificates to the Exchange Agent). The
Certificate or Certificates of HOGANSVILLE Common Stock so delivered shall be
duly endorsed as the Exchange Agent may require. In the event of a transfer of
ownership of shares of HOGANSVILLE Common Stock represented by Certificates that
are not registered in the transfer records of HOGANSVILLE, the consideration
provided in Section 3.1 may be issued to a transferee if the Certificates
representing such shares are delivered to the Exchange Agent, accompanied by all
documents required to evidence such transfer and by evidence satisfactory to the
Exchange Agent that any applicable stock transfer taxes have been paid. If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(i) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as
FLAG and the Exchange Agent may reasonably require, and (iii) any other
documents necessary to evidence and effect the bona fide exchange thereof, the
Exchange Agent shall issue to such holder the consideration into which the
shares represented by such lost, stolen, mislaid or destroyed Certificate shall
have been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of HOGANSVILLE
Common Stock (other than shares to be canceled pursuant to Section 3.3 or as to
which statutory dissenters' rights have been perfected as provided in Section
3.4) 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, together with all undelivered dividends
or distributions in respect of such shares (without interest thereon) pursuant
to Section 4.2. FLAG shall not be obligated to deliver the consideration to
which any former holder of HOGANSVILLE Common Stock is entitled as a result of
the Merger until such holder surrenders such holder's Certificate or
Certificates for exchange as provided in this Section 4.1. Any other provision
4
of this Agreement notwithstanding, neither FLAG nor the Exchange Agent shall be
liable to a holder of HOGANSVILLE Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar Law. Approval of this Agreement by the
shareholders of HOGANSVILLE shall constitute ratification of the appointment of
the Exchange Agent.
4.2 Rights of Former Shareholders of HOGANSVILLE.
-------------------------------------------------
At the Effective Time, the stock transfer books of HOGANSVILLE shall be
closed as to holders of HOGANSVILLE Common Stock immediately prior to the
Effective Time and no transfer of HOGANSVILLE 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, each Certificate theretofore
representing shares of HOGANSVILLE Common Stock (other than shares to be
canceled pursuant to Sections 3.3 and 3.4) shall from and after the Effective
Time represent for all purposes only the right to receive the consideration
provided in Section 3.1 in exchange therefor, subject, however, to FLAG's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by HOGANSVILLE
in respect of such shares of HOGANSVILLE Common Stock in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time. To the
extent permitted by Law, former shareholders of record of HOGANSVILLE shall be
entitled to vote after the Effective Time at any meeting of FLAG shareholders
the number of whole shares of FLAG Common Stock into which their respective
shares of HOGANSVILLE Common Stock are converted, regardless of whether such
holders have exchanged their Certificates for certificates representing FLAG
Common Stock in accordance with the provisions of this Agreement. Whenever a
dividend or other distribution is declared by FLAG on the FLAG 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 of FLAG Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of FLAG Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any Certificate until
such holder surrenders such Certificate for exchange as provided in Section 4.1.
However, upon surrender of such Certificate, both the FLAG Common Stock
certificate (together with all such undelivered dividends or other distributions
without interest) and any undelivered dividends and cash payments payable
hereunder (without interest) shall be delivered and paid with respect to each
share represented by such Certificate. No interest shall be payable with respect
to any cash to be paid under Section 3.1 of this Agreement except to the extent
required in connection with the exercise of dissenters' rights.
5
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF HOGANSVILLE
---------------------------------------------
HOGANSVILLE hereby represents and warrants to FLAG as follows:
5.1 Organization, Standing, and Power.
-------------------------------------------
HOGANSVILLE is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Georgia, and has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its material Assets. HOGANSVILLE is duly qualified or licensed to
transact business as a foreign corporation in good standing in 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 HOGANSVILLE
Material Adverse Effect. The minute book and other organizational documents for
HOGANSVILLE have been made available to FLAG for its review and, except as
disclosed in Section 5.1 of the HOGANSVILLE Disclosure Memorandum, are true and
complete in all material respects as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and shareholders thereof.
5.2 Authority of HOGANSVILLE; No Breach By Agreement.
------------------------------------------------------
(a) HOGANSVILLE 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 HOGANSVILLE, subject to the
approval of this Agreement by the holders of a majority of the outstanding
voting stock of HOGANSVILLE, which is the only shareholder vote required for
approval of this Agreement, and consummation of the Merger by HOGANSVILLE.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid, and binding obligation of HOGANSVILLE, enforceable against
HOGANSVILLE in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, 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 HOGANSVILLE,
nor the consummation by HOGANSVILLE of the transactions contemplated hereby, nor
compliance by HOGANSVILLE with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of HOGANSVILLE's Articles of
Incorporation or Bylaws, or the Charter, Articles of Incorporation, or Bylaws of
any HOGANSVILLE Subsidiary or any resolution adopted by the board of directors
or the shareholders of any HOGANSVILLE Entity, or (ii) except as disclosed in
Section 5.2 of the HOGANSVILLE Disclosure Memorandum, constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
6
any Lien on any Asset of any HOGANSVILLE Entity under, any Contract or Permit of
any HOGANSVILLE Entity, where such Default or Lien, or any failure to obtain
such Consent, is reasonably likely to have, individually or in the aggregate, a
HOGANSVILLE Material Adverse Effect, or (iii) create any right in any third
party to exercise any rights adverse to any FLAG entity or acquire any asset of
any FLAG entity, or (iv) subject to receipt of the requisite Consents referred
to in Section 9.1(b), constitute or result in a Default under or require any
Consent pursuant to, any Law or Order applicable to any HOGANSVILLE Entity or
any of their respective material Assets (including any FLAG Entity or any
HOGANSVILLE Entity becoming subject to or liable for the payment of any Tax on
any of the Assets owned by any FLAG Entity or any HOGANSVILLE Entity being
reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of
applicable federal banking 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, or under the HSR Act, 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 HOGANSVILLE Material Adverse Effect,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by HOGANSVILLE of the Merger and the other
transactions contemplated in this Agreement.
5.3 Capital Stock.
------------------
(a) As of the date of this Agreement, the authorized capital stock of
HOGANSVILLE consists of 1,000,000 shares of HOGANSVILLE Common Stock of which
94,500 shares are issued and outstanding. All of the issued and outstanding
shares of capital stock of HOGANSVILLE 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 HOGANSVILLE has been issued in violation
of any preemptive rights of the current or past shareholders of HOGANSVILLE.
(b) Except as set forth in Section 5.3(a), or as disclosed in Section
5.3(b) of the HOGANSVILLE Disclosure Memorandum, there are no shares of capital
stock or other equity securities of HOGANSVILLE outstanding and no outstanding
Equity Rights relating to the capital stock of HOGANSVILLE.
5.4 HOGANSVILLE Subsidiaries.
------------------------------
HOGANSVILLE has disclosed in Section 5.4 of the HOGANSVILLE Disclosure
Memorandum all of the HOGANSVILLE Subsidiaries that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the number of shares
owned and percentage ownership interest represented by such share ownership) and
all of the HOGANSVILLE Subsidiaries that are general or limited partnerships,
limited liability companies, or other non-corporate entities (identifying the
Law under which such entity is organized, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the amount and nature of
the ownership interest therein). Except as disclosed in Section 5.4 of the
7
HOGANSVILLE Disclosure Memorandum, HOGANSVILLE or one of its wholly-owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each HOGANSVILLE Subsidiary. No capital stock (or
other equity interest) of any HOGANSVILLE Subsidiary is or may become required
to be issued (other than to another HOGANSVILLE Entity) by reason of any Equity
Rights, and there are no Contracts by which any HOGANSVILLE Subsidiary is bound
to issue (other than to another HOGANSVILLE Entity) additional shares of its
capital stock (or other equity interests) or Equity Rights or by which any
HOGANSVILLE Entity is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any HOGANSVILLE Subsidiary (other than to
another HOGANSVILLE Entity). There are no Contracts relating to the rights of
any HOGANSVILLE Entity to vote or to dispose of any shares of the capital stock
(or other equity interests) of any HOGANSVILLE Subsidiary. All of the shares of
capital stock (or other equity interests) of each HOGANSVILLE Subsidiary held by
a HOGANSVILLE Entity are fully paid and (except pursuant to 12 U.S.C. Section 55
in the case of national banks and comparable, applicable State Law, if any, in
the case of State depository institutions) nonassessable and are owned by the
HOGANSVILLE Entity free and clear of any Lien. Except as disclosed in Section
5.4 of the HOGANSVILLE Disclosure Memorandum, each HOGANSVILLE Subsidiary is
either a bank, savings association or a corporation, and is duly organized,
validly existing, and in good standing under the Laws of the jurisdiction in
which it is incorporated or 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 HOGANSVILLE 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 HOGANSVILLE Material Adverse Effect. Each HOGANSVILLE Subsidiary
that is a depository institution is an "insured institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder. The minute
book and other organizational documents for each HOGANSVILLE Subsidiary have
been made available to FLAG for its review, and, except as disclosed in Section
5.4 of the HOGANSVILLE Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings of
the Board of Directors and shareholders thereof.
5.5 Financial Statements.
--------------------------
Each of the HOGANSVILLE Financial Statements (including, in each case, any
related notes) was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements), and fairly presented in all material respects the
consolidated financial position of HOGANSVILLE and its Subsidiaries as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount or effect.
5.6 Absence of Undisclosed Liabilities.
-----------------------------------------
No HOGANSVILLE Entity has any Liabilities that are reasonably likely to
have, individually or in the aggregate, a HOGANSVILLE Material Adverse Effect,
8
except Liabilities which are accrued or reserved against in the consolidated
balance sheets of HOGANSVILLE as of December 31, 1998, included in the
HOGANSVILLE Financial Statements or reflected in the notes thereto. No
HOGANSVILLE Entity has incurred or paid any Liability since December 31, 1998,
except for such Liabilities incurred or paid (i) 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 HOGANSVILLE Material Adverse
Effect or (ii) in connection with the transactions contemplated by this
Agreement.
5.7 Absence of Certain Changes or Events.
-----------------------------------------
Since December 31, 1998, except as disclosed in the HOGANSVILLE Financial
Statements delivered prior to the date of this Agreement or as disclosed in
Section 5.7 of the HOGANSVILLE Disclosure Memorandum, (i) there have been no
events, changes, or occurrences which have had, or are reasonably likely to
have, individually or in the aggregate, a HOGANSVILLE Material Adverse Effect,
and (ii) HOGANSVILLE Entities 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 HOGANSVILLE provided in
Article 7.
5.8 Tax Matters.
----------------
(a) All Tax Returns required to be filed by or on behalf of any HOGANSVILLE
Entities have been timely filed or requests for extensions have been timely
filed, granted, and, to the Knowledge of HOGANSVILLE, have not expired for such
periods, except to the extent that all such failures to file, taken together,
are not reasonably likely to have a HOGANSVILLE Material Adverse Effect, and all
Tax Returns filed are complete and accurate in all material respects. All Taxes
shown on filed Tax Returns have been paid. 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 HOGANSVILLE Material Adverse Effect, except as reserved against in
the HOGANSVILLE Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.8 of the HOGANSVILLE Disclosure
Memorandum. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid. There are no Liens
with respect to Taxes upon any of the Assets of HOGANSVILLE Entities, except for
any such Liens which are not reasonably likely to have a HOGANSVILLE Material
Adverse Effect or with respect to which the Taxes are not yet due and payable.
(b) None of the HOGANSVILLE Entities has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
HOGANSVILLE Entities for the period or periods through and including the date of
the respective HOGANSVILLE Financial Statements that has been made and is
reflected on such HOGANSVILLE Financial Statements is sufficient to cover all
such Taxes.
9
(d) Deferred Taxes of HOGANSVILLE Entities have been provided for in
accordance with GAAP.
(e) Except as disclosed in Section 5.8 of the HOGANSVILLE Disclosure
Memorandum, none of the HOGANSVILLE Entities is a party to any Tax allocation or
sharing agreement and none of HOGANSVILLE Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was HOGANSVILLE) or has any Liability for Taxes
of any Person (other than HOGANSVILLE and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
Law) as a transferee or successor or by Contract or otherwise.
(f) Each of the HOGANSVILLE Entities is in compliance with, and its records
contain all information and documents (including 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 HOGANSVILLE Material Adverse Effect.
(g) Except as disclosed in Section 5.8 of the HOGANSVILLE Disclosure
Memorandum, none of the HOGANSVILLE Entities has made any payments, is obligated
to make any payments, or is a party to any Contract that could obligate it to
make any payments that would be disallowed as a deduction under Sections 28OG or
162(m) of the Internal Revenue Code.
(h) Exclusive of the Merger, there has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of HOGANSVILLE Entities that
occurred during or after any Taxable Period in which HOGANSVILLE Entities
incurred a net operating loss that carries over to any Taxable Period ending
after December 31, 1998.
(i) No HOGANSVILLE Entity has or has had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
(j) All material elections with respect to Taxes affecting HOGANSVILLE
Entities have been or will be timely made.
5.9 Allowance for Possible Loan Losses.
----------------------------------------
The allowance for possible loan or credit losses (the "Allowance") shown on
the consolidated balance sheets of HOGANSVILLE included in the most recent
HOGANSVILLE Financial Statements dated prior to the date of this Agreement was,
and the Allowance shown on the consolidated balance sheets of HOGANSVILLE
included in the HOGANSVILLE Financial Statements as of dates subsequent to the
execution of this Agreement will be, as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or guidelines) to
provide for all known or reasonably anticipated losses relating to or inherent
in the loan and lease portfolios (including accrued interest receivables) of
HOGANSVILLE Entities and other extensions of credit (including letters of credit
10
and commitments to make loans or extend credit) by HOGANSVILLE Entities as of
the dates thereof, except where the failure of such Allowance to be so adequate
is not reasonably likely to have a HOGANSVILLE Material Adverse Effect.
5.10 Assets.
------------
(a) Except as disclosed in Section 5.10 of the HOGANSVILLE Disclosure
Memorandum or as disclosed or reserved against in the HOGANSVILLE Financial
Statements delivered prior to the date of this Agreement, HOGANSVILLE Entities
have good and marketable title, free and clear of all Liens, to all of their
respective Assets, except for any such Liens or other defects of title which are
not reasonably likely to have a HOGANSVILLE Material Adverse Effect. All
tangible properties used in the businesses of the HOGANSVILLE Entities are
usable in the ordinary course of business consistent with HOGANSVILLE's past
practices.
(b) All Assets which are material to HOGANSVILLE's business on a
consolidated basis, held under leases or subleases by any of the HOGANSVILLE
Entities, are held under valid Contracts enforceable against HOGANSVILLE 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, assuming the enforceability of such Contract against the
third party thereto, each such Contract is in full force and effect.
(c) HOGANSVILLE Entities currently maintain the insurance policies
described in Section 5.10(c) of the HOGANSVILLE Disclosure Memorandum. None of
the HOGANSVILLE Entities has received written notice from any insurance carrier
that (i) any policy of insurance will be canceled or that coverage thereunder
will be reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be substantially increased. There are presently no
claims for amounts exceeding in any individual case $25,000 pending under such
policies of insurance and no written notices of claims in excess of such amounts
have been given by any HOGANSVILLE Entity under such policies.
(d) The Assets of the HOGANSVILLE Entities include all material Assets
required to operate the business of the HOGANSVILLE Entities as presently
conducted.
5.11 Intellectual Property.
---------------------------
Each HOGANSVILLE Entity owns or has a license to use all of the
Intellectual Property used by such HOGANSVILLE Entity in the ordinary course of
its business. Each HOGANSVILLE Entity is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such HOGANSVILLE
Entity in connection with such HOGANSVILLE Entity's business operations, and
such HOGANSVILLE Entity has the right to convey by sale or license any
Intellectual Property so conveyed. No HOGANSVILLE Entity is in material Default
under any of its Intellectual Property licenses. No proceedings have been
instituted, or are pending or, to the Knowledge of HOGANSVILLE, threatened,
11
which challenge the rights of any HOGANSVILLE Entity with respect to
Intellectual Property used, sold or licensed by such HOGANSVILLE Entity in the
course of its business, nor has any person claimed or alleged any rights to such
Intellectual Property. To the Knowledge of HOGANSVILLE, the conduct of the
business of the HOGANSVILLE Entities does not infringe any Intellectual Property
of any other person. Except as disclosed in Section 5.11 of the HOGANSVILLE
Disclosure Memorandum, no HOGANSVILLE Entity is obligated to pay any recurring
royalties to any Person with respect to any such Intellectual Property.
5.12 Environmental Matters.
---------------------------
(a) Except as disclosed in Section 5.12 of the HOGANSVILLE Disclosure
Memorandum, to the Knowledge of HOGANSVILLE, each HOGANSVILLE Entity, its
Participation Facilities, and its Operating Properties are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a HOGANSVILLE
Material Adverse Effect.
(b) There is no Litigation pending or, to the Knowledge of HOGANSVILLE,
threatened, before any court, governmental agency, or authority or other forum
in which any HOGANSVILLE Entity or any of its Operating Properties or
Participation Facilities (or HOGANSVILLE in respect of such Operating Property
or Participation Facility) has been or, with respect to threatened Litigation,
may be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the emission,
migration, release, discharge, spillage, or disposal into the environment of any
Hazardous Material, whether or not occurring at, on, under, adjacent to, or
affecting (or potentially affecting) a site owned, leased, or operated by any
HOGANSVILLE Entity or any of its Operating Properties or Participation
Facilities or any neighboring property, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a HOGANSVILLE Material Adverse Effect, nor, to the Knowledge of
HOGANSVILLE, is there any reasonable basis for any Litigation of a type
described in this sentence, except such as is not reasonably likely to have,
individually or in the aggregate, a HOGANSVILLE Material Adverse Effect.
(c) Except as disclosed in Section 5.12 of the HOGANSVILLE Disclosure
Memorandum, during the period of (i) any HOGANSVILLE Entity's ownership or
operation of any of their respective current Assets, or (ii) any HOGANSVILLE
Entity's participation in the management of any Participation Facility or any
Operating Property, to the Knowledge of HOGANSVILLE, there have been no
emissions, migrations, releases, discharges, spillages, or disposals of
Hazardous Material in, on, at, under, adjacent to, or affecting (or potentially
affecting) such properties or any neighboring properties, except such as are not
reasonably likely to have, individually or in the aggregate, a HOGANSVILLE
Material Adverse Effect. Except as disclosed in Section 5.12 of the HOGANSVILLE
Disclosure Memorandum, prior to the period of (i) any HOGANSVILLE Entity's
ownership or operation of any of their respective current properties, (ii) any
HOGANSVILLE Entity's participation in the management of any Participation
Facility or any Operating Property, to the Knowledge of HOGANSVILLE, there were
no releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, or affecting any such property, Participation Facility or Operating
12
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a HOGANSVILLE Material Adverse Effect.
5.13 Compliance with Laws.
---- ---------------------
Each HOGANSVILLE Entity has in effect all Permits necessary for it to own,
lease, or operate its material 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 HOGANSVILLE Material Adverse
Effect, and, to the Knowledge of HOGANSVILLE, 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 HOGANSVILLE Material Adverse Effect.
Except as disclosed in Section 5.13 of the HOGANSVILLE Disclosure Memorandum,
none of the HOGANSVILLE Entities:
(a) is in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for Defaults which are not
reasonably likely to have, individually or in the aggregate, a HOGANSVILLE
Material Adverse Effect; or
(c) since January 1, 1995, has received any written notification or written
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any HOGANSVILLE Entity 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
HOGANSVILLE Material Adverse Effect, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a HOGANSVILLE Material Adverse Effect, or (iii) requiring any
HOGANSVILLE Entity 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 material manner
relates to its capital adequacy, its credit or reserve policies, its management,
or the payment of dividends. Copies of all material reports, correspondence,
notices and other documents relating to any inspection, audit, monitoring or
other form of review or enforcement action by a Regulatory Authority have been
made available to FLAG.
5.14 Immigration Matters.
-------------------------
(a) With respect to all current employees (as defined in Section 27a.1(g)
of Title 8, Code of Federal Regulations) of each HOGANSVILLE Entity, true and
complete copies of all Form I-9 (Employment Eligibility Verification Forms)
completed pursuant to the Immigration Reform and Control Act of 1986 and all
Regulations promulgated thereunder (the "IRCA") and any and all copies of
documentation, records or other papers retained with Forms I-9, have been
delivered to FLAG. Each HOGANSVILLE Entity has complied with the IRCA with
respect to the completion of Forms I-9 for all employees and the reverification
of the employment status of any and all employees whose employment authorization
documents indicated a limited period of employment authorization.
13
(b) With respect to a former employee who has left a HOGANSVILLE Entity's
employment within three (3) years prior to Closing, the HOGANSVILLE Entity has
complied with the IRCA with respect to the maintenance of Forms I-9 for at least
three years or for one year beyond the date of termination, whichever is later.
True and complete copies of all Forms I-9 maintained for former employees
pursuant to the IRCA, and any and all copies of documentation, records or other
papers retained with Forms I-9, have been delivered to FLAG.
5.15 Labor Relations.
---------------------
No HOGANSVILLE Entity is the subject of any Litigation asserting that it or
any other HOGANSVILLE Entity 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 HOGANSVILLE Entity to bargain with any labor
organization as to wages or conditions of employment, nor is any HOGANSVILLE
Entity party to any collective bargaining agreement, nor is there any strike or
other labor dispute involving any HOGANSVILLE Entity, pending or threatened, or
to the Knowledge of HOGANSVILLE, is there any activity involving any HOGANSVILLE
Entity's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.16 Employee Benefit Plans.
-----------------------------
(a) HOGANSVILLE has disclosed in Section 5.16 of the HOGANSVILLE Disclosure
Memorandum, and has delivered or made available to FLAG 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 plan, 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 "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 HOGANSVILLE Entity or ERISA
Affiliate (as defined in subparagraph (c) below) 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, "HOGANSVILLE Benefit Plans"). Each HOGANSVILLE
Benefit Plan which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as an "HOGANSVILLE ERISA
Plan." Each HOGANSVILLE ERISA Plan which is also a "defined benefit plan" (as
defined in Section 4140 of the Internal Revenue Code) is referred to herein as
an "HOGANSVILLE Pension Plan." No HOGANSVILLE Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All HOGANSVILLE 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 HOGANSVILLE Material Adverse Effect. Each HOGANSVILLE 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 HOGANSVILLE has no Knowledge of any circumstances likely to
result in revocation of any such favorable determination letter. To the
14
Knowledge of HOGANSVILLE, no HOGANSVILLE Entity has engaged in a transaction
with respect to any HOGANSVILLE Benefit Plan that, assuming the taxable period
of such transaction expired as of the date hereof, would subject any HOGANSVILLE
Entity to a Tax 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 HOGANSVILLE Material Adverse Effect.
(c) No HOGANSVILLE Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, based on actuarial
assumptions set forth for such plan's most recent actuarial valuation. Since the
date of the most recent actuarial valuation, there has been (i) no material
change in the financial position of any HOGANSVILLE Pension Plan, (ii) no change
in the actuarial assumptions with respect to any HOGANSVILLE Pension Plan, and
(iii) no increase in benefits under any HOGANSVILLE Pension Plan as a result of
plan amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a HOGANSVILLE Material Adverse Effect or
materially adversely affect the funding status of any such plan. Neither any
HOGANSVILLE Pension Plan nor any "single employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any
HOGANSVILLE Entity, or the single-employer plan of any entity which is
considered one employer with HOGANSVILLE under Section 4001 of ERISA or Section
414 of the Internal Revenue Code or Section 302 of ERISA (whether or not waived)
(an "ERISA Affiliate") has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
which is reasonably likely to have a HOGANSVILLE Material Adverse Effect. No
HOGANSVILLE Entity has provided, or is required to provide, security to a
HOGANSVILLE Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any HOGANSVILLE Entity with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a HOGANSVILLE Material
Adverse Effect. No HOGANSVILLE Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a HOGANSVILLE Material Adverse Effect. No
notice of a "reportable event," within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any HOGANSVILLE Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.16 of the HOGANSVILLE Disclosure
Memorandum, no HOGANSVILLE Entity has any Liability for retiree health and life
benefits under any of the HOGANSVILLE Benefit Plans and there are no
restrictions on the rights of such HOGANSVILLE Entity to amend or terminate any
such retiree health or benefit Plan without incurring any Liability thereunder,
which Liability is reasonably likely to have a HOGANSVILLE Material Adverse
Effect.
15
(f) Except as disclosed in Section 5.16 of the HOGANSVILLE Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any HOGANSVILLE
Entity from any HOGANSVILLE Entity under any HOGANSVILLE Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any HOGANSVILLE
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit, where such payment, increase, or acceleration is
reasonably likely to have, individually or in the aggregate, a HOGANSVILLE
Material Adverse Effect.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any HOGANSVILLE Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the HOGANSVILLE Financial Statements to the extent
required by and in accordance with GAAP.
5.17 Material Contracts.
------------------------
Except as disclosed in Section 5.17 of the HOGANSVILLE Disclosure
Memorandum or otherwise reflected in the HOGANSVILLE Financial Statements, none
of the HOGANSVILLE Entities, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $50,000, (ii) any Contract relating to the borrowing of money by any
HOGANSVILLE Entity or the guarantee by any HOGANSVILLE Entity of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, Federal Home Loan Bank
advances and trade payables and Contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any Contract which prohibits or
restricts any HOGANSVILLE Entity from engaging in any business activities in any
geographic area, line of business or otherwise in competition with any other
Person, (iv) any Contract between or among the HOGANSVILLE Entities, (v) any
Contract relating to the provision of data processing, network communication, or
other technical services to or by any HOGANSVILLE Entity, (vi) any exchange
traded or over-the-counter swap, forward, future, option, cap, floor, or collar
financial Contract, or any other interest rate or foreign currency protection
Contract not included on its balance sheet which is a financial derivative
Contract, and (vii) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by HOGANSVILLE with the
SEC (assuming HOGANSVILLE were subject to the reporting requirements of the 0000
Xxx) as of the date of this Agreement (together with all Contracts referred to
in Sections 5.10 and 5.16(a), the "HOGANSVILLE Contracts"). With respect to each
HOGANSVILLE Contract and except as disclosed in Section 5.17 of the HOGANSVILLE
Disclosure Memorandum: (i) assuming the enforceability of such Contract against
the third party thereto, each such Contract is in full force and effect; (ii) no
HOGANSVILLE Entity is in Default thereunder, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a HOGANSVILLE
Material Adverse Effect; (iii) no HOGANSVILLE Entity has repudiated or waived
any material provision of any such Contract; and (iv) no other party to any such
16
Contract is, to the Knowledge of HOGANSVILLE, in Default in any respect, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a HOGANSVILLE Material Adverse Effect, or has repudiated or waived
any material provision thereunder. Except as disclosed in Section 5.17 of the
HOGANSVILLE Disclosure Memorandum, no officer, director or employee of any
HOGANSVILLE Entity is party to any Contract which restricts or prohibits such
officer, director or employee from engaging in activities competitive with any
Person, including any HOGANSVILLE Entity. All of the indebtedness of any
HOGANSVILLE Entity for money borrowed (excluding deposits obtained in the
ordinary course of business) is prepayable at any time by such HOGANSVILLE
Entity without penalty or premium.
5.18 Legal Proceedings
----------------------
. There is no Litigation instituted or pending or, to the Knowledge of
HOGANSVILLE, 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 HOGANSVILLE Entity, or against any director, employee or
employee benefit plan (acting in such capacity) of any HOGANSVILLE Entity, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, a HOGANSVILLE Material Adverse
Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any HOGANSVILLE
Entity, that are reasonably likely to have, individually or in the aggregate, a
HOGANSVILLE Material Adverse Effect. Section 5.18 of the HOGANSVILLE Disclosure
Memorandum contains a summary of all Litigation as of the date of this Agreement
to which any HOGANSVILLE Entity is a party and which names a HOGANSVILLE Entity
as a defendant or cross-defendant or for which, to the Knowledge of HOGANSVILLE,
any HOGANSVILLE Entity has any potential Liability.
5.19 Reports.
-------------
Since January 1, 1995, or the date of organization if later, each
HOGANSVILLE Entity 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 Regulatory Authorities, except for such filings which the failure to
so file is not reasonably likely to have, individually or in the aggregate, a
HOGANSVILLE Material Adverse Effect. 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 did not, in all
material respects, 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.
Since January 1, 1995, no HOGANSVILLE Entity has filed any Suspicious
Activity Report or any claim under any fidelity blanket bond, general liability,
errors and omissions, directors and officers or other insurance policies that
pertain to the operations of its business or the ownership of its assets.
5.20 Statements True and Correct.
----------------------------------
No statement, certificate, instrument, or other writing furnished or to be
furnished by any HOGANSVILLE Entity to FLAG pursuant to this Agreement or any
other document, agreement, or instrument referred to herein contains or will
17
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 misleading. None of the information supplied or
to be supplied by any HOGANSVILLE Entity for inclusion in the registration
statement to be filed by FLAG with the SEC in accordance with Section 8.1 will,
when such 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. All documents that any HOGANSVILLE
Entity is 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. No documents to be filed by a
HOGANSVILLE Entity with any Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, 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.
5.21 Accounting, Tax and Regulatory Matters.
--------------------------------------------
No HOGANSVILLE Entity has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying for pooling of interest accounting treatment and as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
5.22 Charter Provisions.
------------------------
Each HOGANSVILLE Entity 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 Charter, Articles of Incorporation, Bylaws or
other governing instruments of any HOGANSVILLE Entity or restrict or impair the
ability of FLAG or any of its Subsidiaries to vote, or otherwise to exercise the
rights of a shareholder with respect to, shares of any HOGANSVILLE Entity that
may be directly or indirectly acquired or controlled by them.
5.23 Board Recommendation.
--------------------------
The Board of Directors of HOGANSVILLE, at a meeting duly called and held,
has by unanimous vote of those directors present (who constituted all of the
directors then in office) (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interests of the
shareholders and (ii) resolved to recommend that the holders of the shares of
HOGANSVILLE Common Stock approve this Agreement.
5.24 Y2K.
---------
No HOGANSVILLE Entity has received, nor to HOGANSVILLE's Knowledge are
there facts that would form the basis for the issuance of, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulatory Letter No. SR 98-3 (SUP), dated March 4,
1998). HOGANSVILLE has disclosed to FLAG a complete and accurate copy of its
plan, including its good faith estimate of the anticipated associated costs, for
addressing the issues set forth in the Year 2000 guidance papers issued by the
Federal Financial Institutions Examination Council, including the statement
dated May 5, 1997, entitled "Year 2000 Project Management Awareness," December
18
17, 1997, entitled "Safety and Soundness Guidelines Concerning the Year 2000
Business Risk," and October 15, 1998, entitled "Interagency Guidelines
Establishing Year 2000 Standards for Safety and Soundness," as such issues
affect any HOGANSVILLE Entity. Between the date of this Agreement and the
Effective Time, HOGANSVILLE shall use its reasonable best efforts to implement
such plan. HOGANSVILLE has formed a committee to review policies and directives
issued by Regulatory Authorities with respect to preparedness for year 2000 data
processing and other operations, and intends to implement such committee's
recommendations for ensuring compliance with such policies and directives.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF FLAG
--------------------------------------
FLAG hereby represents and warrants to HOGANSVILLE as follows:
6.1 Organization, Standing, and Power.
---------------------------------------
FLAG is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Georgia, and has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its material Assets. FLAG 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 FLAG Material
Adverse Effect. The minute book and other organizational documents for FLAG have
been made available to HOGANSVILLE for its review and, except as disclosed in
Section 6.1 of the FLAG Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings of
the Board of Directors and shareholders thereof.
6.2 Authority of FLAG; No Breach By Agreement.
-----------------------------------------------
(a) FLAG 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 FLAG. This Agreement
represents a legal, valid, and binding obligation of FLAG, enforceable against
FLAG in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, 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 FLAG, nor the
consummation by FLAG of the transactions contemplated hereby, nor compliance by
FLAG with any of the provisions hereof, will (i) conflict with or result in a
19
breach of any provision of FLAG's Articles of Incorporation or Bylaws, or the
Charter, or Articles of Incorporation or Bylaws of any FLAG Entity, or any
resolution adopted by the Board of Directors or the shareholders of any FLAG
Entity, 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 FLAG
Entity under, any Contract or Permit of any FLAG Entity, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a FLAG Material Adverse Effect, or (iii)
subject to receipt of the requisite Consents referred to in Section 9. 1 (b),
constitute or result in a Default under, or require any Consent pursuant to, any
Law or Order applicable to any FLAG Entity or any of their respective material
Assets (including any FLAG Entity becoming subject to or liable for the payment
of any Tax on any of the Assets owned by any FLAG Entity being reassessed or
revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, 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,
or under the HSR Act, 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 FLAG Material Adverse Effect, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
FLAG of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock.
------------------
(a) The authorized capital stock of FLAG consists of (i) 20,000,000 shares
of FLAG Common Stock, of which 6,561,879 shares are issued and outstanding as of
the date of this Agreement, and (ii) 10,000,000 shares of FLAG Preferred Stock,
of which no shares are issued and outstanding. All of the issued and outstanding
shares of FLAG Capital Stock are, and all of the shares of FLAG Common Stock to
be issued in exchange for shares of HOGANSVILLE 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. None of the outstanding shares of FLAG Capital Stock has been,
and none of the shares of FLAG Common Stock to be issued in exchange for shares
of HOGANSVILLE Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past shareholders of FLAG.
(b) Except as set forth in Section 6.3(a), or as disclosed in Section 6.3
of the FLAG Disclosure Memorandum, there are no shares of capital stock or other
equity securities of FLAG outstanding and no outstanding Equity Rights relating
to the capital stock of FLAG.
6.4 FLAG Subsidiaries.
----------------------
FLAG has disclosed in Section 6.4 of the FLAG Disclosure Memorandum all of
the FLAG Subsidiaries that are corporations (identifying its jurisdiction of
incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed to
transact business, and the number of shares owned and percentage ownership
interest represented by such share ownership) and all of the FLAG Subsidiaries
20
that are general or limited partnerships, limited liability companies, or other
non-corporate entities (identifying the Law under which such entity is
organized, each jurisdiction in which the character of its Assets or the nature
or conduct of its business requires it to be qualified and/or licensed to
transact business, and the amount and nature of the ownership interest therein).
Except as disclosed in Section 6.4 of the FLAG Disclosure Memorandum, FLAG or
one of its wholly-owned Subsidiaries owns all of the issued and outstanding
shares of capital stock (or other equity interests) of each FLAG Subsidiary. No
capital stock (or other equity interest) of any FLAG Subsidiary are or may
become required to be issued (other than to another FLAG Entity) by reason of
any Equity Rights, and there are no Contracts by which any FLAG Subsidiary is
bound to issue (other than to another FLAG Entity) additional shares of its
capital stock (or other equity interests) or Equity Rights or by which any FLAG
Entity is or may be bound to transfer any shares of the capital stock (or other
equity interests) of any FLAG Subsidiary (other than to another FLAG Entity).
There are no Contracts relating to the rights of any FLAG Entity to vote or to
dispose of any shares of the capital stock (or other equity interests) of any
FLAG Subsidiary. All of the shares of capital stock (or other equity interests)
of each FLAG Subsidiary held by a FLAG Entity are fully paid and nonassessable
under the applicable corporation Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by the FLAG Entity free
and clear of any Lien. Each FLAG Subsidiary is either a bank, 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 incorporated or 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 FLAG 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
FLAG Material Adverse Effect. Each FLAG Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder. The minute book and other
organizational documents for each FLAG Subsidiary have been made available to
HOGANSVILLE for its review, and, except as disclosed in Section 6.4 of the FLAG
Disclosure Memorandum, are true and complete in all material respects as in
effect as of the date of this Agreement and accurately reflect in all material
respects all amendments thereto and all proceedings of the Board of Directors
and shareholders thereof.
6.5 SEC Filings, Financial Statements.
--------------------------------------
(a) FLAG has timely filed and made available to HOGANSVILLE all SEC
Documents required to be filed by FLAG since December 31, 1993 (the "FLAG SEC
Reports"). The FLAG SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such FLAG SEC Reports or necessary in
order to make the statements in such FLAG SEC Reports, in light of the
circumstances under which they were made, not misleading. No FLAG Subsidiary is
required to file any SEC Documents.
21
(b) Each of the FLAG Financial Statements (including, in each case, any related
notes) contained in the FLAG SEC Reports, including any FLAG SEC Reports filed
after the date of this Agreement until the Effective Time, complied as to form
in all material respects with the applicable published rules and regulations of
the SEC with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly presented in all
material respects the consolidated financial position of FLAG and its
Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
6.6 Absence of Undisclosed Liabilities.
---------------------------------------
No FLAG Entity has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a FLAG Material Adverse Effect, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of FLAG as of December 31, 1998, included in the FLAG Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto. No FLAG Entity has incurred or paid any Liability since December
31, 1998, except for such Liabilities incurred or paid (i) 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 FLAG Material
Adverse Effect or (ii) in connection with the transactions contemplated by this
Agreement.
6.7 Absence of Certain Changes or Events.
-----------------------------------------
Since December 31, 1998, except as disclosed in the FLAG Financial
Statements delivered prior to the date of this Agreement or as disclosed in
Section 6.7 of the FLAG Disclosure Memorandum, (i) there have been no events,
changes or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a FLAG Material Adverse Effect, and (ii) the
FLAG Entities 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 FLAG provided in Article 7.
6.8 Tax Matters.
----------------
(a) All Tax Returns required to be filed by or on behalf of any of the FLAG
Entities have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1998, and on or before the date of the most recent fiscal year end immediately
preceding the Effective Time, except to the extent that all such failures to
file, taken together, are not reasonably likely to have a FLAG Material Adverse
Effect, and all Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. 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 FLAG Material Adverse Effect, except as reserved against in
the FLAG Financial Statements delivered prior to the date of this Agreement or
as disclosed in Section 6.8 of the FLAG Disclosure Memorandum. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no Liens with respect to Taxes
22
upon any of the Assets of the FLAG Entities, except for any such Liens which are
not reasonably likely to have a FLAG Material Adverse Effect or with respect to
which the Taxes are not yet due and payable.
(b) None of the FLAG Entities has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) The provision for any Taxes due or to become due for any of the FLAG
Entities for the period or periods through and including the date of the
respective FLAG Financial Statements that has been made and is reflected on such
FLAG Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the FLAG Entities have been provided for in
accordance with GAAP.
(e) None of the FLAG Entities is a party to any Tax allocation or sharing
agreement and none of the FLAG Entities has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was FLAG) or has any Liability for Taxes of any Person (other
than FLAG and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign, Law) as a transferee or
successor or by Contract or otherwise.
(f) Each of the FLAG Entities is in compliance with, and its records
contain all information and documents (including 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 FLAG Material Adverse Effect.
(g) Except as disclosed in Section 6.8 of the FLAG Disclosure Memorandum,
none of the FLAG Entities has made any payments, is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Sections 28OG or 162(m)
of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the FLAG Entities that occurred during or after any
Taxable Period in which the FLAG Entities incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1997.
(i) No FLAG Entity has or has had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
23
(j) All material elections with respect to Taxes affecting the FLAG
Entities have been or will be timely made.
6.9 Allowance for Possible Loan Losses.
---------------------------------------
The Allowance shown on the consolidated balance sheets of FLAG included in
the most recent FLAG Financial Statements dated prior to the date of this
Agreement was, and the Allowance shown on the consolidated balance sheets of
FLAG included in the FLAG Financial Statements as of dates subsequent to the
execution of this Agreement will be, as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or guidelines) to
provide for all known or reasonably anticipated losses relating to or inherent
in the loan and lease portfolios (including accrued interest receivables) of the
FLAG Entities and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the FLAG Entities as of the dates
thereof, except where the failure of such Allowance to be so adequate is not
reasonably likely to have a FLAG Material Adverse Effect.
6.10 Assets.
------------
(a) Except as disclosed in Section 6.10 of the FLAG Disclosure Memorandum
or as disclosed or reserved against in the FLAG Financial Statements delivered
prior to the date of this Agreement, the FLAG Entities have good and marketable
title, free and clear of all Liens, to all of their respective Assets, except
for any such Liens or other defects of title which are not reasonably likely to
have a FLAG Material Adverse Effect. All tangible properties used in the
businesses of the FLAG Entities are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
FLAG's past practices.
(b) All Assets which are material to FLAG's business on a consolidated
basis, held under leases or subleases by any of the FLAG Entities, 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.
(c) The FLAG Entities currently maintain insurance similar in amounts,
scope and coverage to that maintained by other peer banking organizations. None
of the FLAG Entities has received notice from any insurance carrier that (i) any
policy of insurance will be cancelled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be substantially increased. There are presently no claims for
amounts exceeding in any individual case $25,000 pending under such policies of
insurance and no notices of claims in excess of such amounts have been given by
any FLAG Entity under such policies.
(d) The Assets of the FLAG Entities include all Assets required to operate
the business of the FLAG Entities as presently conducted.
24
6.11 Intellectual Property.
---------------------------
Each FLAG Entity owns or has a license to use all of the Intellectual
Property used by such FLAG Entity in the course of its business. Each FLAG
Entity is the owner of or has a license to any Intellectual Property sold or
licensed to a third party by such FLAG Entity in connection with such FLAG
Entity's business operations, and such FLAG Entity has the right to convey by
sale or license any Intellectual Property so conveyed. No FLAG Entity is in
Default under any of its Intellectual Property licenses. No proceedings have
been instituted, or are pending or to the Knowledge of FLAG threatened, which
challenge the rights of any FLAG Entity with respect to Intellectual Property
used, sold or licensed by such FLAG Entity in the course of its business, nor
has any person claimed or alleged any rights to such Intellectual Property. The
conduct of the business of the FLAG Entities does not infringe any Intellectual
Property of any other person. Except as disclosed in Section 6.11 of the FLAG
Disclosure Memorandum, no FLAG Entity is obligated to pay any recurring
royalties to any Person with respect to any such Intellectual Property. Except
as disclosed in Section 6.11 of the FLAG Disclosure Memorandum, no officer,
director or employee of any FLAG Entity is party to any Contract which restricts
or prohibits such officer, director or employee from engaging in activities
competitive with any Person, including any FLAG Entity.
6.12 Environmental Matters.
---------------------------
(a) To the Knowledge of FLAG, each FLAG Entity, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a FLAG Material Adverse Effect.
(b) There is no Litigation pending or threatened before any court,
governmental agency, or authority or other forum in which any FLAG Entity or any
of its Operating Properties or Participation Facilities (or FLAG in respect of
such Operating Property or Participation Facility) has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the emission, migration, release, discharge, spillage, or disposal into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any FLAG Entity or any of its Operating Properties or Participation
Facilities or any neighboring property, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect, nor is there any reasonable basis for
any Litigation of a type described in this sentence, except such as is not
reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect.
(c) During the period of (i) any FLAG Entity's ownership or operation of
any of their respective current properties, (ii) any FLAG Entity's participation
in the management of any Participation Facility or any Operating Property, there
have been no emissions, migrations, releases, discharges, spillages, or
disposals of Hazardous Material in, on, at, under, adjacent to, or affecting (or
potentially affecting) such properties or any neighboring properties, except
such as are not reasonably likely to have, individually or in the aggregate, a
FLAG Material Adverse Effect. Prior to the period of (i) any FLAG Entity's
ownership or operation of any of their respective current properties, (ii) any
FLAG Entity's participation in the management of any Participation Facility or
26
any Operating Property, to the Knowledge of FLAG, there were no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect.
6.13 Compliance with Laws.
--------------------------
Each FLAG Entity has in effect all Permits necessary for it to own, lease
or operate its material 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 FLAG Material Adverse Effect, and 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 FLAG Material
Adverse Effect. Except as disclosed in Section 6.13 of the FLAG Disclosure
Memorandum, none of the FLAG Entities:
(a) is in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which are not
reasonably likely to, have, individually or in the aggregate, a FLAG Material
Adverse Effect; or
(c) since January 1, 1995, 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 FLAG Entity 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 FLAG Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of which
is reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect, or (iii) requiring any FLAG Entity 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. Copies of all material reports,
correspondence, notices and other documents relating to any inspection, audit,
monitoring or other form of review or enforcement action by a Regulatory
Authority have been made available to HOGANSVILLE.
6.14 Labor Relations.
---------------------
No FLAG Entity is the subject of any Litigation asserting that it or any
other FLAG Entity 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 FLAG Entity to bargain with any labor organization as to wages
or conditions of employment, nor is any FLAG Entity party to any collective
bargaining agreement, nor is there any strike or other labor dispute involving
any FLAG Entity, pending or threatened, or to the Knowledge of FLAG, is there
any activity involving any FLAG Entity's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
26
6.15 Employee Benefit Plans.
----------------------------
(a) FLAG has disclosed in Section 6.15 of the FLAG Disclosure Memorandum
and has delivered or made available to HOGANSVILLE 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 plan, 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 "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 FLAG Entity or ERISA 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 "FLAG Benefit Plans"). Each FLAG
Benefit Plan which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "FLAG ERISA Plan."
Each FLAG ERISA Plan which is also a "defined benefit plan" (as defined in
Section 4140) of the Internal Revenue Code) is referred to herein as a "FLAG
Pension Plan." No FLAG Pension Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(b) All FLAG 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 FLAG Material Adverse Effect. Each FLAG 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
FLAG is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. To the Knowledge of Flag, no FLAG Entity
has engaged in a transaction with respect to any FLAG Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any FLAG Entity to a Tax 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 FLAG Material Adverse
Effect.
(c) No FLAG Pension Plan has any "unfunded current liability," as that term
is defined in Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set
forth for such plan's most recent actuarial valuation. Since the date of the
most recent actuarial valuation, there has been (i) no material change in the
financial position of a FLAG Pension Plan, (ii) no change in the actuarial
assumptions with respect to any FLAG Pension Plan, and (iii) no increase in
benefits under any FLAG Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect or materially adversely affect the
funding status of any such plan. Neither any FLAG Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any FLAG Entity, or the single-employer plan
of any ERISA Affiliate has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
which is reasonably likely to have a FLAG Material Adverse Effect. No FLAG
27
Entity has provided, or is required to provide, security to a FLAG Pension Plan
or to any single-employer plan of an ERISA Affiliate pursuant to Section 40 1
(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any FLAG Entity with respect to any ongoing, frozen or terminated
single-employer plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a FLAG Material Adverse Effect. No FLAG
Entity has incurred any withdrawal Liability with respect to a multiemployer
plan under Subtitle B of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate), which Liability is reasonably likely to
have a FLAG Material Adverse Effect. No notice of a "reportable event," within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any FLAG Pension Plan or
by any ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.15 of the FLAG Disclosure Memorandum,
no FLAG Entity has any Liability for retiree health and life benefits under any
of the FLAG Benefit Plans and there are no restrictions on the rights of such
FLAG Entity to amend or terminate any such retiree health or benefit Plan
without incurring any Liability thereunder, which Liability is reasonably likely
to have a FLAG Material Adverse Effect.
(f) Except as disclosed in Section 6.15 of the FLAG Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any FLAG Entity from any FLAG Entity
under any FLAG Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any FLAG Benefit Plan, or (iii) result in any acceleration of the
time of payment or vesting of any such benefit, where such payment, increase, or
acceleration is reasonably likely to have, individually or in the aggregate, a
FLAG Material Adverse Effect.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any FLAG Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the FLAG Financial Statements to the extent
required by and in accordance with GAAP.
6.16 Material Contracts.
------------------------
Except as disclosed in Section 6.16 of the FLAG Disclosure Memorandum or
otherwise reflected in the FLAG Financial Statements, none of the FLAG Entities,
nor any of their respective Assets, businesses, or operations, is a party to, or
is bound or affected by, or receives benefits under, (i) any employment,
severance, termination, consulting or retirement Contract providing for
aggregate payments to any Person in any calendar year in excess of $50,000, (ii)
any Contract relating to the borrowing of money by any FLAG Entity or the
guarantee by any FLAG Entity of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
28
repurchase agreements, and Federal Home Loan Bank advances of depository
institution Subsidiaries, trade payables and Contracts relating to borrowings or
guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts any FLAG Entity from engaging in any business activities
in any geographic area, line of business or otherwise in competition with any
other Person, (iv) any Contract between or among FLAG Entities, (v) any Contract
relating to the provision of data processing, network communication, or other
technical services to or by any FLAG Entity, (vi) any exchange-traded or
over-the-counter swap, forward, future, option, cap, floor, or collar financial
Contract, or any other interest rate or foreign currency protection Contract not
included on its balance sheet which is a financial derivative Contract, or (vii)
any other Contract or amendment thereto that would be required to be filed as an
exhibit to a Form 10-K filed by FLAG with the SEC as of the date of this
Agreement that has not been filed as an exhibit to FLAG's Form 10-K filed for
the fiscal year ended December 31, 1997, or in an SEC Document and identified to
HOGANSVILLE (together with all Contracts referred to in Sections 6.10 and
6.15(a), the "FLAG Contracts"). With respect to each FLAG Contract and except as
disclosed in Section 6.16 of the FLAG Disclosure Memorandum: (i) the Contract is
in full force and effect; (ii) no FLAG Entity is in Default thereunder, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect; (iii) no FLAG Entity has repudiated
or waived any material provision of any such Contract; and (iv) no other party
to any such Contract is, to the Knowledge of FLAG, in Default in any respect,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a FLAG Material Adverse Effect, or has repudiated or waived any
material provision thereunder. All of the indebtedness of any FLAG Entity for
money borrowed is prepayable at any time by such FLAG Entity without penalty or
premium.
6.17 Legal Proceedings.
-----------------------
There is no Litigation instituted or pending or, to the Knowledge of FLAG,
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 FLAG Entity, or against any director, employee or employee benefit
plan of any FLAG Entity, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a
FLAG Material Adverse Effect, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any FLAG Entity, that are reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect. Section 6.17 of the FLAG Disclosure
Memorandum contains a summary of all Litigation as of the date of this Agreement
to which any FLAG Entity is a party and which names a FLAG Entity as a defendant
or cross-defendant or for which any FLAG Entity has any potential Liability.
6.18 Reports.
-------------
Since January 1, 1993, each FLAG Entity 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 Regulatory 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 FLAG Material
Adverse Effect). 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 did not, in all material respects, 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.
29
6.19 Statements True and Correct.
---------------------------------
No statement, certificate, instrument or other writing furnished or to be
furnished by any FLAG Entity to HOGANSVILLE 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 misleading. None of the information supplied or
to be supplied by any FLAG Entity for inclusion in the Registration Statement to
be filed by FLAG with the SEC, will, when such 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.
None of the documents to be filed by any FLAG Entity with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, 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. All documents that any FLAG Entity thereof is
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.
6.20 Accounting Tax and Regulatory Matters.
--------------------------------------------
No FLAG Entity has taken or agreed to take any action or has any knowledge
of any fact or circumstance that is reasonably likely to (i) prevent the Merger
from qualifying for pooling of interests accounting treatment and as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.l(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.21 Charter Provisions.
------------------------
Each FLAG Entity 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 Charter, Articles of Incorporation, Bylaws or
other governing instruments of any FLAG Entity or restrict or impair the ability
of FLAG or any of its Subsidiaries to vote, or otherwise to exercise the rights
of a shareholder with respect to, shares of any FLAG Entity that may be directly
or indirectly acquired or controlled by them.
6.22 Board Recommendation.
---------------------------
The Board of Directors of FLAG, at a meeting duly called and held, has by
unanimous vote of those directors present (who constituted all of the directors
then in office) determined that this Agreement and the transactions contemplated
hereby, including the Merger, taken together, are fair to and in the best
interests of the FLAG shareholders.
6.23 Y2K.
---------
No FLAG Entity has received, nor to FLAG's Knowledge are there facts that
would form the basis for the issuance of, a "Year 2000 Deficiency Notification
Letter" (as such term is employed in the Federal Reserve's Supervision and
Regulatory Letter No. SR 98-3 (SUP), dated March 4, 1998). FLAG has disclosed to
30
HOGANSVILLE a complete and accurate copy of its plan, including its good faith
estimate of the anticipated associated costs, for addressing the issues set
forth in the Year 2000 guidance papers issued by the Federal Financial
Institutions Examination Council, including the statement dated May 5, 1997,
entitled "Year 2000 Project Management Awareness," December 17, 1997, entitled
"Safety and Soundness Guidelines Concerning the Year 2000 Business Risk," and
October 15, 1998, entitled "Interagency Guidelines Establishing Year 2000
Standards for Safety and Soundness," as such issues affect any FLAG Entity.
Between the date of this Agreement and the Effective Time, FLAG shall use its
reasonable best efforts to implement such plan. FLAG has formed a committee to
review policies and directives issued by Regulatory Authorities with respect to
preparedness for year 2000 data processing and other operations, and intends to
implement such committee's recommendations for ensuring compliance with such
policies and directives.
ARTICLE 7.
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of HOGANSVILLE.
-----------------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of FLAG
shall have been obtained, and except as otherwise expressly contemplated herein,
HOGANSVILLE shall, and shall cause each of its Subsidiaries to (a) operate its
business only in the usual, regular, and ordinary course, (b) preserve intact
its business organization and Assets and maintain its rights and franchises, and
(c) take no action which would (i) materially adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely
affect the ability of any Party to perform its covenants and agreements under
this Agreement.
7.2 Negative Covenants of HOGANSVILLE.
--------------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of FLAG
shall have been obtained, and except as otherwise expressly contemplated herein,
HOGANSVILLE covenants and agrees that it will not do or agree or commit to do,
or permit any of its Subsidiaries to do or agree or commit to do, any of the
following:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any HOGANSVILLE entity, or
(b) incur any additional debt obligation or other obligation for borrowed
money (other than indebtedness of a HOGANSVILLE Entity to another HOGANSVILLE
Entity) in excess of an aggregate of $100,000 (for HOGANSVILLE Entities on a
consolidated basis) except in the ordinary course of the business of the
HOGANSVILLE Subsidiaries consistent with past practices (which shall include,
for the HOGANSVILLE Subsidiaries that are depository institutions, creation of
deposit liabilities, purchases of federal funds, advances from the Federal
Reserve Bank or Federal Home Loan Bank, and entry into repurchase agreements
fully secured by U.S. government or agency securities), or impose, or suffer the
31
imposition, on any Asset of any HOGANSVILLE Entity of any Lien or permit any
such Lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established in
the ordinary course of business, the satisfaction of legal requirements in the
exercise of trust powers, and Liens in effect as of the date hereof that are
disclosed in Section 7.2(b) of the HOGANSVILLE Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any HOGANSVILLE Entity, or declare or pay any dividend or make
any other distribution in respect of HOGANSVILLE's capital stock, other than
regularly scheduled quarterly dividends of $0.10 per share of HOGANSVILLE Common
Stock payable on record dates and in amounts consistent with past practices;
provided that any dividend declared or payable on the shares of HOGANSVILLE
Common Stock for the quarterly period during which the Effective Time occurs
shall, unless otherwise agreed upon in writing by FLAG and HOGANSVILLE, be
declared with a record date prior to the Effective Time only if the normal
record date for payment of the corresponding quarterly dividend to holders of
FLAG Common Stock is before the Effective Time; or
(d) except for this Agreement, or pursuant to the exercise of stock options
outstanding as of the date hereof and pursuant to the terms thereof in existence
on the date hereof, or as disclosed in Section 7.2(d) of the HOGANSVILLE
Disclosure Memorandum, issue, sell, pledge, encumber, authorize the issuance of,
enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional shares of
HOGANSVILLE Common Stock or any other capital stock of any HOGANSVILLE Entity,
or any stock appreciation rights, or any option, warrant, or other Equity Right;
or
(e) adjust, split, combine or reclassify any capital stock of any
HOGANSVILLE Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of HOGANSVILLE Common Stock, or sell,
lease, mortgage or otherwise dispose of or otherwise encumber any Asset having a
book value in excess of $100,000 other than in the ordinary course of business
for reasonable and adequate consideration or any shares of capital stock of any
HOGANSVILLE Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another HOGANSVILLE Entity); or
(f) except for loans made in the ordinary course of its business, make any
material investment, either by purchase of stock or securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person other than a
wholly owned HOGANSVILLE Subsidiary, or otherwise acquire direct or indirect
control over any Person, other than in connection with (i) foreclosures in the
ordinary course of business, (ii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity, or (iii) the creation of new
wholly owned Subsidiaries organized to conduct or continue activities otherwise
permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any HOGANSVILLE Entity, except in accordance with past practice
32
specifically disclosed in Section 7.2(g) of the HOGANSVILLE Disclosure
Memorandum or as required by Law; pay any severance or termination pay or any
bonus other than pursuant to written policies or written Contracts in effect on
the date of this Agreement and disclosed in Section 7.2(g) of the HOGANSVILLE
Disclosure Memorandum; and enter into or amend any severance agreements with
officers of any HOGANSVILLE Entity; grant any material increase in fees or other
increases in compensation or other benefits to directors of any HOGANSVILLE
Entity except in accordance with past practice disclosed in Section 7.2(g) of
the HOGANSVILLE Disclosure Memorandum; or voluntarily accelerate the vesting of
any stock options or other stock-based compensation or employee benefits or
other Equity Rights; or
(h) enter into or amend any employment Contract between any HOGANSVILLE
Entity and any Person having a salary thereunder in excess of $50,000 per year
(unless such amendment is required by Law) that the HOGANSVILLE Entity does not
have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of any HOGANSVILLE Entity or
terminate or withdraw from, or make any material change in or to, any existing
employee benefit plans of any HOGANSVILLE Entity other than any such change that
is required by Law or that, in the opinion of counsel, is necessary or advisable
to maintain the tax qualified status of any such plan, or make any distributions
from such employee benefit plans, except as required by Law, the terms of such
plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice or
except as set forth in Section 7.2(k) of the HOGANSVILLE Disclosure Memorandum,
settle any Litigation involving any Liability of any HOGANSVILLE Entity for
material money damages or restrictions upon the operations of any HOGANSVILLE
Entity; or
(l) except in the ordinary course of business, enter into, modify, amend or
terminate any material Contract (including any loan Contract with an unpaid
balance exceeding $50,000) or waive, release, compromise or assign any material
rights or claims.
7.3 Affirmative Covenants of FLAG.
------------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of
HOGANSVILLE shall have been obtained, and except as otherwise expressly
contemplated herein, FLAG shall and shall cause each of its Subsidiaries to (a)
operate its business only in the usual, regular, and ordinary course, (b)
preserve intact its business organization and Assets and maintain its rights and
franchises, and (c) take no action which would (i) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentences of Section 9.1(b) or 9.1(c), or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
33
7.4 Negative Covenants of FLAG.
----------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of
HOGANSVILLE shall have been obtained, and except as otherwise expressly
contemplated herein, FLAG covenants and agrees that it will not amend the
Articles of Incorporation or Bylaws of FLAG in any manner adverse to the holders
of HOGANSVILLE Common Stock, or take any action which will materially adversely
impact the ability of FLAG Entities to consummate the transactions contemplated
by this Agreement.
7.5 Adverse Changes in Condition.
---------------------------------
Each of FLAG and HOGANSVILLE agrees to give written notice promptly to the
other upon becoming aware of the occurrence or impending occurrence of any event
or circumstance relating to it or any of its Subsidiaries which (i) is
reasonably likely to have, individually or in the aggregate, a HOGANSVILLE
Material Adverse Effect or a FLAG Material Adverse Effect, as applicable, or
(ii) would cause or constitute a material breach of any of its representations,
warranties, or covenants contained herein, and to use its reasonable efforts to
prevent or promptly to remedy the same.
7.6 Reports.
------------
Each of FLAG and HOGANSVILLE and their Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other copies of all
such periodic reports promptly after the same are filed. If financial statements
are contained in any such reports filed with the SEC, such financial statements
will fairly present the consolidated financial position of the entity filing
such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8.
ADDITIONAL AGREEMENTS
---------------------
8.1 Registration Statement.
---------------------------
As soon as practicable after execution of this Agreement, FLAG shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or Securities Laws in connection with the issuance of the shares of
FLAG Common Stock upon consummation of the Merger. HOGANSVILLE shall cooperate
in the preparation and filing of the Registration Statement and shall furnish
all information concerning it and the holders of its capital stock as FLAG may
reasonably request in connection with such action. FLAG and HOGANSVILLE shall
make all necessary filings with respect to the Merger under the Securities Laws.
34
8.2 Nasdaq Listing.
-------------------
FLAG shall use its reasonable efforts to list, prior to the Effective Time,
on the Nasdaq National Market the shares of FLAG Common Stock to be issued to
the holders of HOGANSVILLE Common Stock pursuant to the Merger, and FLAG shall
give all notices and make all filings with the NASD required in connection with
the transactions contemplated herein.
8.3 Shareholder Approval.
-------------------------
HOGANSVILLE shall call a Shareholders' Meeting, to be held as soon as
reasonably practicable after the Registration Statement is declared effective by
the SEC, for the purpose of voting upon approval of this Agreement and such
other related matters as it deems appropriate. In connection with the
Shareholders' Meeting, the Board of Directors of HOGANSVILLE shall recommend to
its shareholders, subject to the conditions in such authorization and
recommendation by the Board of Directors, the approval of the matters submitted
for approval (subject to the Board of Directors of HOGANSVILLE, after having
consulted with and considered the advice of outside counsel, reasonably
determining in good faith that the making of such recommendation, or the failure
to withdraw or modify its recommendation, would constitute a breach of fiduciary
duties of the members of such Board of Directors to HOGANSVILLE's shareholders,
under applicable law), and the Board of Directors and officers of HOGANSVILLE
shall use their reasonable efforts to obtain such shareholders' approval
(subject to the Board of Directors of HOGANSVILLE, after having consulted with
and considered the advice of outside counsel, reasonably determining in good
faith that the taking of such actions would constitute a breach of fiduciary
duties of the members of such Board of Directors to the HOGANSVILLE
shareholders, under applicable law).
8.4 Applications.
------------------
FLAG shall promptly prepare and file, and HOGANSVILLE shall cooperate in
the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this Agreement, including without limitation, the Board of Governors of the
Federal Reserve System and the Georgia Department of Banking and Finance,
seeking the requisite Consents necessary to consummate the transactions
contemplated by this Agreement. The Parties shall deliver to each other copies
of all filings, correspondence and orders to and from all Regulatory Authorities
in connection with the transactions contemplated hereby.
8.5 Filings with State Offices.
-------------------------------
Upon the terms and subject to the conditions of this Agreement, FLAG shall
cause to be filed the Certificate of Merger with the Secretary of State of the
State of Georgia.
8.6 Agreement as to Efforts to Consummate.
-------------------------------------------
Subject to the terms and conditions of this Agreement, each Party agrees to
use, and to cause its Subsidiaries to use, its reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper, or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable after the date of this Agreement,
the transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied the
conditions referred to in Article 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
35
8.7 Investigation and Confidentiality.
--------------------------------------
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the Party
reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby, and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of any other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Each Party shall use its reasonable efforts to exercise its rights
under confidentiality agreements entered into with Persons which were
considering an Acquisition Proposal with respect to such Party to preserve the
confidentiality of the information relating to such Party and its Subsidiaries
provided to such Persons and their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant or agreement of the other Party or which
has had or is reasonably likely to have a HOGANSVILLE Material Adverse Effect or
a FLAG Material Adverse Effect, as applicable.
8.8 Press Releases.
-------------------
Prior to the Effective Time, HOGANSVILLE and FLAG shall consult with each
other as to the form and substance of any press release or other public
disclosure materially related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this Section 8.8 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.
8.9 Certain Actions.
--------------------
Except with respect to this Agreement and the transactions contemplated
hereby, no HOGANSVILLE Entity nor any Representatives thereof retained by any
HOGANSVILLE Entity shall directly or indirectly solicit any Acquisition Proposal
by any Person. Except to the extent the Board of Directors of HOGANSVILLE, after
having consulted with and considered the advice of outside counsel, reasonably
determines in good faith that the failure to take such actions would constitute
a breach of fiduciary duties of the members of such Board of Directors to
36
HOGANSVILLE's shareholders, under applicable Law, no HOGANSVILLE Entity or
Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but HOGANSVILLE may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with its
legal obligations. HOGANSVILLE shall promptly advise FLAG following the receipt
of any Acquisition Proposal and the details thereof, and advise FLAG of any
developments with respect to such Acquisition Proposal promptly upon the
occurrence thereof. HOGANSVILLE shall (i) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Persons
conducted heretofore with respect to any of the foregoing, and (ii) direct and
use its reasonable efforts to cause its Representatives not to engage in any of
the foregoing.
8.10 Accounting and Tax Treatment.
----------------------------------
Each of the Parties undertakes and agrees to use its reasonable efforts to
cause the Merger to, and to take no action which would cause the Merger not to,
qualify for pooling of interests accounting treatment and as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes.
8.11 Charter Provisions
-----------------------
Each Party shall take, and shall cause its Subsidiaries to take, all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby do not
and will not result in the grant of any rights to any Person under the charter,
articles of incorporation, bylaws or other governing instruments of such Party
or any of its Subsidiaries or restrict or impair the ability of FLAG or any of
its Subsidiaries to vote, or otherwise to exercise the rights of a shareholder
with respect to, shares of any HOGANSVILLE Entity that may be directly or
indirectly acquired by them.
8.12 Agreements of Affiliates.
------------------------------
HOGANSVILLE has disclosed in Section 8.12 of the HOGANSVILLE Disclosure
Memorandum each Person whom it reasonably believes is an "affiliate" of
HOGANSVILLE for purposes of Rule 145 under the 1933 Act. HOGANSVILLE shall use
its reasonable efforts to cause each such Person to deliver to FLAG not later
than 30 days after the date of this Agreement a written agreement, substantially
in the form of Exhibit 1, providing that such Person will not sell, pledge,
transfer, or otherwise dispose of the shares of the HOGANSVILLE Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of FLAG Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of FLAG and HOGANSVILLE have
been published within the meaning of Section 201.01 of the SEC's Codification of
37
Financial Reporting Policies, except that transfers may be made in compliance
with Staff Accounting Bulletin No. 76 issued by the SEC. Except for transfers
made in compliance with Staff Accounting Bulletin No. 76, shares of FLAG Common
Stock issued to such affiliates of HOGANSVILLE shall not be transferable until
such time as financial results covering at least 30 days of combined operations
of FLAG and HOGANSVILLE have been published within the meaning of Section 201.01
of the SEC's Codification of Financial Reporting Policies, regardless of whether
each such affiliate has provided the written agreement referred to in this
Section 8.12. FLAG shall be entitled to place restrictive legends upon
certificates for shares of FLAG Common Stock issued to affiliates of HOGANSVILLE
pursuant to this Agreement to enforce the provisions of this Section 8.12. FLAG
shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of FLAG Common Stock by
such affiliates.
8.13 Employee Benefits and Contracts.
--------------------------------------
Following the Effective Time, FLAG shall either (i) continue to provide to
officers and employees of the HOGANSVILLE Entities employee benefits under
HOGANSVILLE's existing employee benefit and welfare plans or, (ii) if FLAG shall
determine to provide to officers and employees of the HOGANSVILLE Entities
employee benefits under other employee benefit plans and welfare plans, provide
generally to officers and employees of the HOGANSVILLE Entities employee
benefits under employee benefit and welfare plans, on terms and conditions which
when taken as a whole are substantially similar to those currently provided by
the FLAG Entities to their similarly situated officers and employees. For
purposes of participation and vesting (but not accrual of benefits) under FLAG's
employee benefit plans, (i) service under any qualified defined benefit plan of
HOGANSVILLE shall be treated as service under FLAG's defined benefit plan, if
any, (ii) service under any qualified defined contribution plans of HOGANSVILLE
shall be treated as service under FLAG's qualified defined contribution plans,
and (iii) service under any other employee benefit plans of HOGANSVILLE shall be
treated as service under any similar employee benefit plans maintained by FLAG.
With respect to officers and employees of the HOGANSVILLE Entities who, at or
after the Effective Time, become employees of a FLAG Entity and who, immediately
prior to the Effective Time, are participants in one or more employee welfare
benefit plans maintained by the HOGANSVILLE Entities, FLAG shall cause each
comparable employee welfare benefit plan which is substituted for a HOGANSVILLE
welfare benefit plan to waive any evidence of insurability or similar provision,
to provide credit for such participation prior to such substitution with regard
to the application of any pre-existing condition limitation, and to provide
credit towards satisfaction of any deductible or out-of-pocket provisions for
expenses incurred by such participants during the period prior to such
substitution, if any, that overlaps with the then current plan year for each
such substituted employee welfare benefit plans. FLAG also shall cause the
Surviving Bank and its Subsidiaries to honor in accordance with their terms all
employment, severance, consulting and other compensation Contracts disclosed in
Section 8.13 of the HOGANSVILLE Disclosure Memorandum to FLAG between any
HOGANSVILLE Entity and any current or former director, officer, or employee
thereof, and all provisions for vested benefits or other vested amounts earned
or accrued through the Effective Time under the HOGANSVILLE Benefit Plans.
8.14 Indemnification.
---------------------
(a) Subject to the conditions set forth in paragraph (b) below, for a
period of six years after the Effective Time, FLAG shall indemnify, defend and
hold harmless each person entitled to indemnification from a HOGANSVILLE Entity
(each, an "Indemnified Party") against all Liabilities arising out of actions or
omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the fullest extent permitted
under Georgia Law and by HOGANSVILLE's Articles of Incorporation and Bylaws as
in effect on the date hereof, including provisions relating to advances of
38
expenses incurred in the defense of any Litigation. Without limiting the
foregoing, in any case in which approval by FLAG is required to effectuate any
indemnification, FLAG shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent counsel
mutually agreed upon between FLAG and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.14, upon learning of any such Liability or Litigation,
shall promptly notify FLAG thereof. In the event of any such Liability or
Litigation (whether arising before or after the Effective Time), (i) FLAG shall
have the right to assume the defense thereof (provided FLAG acknowledges
responsibility for such indemnification) and FLAG shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if FLAG elects not to assume such defense or
counsel for the Indemnified Parties advises that there are substantive issues
which raise conflicts of interest between FLAG and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and FLAG shall pay
all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that FLAG shall be
obligated pursuant to this paragraph (b) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will
cooperate in the defense of any such Litigation, and (iii) FLAG shall not be
liable for any settlement effected without its prior written consent; and
provided further that FLAG shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
ARTICLE 9.
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 Conditions to Obligations of Each Party.
--------------------------------------------
The respective obligations of each Party to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6:
(a) Shareholder Approval. The shareholders of HOGANSVILLE shall have
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or by the
provisions of any governing instruments. The shareholders of FLAG shall have
approved the issuance of shares of FLAG Common Stock pursuant to the Merger, as
and to the extent required by Law, by the provisions of any governing
instruments, or by the rules of the NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
39
transactions contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of any Party would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 9.1 (b)) or for the preventing of any Default under any Contract or
Permit of such Party which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a HOGANSVILLE Material Adverse Effect or
a FLAG Material Adverse Effect, as applicable. No Consent so obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
Board of Directors of any Party would so materially adversely impact the
economic or business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(d) Legal Proceedings. No court or governmental or regulatory authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law or Order (whether temporary, preliminary or permanent) or taken
any other action which prohibits, restricts, makes illegal or, in good faith,
inadvisable, the consummation of the transactions contemplated by this
Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, and no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of FLAG Common Stock issuable pursuant to the Merger shall have been
received.
(f) Nasdaq Listing. The shares of FLAG Common Stock issuable pursuant to
the Merger shall have been approved for listing on the Nasdaq National Market.
(g) Tax Matters. Each Party shall have received a written opinion of
counsel from Powell, Goldstein, Xxxxxx & Xxxxxx LLP, in form reasonably
satisfactory to such Parties (the "Tax Opinion"), to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, (ii) the exchange in the Merger of HOGANSVILLE Common
Stock for FLAG Common Stock will not give rise to gain or loss to the
shareholders of HOGANSVILLE with respect to such exchange (except to the extent
of any cash received), and (iii) neither HOGANSVILLE nor FLAG will recognize
gain or loss as a consequence of the Merger (except for amounts resulting from
any required change in accounting methods and any income and deferred gain
recognized pursuant to Treasury regulations issued under Section 1502 of the
Internal Revenue Code). In rendering such Tax Opinion, such counsel shall be
entitled to rely upon representations of officers of HOGANSVILLE and FLAG
reasonably satisfactory in form and substance to such counsel.
40
(h) Employment Matters. Xxxx X. Xxxxx, Xx. shall have negotiated a mutually
satisfactory employment relationship with FLAG, and any agreement between Xx.
Xxxxx and HOGANSVILLE concerning post termination payments subsequent to a
change in ownership shall have been terminated.
9.2 Conditions to Obligations of FLAG.
--------------------------------------
The obligations of FLAG to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by FLAG pursuant to Section 11.6(a):
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of HOGANSVILLE set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Section 5.3 shall be true and correct (except for inaccuracies which are de
minimus in amount). The representations and warranties set forth in Sections
5.20 and 5.21 shall be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of HOGANSVILLE set
forth in this Agreement (including the representations and warranties set forth
in Sections 5.3, 5.20 and 5.21) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a HOGANSVILLE Material
Adverse Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to "material"
or "Material Adverse Effect" or to the "Knowledge" of any Person shall be deemed
not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of HOGANSVILLE to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material respects.
(c) Certificates. HOGANSVILLE shall have delivered to FLAG (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its secretary, to the effect that to the best of
their Knowledge the conditions set forth in Section 9.1 as relates to
HOGANSVILLE and in Section 9.2(a) and 9.2(b) have been satisfied; provided,
however, that the representations, warranties and covenants to which such
certificate relates shall not been deemed to have survived the Closing, and (ii)
certified copies of resolutions duly adopted by HOGANSVILLE's Board of Directors
and shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as FLAG and its counsel shall request.
(d) Opinion of Counsel. FLAG shall have received an opinion of Xxxxxxxxxx
Xxxxxxxx LLP, counsel to HOGANSVILLE, dated as of the Closing Date, in form
reasonably satisfactory to FLAG, as to the matters set forth in Exhibit 2.
41
(e) Pooling Letters. FLAG shall have received an opinion of Xxxxxx Xxxxxx
Xxxxx, LLP, dated as of the Closing Date, addressed to FLAG and in form and
substance reasonably acceptable to FLAG, to the effect that the Merger, for
accounting purposes, shall qualify for treatment as a pooling of interests.
(f) Affiliates Agreements. FLAG shall have received from each affiliate of
HOGANSVILLE the affiliates letter referred to in Section 8.12 and Exhibit 1.
(g) Claims Letters. Each of the directors and officers of HOGANSVILLE shall
have executed and delivered to FLAG letters in substantially the form of Exhibit
3.
9.3 Conditions to Obligations of HOGANSVILLE.
---------------------------------------------
The obligations of HOGANSVILLE to perform this Agreement and consummate the
Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by HOGANSVILLE pursuant
to Section 11.6(b):
(a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of FLAG set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Section 6.3 shall be true and correct (except for inaccuracies which are de
minimus in amount). The representations and warranties of FLAG set forth in
Section 6.16 and 6.17 shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of FLAG set
forth in this Agreement (including the representations and warranties set forth
in Sections 6.3, 6.16 and 6.17) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a FLAG Material Adverse
Effect; provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of FLAG to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material respects.
(c) Certificates. FLAG shall have delivered to HOGANSVILLE (i) a
certificate, dated as of the Closing Date and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that to the
best of their knowledge the conditions set forth in Section 9.1 as relates to
FLAG and in Section 9.3(a) and 9.3(b) have been satisfied, provided, however,
that the representations, warranties and covenants to which such certificate
relates shall not been deemed to have survived the Closing, and (ii) certified
copies of resolutions duty adopted by FLAG's Board of Directors evidencing the
taking of all corporate action necessary to authorize the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as HOGANSVILLE and its
counsel shall request.
42
(d) Opinion of Counsel. HOGANSVILLE shall have received an opinion of
Powell, Goldstein, Xxxxxx & Xxxxxx LLP, counsel to FLAG, dated as of the Closing
Date, in form reasonably acceptable to HOGANSVILLE, as to the matters set forth
in Exhibit 4.
ARTICLE 10.
TERMINATION
-----------
10.1 Termination.
------------------
Notwithstanding any other provision of this Agreement, and notwithstanding
the approval of this Agreement by the shareholders of HOGANSVILLE, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) By mutual consent of FLAG and HOGANSVILLE; or
(b) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any representation or warranty contained in this Agreement which cannot
be or has not been cured within 30 days after the giving of written notice to
the breaching Party of such breach and which breach is reasonably likely, in the
opinion of the non-breaching Party, to have, individually or in the aggregate, a
HOGANSVILLE Material Adverse Effect or a FLAG Material Adverse Effect, as
applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event (i) any Consent of any Regulatory
Authority required for consummation of the Merger and the other transactions
contemplated hereby shall have been denied by final non-appealable action of
such authority or if any action taken by such authority is not appealed within
the time limit for appeal, or (ii) the shareholders of HOGANSVILLE fail to vote
their approval of the matters relating to this Agreement and the transactions
contemplated hereby at the Shareholders' Meeting where such matters were
presented to such shareholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall not have been
consummated by October 31, 1999, (i) if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
43
Section 10.1(e), or (ii) if the failure to consummate the transactions
contemplated hereby on or before such date is caused by a breach or breaches of
this Agreement by both Parties to the Agreement.
10.2 Effect of Termination.
---------------------------
In the event of the termination and abandonment of this Agreement pursuant
to Section 10.1, this Agreement shall become void and have no effect, except
that (i) the provisions of this Section 10.2 and Article 11 and Section 8.7(b)
shall survive any such termination and abandonment, and (ii) a termination
pursuant to Sections 10.1(b), 10.1(c) or 10.1(e) shall not relieve the breaching
Party from Liability for an uncured willful breach of a representation,
warranty, covenant, or agreement giving rise to such termination.
10.3 Non-Survival of Representations and Covenants.
---------------------------------------------------
The respective representations, warranties, obligations, covenants, and
agreements of the Parties shall not survive the Effective Time except this
Section 10.3 and Articles 1, 2, 3, 4 and 11 and Section 8.10.
ARTICLE 11.
MISCELLANEOUS
-------------
11.1 Definitions.
-----------------
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquisition Proposal" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the stock
or assets of, or other business combination involving the acquisition of such
Party or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any of its
Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits, the FLAG Disclosure Memorandum and the HOGANSVILLE Disclosure
Memorandum delivered pursuant hereto and incorporated herein by reference.
44
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records
of such Person, or any Affiliate of such Person and wherever located.
"Certificate of Merger" shall mean the Certificate of Merger to be executed
by FLAG and filed with the Secretary of State of the State of Georgia relating
to the Merger as contemplated by Section 1.1.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement (provided such oral
agreement is, in any one year period, in excess of $5,000 individually, or
$25,000 in the aggregate), arrangement, authorization, commitment, contract,
indenture, instrument, lease, obligation, plan, practice, restriction,
understanding, or undertaking of any kind or character, or other document to
which any Person is a party or that is binding on any Person or its capital
stock, Assets or business.
"Default" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, after
failing to cure any such breach, violation, default, contravention or conflict
within any applicable grace or cure period (ii) any occurrence of any event that
with the passage of time or the giving of notice or both would constitute a
breach or violation of, default under, contravention of, or conflict with, any
Contract, Law, Order, or Permit, or (iii) any occurrence of any event that with
or without the passage of time or the giving of notice would give rise to a
right of any Person to exercise any remedy or obtain any relief under, terminate
or revoke, suspend, cancel, or modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to increase or
impose any Liability under, any Contract, Law, Order, or Permit.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and other federal, state and local agencies with jurisdiction
over, and including common law in respect of, pollution or protection of the
environment, including the Comprehensive Environmental Response Compensation and
Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and
other Laws relating to emissions, migrations, discharges, releases, or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution use, treatment, storage, disposal,
generation, recycling, transport, or handling of any Hazardous Material.
45
"Equity Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exhibits 1 through 4," inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"FLAG Capital Stock" shall mean, collectively, the FLAG Common Stock, the
FLAG Preferred Stock and any other class or series of capital stock of FLAG.
"FLAG Common Stock" shall mean the $1.00 par value common stock of FLAG.
"FLAG Disclosure Memorandum" shall mean the written information entitled
"FLAG Financial Corporation Disclosure Memorandum" delivered prior to execution
of this Agreement to HOGANSVILLE describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto, unless it is clear from the
disclosure of such information that it applies to other Sections.
"FLAG Entities" shall mean, collectively, FLAG and all FLAG Subsidiaries.
"FLAG Financial Statements" shall mean the consolidated balance sheets
(including related notes and schedules, if any) of FLAG as of December 31, 1998
and as of December 31, 1997 and 1996, and the related statements of income,
changes in shareholders' equity, and cash flows (including related notes and
schedules, if any) for each of the three fiscal years ended December 31, 1997,
1996 and 1995, as filed by FLAG in SEC Documents, and (ii) the consolidated
balance sheets of FLAG (including related notes and schedules, if any) and
related statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents filed
with respect to periods ended subsequent to December 31, 1998.
"FLAG Material Adverse Effect" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on (i) the financial position, business, or results of
operations of FLAG and its Subsidiaries, taken as a whole, or (ii) the ability
of FLAG Entities to perform their obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this Agreement,
46
provided that "Material Adverse Effect" shall not be deemed to include the
impact of (a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting principles
generally applicable to savings associations, banks, and their holding
companies, and (c) actions and omissions of FLAG (or any of its Subsidiaries)
taken with the prior informed written Consent of HOGANSVILLE in contemplation of
the transactions contemplated hereby.
"FLAG Preferred Stock" shall mean the shares of preferred stock of FLAG.
"FLAG Subsidiaries" shall mean the Subsidiaries of FLAG, which shall
include the FLAG Subsidiaries described in Section 6.4 and any corporation,
bank, savings association, or other organization acquired as a Subsidiary of
FLAG in the future and held as a Subsidiary by FLAG at the Effective Time.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
constituent, hazardous waste, solid waste, special waste, regulated substance,
or toxic substance (as those terms are listed, defined or regulated by any
applicable Environmental Laws) and (ii) any chemicals, pollutants, contaminants,
petroleum, petroleum products, or oil (and specifically shall include asbestos
requiring abatement. removal, or encapsulation pursuant to the requirements of
governmental authorities and any polychlorinated biphenyls).
"HOGANSVILLE Common Stock" shall mean the $1.00 par value common stock of
HOGANSVILLE.
"HOGANSVILLE Disclosure Memorandum" shall mean the written information
entitled "HOGANSVILLE Disclosure Memorandum" delivered prior to execution of
this Agreement to FLAG describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically referenced with
respect thereto, unless it is clear from the disclosure of such information that
it applies to other Sections.
"HOGANSVILLE Entities" shall mean, collectively, HOGANSVILLE and all
HOGANSVILLE Subsidiaries.
"HOGANSVILLE Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of HOGANSVILLE as of
December 31, 1998, and (ii) the consolidated balance sheets of HOGANSVILLE
(including related notes and schedules, if any) and related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) with respect to periods ended subsequent to December 31,
1998.
47
"HOGANSVILLE Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of HOGANSVILLE and its Subsidiaries, taken as
a whole, or (ii) the ability of HOGANSVILLE to perform its obligations under
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that an "HOGANSVILLE Material Adverse
Effect" shall not be deemed to include the impact of (a) changes in banking and
similar Laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting principles generally applicable to banks and
their holding companies, and (c) actions and omissions of HOGANSVILLE (or any of
its Subsidiaries) taken with the prior informed written Consent of FLAG in
contemplation of the transactions contemplated hereby.
"HOGANSVILLE Subsidiaries" shall mean the Subsidiaries of HOGANSVILLE,
which shall include the HOGANSVILLE Subsidiaries described in Section 5.4 and
any corporation, bank, savings association, or other organization acquired as a
Subsidiary of HOGANSVILLE in the future and held as a Subsidiary by HOGANSVILLE
at the Effective Time.
"HSR Act" shall mean Section 7A of the Xxxxxxx Act, as added by Title II of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks, service
marks, service names, trade names, applications therefor, and licenses, computer
software (including any source or object codes therefor or documentation
relating thereto), trade secrets, franchises, inventions, and other intellectual
property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a FLAG Entity (including references to
being aware of a particular matter) shall mean those facts that are known or
should reasonably have been known after due inquiry by the chairman, president,
chief financial officer, chief accounting officer, chief operating officer,
chief credit officer, general counsel, any assistant or deputy general counsel,
or any senior, executive or other vice president of such FLAG Entity.
"Knowledge" as used with respect to a HOGANSVILLE Entity (including references
to being aware of a particular matter) shall mean those facts that are actually
known (with no obligation of inquiry) by the president and chief executive
officer of such HOGANSVILLE Entity.
"Law" shall mean any code, law (including common law), ordinance,
regulation, decision, judicial interpretation, reporting or licensing
requirement, rule, or statute applicable to a Person or its Assets, Liabilities,
or business, including those promulgated, interpreted or enforced by any
Regulatory Authority.
48
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the ordinary course of the banking
business, and (iii) Liens which do not materially impair the use of or title to
the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action. claim,
complaint investigation hearing, criminal prosecution, governmental or other
examination or other administrative or other proceeding relating to or affecting
a Party, its business. its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement. but shall not include regular.
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq National Market" shall mean the National Market System of the
National Association of Securities Dealers Automated Quotations System.
"Operating Property" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries and, where required by the
context, includes the owner or operator of such property, but only with respect
to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management and,
where required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or property.
49
"Party" shall mean either HOGANSVILLE or FLAG, and "Parties" shall mean
HOGANSVILLE and FLAG.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets, or
business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by FLAG under the 1933 Act
with respect to the shares of FLAG Common Stock to be issued to the shareholders
of HOGANSVILLE in connection with the transactions contemplated by this
Agreement.
"Regulatory Authorities" shall mean, collectively, the SEC, the NASD, the
Federal Trade Commission, the United States Department of Justice, the Board of
the Governors of the Federal Reserve System, the Office of Thrift Supervision
(including its predecessor, the Federal Home Loan Bank Board), the Federal
Deposit Insurance Corporation, the Georgia Department of Banking and Finance,
and all other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Shareholders Meeting" shall mean the meeting of the shareholders of
HOGANSVILLE to be held pursuant to Section 8. 3, including any adjournment or
adjournments thereof.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or controls
50% or more of the outstanding equity securities either directly or through an
50
unbroken chain of entities as to each of which 50% or more of the outstanding
equity securities is owned directly or indirectly by its parent (provided, there
shall not be included any such entity the equity securities of which are owned
or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves
as a general partner, (iii) in the case of a limited liability company, serves
as a managing member, or (iv) otherwise has the ability to elect a majority of
the directors, trustees or managing members thereof.
"Surviving Corporation" shall mean FLAG as the surviving corporation
resulting from the Merger.
"Tax Return" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection with
Taxes, including any return of an affiliated or combined or unitary group that
includes a Party or its Subsidiaries.
"Tax" or Taxes" shall mean any federal, state, county, local, or foreign
taxes, charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
Allowance Section 5.
Certificates Section 4.1
Closing Section 1.2
Effective Time Section 1.3
ERISA Affiliate Section 5.16(c)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(b)
FLAG Benefit Plans Section 6.15(a)
FLAG ERISA Plan Section 6.15(a)
FLAG Pension Plan Section 6.15(a)
FLAG SEC Reports Section 6.5(a)
HOGANSVILLE Benefit Plans Section 5.16(a)
HOGANSVILLE Contracts Section 5.17
HOGANSVILLE ERISA Plan Section 5.16(a)
HOGANSVILLE Pension Plan Section 5.16(a)
Indemnified Party Section 8.14(a)
Merger Section 1.1
Tax Opinion Section 9.1(g)
51
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
--------------
(a) Except as otherwise provided in this Section 11.2, each Party shall
bear and pay all direct costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including filing,
registration and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel.
(b) If this Agreement is terminated by FLAG pursuant to Sections 10.1(b),
(c) or (d)(ii), HOGANSVILLE shall pay to FLAG an amount equal to the lesser of
$100,000 or FLAG's actual out of pocket expenses incurred in connection with the
transactions contemplated by this Agreement.
(c) If this Agreement is terminated by HOGANSVILLE pursuant to Sections
10.1(b) or (c), FLAG shall pay to HOGANSVILLE an amount equal to the lesser of
$100,000 or HOGANSVILLE's actual out of pocket expenses incurred in connection
with the transactions contemplated by this Agreement.
(d) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders.
----------------------------
Except as disclosed in Section 11.3 of the FLAG Disclosure Memorandum, and
except as disclosed in Section 11.3 of the HOGANSVILLE Disclosure Memorandum,
each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed any broker or finder
or incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by HOGANSVILLE or by FLAG, each of
HOGANSVILLE and FLAG, as the case may be, agrees to indemnify and hold the other
Party harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement.
-----------------------
Except as otherwise expressly provided herein, this Agreement (including
the documents and instruments referred to herein) constitutes the entire
agreement between the Parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral. Nothing in this Agreement, expressed or implied, is
intended to confer upon any Person, other than the Parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement.
52
11.5 Amendments.
------------------
To the extent permitted by Law, this Agreement may be amended by a
subsequent writing signed by each of the Parties upon the approval of each of
the Parties, whether before or after shareholder approval of this Agreement has
been obtained; provided, that after any such approval by the holders of
HOGANSVILLE Common Stock, there shall be made no amendment that, pursuant to the
GBCC, requires further approval by such shareholders without the further
approval of such shareholders.
11.6 Waivers.
-------------
(a) Prior to or at the Effective Time, FLAG, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
HOGANSVILLE, to waive or extend the time for the compliance or fulfillment by
HOGANSVILLE of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of FLAG under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of FLAG.
(b) Prior to or at the Effective Time, HOGANSVILLE, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by FLAG, to waive or extend the time for the compliance or fulfillment
by FLAG, of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of HOGANSVILLE under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of HOGANSVILLE.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 Assignment.
----------------
Except as expressly contemplated hereby, neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any Party
hereto (whether by operation of Law or otherwise) without the prior written
consent of the other Party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the Parties
and their respective successors and assigns.
11.8 Notices.
-------------
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, or by courier
or overnight carrier, to the persons at the addresses set forth below (or at
such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so delivered:
53
HOGANSVILLE: First Hogansville Bankshares, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Telecopy Number: (000) 000-0000
Attention: Xxxx X. Xxxxx, Xx., President
Copy to Counsel: Xxxxxxxxxx Xxxxxxxx LLP
Suite 2800
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
FLAG: Citizens Bank
000 Xxxxx Xxxxxx
X. X. Xxx 000
Xxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: J. Xxxxxx Xxxxxxx, Xx.
Copy to Counsel: Xxxxxx Xxxxxxxxx Xxxxxx & Xxxxxx LLP
Sixteenth Floor
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx XX, Esq.
11.9 Governing Law.
---------------------
This Agreement shall be governed by and construed in accordance with the
Laws of the State of Georgia, without regard to any applicable conflicts of
Laws.
11.10 Counterparts.
-------------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
11.11 Captions, Articles and Sections.
---------------------------------------
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement. Unless otherwise indicated, all references
to particular Articles or Sections shall mean and refer to the referenced
Articles and Sections of this Agreement.
11.12 Interpretations.
-----------------------
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against any party, whether under any rule of construction
or otherwise. No party to this Agreement shall be considered the draftsman. The
parties acknowledge and agree that this Agreement has been reviewed, negotiated,
and accepted by all parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all parties hereto.
54
11.13 Enforcement of Agreement.
-------------------------------
The Parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the Parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
11.14 Severability.
-------------------
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
[SIGNATURES APPEAR ON NEXT PAGE]
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[SIGNATURES TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
FLAG FINANCIAL CORPORATION
By: /s/J. Xxxxxx Xxxxxxx, Xx.
-------------------------
J. Xxxxxx Xxxxxxx, Xx.
President & Chief Executive Officer
FIRST HOGANSVILLE BANKSHARES, INC.
By: /s/Xxxx X. Xxxxx, Xx.
---------------------
Xxxx X. Xxxxx, Xx.
President
Exhibit 1
AFFILIATE AGREEMENT
FLAG Financial Corporation
000 Xxxxx Xxxxxxxxx Xxxxxx
XxXxxxxx, XX 00000
Attention: J. Xxxxxx Xxxxxxx, Xx., President and Chief Executive Officer
Gentlemen:
The undersigned is a shareholder of First Hogansville Bankshares, Inc.
("HOGANSVILLE"), a Georgia Corporation, and will become a shareholder of FLAG
Financial Corporation ("FLAG"), a Georgia corporation, pursuant to the
transactions described in the Agreement and Plan of Merger, dated as of June 1,
1999 (the "Agreement"), by and between FLAG and HOGANSVILLE. Under the terms of
the Agreement, HOGANSVILLE will be merged with and into FLAG (the "Merger"), and
the shares of the $1.00 par value common stock of HOGANSVILLE ("HOGANSVILLE
Common Stock") will be converted into and exchanged for shares of the $1.00 par
value common stock of FLAG ("FLAG Common Stock"). This Affiliate Agreement
represents an agreement between the undersigned and FLAG regarding certain
rights and obligations of the undersigned in connection with the shares of FLAG
to be received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and FLAG hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
HOGANSVILLE he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Initial Restrictions on Disposition. The undersigned agrees that he
will not sell, transfer or otherwise dispose of his interests in, or reduce his
risk relative to, any of the shares of FLAG Common Stock into which his shares
of HOGANSVILLE Common Stock are converted upon consummation of the Merger until
such time as FLAG notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met
except that transfers may be made in compliance with Staff Accounting Bulletin
No. 76 issued by the SEC. The undersigned understands that ASR 130 and 135
relate to publication of financial results of post-Merger combined operations of
FLAG and HOGANSVILLE. FLAG agrees that it will publish such results within 45
days after the end of the first fiscal quarter of FLAG containing the required
period of post-Merger combined operations and that it will notify the
undersigned promptly following such publication.
Exhibit 1 - Affiliate Agreement - Page 2
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) At any meeting of shareholders of HOGANSVILLE called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with respect to
the Merger and the Merger Agreement is sought (the "Shareholders' Meeting"), the
undersigned shall, to the extent that the Shareholder has the power, vote (or
cause to be voted) the Shareholder's Shares in favor of the Merger, the
execution and delivery by HOGANSVILLE of the Merger Agreement, and the approval
of the terms thereof and each of the other transactions contemplated by the
Merger Agreement, provided that the terms of the Merger Agreement shall not have
been amended to reduce the consideration payable in the Merger to a lesser
amount of FLAG Common Stock or otherwise to materially and adversely impair the
Shareholder's rights or increase the Shareholder's obligations thereunder. The
undersigned hereby waives any rights of appraisal, or rights to dissent from the
Merger, that the undersigned may have.
(b) The FLAG Common Stock received by the undersigned as a result of
the Merger will be taken for his own account and not for others, directly or
indirectly, in whole or in part.
(c) FLAG has informed the undersigned that any distribution by the
undersigned of FLAG Common Stock has not been registered under the 1933 Act and
that shares of FLAG Common Stock received pursuant to the Merger can only be
sold by the undersigned (1) following registration under the 1933 Act, or (2) in
conformity with the volume and other requirements of Rule 145(d) promulgated by
the SEC as the same now exist or may hereafter be amended, or (3) to the extent
some other exemption from registration under the 1933 Act might be available.
The undersigned understands that FLAG is under no obligation to file a
registration statement with the SEC covering the disposition of the
undersigned's shares of FLAG Common Stock or to take any other action necessary
to make compliance with an exemption from such registration available.
(d) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned pursuant to
Section 9 hereof, have all shares of HOGANSVILLE Common Stock beneficially owned
by the undersigned registered in the name of the undersigned or such parties, as
applicable, prior to the effective date of the Merger and not in the name of any
bank, broker-dealer, nominee or clearinghouse.
(e) During the thirty (30) days immediately preceding the Effective
Time of the Merger, the undersigned has not sold, transferred, or otherwise
disposed of his interests in, or reduced his risk relative to, any of the shares
of HOGANSVILLE Common Stock beneficially owned by the undersigned as of the
record date for determination of shareholders entitled to vote at the
Shareholders' Meeting of HOGANSVILLE held to approve the Merger.
(f) The undersigned is aware that FLAG intends to treat the Merger as a
tax-free reorganization under Section 368 of the Code for federal income tax
purposes. The undersigned agrees to treat the transaction in the same manner as
FLAG for federal income tax purposes.
Exhibit 1 - Affiliate Agreement - Page 3
4. Restrictions on Transfer. The undersigned understands and agrees
that stop-transfer instructions with respect to the shares of FLAG Common Stock
received by the undersigned pursuant to the Merger will be given to FLAG's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
The shares represented by this certificate were issued
pursuant to a business combination which is accounted for as a "pooling
of interests" and may not be sold, nor may the owner thereof reduce his
risks relative thereto in any way, until such time as FLAG Financial
Corporation ("FLAG") has published the financial results covering at
least 30 days of combined operations after the effective date of the
merger through which the business combination was effected. In
addition, the shares represented by this certificate may not be sold,
transferred or otherwise disposed of except or unless (1) covered by an
effective registration statement under the Securities Act of 1933, as
amended, (2) in accordance with (i) Rule 145(d) (in the case of shares
issued to an individual who is an affiliate of FLAG) of the Rules and
Regulations of such Act, or (3) in accordance with a legal opinion
satisfactory to counsel for FLAG that such sale or transfer is
otherwise exempt from the registration requirements of such Act.
Such legend will also be placed on any certificate representing FLAG securities
issued subsequent to the original issuance of FLAG Common Stock pursuant to the
Merger as a result of any transfer of such shares or any stock dividend, stock
split, or other recapitalization as long as the FLAG Common Stock issued to the
undersigned pursuant to the Merger has not been transferred in such manner as to
justify the removal of the legend therefrom. Upon the request of the
undersigned, FLAG shall cause the certificates representing the shares of FLAG
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to restrictions on transfer by virtue of
ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and 135
have been met. In addition, if the provisions of Rules 144 and 145 are amended
to eliminate restrictions applicable to the FLAG Common Stock received by the
undersigned pursuant to the Merger, or at the expiration of the restrictive
period set forth in Rule 145(d), FLAG, upon the request of the undersigned, will
cause the certificates representing the shares of FLAG Common Stock issued to
the undersigned in connection with the Merger to be reissued free of any legend
relating to the restrictions set forth in Rules 144 and 145(d) upon receipt by
FLAG of an opinion of its counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Disposition. The undersigned has
carefully read the Agreement and this Affiliate Agreement and has discussed
their requirements and impact upon his ability to sell, transfer or otherwise
dispose of the shares of FLAG Common Stock received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for HOGANSVILLE.
6. Filing of Reports by FLAG. FLAG agrees, for a period of three years
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended, so that the public information provisions of Rule 145(d)
promulgated by the SEC as the same are presently in effect will be available to
Exhibit 1 - Affiliate Agreement - Page 4
the undersigned in the event the undersigned desires to transfer any shares of
FLAG Common Stock issued to the undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of FLAG Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for FLAG Common Stock, together with such additional information
as the transfer agent may reasonably request. If FLAG's counsel concludes that
such proposed sale or transfer complies with the requirements of Rule 145(d),
FLAG shall cause such counsel to provide such opinions as may be necessary to
FLAG's transfer agent so that the undersigned may complete the proposed sale or
transfer.
8. Certain Actions. The undersigned covenants and agrees with FLAG
that, for a period of two (2) years after the effective time of the Merger, the
undersigned shall not, without the prior written consent of FLAG, directly or
indirectly serve as a consultant to, serve as a management official of, or be or
become a major shareholder of any financial institution having an office in
Xxxxx County, Georgia. It is expressly understood that the covenants contained
in this paragraph 8 do not apply to (i) "management official" positions which
the undersigned holds with financial institutions (other than FLAG, HOGANSVILLE,
and their subsidiaries) as of the date of this Agreement, (ii) securities
holdings which cause the undersigned to be deemed a major shareholder of a
financial institution (other than FLAG, HOGANSVILLE, and their subsidiaries) as
of the date of this Agreement, or (iii) advisory relationships with a financial
institution which the undersigned has as of the date of this Agreement or may
have after the date hereof solely in the capacity as legal counsel. For the
purposes of the covenants contained in this paragraph 8, the following terms
shall have the following respective meanings:
(a) The term "management official" shall refer to service of
any type which gives the undersigned the authority to participate,
directly or indirectly, in policy-making functions of the financial
institution. This includes, but is not limited to, service as an
organizer, officer, director, or advisory director of the financial
institution. It is expressly understood that the undersigned may be
deemed a management official of the financial institution whether or
not he holds any official, elected, or appointed position with such
financial institution.
(b) The term "financial institution" shall refer to any bank,
bank holding company, savings and loan association, savings and loan
holding company, banking-related company, or any other similar
financial institution which engages in the business of accepting
deposits or making loans or which owns or controls a company which
engages in the business of accepting deposits or making loans. It is
expressly understood that the term "financial institution" shall
include any financial institution as defined herein that, after the
date of this Agreement, makes application for an appropriate federal or
state regulatory authority for approval to organize.
(c) The term "major shareholder" shall refer to the beneficial
ownership of five percent (5%) or more of any class of voting
securities or the ownership of five percent (5%) of the total equity
interest in such company, however denominated.
Exhibit 1 - Affiliate Agreement - Page 5
The provisions of this paragraph 8 shall be of no further force and
effect if the undersigned is not offered employment as a director of FLAG or any
of its subsidiaries (to include the subsidiaries of HOGANSVILLE acquired at the
Effective Time of the Merger) at the Effective Time of the Merger or, if the
undersigned is so employed, the undersigned's employment is terminated by FLAG
after the Effective Time of the Merger.
9. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of
HOGANSVILLE and FLAG that are deemed to be beneficially owned by the undersigned
pursuant to applicable federal securities laws, which the undersigned agrees may
include, without limitation, shares owned or held in the name of (i) the
undersigned's spouse, (ii) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (iii) any trust
or estate in which the undersigned, the undersigned's spouse and any such
relative collectively own at least a ten percent (10%) beneficial interest or of
which any of the foregoing serves as trustee, executor, or in any similar
capacity, and (iv) any corporation or other organization in which the
undersigned, the undersigned's spouse and any such relative collectively own at
least ten percent (10%) of any class of equity securities or of the equity
interest. The undersigned further recognizes that, in the event that the
undersigned is a director or officer of FLAG or becomes a director or officer of
FLAG upon consummation of the Merger, among other things, any sale of FLAG
Common Stock by the undersigned within a period of less than six (6) months
following the Effective Time of the Merger may subject the undersigned to
liability pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended.
10. Miscellaneous. This Affiliate Agreement is the complete agreement
between FLAG and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
SIGNATURES CONTAINED ON NEXT PAGE
Exhibit 1 - Affiliate Agreement - Page 5
This Affiliate Agreement is executed as of the _________ day of
________________, 1999.
Very truly yours,
____________________________________
Signature
____________________________________
Print Name
Address:____________________________
____________________________________
____________________________________
[add below the signatures of all registered
owners of shares deemed beneficially owned
by the affiliate]
------------------------------------
Name
------------------------------------
Name
------------------------------------
Name
AGREED TO AND ACCEPTED as of
the _______ day of _____________________, 1999.
FLAG FINANCIAL CORPORATION
By: __________________________________________
Exhibit 1 - Affiliate Agreement - Page 6
Exhibit 2
MATTERS AS TO WHICH XXXXXXXXXX XXXXXXXX LLP WILL OPINE
1. First Hogansville Bankshares, Inc. ("HOGANSVILLE") is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia with full corporate power and authority to carry on the business in
which it is engaged, and to own and use its Assets.
2. The execution and delivery of the Agreement and compliance with its terms do
not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of HOGANSVILLE or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default or
acceleration under any Contract disclosed in the Agreement, Law, Order or Permit
(subject to the approval of Regulatory Authorities) to which HOGANSVILLE is a
party or by which HOGANSVILLE is bound.
3. The Agreement has been duly and validly executed and delivered by HOGANSVILLE
and, assuming valid authorization, execution and delivery by FLAG, constitutes a
valid and binding agreement of HOGANSVILLE enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
4. The authorized capital stock of HOGANSVILLE consists of 1,000,000 shares of
the HOGANSVILLE Common Stock, of which 94,500 shares were issued and outstanding
as of _______________________, 1999. The shares of the HOGANSVILLE Common Stock
that are issued and outstanding were not issued in violation of any statutory
preemptive rights of shareholders, were duly issued, and are fully paid and
nonassessable under the GBCC. To our knowledge, except as set forth above, or as
disclosed in Section 5.3 of the HOGANSVILLE Disclosure Memorandum, as of
______________, 1999, there were no shares of capital stock or other equity
securities of HOGANSVILLE outstanding and no outstanding Equity Rights relating
to the capital stock of HOGANSVILLE.
Exhibit 3
____________________, 1999
FLAG Financial Corporation
000 Xxxxx Xxxxxxxxx Xxxxxx
XxXxxxxx, XX 00000
RE: First Hogansville Bankshares, Inc. ("HOGANSVILLE")
Hogansville, Georgia
Ladies and Gentlemen:
This letter is delivered pursuant to Section 9.2(g) of the Agreement
and Plan of Merger, dated as of June 1, 1999, by and between FLAG Financial
Corporation and HOGANSVILLE.
In my capacity as an officer or a director of HOGANSVILLE, and as of
the date of this letter, I do not, to the best of my knowledge, have any claims,
and I am not aware of any facts or circumstances that I believe are likely to
give rise to any claim, for indemnification under HOGANSVILLE's Articles of
Incorporation or Bylaws as existing on the date hereof or as may be afforded by
the laws of the State of Georgia or the United States.
Very truly yours,
------------------------------------------
Signature of Officer or Director
------------------------------------------
Name of Officer or Director
------------------------------------------
Position at HOGANSVILLE
Exhibit 4
MATTERS AS TO WHICH POWELL, GOLDSTEIN, XXXXXX & XXXXXX LLP
WILL OPINE
1. FLAG Financial Corporation ("FLAG") is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia
with full corporate power and authority to carry on the business in which it is
engaged, and to own and use its Assets.
2. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of FLAG or, to our knowledge but without any independent
investigation, result in any conflict with, breach of, or default under any
Contract disclosed in the Agreement, Law, Order or Permit (subject to the
approval of Regulatory Authorities) to which FLAG is a party or by which FLAG is
bound.
3. The Agreement has been duly and validly executed and delivered by FLAG,
and assuming valid authorization, execution and delivery by First Hogansville
Bankshares, Inc., constitutes a valid and binding agreement of FLAG enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or similar laws affecting creditors'
rights generally, provided, however, that we express no opinion as to the
availability of the equitable remedy of specific performance.
4. The authorized capital stock of FLAG consists of 20,000,000 shares of
FLAG Common Stock, of which 6,561,879 shares are issued and outstanding as of
____________ 1999, and (ii) 10,000,000 shares of FLAG Preferred Stock, of which
no shares are issued and outstanding as of _____________________ 1999. The
shares of FLAG Common Stock that are issued and outstanding were not issued in
violation of any statutory preemptive rights of shareholders, were duly issued
and are fully paid and nonassessable under the Georgia Business Corporation
Code. To our knowledge, except as set forth above, or as disclosed in Section
6.3 of the FLAG Disclosure Memorandum, as of _________________________, 1999,
there were no shares of capital stock or other equity securities of FLAG
outstanding and no outstanding Equity Rights relating to the capital stock of
FLAG. The shares of FLAG Common Stock to be issued to the shareholders of First
Hogansville Bankshares, Inc. as contemplated by the Agreement have been
registered under the Securities Act of 1933, as amended, and when properly
issued and delivered following consummation of the Merger will be fully paid and
non-assessable under the Georgia Business Corporation Code.
