AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FLAG FINANCIAL CORPORATION
AND
HEART OF GEORGIA BANCSHARES, INC.
Dated as of August 19, 1998
TABLE OF CONTENTS
LIST OF EXHIBITS..............................................................V
AGREEMENT AND PLAN OF MERGER..................................................1
ARTICLE 1. TRANSACTIONS AND TERMS OF THE MERGER...............................2
1.1 MERGER..........................................................2
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..........................................3
ARTICLE 3. MANNER OF CONVERTING SHARES........................................3
3.1 CONVERSION OF SHARES............................................3
3.2 ANTI-DILUTION PROVISIONS........................................3
3.3 SHARES HELD BY HEART OF GEORGIA OR FLAG.........................4
3.4 DISSENTING SHAREHOLDERS.........................................4
3.5 FRACTIONAL SHARES...............................................4
ARTICLE 4. EXCHANGE OF SHARES.................................................4
4.1 EXCHANGE PROCEDURES.............................................4
4.2 RIGHTS OF FORMER SHAREHOLDERS OF HEART OF GEORGIA...............5
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF HEART OF GEORGIA.................6
5.1 ORGANIZATION, STANDING, AND POWER...............................6
5.2 AUTHORITY OF HEART OF GEORGIA; NO BREACH BY AGREEMENT...........6
5.3 CAPITAL STOCK...................................................7
5.4 HEART OF GEORGIA SUBSIDIARIES...................................8
i
5.5 FINANCIAL STATEMENTS............................................9
5.6 ABSENCE OF UNDISCLOSED LIABILITIES..............................9
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS............................9
5.8 TAX MATTERS.....................................................9
5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES.............................11
5.10 ASSETS.........................................................11
5.11 INTELLECTUAL PROPERTY..........................................12
5.12 ENVIRONMENTAL MATTERS..........................................12
5.13 COMPLIANCE WITH LAWS...........................................13
5.14 LABOR RELATIONS................................................14
5.15 EMPLOYEE BENEFIT PLANS.........................................14
5.16 MATERIAL CONTRACTS.............................................16
5.17 LEGAL PROCEEDINGS..............................................17
5.18 REPORTS........................................................17
5.19 STATEMENTS TRUE AND CORRECT....................................18
5.20 ACCOUNTING, TAX AND REGULATORY MATTERS.........................18
5.21 CHARTER PROVISIONS.............................................18
5.22 BOARD RECOMMENDATION...........................................18
5.23 Y-2K...........................................................18
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.............................23
6.10 ASSETS.........................................................24
6.11 INTELLECTUAL PROPERTY..........................................24
6.12 ENVIRONMENTAL MATTERS..........................................25
6.13 COMPLIANCE WITH LAWS...........................................25
6.14 LABOR RELATIONS................................................26
6.15 EMPLOYEE BENEFIT PLANS.........................................26
6.16 MATERIAL CONTRACTS.............................................28
6.17 LEGAL PROCEEDINGS..............................................29
6.18 REPORTS........................................................29
6.19 STATEMENTS TRUE AND CORRECT....................................29
6.20 ACCOUNTING, TAX AND REGULATORY MATTERS.........................30
6.21 CHARTER PROVISIONS.............................................30
6.22 BOARD RECOMMENDATION...........................................30
6.23 Y2K............................................................30
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ARTICLE 7. CONDUCT OF BUSINESS PENDING CONSUMMATION..........................31
7.1 AFFIRMATIVE COVENANTS OF HEART OF GEORGIA......................31
7.2 NEGATIVE COVENANTS OF HEART OF GEORGIA.........................31
7.3 AFFIRMATIVE COVENANTS OF FLAG..................................33
7.4 NEGATIVE COVENANTS OF FLAG.....................................33
7.5 ADVERSE CHANGES IN CONDITION...................................33
7.6 REPORTS........................................................34
ARTICLE 8. ADDITIONAL AGREEMENTS.............................................34
8.1 REGISTRATION STATEMENT.........................................34
8.2 NASDAQ LISTING.................................................34
8.3 SHAREHOLDER APPROVAL...........................................34
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..............................35
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................................37
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..............................40
9.3 CONDITIONS TO OBLIGATIONS OF HEART OF GEORGIA..................42
ARTICLE 10. TERMINATION......................................................43
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............................................53
11.4 ENTIRE AGREEMENT...............................................53
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11.5 AMENDMENTS.....................................................53
11.6 WAIVERS........................................................53
11.7 ASSIGNMENT.....................................................54
11.8 NOTICES........................................................54
11.9 GOVERNING LAW..................................................55
11.10 COUNTERPARTS...................................................55
11.11 CAPTIONS, ARTICLES AND SECTIONS................................55
11.12 INTERPRETATIONS................................................55
11.13 ENFORCEMENT OF AGREEMENT.......................................55
11.14 SEVERABILITY...................................................55
SIGNATURES TO AGREEMENT AND PLAN OF MERGER
iv
LIST OF EXHIBITS
Exhibit
Number Description
------ -----------
1. Form of Agreement of Affiliates of Heart of Georgia Bancshares, Inc. (ss.
8.12, ss. 9.2(f)).
2. Matters as to which Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P. 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 August 19, 1998, by and between FLAG FINANCIAL CORPORATION ("FLAG"),
a Georgia corporation located in LaGrange, Georgia, and HEART OF GEORGIA
BANCSHARES, INC. ("HEART OF GEORGIA"), a Georgia corporation located in Mount
Xxxxxx, Georgia.
Preamble
--------
The respective Boards of Directors of HEART OF GEORGIA 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 HEART OF GEORGIA by FLAG, pursuant to the merger
of HEART OF GEORGIA with and into FLAG. At the effective time of such merger,
the outstanding shares of the capital stock of HEART OF GEORGIA shall be
converted into the right to receive shares of the common stock of FLAG (except
as provided herein). As a result, shareholders of HEART OF GEORGIA shall become
shareholders of FLAG, and FLAG shall conduct the business and operations of
HEART OF GEORGIA. The transactions described in this Agreement are subject to
(a) approval of the shareholders of HEART OF GEORGIA, (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:
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ARTICLE 1.
TRANSACTIONS AND TERMS OF THE MERGER
------------------------------------
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, HEART OF GEORGIA 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 HEART OF GEORGIA and FLAG, as set forth
herein.
1.2 Time anbd 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 HEART OF GEORGIA 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
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) Xxxxxx X. Xxxxxxx and
Xxxxxx X. Xxxxxxx 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.
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 HEART OF GEORGIA, or the shareholders of the foregoing, the shares of HEART
OF GEORGIA 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 HEART OF GEORGIA Common Stock (excluding shares held by
any HEART OF GEORGIA 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 2.025 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 HEART OF GEORGIA or FLAG. Each of the shares of HEART OF
GEORGIA Common Stock held by any HEART OF GEORGIA 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.
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3.4 Dissenting Shareholders. Any holder of shares of HEART OF GEORGIA
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 HEART OF
GEORGIA 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 HEART OF GEORGIA Common Stock is
entitled under this Article 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of HEART OF GEORGIA
Common Stock held by him. If and to the extent required by applicable Law, HEART
OF GEORGIA will establish (or cause to be established) an escrow account with an
amount sufficient to satisfy the maximum aggregate payment that may be required
to be paid to dissenting shareholders. 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.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of HEART OF GEORGIA 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
HEART OF GEORGIA 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
4
Certificates shall pass, only upon proper delivery of such Certificates to the
Exchange Agent). The Certificate or Certificates of HEART OF GEORGIA 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 HEART OF GEORGIA Common Stock
represented by Certificates that are not registered in the transfer records of
HEART OF GEORGIA, 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 HEART OF GEORGIA 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 HEART OF GEORGIA 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 of this Agreement notwithstanding, neither FLAG nor the
Exchange Agent shall be liable to a holder of HEART OF GEORGIA 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 HEART OF GEORGIA shall constitute
ratification of the appointment of the Exchange Agent.
4.2 Rights of Former Shareholders of HEART OF GEORGIA. At the Effective
Time, the stock transfer books of HEART OF GEORGIA shall be closed as to holders
of HEART OF GEORGIA Common Stock immediately prior to the Effective Time and no
transfer of HEART OF GEORGIA 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
HEART OF GEORGIA 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 HEART OF GEORGIA in respect of such shares
of HEART OF GEORGIA 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 HEART OF GEORGIA shall be entitled to vote
after the Effective Time at any meeting of FLAG shareholders the number of whole
5
shares of FLAG Common Stock into which their respective shares of HEART OF
GEORGIA 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.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF HEART OF GEORGIA
--------------------------------------------------
HEART OF GEORGIA hereby represents and warrants to FLAG as follows:
5.1 Organization, Standing, and Power. HEART OF GEORGIA 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.
HEART OF GEORGIA 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 HEART OF GEORGIA Material Adverse
Effect. The minute book and other organizational documents for HEART OF GEORGIA
have been made available to FLAG for its review and, except as disclosed in
Section 5.1 of the HEART OF GEORGIA 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 HEART OF GEORGIA; No Breach By Agreement.
(a) HEART OF GEORGIA 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 HEART OF
GEORGIA, subject to the approval of this Agreement by the holders of a majority
6
of the outstanding voting stock of HEART OF GEORGIA, which is the only
shareholder vote required for approval of this Agreement, and consummation of
the Merger by HEART OF GEORGIA. Subject to such requisite shareholder approval,
this Agreement represents a legal, valid, and binding obligation of HEART OF
GEORGIA, enforceable against HEART OF GEORGIA 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 HEART OF
GEORGIA, nor the consummation by HEART OF GEORGIA of the transactions
contemplated hereby, nor compliance by HEART OF GEORGIA with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of HEART OF GEORGIA's Articles of Incorporation or Bylaws, or the Charter,
Articles of Incorporation, or Bylaws of any HEART OF GEORGIA Subsidiary or any
resolution adopted by the board of directors or the shareholders of any HEART OF
GEORGIA Entity, or (ii) except as disclosed in Section 5.2 of the HEART OF
GEORGIA Disclosure Memorandum, 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 HEART OF GEORGIA Entity under, any Contract or Permit of any HEART
OF GEORGIA Entity, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a HEART
OF GEORGIA 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 HEART OF
GEORGIA Entity or any of their respective material Assets (including any FLAG
Entity or any HEART OF GEORGIA Entity becoming subject to or liable for the
payment of any Tax or any of the Assets owned by any FLAG Entity or any HEART OF
GEORGIA 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 HEART OF GEORGIA Material Adverse
Effect, no notice to, filing with, or Consent of, any public body or authority
is necessary for the consummation by HEART OF GEORGIA 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 HEART
OF GEORGIA consists of 1,000,000 shares of HEART OF GEORGIA Common Stock, of
which 220,000 shares are issued and outstanding. All of the issued and
outstanding shares of capital stock of HEART OF GEORGIA 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 HEART OF GEORGIA has been issued
7
in violation of any preemptive rights of the current or past shareholders of
HEART OF GEORGIA.
(b) Except as set forth in Section 5.3(a), or as disclosed in Section
5.3(b) of the HEART OF GEORGIA Disclosure Memorandum, there are no shares of
capital stock or other equity securities of HEART OF GEORGIA outstanding and no
outstanding Equity Rights relating to the capital stock of HEART OF GEORGIA.
5.4 HEART OF GEORGIA Subsidiaries. HEART OF GEORGIA has disclosed in
Section 5.4 of the HEART OF GEORGIA Disclosure Memorandum all of the HEART OF
GEORGIA 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 HEART OF GEORGIA
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 HEART OF GEORGIA
Disclosure Memorandum, HEART OF GEORGIA or one of its wholly-owned Subsidiaries
owns all of the issued and outstanding shares of capital stock (or other equity
interests) of each HEART OF GEORGIA Subsidiary. No capital stock (or other
equity interest) of any HEART OF GEORGIA Subsidiary is or may become required to
be issued (other than to another HEART OF GEORGIA Entity) by reason of any
Equity Rights, and there are no Contracts by which any HEART OF GEORGIA
Subsidiary is bound to issue (other than to another HEART OF GEORGIA Entity)
additional shares of its capital stock (or other equity interests) or Equity
Rights or by which any HEART OF GEORGIA Entity is or may be bound to transfer
any shares of the capital stock (or other equity interests) of any HEART OF
GEORGIA Subsidiary (other than to another HEART OF GEORGIA Entity). There are no
Contracts relating to the rights of any HEART OF GEORGIA Entity to vote or to
dispose of any shares of the capital stock (or other equity interests) of any
HEART OF GEORGIA Subsidiary. All of the shares of capital stock (or other equity
interests) of each HEART OF GEORGIA Subsidiary held by a HEART OF GEORGIA 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 HEART OF
GEORGIA Entity free and clear of any Lien. Except as disclosed in Section 5.4 of
the HEART OF GEORGIA Disclosure Memorandum, each HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Material Adverse Effect. Each HEART OF GEORGIA
Subsidiary that is a depository institution is an "insured institution" as
8
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder. The minute book and other organizational documents for each HEART OF
GEORGIA Subsidiary have been made available to FLAG for its review, and, except
as disclosed in Section 5.4 of the HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART
OF GEORGIA 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 HEART OF GEORGIA Entity has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a HEART OF GEORGIA Material Adverse Effect, except Liabilities which
are accrued or reserved against in the consolidated balance sheets of HEART OF
GEORGIA as of December 31, 1997 or March 31, 1998, included in the HEART OF
GEORGIA Financial Statements or reflected in the notes thereto. No HEART OF
GEORGIA Entity has incurred or paid any Liability since March 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 HEART OF GEORGIA 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, 1997, except
as disclosed in the HEART OF GEORGIA Financial Statements delivered prior to the
date of this Agreement or as disclosed in Section 5.7 of the HEART OF GEORGIA
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 HEART OF GEORGIA Material Adverse Effect, and (ii) HEART OF GEORGIA
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 HEART OF GEORGIA provided in Article 7.
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any HEART OF
GEORGIA Entities have been timely filed or requests for extensions have been
timely filed, granted, and, to the Knowledge of HEART OF GEORGIA, 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 HEART OF GEORGIA 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
9
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 HEART OF GEORGIA Material Adverse Effect,
except as reserved against in the HEART OF GEORGIA Financial Statements
delivered prior to the date of this Agreement or as disclosed in Section 5.8 of
the HEART OF GEORGIA 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
HEART OF GEORGIA Entities, except for any such Liens which are not reasonably
likely to have a HEART OF GEORGIA Material Adverse Effect or with respect to
which the Taxes are not yet due and payable.
(b) None of the HEART OF GEORGIA 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 HEART
OF GEORGIA Entities for the period or periods through and including the date of
the respective HEART OF GEORGIA Financial Statements that has been made and is
reflected on such HEART OF GEORGIA Financial Statements is sufficient to cover
all such Taxes.
(d) Deferred Taxes of HEART OF GEORGIA Entities have been provided for in
accordance with GAAP.
(e) Except as disclosed in Section 5.8 of the HEART OF GEORGIA Disclosure
Memorandum, none of the HEART OF GEORGIA Entities is a party to any Tax
allocation or sharing agreement and none of HEART OF GEORGIA 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 HEART OF GEORGIA) or has any
Liability for Taxes of any Person (other than HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Material Adverse Effect.
(g) Except as disclosed in Section 5.8 of the HEART OF GEORGIA Disclosure
Memorandum, none of the HEART OF GEORGIA 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.
10
(h) Exclusive of the Merger, there has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of HEART OF GEORGIA Entities
that occurred during or after any Taxable Period in which HEART OF GEORGIA
Entities incurred a net operating loss that carries over to any Taxable Period
ending after December 31, 1997.
(i) No HEART OF GEORGIA 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 HEART OF GEORGIA
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
HEART OF GEORGIA included in the most recent HEART OF GEORGIA Financial
Statements dated prior to the date of this Agreement was, and the Allowance
shown on the consolidated balance sheets of HEART OF GEORGIA included in the
HEART OF GEORGIA 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 HEART OF GEORGIA
Entities and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by HEART OF GEORGIA Entities as of
the dates thereof, except where the failure of such Allowance to be so adequate
is not reasonably likely to have a HEART OF GEORGIA Material Adverse Effect.
5.10 Assets.
(a) Except as disclosed in Section 5.10 of the HEART OF GEORGIA Disclosure
Memorandum or as disclosed or reserved against in the HEART OF GEORGIA Financial
Statements delivered prior to the date of this Agreement, HEART OF GEORGIA
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 HEART OF GEORGIA Material Adverse
Effect. All tangible properties used in the businesses of the HEART OF GEORGIA
Entities are usable in the ordinary course of business consistent with HEART OF
GEORGIA's past practices.
(b) All Assets which are material to HEART OF GEORGIA's business on a
consolidated basis, held under leases or subleases by any of the HEART OF
GEORGIA Entities, are held under valid Contracts enforceable against HEART OF
GEORGIA 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.
11
(c) HEART OF GEORGIA Entities currently maintain the insurance policies
described in Section 5.10(c) of the HEART OF GEORGIA Disclosure Memorandum. None
of the HEART OF GEORGIA 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 HEART OF GEORGIA Entity under such policies.
(d) The Assets of the HEART OF GEORGIA Entities include all material Assets
required to operate the business of the HEART OF GEORGIA Entities as presently
conducted.
5.11 Intellectual Property. Each HEART OF GEORGIA Entity owns or has a
license to use all of the Intellectual Property used by such HEART OF GEORGIA
Entity in the ordinary course of its business. Each HEART OF GEORGIA Entity is
the owner of or has a license to any Intellectual Property sold or licensed to a
third party by such HEART OF GEORGIA Entity in connection with such HEART OF
GEORGIA Entity's business operations, and such HEART OF GEORGIA Entity has the
right to convey by sale or license any Intellectual Property so conveyed. No
HEART OF GEORGIA 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 HEART OF GEORGIA, threatened, which challenge the rights of any
HEART OF GEORGIA Entity with respect to Intellectual Property used, sold or
licensed by such HEART OF GEORGIA Entity in the course of its business, nor has
any person claimed or alleged any rights to such Intellectual Property. To the
Knowledge of HEART OF GEORGIA, the conduct of the business of the HEART OF
GEORGIA Entities does not infringe any Intellectual Property of any other
person. Except as disclosed in Section 5.11 of the HEART OF GEORGIA Disclosure
Memorandum, no HEART OF GEORGIA 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 HEART OF GEORGIA Disclosure
Memorandum, to the Knowledge of HEART OF GEORGIA, each HEART OF GEORGIA 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 HEART OF GEORGIA
Material Adverse Effect.
(b) There is no Litigation pending or, to the Knowledge of HEART OF
GEORGIA, threatened, before any court, governmental agency, or authority or
other forum in which any HEART OF GEORGIA Entity or any of its Operating
Properties or Participation Facilities (or HEART OF GEORGIA 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
12
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 HEART OF GEORGIA 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 HEART OF GEORGIA Material Adverse Effect, nor, to the Knowledge
of HEART OF GEORGIA, 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 HEART OF GEORGIA Material Adverse Effect.
(c) Except as disclosed in Section 5.12 of the HEART OF GEORGIA Disclosure
Memorandum, during the period of (i) any HEART OF GEORGIA Entity's ownership or
operation of any of their respective current Assets, or (ii) any HEART OF
GEORGIA Entity's participation in the management of any Participation Facility
or any Operating Property, to the Knowledge of HEART OF GEORGIA, 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 HEART OF GEORGIA
Material Adverse Effect. Except as disclosed in Section 5.12 of the HEART OF
GEORGIA Disclosure Memorandum, prior to the period of (i) any HEART OF GEORGIA
Entity's ownership or operation of any of their respective current properties,
(ii) any HEART OF GEORGIA Entity's participation in the management of any
Participation Facility or any Operating Property, to the Knowledge of HEART OF
GEORGIA, 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 HEART OF GEORGIA Material Adverse
Effect.
5.13 Compliance with Laws. Each HEART OF GEORGIA 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
HEART OF GEORGIA Material Adverse Effect, and, to the Knowledge of HEART OF
GEORGIA, 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 HEART OF GEORGIA Material Adverse Effect. Except as disclosed in
Section 5.13 of the HEART OF GEORGIA Disclosure Memorandum, none of the HEART OF
GEORGIA 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 HEART OF GEORGIA
Material Adverse Effect; or
(c) since January 1, 1995, or as of the date of organization, if later, 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 HEART OF GEORGIA Entity is not in
compliance with any of the Laws or Orders which such governmental authority or
13
Regulatory Authority enforces, where such noncompliance is reasonably likely to
have, individually or in the aggregate, a HEART OF GEORGIA Material Adverse
Effect, (ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a HEART OF GEORGIA
Material Adverse Effect, or (iii) requiring any HEART OF GEORGIA 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 Labor Relations. No HEART OF GEORGIA Entity is the subject of any
Litigation asserting that it or any other HEART OF GEORGIA 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 HEART OF GEORGIA
Entity to bargain with any labor organization as to wages or conditions of
employment, nor is any HEART OF GEORGIA Entity party to any collective
bargaining agreement, nor is there any strike or other labor dispute involving
any HEART OF GEORGIA Entity, pending or threatened, or to the Knowledge of HEART
OF GEORGIA, is there any activity involving any HEART OF GEORGIA Entity's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
5.15 Employee Benefit Plans.
(a) HEART OF GEORGIA has disclosed in Section 5.15 of the HEART OF GEORGIA
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 HEART OF GEORGIA 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, "HEART OF GEORGIA Benefit Plans"). Each HEART OF
GEORGIA 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 "HEART OF
GEORGIA ERISA Plan." Each HEART OF GEORGIA 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 "HEART OF GEORGIA Pension Plan." No HEART OF GEORGIA
Pension Plan is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA.
14
(b) All HEART OF GEORGIA 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 HEART OF GEORGIA Material Adverse Effect.
Each HEART OF GEORGIA 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 HEART OF GEORGIA has no Knowledge
of any circumstances likely to result in revocation of any such favorable
determination letter. To the Knowledge of HEART OF GEORGIA, no HEART OF GEORGIA
Entity has engaged in a transaction with respect to any HEART OF GEORGIA Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, would subject any HEART OF GEORGIA 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
HEART OF GEORGIA Material Adverse Effect.
(c) No HEART OF GEORGIA 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 HEART OF GEORGIA Pension Plan, (ii) no
change in the actuarial assumptions with respect to any HEART OF GEORGIA Pension
Plan, and (iii) no increase in benefits under any HEART OF GEORGIA 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 HEART OF GEORGIA Material
Adverse Effect or materially adversely affect the funding status of any such
plan. Neither any HEART OF GEORGIA Pension Plan nor any "single employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any HEART OF GEORGIA Entity, or the single-employer plan of any
entity which is considered one employer with HEART OF GEORGIA 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 HEART OF GEORGIA
Material Adverse Effect. No HEART OF GEORGIA Entity has provided, or is required
to provide, security to a HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA
Material Adverse Effect. No HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
15
(e) Except as disclosed in Section 5.15 of the HEART OF GEORGIA Disclosure
Memorandum, no HEART OF GEORGIA Entity has any Liability for retiree health and
life benefits under any of the HEART OF GEORGIA Benefit Plans and there are no
restrictions on the rights of such HEART OF GEORGIA 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 HEART OF GEORGIA
Material Adverse Effect.
(f) Except as disclosed in Section 5.15 of the HEART OF GEORGIA 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 HEART OF GEORGIA
Entity from any HEART OF GEORGIA Entity under any HEART OF GEORGIA Benefit Plan
or otherwise, (ii) increase any benefits otherwise payable under any HEART OF
GEORGIA 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 HEART OF GEORGIA
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 HEART OF GEORGIA 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 HEART OF GEORGIA Financial Statements to
the extent required by and in accordance with GAAP.
5.16 Material Contracts. Except as disclosed in Section 5.16 of the HEART
OF GEORGIA Disclosure Memorandum or otherwise reflected in the HEART OF GEORGIA
Financial Statements, none of the HEART OF GEORGIA 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 HEART OF GEORGIA Entity or the
guarantee by any HEART OF GEORGIA 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 HEART
OF GEORGIA 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 HEART OF GEORGIA Entities, (v) any Contract
relating to the provision of data processing, network communication, or other
technical services to or by any HEART OF GEORGIA 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 HEART OF GEORGIA with
16
the SEC (assuming HEART OF GEORGIA 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 5.15(a), the "HEART OF GEORGIA Contracts").
With respect to each HEART OF GEORGIA Contract and except as disclosed in
Section 5.16 of the HEART OF GEORGIA 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 HEART OF GEORGIA Entity is in
Default thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a HEART OF GEORGIA Material Adverse Effect;
(iii) no HEART OF GEORGIA 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 HEART OF GEORGIA, in Default in any respect, other than Defaults
which are not reasonably likely to have, individually or in the aggregate, a
HEART OF GEORGIA Material Adverse Effect, or has repudiated or waived any
material provision thereunder. Except as disclosed in Section 5.16 of the HEART
OF GEORGIA Disclosure Memorandum, no officer, director or employee of any HEART
OF GEORGIA 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 HEART OF GEORGIA Entity. All of the indebtedness of any
HEART OF GEORGIA Entity for money borrowed is prepayable at any time by such
HEART OF GEORGIA Entity without penalty or premium.
5.17 Legal Proceedings. There is no Litigation instituted or pending or, to
the Knowledge of HEART OF GEORGIA, 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 HEART OF GEORGIA Entity, or
against any director, employee or employee benefit plan (acting in such
capacity) of any HEART OF GEORGIA Entity, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in the
aggregate, a HEART OF GEORGIA Material Adverse Effect, nor are there any Orders
of any Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any HEART OF GEORGIA Entity, that are reasonably likely to
have, individually or in the aggregate, a HEART OF GEORGIA Material Adverse
Effect. Section 5.17 of the HEART OF GEORGIA Disclosure Memorandum contains a
summary of all Litigation as of the date of this Agreement to which any HEART OF
GEORGIA Entity is a party and which names a HEART OF GEORGIA Entity as a
defendant or cross-defendant or for which, to the Knowledge of HEART OF GEORGIA,
any HEART OF GEORGIA Entity has any potential Liability.
5.18 Reports. Since January 1, 1995, or the date of organization if later,
each HEART OF GEORGIA 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 HEART OF GEORGIA 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.
17
5.19 Statements True and Correct. No statement, certificate, instrument, or
other writing furnished or to be furnished by any HEART OF GEORGIA Entity to
FLAG 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 HEART OF
GEORGIA 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 HEART OF GEORGIA 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 HEART OF
GEORGIA 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.
5.20 Accounting, Tax and Regulatory Matters. No HEART OF GEORGIA 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.
5.21 Charter Provisions. Each HEART OF GEORGIA 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 HEART OF GEORGIA
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 HEART OF GEORGIA Entity that may be directly or indirectly
acquired or controlled by them.
5.22 Board Recommendation. The Board of Directors of HEART OF GEORGIA, 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 HEART OF GEORGIA Common Stock approve this Agreement.
5.23 Y-2K. HEART OF GEORGIA 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.
18
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF FLAG
--------------------------------------
FLAG hereby represents and warrants to HEART OF GEORGIA 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 HEART OF GEORGIA
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
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
19
of any Tax or 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 5,174,807 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 HEART OF GEORGIA 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 HEART OF GEORGIA 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 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
20
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
HEART OF GEORGIA 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 HEART OF GEORGIA 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.
(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
21
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, 1997 and
March 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 March 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, 1997, 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,
1997, 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
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 vet 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 veers currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
22
(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.
(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
23
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.
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
24
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, to the Knowledge of FLAG, 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
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
25
aggregate, a FLAG Material Adverse Effect. Except as disclosed in Section 6.11
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 HEART OF GEORGIA.
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.
6.15 Employee Benefit Plans.
(a) FLAG has disclosed in Section 6.12 of the FLAG Disclosure Memorandum
and has delivered or made available to HEART OF GEORGIA 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,
26
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
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
27
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 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
28
Form 10-K filed for the fiscal year ended December 31, 1997, or in an SEC
Document and identified to HEART OF GEORGIA (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.
6.19 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any FLAG Entity to HEART OF
GEORGIA 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
29
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. Each FLAG Entity is in compliance with all policies and
directives issued by Regulatory Authorities with respect to preparedness for
year 2000 data processing and other operations. Section 6.23 of the FLAG
Disclosure Memorandum sets forth a summary of the steps taken by FLAG to ensure
such compliance. FLAG has entered into an agreement with Phoenix International
Ltd., Inc. ("Phoenix") to license the Phoenix Retail Banking System, and FLAG is
scheduled to convert each of the existing FLAG Entities, as well as the HEART OF
GEORGIA Subsidiaries, to the Phoenix Retail Banking System prior to March 31,
1999. Phoenix has represented to FLAG that the Phoenix Retail Banking System is
year 2000 compliant.
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ARTICLE 7.
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of HEART OF GEORGIA. 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, HEART OF GEORGIA 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 HEART OF GEORGIA. 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, HEART OF GEORGIA 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 HEART OF GEORGIA entity, or
(b) incur any additional debt obligation or other obligation for borrowed
money (other than indebtedness of a HEART OF GEORGIA Entity to another HEART OF
GEORGIA Entity) in excess of an aggregate of $100,000 (for HEART OF GEORGIA
Entities on a consolidated basis) except in the ordinary course of the business
of the HEART OF GEORGIA Subsidiaries consistent with past practices (which shall
include, for the HEART OF GEORGIA 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 imposition, on any Asset of any HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Entity, or declare or pay any dividend or
make any other distribution in respect of HEART OF GEORGIA's capital stock; or
31
(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 HEART OF GEORGIA
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
HEART OF GEORGIA Common Stock or any other capital stock of any HEART OF GEORGIA
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 HEART OF
GEORGIA Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of HEART OF GEORGIA 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 HEART OF GEORGIA Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Entity, except in accordance with past practice
specifically disclosed in Section 7.2(g) of the HEART OF GEORGIA 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 HEART OF
GEORGIA Disclosure Memorandum; and enter into or amend any severance agreements
with officers of any HEART OF GEORGIA Entity; grant any material increase in
fees or other increases in compensation or other benefits to directors of any
HEART OF GEORGIA Entity except in accordance with past practice disclosed in
Section 7.2(g) of the HEART OF GEORGIA 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 HEART OF
GEORGIA Entity and any Person having a salary thereunder in excess of $50,000
per year (unless such amendment is required by Law) that the HEART OF GEORGIA
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
32
(i) adopt any new employee benefit plan of any HEART OF GEORGIA Entity or
terminate or withdraw from, or make any material change in or to, any existing
employee benefit plans of any HEART OF GEORGIA 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 HEART OF GEORGIA Disclosure
Memorandum, settle any Litigation involving any Liability of any HEART OF
GEORGIA Entity for material money damages or restrictions upon the operations of
any HEART OF GEORGIA 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 HEART OF GEORGIA 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.
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 HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Material Adverse Effect or a FLAG
Material Adverse Effect, as applicable, or (ii) would cause or constitute a
33
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 HEART OF GEORGIA 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 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.
HEART OF GEORGIA 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 HEART OF GEORGIA shall make all necessary filings with
respect to the Merger under the Securities Laws.
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 HEART OF GEORGIA 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. HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA, after having consulted with and
34
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 HEART OF GEORGIA's shareholders, under applicable
law), and the Board of Directors and officers of HEART OF GEORGIA shall use
their reasonable efforts to obtain such shareholders' approval (subject to the
Board of Directors of HEART OF GEORGIA, 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 HEART OF GEORGIA shareholders,
under applicable law).
8.4 Applications. FLAG shall promptly prepare and file, and HEART OF
GEORGIA 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 Agreements as to Effects 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.
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.
35
(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 HEART OF GEORGIA Material Adverse
Effect or a FLAG Material Adverse Effect, as applicable.
8.8 Press Releases. Prior to the Effective Time, HEART OF GEORGIA 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 HEART OF GEORGIA Entity nor any
Representatives thereof retained by any HEART OF GEORGIA Entity shall directly
or indirectly solicit any Acquisition Proposal by any Person. Except to the
extent the Board of Directors of HEART OF GEORGIA, 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 HEART OF GEORGIA's
shareholders, under applicable Law, no HEART OF GEORGIA 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 HEART OF GEORGIA 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. HEART OF GEORGIA 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. HEART OF GEORGIA 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.
36
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 HEART OF GEORGIA Entity
that may be directly or indirectly acquired by them.
8.12 Agreements of Affiliates. HEART OF GEORGIA has disclosed in Section
8.12 of the HEART OF GEORGIA Disclosure Memorandum each Person whom it
reasonably believes is an "affiliate" of HEART OF GEORGIA for purposes of Rule
145 under the 1933 Act. HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA have been published within the meaning
of Section 201.01 of the SEC's Codification of 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 HEART OF GEORGIA shall not be transferable until such time as
financial results covering at least 30 days of combined operations of FLAG and
HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF
GEORGIA Entities employee benefits under HEART OF GEORGIA's existing employee
benefit and welfare plans or, (ii) if FLAG shall determine to provide to
officers and employees of the HEART OF GEORGIA Entities employee benefits under
other employee benefit plans and welfare plans, provide generally to officers
37
and employees of the HEART OF GEORGIA 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 HEART OF GEORGIA shall
be treated as service under FLAG's defined benefit plan, if any, (ii) service
under any qualified defined contribution plans of HEART OF GEORGIA shall be
treated as service under FLAG's qualified defined contribution plans, and (iii)
service under any other employee benefit plans of HEART OF GEORGIA shall be
treated as service under any similar employee benefit plans maintained by FLAG.
With respect to officers and employees of the HEART OF GEORGIA 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 HEART OF GEORGIA Entities, FLAG
shall cause each comparable employee welfare benefit plan which is substituted
for a HEART OF GEORGIA 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 HEART OF GEORGIA
Disclosure Memorandum to FLAG between any HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA
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 HEART OF GEORGIA's Articles of Incorporation and Bylaws
as in effect on the date hereof, including provisions relating to advances of
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
38
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 HEART OF GEORGIA 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
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 HEART OF GEORGIA Material Adverse
39
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 or makes illegal 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 HEART OF GEORGIA
Common Stock for FLAG Common Stock will not give rise to gain or loss to the
shareholders of HEART OF GEORGIA with respect to such exchange (except to the
extent of any cash received), and (iii) neither HEART OF GEORGIA 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 HEART OF GEORGIA
and FLAG reasonably satisfactory in form and substance to such counsel.
(h) Xxxxxx X. Xxxxxxx shall have negotiated a mutually satisfactory
employment relationship with FLAG, and any previously existing agreements
between Xx. Xxxxxxx and HEART OF GEORGIA concerning employment, severance,
consulting and any other compensation, including post termination payments
subsequent to a change in ownership, shall have been terminated.
40
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 HEART OF GEORGIA 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 HEART OF GEORGIA
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 HEART OF GEORGIA 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 HEART OF GEORGIA 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. HEART OF GEORGIA 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 HEART OF
GEORGIA 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 HEART OF GEORGIA'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 Xxxxxx
Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P., counsel to HEART OF GEORGIA, 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 date of filing of the Registration Statement with
the SEC and 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
HEART OF GEORGIA the affiliates letter referred to in Section 8.12 and Exhibit
1.
(g) Claims Letters. Each of the directors and officers of HEART OF GEORGIA
shall have executed and delivered to FLAG letters in substantially the form of
Exhibit 3.
9.3 Conditions to Obligations of HEART OF GEORGIA. The obligations of HEART
OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA (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
42
copies of resolutions duty adopted by FLAG'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 HEART OF
GEORGIA and its counsel shall request.
(d) Opinion of Counsel. HEART OF GEORGIA 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 HEART OF GEORGIA, 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 HEART
OF GEORGIA, this Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time:
(a) By mutual consent of FLAG and HEART OF GEORGIA; 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
HEART OF GEORGIA 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 HEART OF GEORGIA 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
43
(e) By either Party in the event that the Merger shall not have been
consummated by December 31, 1998, 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 Section 10.1(e).
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 HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA 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 (i) the consolidated balance sheets
(including related notes and schedules, if any) of FLAG as of June 30, 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 the six months ended June 30, 1998, and 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 June 30,
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 HEART OF GEORGIA 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).
"HEART OF GEORGIA Common Stock" shall mean the $1.00 par value common stock
of HEART OF GEORGIA.
"HEART OF GEORGIA Disclosure Memorandum" shall mean the written information
entitled "HEART OF GEORGIA 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.
"HEART OF GEORGIA Entities" shall mean, collectively, HEART OF GEORGIA and
all HEART OF GEORGIA Subsidiaries.
"HEART OF GEORGIA Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of HEART OF
GEORGIA as of June 30, 1998, and as of December 31, 1997 and the related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the six months ended June 30, 1998, and
47
for the Fiscal year ended December 31, 1997, and (ii) the consolidated balance
sheets of HEART OF GEORGIA (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 June 30, 1998.
"HEART OF GEORGIA 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 HEART OF GEORGIA and its Subsidiaries,
taken as a whole, or (ii) the ability of HEART OF GEORGIA to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that an "HEART OF GEORGIA
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 HEART OF
GEORGIA (or any of its Subsidiaries) taken with the prior informed written
Consent of FLAG in contemplation of the transactions contemplated hereby.
"HEART OF GEORGIA Subsidiaries" shall mean the Subsidiaries of HEART OF
GEORGIA, which shall include the HEART OF GEORGIA Subsidiaries described in
Section 5.4 and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of HEART OF GEORGIA in the future and held
as a Subsidiary by HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Entity.
48
"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.
"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.
49
"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.
"Party" shall mean either HEART OF GEORGIA or FLAG, and "Parties" shall
mean HEART OF GEORGIA 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 HEART OF GEORGIA 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.
50
"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 HEART
OF GEORGIA 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
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.
51
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
Allowance Section 5.9
Certificates Section 4.1
Closing Section 1.2
Effective Time Section 1.3
ERISA Affiliate Section 5.15(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)
HEART OF GEORGIA Benefit Plans Section 5.15(a)
HEART OF GEORGIA Contracts Section 5.16
HEART OF GEORGIA ERISA Plan Section 5.15(a)
HEART OF GEORGIA Pension Plan Section 5.15(a)
Indemnified Party Section 8.14(a)
Merger Section 1.1
Tax Opinion Section 9.1(g)
(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), HEART OF GEORGIA 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 HEART OF GEORGIA pursuant to
Sections 10.1(b) or (c), FLAG shall pay to HEART OF GEORGIA an amount equal to
the lesser of $100,000 or HEART OF GEORGIA'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.
52
11.3 Brokers and Finders. 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
HEART OF GEORGIA or by FLAG, each of HEART OF GEORGIA 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.
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 HEART OF GEORGIA 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; and further provided, that after any such
approval by the holders of FLAG Common Stock, the provisions of this Agreement
relating to the manner or basis in which shares of HEART OF GEORGIA Common Stock
will be exchanged for shares of FLAG Common Stock shall not be amended after the
Shareholders' Meeting in a manner adverse to the holders of FLAG Common Stock
without any requisite approval of the holders of the issued and outstanding
shares of FLAG Common Stock entitled to vote thereon.
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
HEART OF GEORGIA, to waive or extend the time for the compliance or fulfillment
by HEART OF GEORGIA 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.
53
(b) Prior to or at the Effective Time, HEART OF GEORGIA, 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 HEART OF GEORGIA
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 HEART OF GEORGIA.
(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:
HEART OF GEORGIA: Heart of Georgia Bancshares, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Copy to Counsel: Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
First Union Plaza, Suite 1400
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
54
FLAG: FLAG Financial Corporation
000 Xxxxx Xxxxxxxxx Xx.
XxXxxxxx, 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.
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.
55
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
HEART OF GEORGIA BANCSHARES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
Exhibit 1
ARTICLE 12.
12.1 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 Heart of Georgia Bancshares, Inc.
("HEART OF GEORGIA"), 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
________________ ___, 1998 (the "Agreement"), by and between FLAG, and HEART OF
GEORGIA. Under the terms of the Agreement, HEART OF GEORGIA will be merged with
and into FLAG (the "Merger"), and the shares of the $_.__ par value common stock
of HEART OF GEORGIA ("HEART OF GEORGIA 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
HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA. 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.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) At any meeting of shareholders of HEART OF GEORGIA 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 vote (or cause to be voted) the Shareholder's Shares in favor
of the Merger, the execution and delivery by HEART OF GEORGIA 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 HEART OF GEORGIA 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 HEART OF GEORGIA Common Stock beneficially owned by the undersigned as of the
record date for determination of shareholders entitled to vote at the
Shareholders' Meeting of HEART OF GEORGIA held to approve the Merger.
2
(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.
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 HEART OF GEORGIA.
3
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
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
Xxxxxxxxxx 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, HEART OF GEORGIA, 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, HEART OF GEORGIA,
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
4
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.
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 HEART OF GEORGIA 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 HEART OF
GEORGIA 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
5
This Affiliate Agreement is executed as of the _________ day of
________________, 1998.
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 ________________, 1998.
FLAG FINANCIAL CORPORATION
By:---------------------------
6
Exhibit 2
ARTICLE 13.
13.1
MATTERS AS TO WHICH XXXXXX XXXXXXX XXXXX & XXXXXXXXXXX, L.L.P. WILL OPINE
1. Heart of Georgia Bancshares, Inc. ("HEART OF GEORGIA") 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 HEART OF GEORGIA 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 HEART OF GEORGIA is a party or by which HEART OF
GEORGIA is bound.
3. The Agreement has been duly and validly executed and delivered by HEART
OF GEORGIA and, assuming valid authorization, execution and delivery by
FLAG, constitutes a valid and binding agreement of HEART OF GEORGIA
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 HEART OF GEORGIA consists of 1,000,000
shares of the HEART OF GEORGIA Common Stock, of which 220,000 shares were
issued and outstanding as of _______________________, 1998. The shares of
the HEART OF GEORGIA 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 HEART OF GEORGIA Disclosure Memorandum, as of ______________, 1998,
there were no shares of capital stock or other equity securities of HEART
OF GEORGIA outstanding and no outstanding Equity Rights relating to the
capital stock of HEART OF GEORGIA.
Exhibit 3
ARTICLE 14.
14.1
____________________, 1998
FLAG Financial Corporation
000 Xxxxx Xxxxxxxxx Xxxxxx
XxXxxxxx, XX 00000
RE: Heart of Georgia Bancshares, Inc. ("HEART OF GEORGIA ")
Mount Xxxxxx, Georgia
Ladies and Gentlemen:
This letter is delivered pursuant to Section 9.2(g) of the Agreement
and Plan of Merger, dated as of ____________ __, 1998, by and between FLAG
Financial Corporation and HEART OF GEORGIA.
In my capacity as an officer or a director of HEART OF GEORGIA, 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 HEART OF GEORGIA'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,
--------------------------------------
14.2 Signature of Officer or Director
--------------------------------------
14.3 Name of Officer or Director
--------------------------------------
14.4 Position at HEART OF GEORGIA
Exhibit 4
ARTICLE 15.
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 Heart of
Georgia Bancshares, 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 5,174,807 shares are issued and outstanding as
of ____________ 1998, and (ii) 10,000,000 shares of FLAG Preferred Stock,
of which no shares are issued and outstanding as of _____________________
1998. 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
_________________________, 1998, 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 Heart of Georgia Bancshares, 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.
