|
As
filed with the Securities and Exchange Commission on May 1,
2007
|
File
No. 333-141203
|
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
Pre-Effective
Amendment No. 2
to
FORM
S-4
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
UNITED
COMMUNITY BANKS, INC.
(Exact
name of issuer as specified in its charter)
|
Georgia
(State
or other jurisdiction of
incorporation
or organization)
|
6022
(Primary
Standard Industrial
Classification
Code Number)
|
58-1807304
(I.R.S.
Employer
Identification
Number)
|
|
United
Community Banks, Inc.
63
Highway 515
Blairsville,
Georgia 30512
(706)
745-2151
(Address,
including zip code, and telephone number,
including
area code, of registrant’s principal executive offices)
|
Jimmy
C. Tallent
63
Highway 515
Blairsville,
Georgia 30512
(706)
745-2151
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
|
Copies
to:
|
Richard
R. Cheatham
Kilpatrick
Stockton LLP
1100
Peachtree Street, Suite 2800
Atlanta,
Georgia 30309-4530
(404)
815-6500
|
Kathryn
L. Knudson
Powell
Goldstein LLP
One
Atlantic Center, 14th
Floor
1201
West Peachtree Street
Atlanta,
Georgia 30309
(404)
572-6600
|
Approximate
date of commencement of proposed sale to the public:
The
exchange of Registrant’s shares for shares of common stock of Gwinnett
Commercial Group, Inc. will take place upon consummation of the merger of
Gwinnett Commercial Group, Inc. into the Registrant.
If
the
securities being registered on this form are being offered in connection with
the formation of a holding company and there is compliance with General
Instruction G, check the following box. o
If
this
form is filed to register additional securities of an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. o____________________
If
this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o____________________
CALCULATION
OF REGISTRATION FEE
|
Title
of Each Class of Securities
to be Registered |
Amount
to be
Registered |
Proposed
Maximum
Offering Price per Share |
Proposed
Maximum
Aggregate Offering Price |
Amount
of
Registration Fee |
|
Common
Stock, par value $1.00 per share
|
5,692,082(1)
|
Not
Applicable
|
48,176,181(2)
|
$1,479.01(2)(3)
|
|
(1)
|
The
number of shares of the Registrant’s common stock being registered
hereunder is based upon the anticipated maximum number of such shares
required to consummate the proposed merger of Gwinnett Commercial
Group,
Inc. into the Registrant. The Registrant will remove from registration
by
means of a post-effective amendment any shares being registered that
are
not issued in connection with such
merger.
|
|
(2)
|
In
accordance with Rule 457(f)(2) and (3), the registration fee is based
on
$48,176,181, which is the result of (i) $70,489,435, the maximum
number of
shares of common stock of Gwinnett Commercial Group, Inc. that may
be
received by the Registrant pursuant to the merger (2,830,901) multiplied
by the book value per share of Gwinnett Commercial Group, Inc. as
of
February 28, 2007 ($24.90), minus (ii) $22,313,254 in cash to be
paid by
the Registrant in the proposed
merger.
|
|
(3)
|
Previously
paid.
|
The
Registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
The
information in this document is not complete and may be changed. We may not
sell
the securities offered by this document until the registration statement filed
with the Securities and Exchange Commission is effective. This document is
not
an offer to sell these securities, and we are not soliciting an offer to buy
these securities, in any state where the offer or sale is not
permitted.
PROXY
STATEMENT/PROSPECTUS
 |
 |
These
materials are a proxy statement of Gwinnett Commercial Group, Inc. and
a
prospectus of United Community Banks, Inc. They are furnished to you in
connection with the notice of special meeting of shareholders to be held
on June 1,
2007.
At the
special meeting of Gwinnett shareholders, you will be asked to vote on
the
merger of Gwinnett with and into United described in more detail herein.
As
of May 1, 2007, the record date for the Gwinnett shareholders meeting,
there were 2,830,901 shares
of
common stock outstanding and entitled to vote at that meeting. Approval
of the
merger requires the affirmative vote of holders of a majority of those
shares.
Subject
to the election and adjustment procedures described in this document, in
connection with the merger if approved and consummated, holders of Gwinnett
common stock will be entitled to receive, in exchange for each share of Gwinnett
common stock, consideration equal to either (i) 2.2545 shares of United common
stock, or (ii) $72.8865 in cash, without interest; provided,
that an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. As a result, up to
an
aggregate of 5,692,082 shares of United common stock may be issued to Gwinnett
shareholders if the merger is approved and consummated and there is no
adjustment. This document is a United prospectus with respect to the offering
and issuance of such 5,692,082 shares of United common stock.
United’s
common stock trades on the Nasdaq Stock Market under the ticker symbol
“UCBI”.
The
accompanying materials contain information regarding the proposed merger
and the
companies participating in the merger, and the Agreement and Plan of
Reorganization pursuant to which the merger will be consummated if approved.
We
encourage you to read the entire document carefully. Please
also see the “Risk Factors” section of United’s Form 10-K for the year ended
December 31, 2006, which is incorporated herein by reference, for a description
of the factors that you should consider that may affect the value of United
common stock to be issued in the merger.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved these securities or passed upon the adequacy or accuracy
of these materials. Any representation to the contrary is a criminal offense.
Shares of common stock of United are not savings accounts, deposits or other
obligations of any bank and are not insured or guaranteed by the Federal
Deposit
Insurance Corporation or any other governmental agency.
The
date of these materials are_______ ___, 2007, and they are expected to be
first
mailed to shareholders on or about______ ___, 2007.
GWINNETT
COMMERCIAL GROUP, INC.
2230
Riverside Parkway
Lawrenceville,
Georgia 30043
|
Notice
Of Special Meeting Of Shareholders
To
Be Held On June 1, 2007
|
A
special
meeting of shareholders of Gwinnett Commercial Group, Inc. will be held
on June 1, 2007, at 8:00 a.m., at the main office of First Bank of the
South, 2230 Riverside Parkway, Lawrenceville, Georgia 30043 for the following
purposes:
|
1.
|
to
consider and vote on an Agreement and Plan of Reorganization, under
which
Gwinnett Commercial Group, Inc. (“Gwinnett”) will merge with and into
United Community Banks, Inc. (“United”), as more particularly described in
the accompanying materials; and
|
|
2.
|
to
transact such other business as may properly come before the special
meeting or any adjournments of the special
meeting.
|
If
Gwinnett shareholders approve the merger, Gwinnett will be merged with and
into
United. Unless adjusted pursuant to the terms of the merger agreement, Gwinnett
shareholders may elect to receive shares of United common stock or cash in
exchange for each of their shares of Gwinnett common stock in the merger on
the
following basis:
|
·
|
2.2545
shares of United common stock; or
|
|
·
|
$72.8865
in cash, without interest;
|
provided,
that an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. If the aggregate cash
elections are greater than the maximum, all such cash elections will be subject
to proration, and, if the aggregate stock elections are greater than the
maximum, all such stock elections will be subject to proration, all as more
fully explained under the heading “Details of the Proposed Merger-The Merger
Consideration” (page 14).
Approval
of the merger will require the approval of the holders of at least a
majority of
the
Gwinnett common stock entitled to vote at the special meeting. Only shareholders
of record of Gwinnett common stock at the close of business on May 1, 2007
will be entitled to vote at the special meeting or any adjournments thereof.
Gwinnett’s board of directors has adopted a resolution approving the merger and
the merger agreement and unanimously recommends that you vote for the proposal
to approve the merger.
If
the
merger is completed, Gwinnett shareholders who dissent with respect to the
merger will be entitled to receive a cash payment for their shares of Gwinnett
common stock if they comply with certain statutory provisions of Article 13
of
the Georgia Business Corporation Code regarding the rights of dissenting
shareholders, all as more fully explained under the heading “Details of the
Proposed Merger-Rights of Dissenting Shareholders” (page 28) and in Appendix B
to the accompanying materials.
Business
and financial information about Gwinnett is available without charge to you
upon
written or oral request made to Andrew R. Pourchier, Executive Vice
President, Chief
Financial Officer and Secretary, Gwinnett Commercial Group, Inc., 2230 Riverside
Parkway, Lawrenceville, Georgia 30043, telephone number (770) 237-0007. To
obtain delivery of such business and financial information before the special
meeting, your request must be received no later than May 25,
2007.
A
form of
proxy for use by you is enclosed. To ensure representation at the special
meeting, each Gwinnett shareholder is requested to sign, date, and return the
proxy card promptly in the enclosed, stamped envelope. A previously submitted
proxy may be revoked by notifying Andrew R. Pourchier, Executive Vice President,
Chief Financial Officer and Secretary of Gwinnett, in writing, or by submitting
an executed, later-dated proxy prior to the special meeting to Andrew R.
Pourchier, Gwinnett Commercial Group, Inc., 2230 Riverside Parkway,
Lawrenceville, Georgia 30043. A previously submitted proxy also may be revoked
by attending the special meeting and requesting the right to vote in person.
A
properly signed and returned proxy card, if not revoked, will be voted at the
special meeting in the manner specified by the duly submitted
proxy.
|
By
Order of the Board of Directors,
|
|
|
________
__, 2007
|
____________________________
|
|
Lawrenceville,
Georgia
|
John
D. Stephens, Chairman
|
TABLE
OF CONTENTS
|
Page
|
||
|
1
|
||
|
4
|
||
|
4
|
||
|
5
|
||
|
5
|
||
|
5
|
||
|
6
|
||
|
6
|
||
|
6
|
||
|
6
|
||
|
6
|
||
|
7
|
||
|
7
|
||
|
7
|
||
|
8
|
||
|
8
|
||
|
9
|
||
|
10
|
||
|
12
|
||
|
14
|
||
|
14
|
||
|
17
|
||
|
18
|
||
|
19
|
||
|
22
|
||
|
23
|
||
|
23
|
||
|
23
|
||
|
24
|
||
|
26
|
||
|
27
|
||
|
27
|
||
|
27
|
||
|
28
|
||
|
28
|
||
|
30
|
||
|
32
|
||
|
42
|
||
|
42
|
||
|
42
|
||
|
45
|
||
|
46
|
||
|
46
|
||
|
46
|
||
|
48
|
||
|
48
|
||
|
48
|
||
|
49
|
||
|
50
|
||
|
50
|
||
|
50
|
||
|
50
|
||
|
50
|
||
|
51
|
||
|
52
|
||
|
Appendix
A - Agreement and Plan of Reorganization
|
||
|
Appendix
B - Georgia Dissenters’ Rights Statute
|
||
|
Appendix
C - Fairness Opinion
|
Q: What
am I being asked to approve?
A: You
are
being asked to approve the Agreement and Plan of Reorganization by and between
Gwinnett and United, pursuant to which Gwinnett will be merged with and into
United. Approval of the merger requires the affirmative vote of a majority
of
the outstanding shares of Gwinnett common stock. The
Gwinnett board of directors has unanimously approved and adopted the Agreement
and Plan of Reorganization and recommends voting FOR approval of this merger
agreement.
Q: When
is the merger expected to be completed?
A: We
plan
to complete the merger during the second quarter of 2007.
Q: What
will I receive in the merger?
A: Unless
adjusted pursuant to the terms of the merger agreement, you will receive either
(i) 2.2545 shares
of
United common stock, or (ii) $72.8865 in cash, without interest, for each share
of Gwinnett common stock; provided,
that an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. United will not issue
fractional shares in the merger. Instead, you will receive a cash payment,
without interest, for the value of any fraction of a share of United common
stock that you would otherwise be entitled to receive based on $32.33 per
share.
For
example:
Assuming
the stock exchange ratio remains 2.2545 and stock elections are not subject
to
proration, if you own 100 shares of Gwinnett common stock and elect to receive
all stock in the merger, you will be entitled to 225 shares of United common
stock (100 x 2.2545, rounded down to the nearest whole share). In addition,
you
will be entitled to receive $14.55 in cash for your .45 fractional share of
United (.45 x $32.33).
To
review
what you will receive in the merger in greater detail, see “Details of the
Proposed Merger-The Merger Consideration” beginning on page 17.
Q: What
should I do now?
A: Indicate
on the enclosed proxy card how you want to vote with respect to the proposed
merger, and sign and mail the proxy card in the enclosed envelope as soon
as
possible so that your shares will be represented at the meeting. If you sign
and
send in a proxy card but do not indicate how you want to vote, your proxy
will
be voted in favor of the proposal to approve the merger. A special shareholders
meeting will take place on June 1, 2007, at 8:00 a.m. at the main
office of First Bank of the South, 2230 Riverside Parkway, Lawrenceville,
Georgia 30043, to vote on the merger proposal.
You
may
withdraw your proxy up to and including the day of the special meeting by
notifying Gwinnett prior to the meeting, in writing, or by submitting an
executed, later-dated proxy to: Andrew R. Pourchier, Executive Vice President,
Chief Financial Officer and Secretary, Gwinnett Commercial Group, Inc., 2230
Riverside Parkway, Lawrenceville, Georgia 30043.
-1-
Q: How
can I elect stock, cash or both?
A: You
may
indicate a preference to receive United common stock, cash or a combination
of
both in the merger by completing the enclosed election form. However,
an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. Accordingly,
if the aggregate cash elections are greater than the maximum, each cash election
will be reduced pro rata based on the amount that the aggregate cash elections
exceed the maximum. Alternatively, if the aggregate stock elections are greater
than the maximum, each stock election will be reduced pro rata based on the
amount that the aggregate stock elections exceed the maximum. If
you do
not make an election by or at the special shareholders meeting to be held
on June 1, 2007, you will be treated as though you elected to receive all
cash
unless cash has been fully subscribed by the electing Gwinnett shareholders,
in
which event you will be treated as if you elected all stock. Gwinnett’s
board of directors makes no recommendation as to whether you should choose
United common stock or cash or a combination of both for your shares of Gwinnett
Commercial Group, Inc. common stock. You should consult with your own financial
advisor on that decision.
Q: What
information should I consider?
A: We
encourage you to read this entire document carefully. You should also review
the
factors considered by each company’s board of directors discussed in “Details of
the Proposed Merger-Background of and Reasons for the Merger” beginning on page
14.
Q: What
will I receive as consideration for the Gwinnett stock options and/or stock
appreciation rights I hold?
A: Each
Gwinnett option holder has agreed not to exercise his or her options prior
to
the closing of the merger. In exchange, United has agreed to pay the holder
of
each option $72.8865 in cash less the exercise price of each option. United
has
also agreed to pay the holder of each Gwinnett stock appreciation right, which
we refer to as a “SAR”, $72.8865 in cash less the exercise price of each SAR.
Q: What
are the tax consequences of the merger to me?
A: We
expect
that the exchange of shares of Gwinnett common stock for United common stock
by
Gwinnett shareholders generally will be tax-free to you for federal income
tax
purposes. However, you will have to pay taxes at either capital gains or
ordinary income rates, depending upon individual circumstances, on cash received
(i) in exchange for your shares of Gwinnett common stock; (ii) in lieu of
fractional shares of United Stock; (iii) if you are a Gwinnett option and/or
SARs holder, in exchange for your options and/or SARs; and (iv) upon your
exercise of dissenters’ rights. To review the tax consequences to Gwinnett
shareholders and option and SARs holders in greater detail, see “Details of the
Proposed Merger-Material Federal Income Tax Consequences of the Merger and
Opinion of Tax Counsel” beginning on page 30.
Your
tax consequences will depend on your personal situation. You should consult
your
tax adviser for a full understanding of the tax consequences of the merger
to
you.
-2-
Q: Should
I send in my stock certificates now?
A: No.
After
the merger is completed, you will receive written instructions from United
for
exchanging your Gwinnett common stock certificates for United common stock
and/or cash.
Q: Who
should I call with questions?
A: You
should call Andrew R. Pourchier, Executive Vice President, Chief Financial
Officer and Secretary of Gwinnett at (770) 237-0007.
-3-
SUMMARY
This
summary highlights material information from these materials regarding the
proposed merger. For a more complete description of the terms of the proposed
merger, you should carefully read this entire document, and the related
documents to which it refers. The Agreement and Plan of Reorganization and
Agreement and Plan of Merger, which are the legal documents that govern the
proposed merger, are in Appendix A to these materials. In addition, the sections
entitled “Where You Can Find More Information”, on page 50, and “Incorporation
of Certain Documents By Reference”, on page 51, contain references to additional
sources of information about United.
| · |
The
Companies (see pages 42 and
46)
|
United
Community Banks, Inc.
63 Highway 515
Blairsville, Georgia 30512
(706) 745-2151
63 Highway 515
Blairsville, Georgia 30512
(706) 745-2151
United
is
the third largest bank holding company based in Georgia with assets of $7.1
billion, loans of $5.4 billion, deposits of $5.8 billion, and stockholders’
equity of $617 million at December 31, 2006. United conducts substantially
all
of its operations through 26 separate “community banks” with 102 locations in
north Georgia, metro Atlanta, coastal Georgia, western North Carolina, and
east
Tennessee through two wholly-owned state chartered bank subsidiaries: United
Community Bank, Blairsville, Georgia, and United Community Bank, Murphy, North
Carolina. United’s community banks offer a full range of retail and corporate
banking services, including checking, savings and time deposit accounts, secured
and unsecured loans, wire transfers, brokerage services and other financial
services.
United
also operates United Community Mortgage Services, a full-service retail mortgage
lending operation approved as a seller/servicer for Fannie Mae and the Federal
Home Mortgage Corporation, as a division of its Georgia bank subsidiary, and
Brintech, Inc., a New Smyrna Beach, Florida based consulting firm for the
financial services industry. Additionally, United provides retail brokerage
services through a third party broker/dealer.
|
Gwinnett
Commercial Group, Inc.
2230
Riverside Parkway
Lawrenceville,
Georgia 30043
(770)
237-0007
|
|
Gwinnett
is a bank holding company based in Lawrenceville, Georgia with assets
of
$675 million, loans of $536 million, deposits of $583 million, and
shareholders’ equity of $79 million as of December 31, 2006. Gwinnett is
the parent company of First Bank of the South, a full service bank
with
its main office in Lawrenceville, Georgia. First Bank of the South
operates branch locations in Embry Hills in DeKalb County, Johns
Creek in
north Fulton County, and Buford and Snellville in Gwinnett County.
The
bank offers a full range of lending products and traditional banking
products and services, including commercial, real estate, and consumer
loans, cash management services, and savings and time deposit
accounts.
|
-4-
If
Gwinnett shareholders approve the merger and subject to required regulatory
approvals, Gwinnett will be merged with and into United. Unless adjusted
pursuant to the terms of the merger agreement, Gwinnett shareholders may elect
to receive shares of United common stock or cash in exchange for each of their
shares of Gwinnett common stock in the merger on the following
basis:
|
·
|
2.2545
shares of United common stock; or
|
|
·
|
$72.8865
in cash, without interest;
|
provided,
that an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. You may elect any
combination of stock or cash for all of your Gwinnett shares. If the aggregate
cash elections are greater than the maximum, all such cash elections will be
subject to proration, and, if the aggregate stock elections are greater than
the
maximum, all such stock elections will be subject to proration.
You
will
also receive a cash payment, without interest, for the value of any fraction
of
a share of United common stock that you would otherwise be entitled to receive
based on $32.33 per share.
Following
the merger, Gwinnett’s subsidiary, First Bank of the South, will be merged with
and into United Community Bank, a wholly-owned Georgia bank subsidiary of
United, and United Community Bank will be the surviving bank.
The
boards of directors of Gwinnett and United support the merger and believe that
it is in the best interests of both companies and their respective shareholders.
The board of directors of Gwinnett believes that the merger will allow Gwinnett
to better serve its customers and markets and that the merger will permit
Gwinnett shareholders to have an equity interest in a resulting financial
institution with greater financial resources, significant economies of scale
and
a larger shareholder base, which will increase the liquidity of the Gwinnett
shareholders’ equity investments. The board of directors of United believes that
Gwinnett provides United with an expansion opportunity in an attractive market
area. Both boards of directors believe that the terms of the merger are fair
and
equitable and that following the merger the combined bank will maintain the
competitive advantage of a community banking business model.
The
special meeting of shareholders of Gwinnett will be held on June 1, 2007 at
8:00 a.m., at the main office of First Bank of the South, 2230 Riverside
Parkway, Lawrenceville, Georgia 30043, for the purpose of voting on approval
of
the merger.
-5-
You
are
entitled to vote at the shareholders’ meeting if you owned shares of Gwinnett
common stock on May 1, 2007.
Approval
by holders of a majority of the Gwinnett common stock outstanding on May 1,
2007, is required to approve the merger. As of such date, 2,830,901 shares
of
Gwinnett common stock were issued and outstanding, each of which is entitled
to
one vote per share.
All of
the directors, executive officers and 5% shareholders of Gwinnett have agreed
to
vote their shares in favor of the merger. Gwinnett’s directors, executive
officers and 5% shareholders own 1,228,697 shares,
or 43.40%, of Gwinnett common stock
(excluding options).
The
merger will not occur unless certain conditions are met, and United or Gwinnett
can terminate the merger agreement if specified events occur or fail to occur.
The merger must also be approved by the Gwinnett shareholders. Following the
merger, Gwinnett’s subsidiary, First Bank of the South, will be merged into
United’s Georgia bank subsidiary, United Community Bank.
The
merger and the bank merger have been approved by the Board of Governors of
the
Federal Reserve System, the Federal Deposit Insurance Corporation and the
Department of Banking and Finance of the State of Georgia.
The
closing of the merger will occur after the merger is approved by Gwinnett
shareholders and the foregoing regulators and after the certificate of merger
is
filed as required under Georgia law.
You
are
entitled to dissent from the merger and to receive a cash payment for your
Gwinnett common stock if you follow certain statutory provisions regarding
the
rights of dissenting shareholders under Article 13 of the Georgia Business
Corporation Code.
Gwinnett
has received an opinion from Kilpatrick Stockton LLP stating that, assuming
the
merger is completed as currently anticipated, Gwinnett will not recognize any
gain or loss for federal income tax purposes, and shareholders of Gwinnett
to
the extent they receive solely United stock will not recognize any gain or
loss
for federal income tax purposes. All cash you receive as a result of the merger
(i) pursuant to a cash election, (ii) in lieu of fractional shares, (iii) if
you
are a Gwinnett option and/or SARs holder, in exchange for your options and/or
SARs, and (iv) as payment for exercising your right to dissent, will be fully
or
partially subject to income tax under the Internal Revenue Code as either
ordinary income or a capital gain or loss, depending upon your particular
circumstances. Neither United nor Gwinnett has requested a ruling to this effect
from the Internal Revenue Service.
-6-
The
merger will be accounted for as a purchase for financial reporting and
accounting purposes.
Burke
Capital Group, L.L.C. has rendered an opinion to Gwinnett that based on and
subject to the procedures, matters, and limitations described in its opinion
and
other matters it considered relevant, as of the date of its opinion, the merger
consideration is fair from a financial point of view to the shareholders of
Gwinnett. A summary of Burke’s opinion begins on page 29 and the full opinion is
attached as Appendix C to these materials.
United’s
common stock trades on the Nasdaq Stock Market under the ticker symbol “UCBI”.
The following table sets forth, for the periods indicated, the high, low and
closing sales prices per share of United’s common stock as quoted on Nasdaq.
Amounts have been restated to reflect the pro forma effect of United’s
three-for-two split effective April 28, 2004:
|
High
|
Low
|
Close
|
||||||||
|
2007
|
||||||||||
|
Second
Quarter (through May 1, 2007)
|
$
|
33.03
|
$
|
29.52
|
$
|
29.89
|
||||
|
First
Quarter
|
34.98
|
30.81
|
32.79
|
|||||||
|
2006
|
||||||||||
|
Fourth
Quarter
|
33.37
|
29.03
|
32.32
|
|||||||
|
Third
Quarter
|
33.10
|
27.51
|
30.05
|
|||||||
|
Second
Quarter
|
31.26
|
27.02
|
30.44
|
|||||||
|
First
Quarter
|
29.64
|
26.02
|
28.15
|
|||||||
|
2005
|
||||||||||
|
Fourth
Quarter
|
30.50
|
25.32
|
26.66
|
|||||||
|
Third
Quarter
|
29.36
|
25.75
|
28.50
|
|||||||
|
Second
Quarter
|
26.44
|
21.70
|
26.02
|
|||||||
|
First
Quarter
|
27.92
|
23.02
|
23.73
|
|||||||
|
2004
|
||||||||||
|
Fourth
Quarter
|
29.60
|
23.17
|
26.93
|
|||||||
|
Third
Quarter
|
25.45
|
21.75
|
24.27
|
|||||||
|
Second
Quarter
|
25.36
|
21.89
|
25.18
|
|||||||
|
First
Quarter
|
24.62
|
21.37
|
23.73
|
|||||||
The
closing sales price of United common stock as of February 5, 2007, the date
the
merger agreement was executed, was $33.06. The closing sales price of United
common stock as of May 1, 2007, the most recent date feasible for inclusion
in these materials, was $29.89.
There
has
been no public trading market for Gwinnett common stock. We believe the last
sale of Gwinnett common stock among shareholders in a private transaction was
on
November 13, 2006 at a price of $60.00
per
share, based on unofficial information that Gwinnett management believes is
reliable.
-7-
Assuming
there is no adjustment in the merger consideration, if the merger had been
completed on February 5, 2007, the implied value of one share of Gwinnett
common
stock, exchanged for shares of United common stock in the event of a stock
election, would have been $74.53 based on United’s closing sales price on that
date, and, on May 1, 2007, the implied value of one share of Gwinnett
common stock, exchanged for shares of United common stock, would have been
$73.97. The value of one share of Gwinnett common stock exchanged for cash
is
fixed at $67.38.
There
were 287 shareholders of record of Gwinnett common stock as of May 1,
2007.
United
declared cash dividends of $.18 per share, in the aggregate, in the first
and second quarters of 2007, $.32 per share in 2006, $.28 per share in 2005
and
$.24 per share in 2004. United intends to continue paying cash dividends,
but
the amount and frequency of cash dividends, if any, will be determined by
United’s board of directors after consideration of certain non-financial and
financial factors including earnings, capital requirements, and the financial
condition of United, and will depend on cash dividends paid to it by its
subsidiary banks. The ability of United’s subsidiary banks to pay dividends to
it is restricted by certain regulatory requirements.
Pursuant
to the terms of the merger agreement, Gwinnett declared a cash dividend of
$3.80
per share (which includes a regular annual cash dividend of $1.55 per share)
to
record holders as of February 5, 2007 payable on March 12, 2007. Gwinnett
declared cash dividends of $1.45 per share in 2006, $1.35 per share in 2005
and
$1.25 per share in 2004.
Following
the merger you will no longer be a Gwinnett shareholder and, if you receive
shares of United common stock following the merger, your rights as a shareholder
will no longer be governed by Gwinnett’s articles of incorporation and bylaws.
You will be a United shareholder, and your rights as a United shareholder will
be governed by United’s articles of incorporation and bylaws. Your former rights
as a Gwinnett shareholder and your new rights as a United shareholder are
different in certain ways, including the following:
|
·
|
Gwinnett’s
board of directors consists of 15 members, while United’s consists of 11
members.
|
|
·
|
The
bylaws of Gwinnett set forth different requirements for removal of
directors than do the articles of incorporation and bylaws of
United.
|
|
·
|
United
has different special procedures in its articles of incorporation
requiring supermajority approval and disinterested shareholder approval
of
some business transactions.
|
|
·
|
The
articles of incorporation of United require a supermajority shareholder
vote to amend most provisions of its articles of incorporation and
bylaws.
Gwinnett’s articles of incorporation and bylaws do
not.
|
|
·
|
United
is subject to filing requirements under the Securities Exchange Act.
Gwinnett is not subject to such
requirements.
|
-8-
Some
of
the directors and officers of Gwinnett have interests in the merger in addition
to their interests as shareholders generally, including the
following:
|
·
|
Glenn
S. White, President and Chief Executive Officer of Gwinnett will
terminate
his employment agreement with Gwinnett and has entered into a settlement
agreement with United for a payment equal to $939,550, as required
by his
existing employment agreement upon his termination following a change
in
control of Gwinnett and reduced to prevent such payment from being
an
amount that would be considered an “excess parachute payment” under the
Internal Revenue Code. Mr. White has entered into a new employment
agreement with United for a rolling three-year term, and will be
granted
10,000 shares of restricted stock, which will vest on the fifth
anniversary of the closing of the merger, and options to purchase
25,000
shares. The options vest as follows: 50% on the third anniversary,
25% on
the fourth anniversary and 25% on the fifth anniversary of the closing
of
the merger.
|
|
·
|
Steven
W. Williams, President of First Bank of the South and Executive
Vice-President of Gwinnett will terminate his employment agreement
with
Gwinnett and has entered into a settlement agreement with United
for a
payment equal to $443,467, as required by his existing employment
agreement upon his termination following a change in control of Gwinnett.
Mr. Williams has entered into a new employment agreement with United
for a
rolling two-year term, and will be granted 7,000 shares of restricted
stock, which will vest on the fifth anniversary of the closing of
the
merger, and options to purchase 17,500 shares. The options vest as
follows: 50% on the third anniversary, 25% on the fourth anniversary
and
25% on the fifth anniversary of the closing of the
merger.
|
|
·
|
Andrew
R. Pourchier, Executive Vice President, Chief Financial Officer and
Secretary of Gwinnett, has entered into a one year consulting agreement
with United and will terminate his employment agreement with Gwinnett
for
a payment equal to $442,467, as required by his existing employment
agreement upon his termination following a change in control of
Gwinnett.
|
|
·
|
At
the closing of the merger, various other Gwinnett officers will terminate
their respective employment agreement with Gwinnett and have entered
into
a settlement agreement with United for a payment equal to the amount
required by their existing employment agreements upon their respective
termination following a change in control of Gwinnett. Each of these
officers have entered into an employment agreement with
United.
|
|
·
|
In
exchange for a payment by United, various Gwinnett lending officers
have
entered into non-competition agreements with United that will prohibit
the
officers from competing with United after the closing of the merger
if
their employment is terminated.
|
|
·
|
United
will generally indemnify and provide liability insurance to the present
directors and officers of Gwinnett Commercial and First Bank of the
South
for a period of three years following the closing of the merger for
actions taken by such directors and officers in such
capacity.
|
|
·
|
United
has agreed to appoint John D. Stephens, chairman of the board of
directors
of Gwinnett, to the board of directors of United following the closing
of
the merger.
|
-9-
We
are
providing the following information to help you analyze the financial aspects
of
the merger. The following tables set forth summary historical operations and
financial condition data and summary performance, asset quality and other
information of United at and for the periods indicated. You should read this
data in conjunction with United’s Consolidated Financial Statements and notes
thereto incorporated herein by reference from United’s Annual Report on Form
10-K for the year ended December 31, 2006. United’s “net operating income” is
determined by methods other than in accordance with generally accepted
accounting principles, or GAAP.
Please
see the following “GAAP Reconciliation and Explanation” below for a
reconciliation of the difference between United’s non-GAAP net operating income
and its GAAP net income.
United’s
per share amounts and weighted average shares outstanding have been restated
to
reflect the three-for-two stock split effective April 28, 2004 and the
two-for-one stock split effective May 29, 2002.
|
For
the Year Ended December 31,
|
||||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
|
(in
thousands, except per share data; taxable equivalent)
|
||||||||||||||||
|
INCOME
SUMMARY
|
||||||||||||||||
|
Interest
revenue
|
$
|
446,695
|
$
|
324,225
|
$
|
227,792
|
$
|
198,689
|
$
|
185,498
|
||||||
|
Interest
expense
|
208,815
|
127,426
|
74,794
|
70,600
|
76,357
|
|||||||||||
|
Net
interest revenue
|
237,880
|
196,799
|
152,998
|
128,089
|
109,141
|
|||||||||||
|
Provision
for loan losses
|
14,600
|
12,100
|
7,600
|
6,300
|
6,900
|
|||||||||||
|
Fee
Revenue
|
49,095
|
46,148
|
39,539
|
38,184
|
30,734
|
|||||||||||
|
Total
revenue
|
272,375
|
230,847
|
184,937
|
159,973
|
132,975
|
|||||||||||
|
Operating
expenses(1)
|
162,070
|
140,808
|
110,974
|
97,251
|
80,690
|
|||||||||||
|
Income
before taxes
|
110,305
|
90,039
|
73,963
|
62,722
|
52,285
|
|||||||||||
|
Income
taxes
|
41,490
|
33,297
|
26,807
|
23,247
|
19,505
|
|||||||||||
|
Net
operating income
|
68,815
|
56,742
|
47,156
|
39,475
|
32,780
|
|||||||||||
|
Merger-related
charges, net of tax
|
—
|
—
|
565
|
1,357
|
—
|
|||||||||||
|
Net
income
|
$
|
68,815
|
$
|
56,742
|
$
|
46,591
|
$
|
38,118
|
$
|
32,780
|
||||||
|
OPERATING
PERFORMANCE(1)
|
||||||||||||||||
|
Earnings
per common share:
|
||||||||||||||||
|
Basic
|
$
|
1.70
|
$
|
1.47
|
$
|
1.31
|
$
|
1.15
|
$
|
1.02
|
||||||
|
Diluted
|
1.66
|
1.43
|
1.27
|
1.12
|
.99
|
|||||||||||
|
Return
on tangible equity(2)(3)
|
17.52
|
%
|
18.99
|
%
|
19.74
|
%
|
19.24
|
%
|
17.88
|
%
|
||||||
|
Return
on assets
|
1.09
|
1.04
|
1.07
|
1.06
|
1.11
|
|||||||||||
|
Efficiency
ratio
|
56.35
|
57.77
|
57.65
|
58.39
|
57.72
|
|||||||||||
|
Dividend
payout ratio
|
18.82
|
19.05
|
18.32
|
17.39
|
16.34
|
|||||||||||
|
GAAP
PERFORMANCE
|
||||||||||||||||
|
Per
common share:
|
||||||||||||||||
|
Basic
earnings
|
$
|
1.70
|
$
|
1.47
|
$
|
1.29
|
$
|
1.11
|
$
|
1.02
|
||||||
|
Diluted
earnings
|
1.66
|
1.43
|
1.25
|
1.08
|
.99
|
|||||||||||
|
Cash
dividends declared (rounded)
|
.32
|
.28
|
.24
|
.20
|
.17
|
|||||||||||
|
Book
value
|
14.37
|
11.80
|
10.39
|
8.47
|
6.89
|
|||||||||||
|
Tangible
book value(3)
|
10.57
|
8.94
|
7.34
|
6.52
|
6.49
|
|||||||||||
|
Key
performance ratios:
|
||||||||||||||||
|
Return
on equity(2)
|
13.28
|
%
|
13.46
|
%
|
14.39
|
%
|
14.79
|
%
|
16.54
|
%
|
||||||
|
Return
on assets
|
1.09
|
1.04
|
1.05
|
1.02
|
1.11
|
|||||||||||
|
Net
interest margin
|
4.05
|
3.85
|
3.71
|
3.68
|
3.95
|
|||||||||||
|
Dividend
payout ratio
|
18.82
|
19.05
|
18.60
|
18.02
|
16.34
|
|||||||||||
|
Equity
to assets
|
8.06
|
7.63
|
7.45
|
7.21
|
7.01
|
|||||||||||
|
Tangible
equity to assets(3)
|
6.32
|
5.64
|
5.78
|
6.02
|
6.60
|
|||||||||||
|
ASSET
QUALITY
|
||||||||||||||||
|
Allowance
for loan losses
|
$
|
66,566
|
$
|
53,595
|
$
|
47,196
|
$
|
38,655
|
$
|
30,914
|
||||||
|
Non-performing
assets
|
13,654
|
12,995
|
8,725
|
7,589
|
8,019
|
|||||||||||
|
Net
charge-offs
|
5,524
|
5,701
|
3,617
|
4,097
|
3,111
|
|||||||||||
|
Allowance
for loan losses to loans
|
1.24
|
%
|
1.22
|
%
|
1.26
|
%
|
1.28
|
%
|
1.30
|
%
|
||||||
|
Non-performing
assets to total assets
|
.19
|
.22
|
.17
|
.19
|
.25
|
|||||||||||
|
Net
charge-offs to average loans
|
.12
|
.14
|
.11
|
.15
|
.14
|
|||||||||||
-10-
|
For
the Year Ended December 31,
|
||||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
|
(in
thousands, except per share data; taxable equivalent)
|
||||||||||||||||
|
AVERAGE
BALANCES
|
||||||||||||||||
|
Loans
|
$
|
4,800,981
|
$
|
4,061,091
|
$
|
3,322,916
|
$
|
2,753,451
|
$
|
2,239,875
|
||||||
|
Investment
Securities
|
1,041,897
|
989,201
|
734,577
|
667,211
|
464,468
|
|||||||||||
|
Earning
assets
|
5,877,483
|
5,109,053
|
4,119,327
|
3,476,030
|
2,761,265
|
|||||||||||
|
Total
assets
|
6,287,148
|
5,472,200
|
4,416,835
|
3,721,284
|
2,959,295
|
|||||||||||
|
Deposits
|
5,017,435
|
4,003,084
|
3,247,612
|
2,743,087
|
2,311,717
|
|||||||||||
|
Shareholders’
equity
|
506,946
|
417,309
|
329,225
|
268,446
|
207,312
|
|||||||||||
|
Common
shares outstanding:
|
||||||||||||||||
|
Basic
|
40,393
|
38,477
|
36,071
|
34,132
|
32,062
|
|||||||||||
|
Diluted
|
41,575
|
39,721
|
37,273
|
35,252
|
33,241
|
|||||||||||
|
AT
YEAR END
|
||||||||||||||||
|
Loans
|
$
|
5,376,538
|
$
|
4,398,286
|
$
|
3,734,905
|
$
|
3,015,997
|
$
|
2,381,798
|
||||||
|
Investment
securities
|
1,107,153
|
990,687
|
879,978
|
659,891
|
559,390
|
|||||||||||
|
Earning
assets
|
6,565,730
|
5,470,718
|
4,738,389
|
3,796,332
|
3,029,409
|
|||||||||||
|
Total
assets
|
7,101,249
|
5,865,756
|
5,087,702
|
4,068,834
|
3,211,344
|
|||||||||||
|
Deposits
|
5,772,886
|
4,477,600
|
3,680,516
|
2,857,449
|
2,385,239
|
|||||||||||
|
Shareholders’
equity
|
616,767
|
472,686
|
397,088
|
299,373
|
221,579
|
|||||||||||
|
Common
shares outstanding
|
42,891
|
40,020
|
38,168
|
35,289
|
31,895
|
|||||||||||
|
(1)
|
Excludes
pre-tax merger-related and restructuring charges totaling $.9 million,
or
$.02 per diluted common share, recorded in 2004 and $2.1 million,
or $.04
per diluted common share, recorded in
2003.
|
|
(2)
|
Net
income available to common stockholders, which excludes preferred
stock
dividends, divided by average realized common equity which excludes
accumulated other comprehensive income
(loss).
|
|
(3)
|
Excludes
effect of acquisition related intangibles and associated
amortization.
|
GAAP
Reconciliation and Explanation
United’s
net operating income is determined by methods other than in accordance with
GAAP
and excludes merger-related charges. United excludes these charges because
management believes that non-GAAP operating results provide a helpful measure
for assessing United’s financial performance since the excluded charges are
non-recurring and operating income more closely reflects what United earned
during the applicable periods disregarding the non-operating impact of
acquisitions. United’s net operating income should not be viewed as a substitute
for net income determined in accordance with GAAP and is not necessarily
comparable to non-GAAP performance measures that may be presented by other
companies. The following is a reconciliation of United’s net operating income to
GAAP net income:
|
For
the Years Ended December 31,
|
||||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
|
(in
thousand)
|
||||||||||||||||
|
Total
merger-related charges
|
$
|
—
|
$
|
—
|
$
|
870
|
$
|
2,088
|
$
|
—
|
||||||
|
Income
tax effect of above charges
|
—
|
—
|
305
|
731
|
—
|
|||||||||||
|
After-tax
effect of
merger-related charges
|
$
|
—
|
$
|
—
|
$
|
565
|
$
|
1,357
|
$
|
—
|
||||||
|
Net
Income Reconciliation
|
||||||||||||||||
|
Net
operating income
|
$
|
68,815
|
$
|
56,742
|
$
|
47,156
|
$
|
39,475
|
$
|
32,780
|
||||||
|
After-tax
effect of merger-related charges
|
—
|
—
|
(565
|
)
|
(1,357
|
)
|
—
|
|||||||||
|
Net
income (GAAP)
|
$
|
68,815
|
$
|
56,742
|
$
|
46,591
|
$
|
38,118
|
$
|
32,780
|
||||||
|
Basic
Earnings Per Share Reconciliation
|
||||||||||||||||
|
Basic
operating earnings per share
|
$
|
1.70
|
$
|
1.47
|
$
|
1.31
|
$
|
1.15
|
$
|
1.02
|
||||||
|
Per
share effect of merger-related charges
|
—
|
—
|
(.02
|
)
|
(.04
|
)
|
—
|
|||||||||
|
Basic
earnings per share (GAAP)
|
$
|
1.70
|
$
|
1.47
|
$
|
1.29
|
$
|
1.11
|
$
|
1.02
|
||||||
|
Diluted
Earnings Per Share Reconciliation
|
||||||||||||||||
|
Diluted
operating earnings per share
|
$
|
1.66
|
$
|
1.43
|
$
|
1.27
|
$
|
1.12
|
$
|
.99
|
||||||
|
Per
share effect of merger-related charges
|
—
|
—
|
(.02
|
)
|
(.04
|
)
|
—
|
|||||||||
|
Diluted
earnings per share (GAAP)
|
$
|
1.66
|
$
|
1.43
|
$
|
1.25
|
$
|
1.08
|
$
|
.99
|
||||||
-11-
RISK
FACTORS
In
addition to the other information, including risk factors, incorporated by
reference herein from United’s Annual Report on Form 10-K for the year ended
December 31, 2006 , you should carefully read and consider the following factors
in evaluating the merger and in deciding whether to elect to receive cash,
shares of United common stock or some combination thereof in the
merger.
Because
the market price of United common stock will fluctuate, Gwinnett shareholders
electing to receive stock cannot be sure of the value of the merger
consideration they will receive.
Upon
completion of the merger, each share of Gwinnett common stock will be converted
into the merger consideration consisting of shares of United common stock or
cash. The market value of the merger consideration received by Gwinnett
shareholders who receive all or part of the merger consideration in the form
of
United shares will vary with the price of United’s common stock. United’s stock
price changes daily as a result of a variety of factors other than the business
and relative prospects of United, including general market and economic
conditions, industry trends, and the regulatory environment. These factors
are
beyond United’s control.
Gwinnett
shareholders may receive a form of consideration different from what they
elect.
Although
each Gwinnett shareholder may elect to receive all cash or all stock, an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. Accordingly,
if the aggregate cash elections are greater than the maximum, each cash election
will be reduced pro rata based on the amount that the aggregate cash elections
exceed the maximum. Alternatively, if the aggregate stock elections are greater
than the maximum, each stock election will be reduced pro rata based on the
amount that the aggregate stock elections exceed the maximum.
For
example, if you elect to receive cash for 1,000 Gwinnett shares and the
aggregate cash elections exceed by 10% the 306,137 Gwinnett
share
maximum, the shares for which you will be paid cash will be reduced to the
number determined by dividing your cash election by the aggregate cash elections
and multiplying that quotient by the 306,137 cash election maximum. This
proration will result in you receiving cash for 909 of your Gwinnett shares
and
being treated as if you had elected to receive stock for your remaining 91
shares.
At
the
time you vote with respect to the merger agreement, you will not know how much
cash or the number of United shares you will receive as a result of the
merger.
Gwinnett’s
officers and directors have interests in the merger in addition to or different
from your interests as a Gwinnett shareholder.
Some
of
Gwinnett’s executive officers participated in negotiations of the merger
agreement with United, and the board of directors approved the merger agreement
and is recommending that Gwinnett shareholders vote for the merger agreement.
In
considering these facts and the other information contained in these materials,
you should be aware that certain of Gwinnett’s executive officers and directors
have economic interests in the merger in addition to the interests that they
share with you as a Gwinnett shareholder. These
interests include the payment of certain benefits in consideration of the
termination of existing employment agreements, the employment of several of
Gwinnett’s current executive officers by United following completion of the
merger and the appointment of John D. Stephens, the chairman of the board of
directors of Gwinnett, to the board of directors of United. See
“Details of the
Proposed Merger — Interest of the Directors and Officers of Gwinnett in the
Merger” on page 24.
-12-
United
may be unable to successfully integrate Gwinnett’s operations and retain its key
employees.
The
merger involves the integration of two companies that previously operated
independently. The difficulties of combining the companies’ operations include
integrating personnel, departments, systems, operating procedures and
information technologies and retaining key employees. Failures in integrating
operations or the loss of key personnel could have a material adverse effect
on
the business and results of operations of the combined company.
If
the merger is not completed, United and Gwinnett common stock could be
materially adversely affected.
The
merger is subject to customary conditions to closing, including the approval
of
the Gwinnett shareholders. In addition, United and Gwinnett may terminate the
merger agreement under certain circumstances. If United and Gwinnett do not
complete the merger, the market price of United common stock or Gwinnet common
stock may fluctuate to the extent that the current market prices of those shares
reflect a market assumption that the merger will be completed. Further, whether
or not the merger is completed, United and Gwinnett will also be obligated
to
pay certain investment banking, legal and accounting fees and related expenses
in connection with the merger, which could negatively impact results of
operations when incurred. In addition, neither company would realize any of
the
expected benefits of having completed the merger. If the merger is not
completed, United and Gwinnett cannot assure their respective shareholders
that
additional risks will not materialize or not materially adversely affect the
business, results of operations and stock prices of United and
Gwinnett.
The
termination fee contained in the merger agreement may discourage other companies
from trying to acquire Gwinnett.
Gwinnett
has agreed to pay a termination fee of $7.5 million to United if, under certain
circumstances, the merger agreement is terminated and, at the time of
termination, a competing offer is outstanding or such offer has been accepted
by
Gwinnett. This fee could discourage other companies from trying to acquire
Gwinnett.
-13-
In
exercising their fiduciary responsibilities to shareholders, Gwinnett’s
management and board of directors regularly assess the local banking industry,
including the regulatory and competitive environment for banking services.
The
board of directors has, over time, considered the possibility of a number of
strategic options in evaluating ways to maximize shareholder value. As a result
of Gwinnett’s historical growth and performance, management and the board of
directors began to consider the company’s strategic alternatives in the summer
of 2006, including, but not limited to, capital planning, a de novo branching
strategy, acquisitions of other community banks, and pursuing a sale or merger
transaction.
In
June
2006, Gwinnett elected to engage an investment banking firm to advise it on
general investment banking matters including the operating and merger and
acquisition environment in Atlanta and, more specifically, the potential
acquisition of other community banks or the sale of the company. Gwinnett
engaged Burke Capital Group, L.L.C. as its financial advisor based on its
extensive experience advising financial institutions and other qualifications.
Burke has detailed knowledge of Gwinnett, is very familiar with the Southeastern
U.S. banking market and, to a greater extent, the Atlanta banking market, and
had significant knowledge of potential partners for a merger or sale of
Gwinnett.
Burke
held discussions with senior management of Gwinnett to compile a list of the
most likely strategic partners in the event that Gwinnett decided to pursue
a
sale transaction. In the following weeks, Burke obtained and reviewed several
detailed reports provided by Gwinnett including: company history, markets,
management, past and current financial performance, projected financial
performance, business plan, asset quality, branch locations and a variety of
other financial and non-financial information. Burke utilized this data to
compile a package of confidential financial and business information regarding
Gwinnett to be used by Burke as a marketing tool for initial discussions with
selected strategic partners.
From
June
through August 2006, Burke contacted ten bank holding companies with known
interest in the Atlanta marketplace. Burke entered into confidentiality
agreements on behalf of Gwinnett with seven of these companies and provided
each
with a package of confidential financial and business information regarding
Gwinnett. From August through December 2006, several of these companies,
including United, held meetings with senior management of Gwinnett to discuss
Gwinnett’s strategic direction and a potential acquisition of the company.
During
December 2006, Gwinnett held several meetings with the management of United
to
assess combining the respective organizations. In late December 2006, Gwinnett,
United and Burke met to discuss the preliminary terms of a potential acquisition
by United. United expressed an oral preliminary indication of interest utilizing
85% stock and 15% cash consideration for a purchase price of approximately
$205
million.
On
January 4, 2006, Burke met with the Gwinnett board of directors to discuss
the
initial oral indication of interest received from United. Burke and Gwinnett
considered the United offer as well as the timing and expectation of offers
from
the other interested parties. Gwinnett discussed its obligations to give due
consideration to all relevant factors, including the short-term and long-term
interests of Gwinnett’s employees, customers, shareholders and other
constituents. The Gwinnett board of directors authorized the executive officers
of Gwinnett and Burke to continue to negotiate the price and other terms of
a
transaction with United.
-14-
Throughout
January 2007, the parties continued to negotiate the merger consideration,
the
treatment of outstanding options to purchase Gwinnett common stock in the merger
and the ability of Gwinnett to pay a pre-closing dividend to its shareholders.
As the parties negotiated that purchase price, they also discussed whether
(1)
the purchase price would be a fixed amount and the exchange ratio for United
stock would fluctuate or the exchange ratio for United stock would be fixed
and
the purchase price would fluctuate, and (2) the purchase price would be subject
to adjustment in the event of a substantial increase or decrease in the market
price of United’s stock.
After
extensive negotiations, the parties agreed on a purchase price of $216.5 million
based on the recent average trading price of United common stock of $32.33,
which equated to 5.7 million shares of United common stock and $32.5 million
in
cash to stockholders and holders of Gwinnett options and stock appreciation
rights. In addition to the merger consideration, the parties agreed that
Gwinnett shareholders would receive their regularly scheduled annual cash
dividend of $1.55 from Gwinnett payable in March 2007 and a special cash
dividend not to exceed $2.25 per share (which is in part attributable to 2007
earnings), both payable prior to the closing of the transaction, and that United
would purchase outstanding Gwinnett stock options and stock appreciation rights
for cash. On January 10, 2007, United provided a term sheet to Gwinnett, which
summarized the material terms of the proposed transaction.
The
Gwinnett board of directors met on January 16, 2007 and approved the term sheet
and authorized the executive officers to proceed with the negotiation and
preparation of a definitive merger agreement. The board also reviewed a
memorandum provided by Powell Goldstein LLP, legal counsel to Gwinnett,
regarding the legal standards applicable to its decisions and actions with
respect to the proposed transactions. The parties then scheduled their
respective due diligence investigations of the other party, and counsel for
each
party began the preparation of a definitive merger agreement.
On
February 5, 2007, the Gwinnett board of directors met to evaluate and discuss
the proposed definitive merger agreement between Gwinnett and United. Burke
rendered to the Gwinnett board of directors its oral opinion (subsequently
confirmed in writing) that, as of the date of its opinion and based upon and
subject to the considerations described in its opinion and other matters that
Burke considered relevant, the proposed merger consideration was fair, from
a
financial point of view, to Gwinnett’s common stockholders. Powell Goldstein
briefly reviewed the memorandum that was previously provided to the Gwinnett
board of directors regarding the legal standards applicable to its decisions
and
actions with respect to the proposed transactions. Powell Goldstein also
reviewed the legal terms of the proposed merger and the related agreements.
On
February 5, 2007, following a thorough review and discussion, the Gwinnett
board
of directors voted to approve the Agreement and Plan of Reorganization providing
for the merger of Gwinnett with United. Gwinnett and United finalized, executed,
and delivered the definitive agreements for the transaction on that date. The
transaction was announced publicly prior to the opening of the trading markets
on February 6, 2007.
Without
assigning any relative or specific weights, the board of directors of Gwinnett
considered the following material factors in approving the merger:
Positive
Factors:
|
·
|
The
value and form of the consideration to be received by Gwinnett
shareholders relative to the actual, tangible and leveraged book
value,
core deposits and aggregate and per share earnings of Gwinnett;
|
-15-
|
·
|
Information
concerning the financial condition, results of operations and business
prospects of Gwinnett and of United;
|
|
·
|
The
financial terms of recent business combinations in the financial
services
industry and a comparison of the multiples of selected combinations
with
the terms of the proposed transaction with United;
|
|
·
|
A
report and opinion presented by Burke as to the fairness, from a
financial
point of view, of the consideration to be paid to the company’s
shareholders in the merger;
|
|
·
|
Gwinnett
shareholders’ ability to elect to receive United common stock or cash in
exchange for their Gwinnett common
stock;
|
|
·
|
The
special dividend of $2.25 per share to be paid to Gwinnett’s shareholders
in addition to their regular annual dividend of $1.55 per
share;
|
|
·
|
The
liquidity of the consideration to be received by Gwinnett’s shareholders
in the merger in light of United’s status as a Nasdaq-listed
company;
|
|
·
|
The
cultural fit between the Gwinnett and United community banking business
models;
|
|
·
|
United’s
positive record in retaining customers and employees following business
combination transactions;
|
|
·
|
The
alternatives to the merger, including remaining an independent
institution;
|
|
·
|
The
competitive and regulatory environment for financial institutions
generally; and
|
|
·
|
The
fact that the merger is structured as a tax-free reorganization and
the
exchange of Gwinnett common stock for United common stock will occur
on a
tax-free basis.
|
Negative
Factors:
·
Gwinnett
shareholders will receive a dividend downgrade of approximately 46% based on
Gwinnett’s and United’s respective dividend rates as of December 31,
2006;
·
Collectively,
the Gwinnett shareholders will not hold a controlling interest in the resulting
company; and
·
The
risk
that the combined company may not realize the expected benefits from the merger
if United and Gwinnett are not successful in integrating the two companies
following the merger.
The
Gwinnett board of directors believes that analyses performed by Burke in
connection with rendering its opinion to the board, taken as a whole, support
the boards’ recommendation to the Gwinnett shareholders to approve the proposed
merger. The Gwinnett board of directors considered in its review of the analyses
performed by Burke all of the individual factors that did not support a
recommendation to the Gwinnett shareholders to approve the proposed merger.
These factors included:
|
·
|
the
price to the last twelve months earnings multiple and the associated
implied value of the merger consideration was less than the median
price
to the last twelve months earnings multiples and associated implied
values
of the consideration received in 10 comparable southeast transactions
and
25 comparable U.S. transactions;
|
-16-
|
·
|
the
price to actual book value multiple and the associated implied value
of
the merger consideration was less than the median price to actual
book
value multiples and associated implied values of the consideration
received in 10 comparable southeast transactions and 25 comparable
U.S.
transactions;
|
|
·
|
the
price to tangible book value multiple and the associated implied
value of
the merger consideration was less than the median price to tangible
book
value multiples and associated implied values of the consideration
received in 10 comparable southeast transactions and 25 comparable
U.S.
transactions;
|
|
·
|
the
contribution analysis indicated that the pro forma ownership of United
common stock issuable to Gwinnett shareholders assuming a hypothetical
100% stock transaction in the merger was slightly less than the earnings
contributed to United by Gwinnett;
and
|
|
·
|
the
selected peer group analysis of United indicated that the liquidity
for
United’s common stock is low compared to the selected peer
group.
|
After
careful consideration of these factors and the potential short- and long-term
benefits to Gwinnett shareholders, the Gwinnett board of directors determined
that the overall potential benefits of the merger outweighed these negative
factors.
The
board
of directors of Gwinnett believes the merger is in the best interest of its
shareholders and will allow Gwinnett to better serve its customers and markets.
The merger will permit Gwinnett shareholders to have an equity interest in
a
resulting financial institution with greater financial resources, significant
economies of scale and a larger shareholder base, which will increase the
liquidity of the Gwinnett shareholders’ equity investments. The board of
directors of Gwinnett also believes that the terms of the merger, including
the
basis of exchange of United common stock for Gwinnett common stock, which was
determined through arms-length negotiations between United and Gwinnett, are
fair and equitable and take into account the relative earning power of United
and Gwinnett, historic and anticipated operations, the economies of scale to
be
achieved through the merger, the trading prices of the shares of the respective
companies, and other pertinent factors.
The
board
of directors of Gwinnett believes that in the current regulatory and competitive
environment, a partnership with a larger organization with a more diverse
franchise, greater economies of scale, larger capital base, more diverse product
line, and a superior ability to attract talented employees provides a distinct
competitive advantage, and that following the merger the combined bank will
maintain the competitive advantage of a community banking business
model.
Unless
adjusted pursuant to the terms of the merger agreement, Gwinnett shareholders
may elect to receive shares of United common stock or cash in exchange for
each
of their shares of Gwinnett common stock in the merger on the following
basis:
|
·
|
2.2545
shares of United common stock; or
|
|
·
|
$72.8865
in cash, without interest;
|
provided,
that an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. Although each Gwinnett
shareholder may elect to receive cash or stock, if
the
aggregate cash elections are greater than the maximum, each cash election will
be reduced pro rata based on the amount that the aggregate cash elections exceed
the maximum. Alternatively, if the aggregate stock elections are greater than
the maximum, each stock election will be reduced pro rata based on the amount
that the aggregate stock elections exceed the maximum.
-17-
For
example, if you elect to receive cash for 1,000 Gwinnett shares and the
aggregate cash elections exceed by 10% the 306,137 Gwinnett
share
maximum, the shares for which you will be paid cash will be reduced to the
number determined by dividing your cash election by the aggregate cash elections
and multiplying that quotient by the 306,137 cash election maximum. This
proration will result in you receiving cash for 909 of your Gwinnett shares
and
being treated as if you had elected to receive stock for your remaining 91
shares.
At
the
time you vote with respect to the merger agreement, you will not know how much
cash or the number of United shares you will receive as a result of the merger.
United
will not issue fractional shares in the merger. Instead, you will receive a
cash
payment, without interest, for the value of any fraction of a share of United
common stock that you would otherwise be entitled to receive based on $32.33
per
share.
Because
a
portion of the merger consideration includes United common stock payable
at a
fixed exchange ratio for Gwinnett common stock and the market
value of the United common stock changes daily, the total value of the merger
consideration will fluctuate. Neither United nor Gwinnett can give you any
assurance as to the price of United common stock or the value of the merger
consideration when the merger becomes effective or when United’s shares are
delivered to you. As
an
illustration, assuming the merger had been completed on February 5, 2007,
the
date the merger agreement was executed, the aggregate merger consideration
payable pursuant to stock and cash elections (which does not include $10,165,563
payable to holders of Gwinnett options and SARs) would have been $210,493,434.
However, assuming the merger had been completed on May 1, 2007, the most
recent date available before these materials were mailed, the aggregate merger
consideration payable pursuant to stock and cash elections would have been
$192,449,585.
Under
the
merger agreement, the merger consideration may be adjusted if the average
closing price of United common stock for the 30 day period preceding the six
trading days prior to the Closing Date is greater than $33.56 or less than
$29.09 per share and the percentage change in the United stock price is greater
than the concurrent percentage change in the average price per share of the
peer
group of comparable companies specified in the merger agreement. In such case,
the stock or cash portion of the merger consideration may be adjusted by the
amount which would cause the value of the portion of the merger consideration
payable in United stock to be increased or decreased by the lesser of (i) the
difference between the percentage change in the United stock price and the
percentage change in the peer group stock price, or (ii) the difference between
the percentage change in the United stock price and a 10% change.
For
example, assume that United’s average closing price decreased 15% from $32.33 to
$27.48 and that the concurrent average price per share of the peer group
decreased 12%. In that case, the aggregate merger consideration would have
decreased from the $210,493,434 value on February 5, 2007 to $178,731,625.
Gwinnett would then have the right to terminate the merger agreement because
the
percentage decrease in the United stock price is greater than 10% and the
percentage change in the United stock price is greater than the percentage
change in the average price per share of the peer group. United can prevent
the
merger agreement from terminating by electing to increase the merger
consideration by an amount equal to 3% of the value of the stock consideration.
In this example, 3% is the difference between the percentage change in the
United stock price and the percentage change in the peer group stock price,
which is less than the difference between the percentage change in the United
stock price and 10%. This increase would cause the total merger consideration
to
increase to $184,252,375. If United elected not to make the adjustment, Gwinnett
could, but would not be required to, terminate the merger agreement and the
merger would not be completed.
-18-
Alternatively,
assume that United’s average closing price increased 15% from $32.33 to $37.18
and that the concurrent change in the average price per share of the peer group
increased 12%. In that case, the aggregate merger consideration would have
increased from the $210,493,434 value on February 5, 2007 to $233,944,805.
United would then have the right to adjust the merger consideration because
the
percentage increase in the United stock price is greater than 10% and the
percentage change in the United stock price is greater than the percentage
change in the average price per share of the peer group. United could elect
to
decrease the merger consideration by an amount equal to 3% of the value of
the
stock consideration. In this example, 3% is the difference between the
percentage change in the stock price and the percentage change in the peer
group
stock price, which is less than the difference between the percentage change
in
the United stock price and 10%. This decrease would cause the total merger
consideration to decrease to $228,424,055. Gwinnett would then have the right
to
terminate the merger agreement because of the adjustment and the merger would
not be completed. If United elected not to make the adjustment, the merger
agreement would not terminate.
This
summary highlights selected information regarding the merger consideration
adjustment and termination provisions in the merger agreement. For a more
complete description of these terms, you should carefully read the Agreement
and
Plan of Reorganization included in Appendix A to these materials. In addition,
we
urge you
to obtain current information on the market value of United shares. See
“Summary —
Markets for Common Stock” on page 7.
The
material features of the merger agreement are summarized below:
Effective
Date
The
merger agreement provides that the merger will be effective upon the approval
of
the Agreement and Plan of Reorganization by the shareholders of Gwinnett and
the
filing of the Certificate of Merger reflecting the merger with the Secretary
of
State of the State of Georgia.
The
merger and the bank merger have been approved by the Board of Governors of
the
Federal Reserve System, the Federal Deposit Insurance Corporation and the
Department of Banking and Finance of the State of Georgia. Management of United
and Gwinnett anticipate that the merger will become effective during the second
quarter of 2007.
Terms
of the Merger
If
Gwinnett shareholders approve the merger and subject to required regulatory
approvals, Gwinnett will be merged with and into United. In connection with
the
merger, Gwinnett shareholders will receive United common stock or cash or a
combination of both in exchange for their Gwinnett common stock, subject to
adjustment and proration as previously described. United shareholders will
continue to hold their existing United common stock.
-19-
If,
prior
to the merger closing, the outstanding shares of United common stock or Gwinnett
common stock are increased through a stock dividend, stock split, subdivision,
recapitalization, or reclassification of shares, or are combined into a lesser
number of shares by reclassification, reverse stock split, recapitalization,
reduction of capital or other transaction, the number of shares of United common
stock and/or cash to be delivered pursuant to the merger in exchange for a
share
of Gwinnett common stock will be proportionately adjusted.
If
the
merger is completed, Gwinnett will be merged with and into United. Following
the
merger, the articles of incorporation, bylaws, corporate identity, and existence
of United will not be changed, and Gwinnett will cease to exist as a separate
entity. Following the merger, Gwinnett’s subsidiary, First Bank of the South,
will be merged with and into United Community Bank, Blairsville, Georgia, a
wholly-owned Georgia bank subsidiary of United, and United Community Bank will
be the surviving bank.
Registration
of United Common Stock
As
a
condition to the merger, United agreed to register with the Securities and
Exchange Commission the shares of United common stock to be exchanged for shares
of Gwinnett common stock and to maintain the effectiveness of such registration
through the issuance of such shares in connection with the closing of the
merger. However, such registration will not cover resales of United common
stock
by any former holders of Gwinnett common stock, and United is under no
obligation to maintain the effectiveness of such registration, or to prepare
and
file any post-effective amendments to such registration, after the issuance
of
such shares in connection with the closing of the merger.
Gwinnett
Option and SAR Holders
Each
Gwinnett option holder has agreed not to exercise his or her options prior
to
the closing of the merger. In exchange, United has agreed to pay the holder
of
each option $72.8865 in cash less the exercise price of each option. United
has
also agreed to pay the holder of each Gwinnett stock appreciation right, which
we refer to as a SAR, $72.8865 in cash less the exercise price of each SAR.
Termination
and Conditions of Closing
The
merger agreement may be terminated at any time either before or after approval
of the merger agreement by the shareholders of Gwinnett, but not later than
the
effective date of the merger:
|
(1)
|
by
either party, if a material adverse change in the financial condition
or
business of the other party has occurred, or if material loss or
damage to
the other party’s properties or assets has occurred, which change, loss or
damage materially affects or impairs such party’s ability to conduct its
business;
|
|
(2)
|
by
either party, if the other party has not substantially complied with,
or
substantially performed, the terms, covenants or conditions of the
merger
agreement, and such non-compliance has not otherwise been
waived;
|
|
(3)
|
by
either party, in the event of a material breach by the other party
of any
covenant, agreement or obligation contained in the merger agreement
which
breach has not been cured within 20 days after the giving of written
notice of the breach or, if such breach is not capable of being cured
within 20 days, the breaching party has not begun to cure such breach
within 20 days after such written
notice;
|
|
(4)
|
by
either party, if the terminating party learns of any facts or conditions
not disclosed by the other party in the merger agreement, or by United
if
it learns of any facts or conditions not disclosed by Gwinnett in
its
financial statements or disclosure memorandum, or by Gwinnett if
it learns
of any facts or conditions not disclosed by United in its SEC reports,
which facts or conditions were required to be disclosed, and which
materially and adversely affects such business, properties, assets,
or
earnings or the ownership, value or continuance
thereof;
|
-20-
|
(5)
|
by
either party, if any action, suit or proceeding is instituted or
threatened against either party seeking to restrain, prohibit or
obtain
substantial damages in respect of the merger agreement or the consummation
of the transactions, which, in the good faith opinion of the terminating
party makes consummation of the transactions
inadvisable;
|
|
(6)
|
by
either party, if the merger has not occurred on or before July 31,
2007;
|
|
(7)
|
by
United, if the holders of more than 5% of the outstanding shares
of
Gwinnett common stock elect to exercise statutory dissenters’ rights;
|
|
(8)
|
by
either party, if the Gwinnett shareholders do not approve the merger
agreement; or
|
|
(9)
|
by
Gwinnett, as described in “—
Merger Consideration Adjustment and Termination Rights” on page
18;
|
Gwinnett
must pay to United a termination fee of $7.5 million, if, while a competing
offer for the acquisition of Gwinnett by a party other than United is
outstanding or after such an offer has been accepted by Gwinnett:
| · |
either
party terminates the agreement because the Gwinnett shareholders
did not
approve the merger;
|
| · |
Gwinnett
terminates the agreement other than pursuant to either (1)-(4) listed
above; or
|
| · |
United
terminates the agreement pursuant to either (2)-(5) listed
above.
|
The
following summarizes the required conditions of closing:
| · |
the
accuracy of the representations and warranties of all parties contained
in
the merger agreement and related documents as of the date when made
and
the effective date;
|
| · |
the
performance of all agreements and the satisfaction of all conditions
required by the merger agreement;
|
|
·
|
the
delivery of officers’ certificates, secretary’s certificates, and legal
opinions to Gwinnett and United by the
other;
|
|
·
|
the
execution of an agreement by each director and executive officer
of
Gwinnett, pursuant to which each of them agrees: (i) to recommend,
subject
to any applicable fiduciary duty, to Gwinnett shareholders approval
of the
merger; (ii) to vote the capital stock of Gwinnett owned or controlled
by
them in favor of the merger; (iii) to transfer or assign shares of
United
common stock, received by them in connection with the merger only
in
compliance with the 1933 Securities Exchange Act, applicable state
securities laws and the rules and regulations promulgated under either;
and (iv) with respect to directors only, to not compete with United
for a
period of two years after the closing date of the
merger.
|
| · |
approval
of the merger by at least a majority of the shares held by Gwinnett
shareholders;
|
| · |
approvals
of governmental authorities, and the expiration of any regulatory
waiting
periods;
|
-21-
|
·
|
effectiveness
of the registration statement of United relating to the shares of
United
common stock to be issued to Gwinnett shareholders in the merger,
of which
this document forms a part;
|
| · |
the
receipt by United of a letter from Mauldin & Jenkins Certified Public
Accounts, LLC with respect to Gwinnett’s unaudited financial statements
from December 31, 2006 through the date of the most recent monthly
financial statements available in the ordinary course of business;
and
|
| · |
the
issuance of certificate of merger by the Secretary of State of the
State
of Georgia.
|
Surrender
of Certificates and Election of Consideration
After
the
effective date of the merger, each holder of Gwinnett common stock (as of
that
date) will be required to deliver the certificates representing such holder’s
shares of Gwinnett common stock to United’s exchange agent, Illinois Stock
Transfer, in order to receive payment of the consideration from United in
connection with the merger. Each holder of Gwinnett common stock must complete
and return the enclosed election form by or at the special shareholders
meeting to be held on June 1, 2007 indicating his, her or its preference
as to
the proportion of United common stock and/or cash he, she or it wishes to
receive upon delivery of his, her or its shares of Gwinnett common stock.
Although
each Gwinnett shareholder may elect to receive all cash or all stock, an
aggregate of no more than 306,137 shares of Gwinnett common stock may be
exchanged for cash and an aggregate of no more than 2,524,764 shares of Gwinnett
common stock may be exchanged for United common stock. Accordingly,
if the aggregate cash elections are greater than the maximum, each cash election
will be reduced pro rata based on the amount that the aggregate cash elections
exceed the maximum. Alternatively, if the aggregate stock elections are greater
than the maximum, each stock election will be reduced pro rata based on the
amount that the aggregate stock elections exceed the maximum.
If a
holder does not make an election by or at the special shareholders meeting
to be held on June 1, 2007, the holder will be treated as though it elected
to
receive cash unless cash has been fully subscribed by the electing Gwinnett
shareholders, in which event such holder will be treated as if he, she or
it
elected stock.
After
delivering shares of Gwinnett common stock, the holder will receive either
2.2545 shares of United common stock, or a cash payment of $72.8865, without
interest per share of Gwinnett common stock that such holder owned on the
effective date of the merger. In lieu of a fractional share, a cash payment,
without interest, will be paid for any fractional interest in United common
stock.
Until
a
holder delivers Gwinnett common stock to United, the holder may not receive
payment of any dividends or other distributions on shares of United common
stock
into which his, her, or its shares of Gwinnett common stock have been converted,
if any, and may not receive any notices sent by United to its shareholders
with
respect to those shares.
The
holders of a majority of the outstanding shares of Gwinnett common stock
entitled to vote at the special meeting must approve the merger agreement for
the merger to be completed. Abstentions from voting and broker non-votes will
be
included in determining whether a quorum is present and will have the effect
of
a vote against the merger agreement.
As
of May 1, 2007, the record date for determining the shareholders entitled
to notice of and to vote at the special meeting, the outstanding voting
securities of Gwinnett consisted of 2,830,901 shares of Gwinnett common stock,
with each registered holder of Gwinnett common stock being entitled to one
vote
per share. All of the directors, executive officers and 5% shareholders of
Gwinnett have agreed to vote their shares in favor of the merger. Gwinnett’s
directors, executive officers and 5% shareholders own 1,228,697 shares,
or 43.40%, of Gwinnett common stock (excluding options).
-22-
Under
the
terms of the merger agreement, after the closing of the merger United plans
to
increase the size of its Board from 11 members to 12 and appoint John D.
Stephens, the current chairman of the board of directors of Gwinnett, to the
board of directors of United. Mr. Stephens, age 66, has served as the chairman
of the board of directors of Gwinnet and its bank subsidiary, First Bank of
the
South, since May 2000. Mr. Stephens is also the president and chief executive
officer of Stephens Rock & Dirt, a position he has held since
2001.
As
a
director of United, Mr. Stephens will receive an annual retainer of $20,000
and
a separate meeting fee of $3,000 for each board meeting he attends in 2007.
The
annual retainer and meeting fees are payable in cash or may be deferred pursuant
to United’s Deferred Compensation Plan. In addition to the retainer and meeting
fees, United reimburses non-employee directors for their travel expenses
incurred in attending meetings of the board of directors or its committees,
as
well as for fees and expenses incurred in attending director education seminars
and conferences. Directors do not receive any stock option or other equity
awards nor any other personal benefits.
All
expenses incurred by United in connection with the merger, including all fees
and expenses of its agents, representatives, counsel and accountants and the
fees and expenses related to filing these materials and all regulatory
applications with state and federal authorities will be paid by United. All
expenses incurred by Gwinnett in connection with the merger agreement, including
all fees and expenses of its agents, representatives, counsel and accountants
will be paid by Gwinnett. The cost of reproducing and mailing these materials
will be shared by the parties, with each party paying 50%.
The
merger agreement provides that, pending consummation of the merger, Gwinnett
will, except with the written consent of United:
| · |
conduct
its business in the ordinary course, without the creation of any
indebtedness for borrowed money other than deposits and ordinary
and
customary accounts and credit
arrangements;
|
| · |
maintain
its properties and assets in good operating condition, ordinary wear
and
tear excepted;
|
| · |
maintain
and keep in full force and effect all required
insurance;
|
| · |
preserve
its capital structure and make no change in its authorized or issued
capital stock or other securities, and grant no right or option to
purchase or otherwise acquire any of its capital stock or
securities;
|
| · |
not
pay cash dividends other than cash dividends payable prior to the
effective date of closing not to exceed, in the aggregate, $3.80
per share
of Gwinnett common stock to record holders as of February 5,
2007;
|
-23-
|
·
|
not
redeem, purchase or otherwise acquire, directly or indirectly, any
of its
capital stock;
|
| · |
make
no amendment to its articles of incorporation or bylaws, and preserve
its
corporate existence and powers;
|
| · |
acquire
no business, corporation, partnership, association or other entity
or
division thereof, and no assets which are material, in the aggregate,
to
it;
|
| · |
not
sell, mortgage, lease, buy or otherwise acquire, transfer or dispose
of
any real property or interest therein, or any tangible or intangible
asset
(other than in the ordinary course of
business);
|
| · |
make
no change in its banking and safe deposit
arrangements;
|
| · |
not
enter into, renew or cancel any material
contracts;
|
| · |
maintain
all books and records in the usual, regular and ordinary
course;
|
| · |
file
all reports required to be filed with any regulatory or governmental
agencies, and deliver copies of such reports to United promptly after
they
are filed; and
|
| · |
adopt
no new severance plan and grant no severance or termination payments
to
any officer, director or employee, other than in accordance with
existing
agreements or the agreements that are conditions to the closing of
the
merger.
|
In
addition, the merger agreement provides that Gwinnett will promptly advise
United, orally and in writing, of any change or event having, or which the
Gwinnett management believes could have, a material adverse effect on the
assets, liabilities, business, operations or financial condition of
Gwinnett.
Except
as
set forth below, no director or officer of Gwinnett, or any of their associates,
has any direct or indirect material interest in the merger other than owning
shares of Gwinnett common stock which will be converted in the merger into
United common stock and cash. United and Gwinnett do not anticipate that the
merger will result in any material change in compensation to employees of
Gwinnett other than as set forth below.
Glenn
S.
White, President and Chief Executive Officer of Gwinnett will terminate his
employment agreement with Gwinnett and has entered into a settlement agreement
with United for a payment of three times the sum of his current base salary,
average annual bonus of the three most recent years and annual automobile
allowance, or $939,550, as required by his existing employment agreement upon
his termination following change in control of Gwinnett and reduced to prevent
such payment from being an amount that would be considered an “excess parachute
payment” under the Internal Revenue Code.
Mr.
White
has entered into a new employment agreement with United for a rolling three-year
term that provides for a payment of an amount equal to three times the sum
of
his base salary then in effect, an amount equal to his average annual bonus
of
the three most recent years and his monthly automobile allowance multiplied
by
twelve, subject to any reduction necessary to prevent such payment from being
considered an “excess parachute payment”, if, within six months following a
change of control of United, either Mr. White terminates his employment or
United terminates Mr. White other than for cause. The agreement also provides
that, if Mr. White is terminated at any time by United without cause, Mr. White
will receive (i) his base salary for a period of thirty-six months, and (ii)
an
amount equal to two times the average annual bonus paid to Mr. White for the
three most recent fiscal years. Additionally, if Mr. White terminates his
employment from United with cause he will be entitled to receive his base salary
for a period of the lesser of thirty-six months following the effective date
of
the termination or the remaining term of the agreement. United will also grant
Mr. White 10,000 shares of restricted stock, which will vest on the fifth
anniversary of the closing of the merger, and options to purchase 25,000 shares.
The options vest as follows: 50% on the third anniversary, 25% on the fourth
anniversary and 25% on the fifth anniversary of the closing of the
merger.
-24-
Steven
W.
Williams, President of First Bank of the South and Executive Vice-President
of
Gwinnett will terminate his employment agreement with Gwinnett and has entered
into a settlement agreement with United for a payment of two times the sum
of
his current base salary, average annual bonus of the three most recent years
and
annual automobile allowance, or $443,467, as required by his existing employment
agreement upon his termination following change in control of
Gwinnett.
Mr.
Williams has entered into a new employment agreement with United for a rolling
two-year term that provides for a payment of an amount equal to two times the
sum of his base salary then in effect, an amount equal to his average annual
bonus of the three most recent years and his monthly automobile allowance
multiplied by twelve, subject to any reduction necessary to prevent such payment
from being considered an “excess parachute payment”, if, within six months
following a change of control of United, either Mr. Williams terminates his
employment or United terminates Mr. Williams other than for cause. The agreement
also provides that, if Mr. Williams is terminated at any time by United without
cause, Mr. Williams will continue to receive his base salary for a period of
twenty-four months. Additionally, if Mr. Williams terminates his employment
from
United with cause he will be entitled to receive his base salary for a period
of
the lesser of twenty-four months following the effective date of the termination
or the remaining term of the agreement. United will also grant Mr. Williams
7,000 shares of restricted stock, which will vest on the fifth anniversary
of
the closing of the merger, and options to purchase 17,500 shares. The options
vest as follows: 50% on the third anniversary, 25% on the fourth anniversary
and
25% on the fifth anniversary of the closing of the merger.
Andrew
R.
Pourchier, Executive Vice President, Chief Financial Officer and Secretary
of
Gwinnett, has entered into a one year consulting agreement with United and
will
terminate his employment agreement with Gwinnett for a payment of two times
the
sum of his current base salary, average annual bonus of the three most recent
years and annual automobile allowance, or $442,467, as required by his existing
employment agreement upon his termination following a change in control of
Gwinnett.
At
the
closing of the merger, four other Gwinnett officers will terminate their
respective employment agreement with Gwinnett and have entered into a settlement
agreement with United for aggregate payments of $972,667, as required by their
existing employment agreements upon their respective termination following
a
change in control of Gwinnett. Each of these officers have entered into an
employment agreement with United that provides for a payment upon their
respective termination following a change in control.
In
exchange for a payment by United, twelve Gwinnett lending officers have entered
into non-competition agreements with United that will prohibit the officers
from
competing with United after the closing of the merger if their employment is
terminated in exchange for aggregate payments of $700,000.
United
will generally indemnify and provide liability insurance to the present
directors and officers of Gwinnett Commercial and First Bank of the South for
a
period of three years following the closing of the merger for actions taken
by
such directors and officers in such capacity.
-25-
United
has agreed to provide to officers and employees of Gwinnett who continue
employment with United or its subsidiaries employee benefits under employee
benefit plans, on terms and conditions substantially similar to those currently
provided to similarly situated United officers and employees.
United
has agreed to appoint John D. Stephens, chairman of the board of directors
of
Gwinnett, to the board of directors of United following the closing of the
merger.
Following
the merger you will no longer be a Gwinnett shareholder and, if you receive
shares of United following the merger, your rights as a shareholder will no
longer be governed by Gwinnett’s articles of incorporation and bylaws. You will
be a United shareholder and your rights as a United shareholder will be governed
by United’s articles of incorporation and bylaws. Your former rights as a
Gwinnett shareholder and your new rights as a United shareholder are different
in certain ways, including the following:
Composition
of Board of Directors
Gwinnett’s
board of directors consists of 15 members, while United’s consists of 11
members.
Removal
of Directors
The
bylaws of Gwinnett provide that directors may be removed with or without cause,
upon the affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to vote in an election of Directors.
The
articles of incorporation of United provide that directors may be removed only
for cause and only upon the affirmative vote of the holders of two-thirds of
the
issued and outstanding shares entitled to vote on the removal.
Approval
of Business Transactions
Neither
the articles of incorporation nor bylaws of Gwinnett require any supermajority
approval of business transactions.
Neither
the articles of incorporation nor bylaws of United require any supermajority
approval of business transactions generally. The articles of incorporation
of
United provide that in order to engage in a merger, consolidation, sale or
transfer or disposition of all or substantially all of the assets of United,
sale of $1 million or more in securities, a plan of liquidation, or any other
transaction with any holder of 10% or more of the issued and outstanding shares
of United that would increase the percentage ownership of such shareholder,
such
transaction must be approved by either a resolution adopted by at least
three-fourths of the directors then in office, or the affirmative vote of the
holders of at least 75% of the outstanding shares of common stock of United
and
the separate affirmative vote of at least 75% of the outstanding shares of
common stock, excluding those shares held by such shareholder.
Amendments
to Articles of Incorporation and Bylaws
Gwinnett’s
articles of incorporation provide that action by the shareholders with respect
to bylaws shall be taken by an affirmative vote of a majority of all shares
entitled to elect Directors, and action by the Board of Directors with respect
to bylaws shall be taken by an affirmative vote of a majority of all Directors
then holding office. The shareholder may provide by resolution that any bylaw
provision repealed, amended, adopted or altered by them may not be repealed,
amended, adopted or altered by the Board of Directors.
-26-
The
articles of incorporation of United provide that its articles of incorporation
may be amended to increase its authorized shares by a majority vote of the
outstanding shares. Otherwise, its articles of incorporation and bylaws may
be
amended only by the affirmative vote of holders of two-thirds of the shares
of
United capital stock then issued and outstanding and entitled to
vote.
Securities
Exchange Act Reporting
United
is
subject to filing requirements under the Securities Exchange Act. These filing
requirements are both periodic and transaction-based obligations whereby United
discloses certain information to the Securities and Exchange Commission, and
this information is subsequently made available to the public.
Gwinnett
is not subject to any of the filing requirements with the Securities and
Exchange Commission.
United
declared cash dividends of $.18 per share, in the aggregate, in the first
and second quarters of 2007, $.32 per share in 2006, $.28 per share in 2005
and
$.24 per share in 2004. United intends to continue paying cash dividends,
but
the amount and frequency of cash dividends, if any, will be determined by
United’s board of directors after consideration of certain non-financial and
financial factors including earnings, capital requirements, and the financial
condition of United, and will depend on cash dividends paid to it by its
subsidiary banks. The ability of United’s subsidiary banks to pay dividends to
it is restricted by certain regulatory requirements.
Pursuant
to the terms of the merger agreement, Gwinnett declared a cash dividend of
$3.80
per share (which includes a regular cash dividend of $1.55 per share) to record
holders as of February 5, 2007 payable on March 12, 2007. Gwinnett declared
cash
dividends of $1.45 per share in 2006, $1.35 per share in 2005 and $1.25 per
share in 2004.
The
merger will be accounted for as a purchase for financial reporting and
accounting purposes. After the merger, the results of operations of Gwinnett
will be included in the consolidated financial statements of United. The merger
consideration will be allocated based on the fair values of the assets acquired
and the liabilities assumed. Any excess of cost over fair value of the net
tangible and identified intangible assets of Gwinnett acquired will be recorded
as goodwill. Any identified intangible asset may be amortized by charges to
operations under generally accepted accounting principles.
Although
United, through these materials, will register the United common stock to be
issued in the merger under the Securities Act of 1933, the former directors,
executive officers, and 10% or greater shareholders of Gwinnett and certain
other affiliates of United (as defined in Rule 405 of the Securities Act) may
not resell the United common stock received by them unless those sales are
made
pursuant to an effective registration statement under the Securities Act, or
under Rules 144 and 145 of the Securities Act, or another exemption from
registration under the Securities Act. Rules 144 and 145 limit the amount of
United common stock or other equity securities of United that those persons
may
sell during any three-month period, and require that certain current public
information with respect to United be available and that the United common
stock
be sold in a broker’s transaction or directly to a market maker in United common
stock.
-27-
The
Board
of Governors of the Federal Reserve System has approved the merger. In
determining whether to grant that approval, the Federal Reserve considered
the
effect of the merger on the financial and managerial resources and future
prospects of the companies and banks concerned and the convenience and needs
of
the communities to be served.
The
Georgia Department of Banking and Finance has also approved the merger.
The
Department of Banking and Finance’s review of the application did not include an
evaluation of the proposed transaction from the financial perspective of the
individual shareholders of Gwinnett. Further, no shareholder should construe
an
approval of the application by the Department of Banking and Finance to be
a
recommendation that the shareholders vote to approve the proposal. Each
shareholder entitled to vote should evaluate the proposal to determine the
personal financial impact of the completion of the proposed transaction.
Shareholders not fully knowledgeable in such matters are advised to obtain
the
assistance of competent professionals in evaluating all aspects of the proposal
including any determination that the completion of the proposed transaction
is
in the best financial interest of the shareholder.
Georgia
law confers rights upon shareholders of corporations organized under Georgia
law, such as Gwinnett, in certain circumstances, to demand payment for the
fair
value of all or a portion of their shares, and it establishes procedures for
the
exercise of those rights. These shareholder rights are referred to within this
document as “dissenters’ rights”.
In
general, if the merger is completed, under Article 13 of the Georgia Business
Corporation Code, a Gwinnett shareholder who dissents from the merger, and
who
otherwise complies with the provisions of Article 13, is entitled to demand
and
receive payment in cash of an amount equal to the fair value of all, but not
less than all, of such shareholder’s shares of Gwinnett common
stock.
For
the
purpose of determining the amount to be received in connection with the exercise
of statutory dissenters’ rights under the Georgia Business Corporation Code,
Georgia law provides that the fair value of a dissenting Gwinnett shareholder’s
common stock equals the value of the shares immediately before the effective
date of the merger, excluding any appreciation or depreciation in anticipation
of the merger.
A
dissenting shareholder of Gwinnett must exercise dissenters’ rights with respect
to all of the shares owned of record by such shareholder, other than those
shares registered in the dissenting shareholder’s name but beneficially owned by
another person. Shares registered in the name of a dissenting shareholder but
beneficially owned by another person, may be excluded from a dissenting
shareholder’s dissent only if the dissenting shareholder notifies Gwinnett in
writing of the name and address of each person on whose behalf dissenters’
rights are being asserted and the number of shares owned beneficially by such
person.
-28-
A
Gwinnett shareholder who choosing to dissent from the merger and to receive
payment in cash of the fair value of shares of Gwinnett common stock owned
by
such shareholder in accordance with the requirements of the Georgia Business
Corporation Code must:
| · |
deliver
to Gwinnett, prior to the time the shareholder vote on the merger
agreement is taken, a written notice of such shareholder’s intent to
demand payment for those shares registered in the dissenting shareholder’s
name if the merger is completed;
and
|
| · |
not
vote those shares in favor of the merger
agreement.
|
Any
filing of a written notice of intent to dissent with respect to the merger
should be sent to: Andrew R. Pourchier, Executive Vice President, Chief
Financial Officer and Secretary, Gwinnett Commercial Group, Inc., 2230 Riverside
Parkway, Lawrenceville, Georgia 30043. A
vote against the merger agreement alone will not satisfy the requirements for
compliance with Article 13 of the Georgia Business Corporation Code. A
shareholder who wishes to dissent from the merger must, as an initial matter,
separately comply with all
of applicable conditions listed above.
Within
ten days after the vote of Gwinnett shareholders is taken at the special
meeting, Gwinnett will provide to each shareholder who timely submitted a
written notice of intent to dissent, and who did not vote in favor of the merger
at the special meeting, a dissenters’ notice that:
| · |
states
where the dissenting shareholder must send a payment demand, and
where and
when the certificates for the dissenting shareholder’s shares, if any, are
to be deposited;
|
| · |
sets
a date by which Gwinnett must receive the dissenting shareholder’s payment
demand; and
|
| · |
is
accompanied by a copy of Article 13 of the Georgia Business Corporation
Code.
|
Following
receipt of the dissenters’ notice from Gwinnett, each dissenting Gwinnett
shareholder must deposit Gwinnett share certificates representing the shares
subject to the dissent with Gwinnett, or its successor and demand payment from
Gwinnett in accordance with the terms of the dissenters’ notice. A
dissenting shareholder who does not deposit those share certificate(s) and
demand payment from Gwinnett by the date set forth in the dissenters’ notice
will forfeit any right to payment under Article 13 of the Georgia Business
Corporation Code.
Within
ten days after the later of the date that the vote of Gwinnett shareholders
is
taken at the special meeting, or the date on which Gwinnett receives a payment
demand, Gwinnett will send a written offer to each shareholder who complied
with
the provisions set forth in the dissenters’ notice to pay each such shareholder
an amount that Gwinnett estimates to be the fair value of those shares, plus
accrued interest. The offer of payment will be accompanied by:
| · |
Gwinnett’s
balance sheet as of the end of a fiscal year ending not more than
16
months before the date of making an offer, an income statement for
that
year, a statement of changes in shareholders’ equity for that year, and
the latest available interim financial statements, if
any;
|
| · |
an
explanation of how any interest was
calculated;
|
| · |
a
statement of the dissenting shareholder’s right to demand payment of a
different amount under Section 14-2-1327 of the Georgia Business
Corporation Code; and
|
| · |
a
copy of Article 13 of the Georgia Business Corporation
Code.
|
A
dissenting shareholder choosing to accept Gwinnett’s offer of payment must do so
by written notice to Gwinnett within 30 days after receipt of Gwinnett’s offer
of payment. A dissenting shareholder not responding to that offer within the
30-day period will be deemed to have accepted the offer of payment. Gwinnett
must make payment to each shareholder who responds to the offer of payment
within 60 days after the making of the offer of payment, or the effective date
of the merger, whichever is later. Upon payment, the dissenting shareholder
will
cease to have any interest in such shares of Gwinnett common stock.
-29-
If
a
dissenting shareholder does not accept, within 30 days after Gwinnett’s offer,
the estimate of fair value in payment for such shares and interest due thereon
and demands payment of some other estimate of the fair value of the shares
and
interest due thereon, then Gwinnett, within 60 days after receiving the payment
demand of a different amount from a dissenting shareholder, must file an action
in the Superior Court in Gwinnett County, Georgia, requesting that the fair
value of those shares be determined. Gwinnett must make all dissenting
shareholders whose demands remain unsettled parties to the proceeding. If
Gwinnett does not commence the proceeding within that 60-day period, it will
be
required to pay each dissenting shareholder whose demand remains unsettled
the
amount demanded by the dissenting shareholder.
Gwinnett
urges its shareholders to read all of the dissenter’s rights provisions of the
Georgia Business Corporation Code, which are reproduced in full in Appendix
B to
these materials and which are incorporated herein by reference.
Consideration
Received for Gwinnett Common Stock
Gwinnett
has received an opinion from Kilpatrick Stockton, LLP to the effect that,
assuming the merger is completed in accordance with the terms of the merger
agreement:
| · |
the
merger and the issuance of shares of United common stock in connection
with the merger, as described in the merger agreement, will constitute
a
tax-free reorganization under Section 368(a)(1)(A) of the Internal
Revenue
Code of 1986, as amended;
|
| · |
no
gain or loss will be recognized by Gwinnett as a result of the
merger;
|
| · |
no
gain or loss will be recognized by holders of Gwinnett common stock
upon
the exchange of Gwinnett common stock solely for United common stock
as a
result of the merger;
|
| · |
if
pursuant
to the merger a Gwinnett shareholder exchanges all of his or her
shares of
Gwinnett common stock for a combination of United stock and cash,
the
Gwinnett shareholder will generally recognize gain (but not loss)
in an
amount equal to the lesser of (i) the amount of gain realized
(i.e.,
the excess of the sum of the amount of cash, but not cash received
in lieu
of a fractional share, and the fair market value of the United common
stock received pursuant to the merger over such shareholder’s adjusted tax
basis in its shares of Gwinnett common stock surrendered), and
(ii) the amount of cash (but not cash in lieu of a fractional share)
received pursuant to the merger. Any recognized gain will generally
be
long-term capital gain if the Gwinnett shareholder’s holding period with
respect to the Gwinnett common stock surrendered is more than one
year.
If, however, the cash received has the effect of the distribution
of a
dividend, the gain would be treated as a dividend to the extent of
the
holder’s ratable share of Gwinnett’s
accumulated earnings and profits as calculated for federal income
tax
purposes;
|
|
·
|
gain
or loss will be recognized pursuant to Section 302 of the Internal
Revenue
Code of 1986, as amended, by Gwinnett common stockholders upon their
receipt of solely cash for their shares of Gwinnett common stock,
including cash received (i) as a result of a cash election; (ii)
in lieu
of fractional shares of United common stock, and (iii) upon their
exercise
of dissenters’ rights;
|
-30-
| · |
the
aggregate tax basis of United common stock received by shareholders
of
Gwinnett pursuant to the merger will be the same as the tax basis
of the
shares of Gwinnett common stock exchanged therefore, (i) decreased
by any
portion of such tax basis allocated to fractional shares of United
common
stock that are treated as redeemed by United, (ii) decrease by the
amount
of cash received by a shareholder in the merger (other than cash
received
with respect to fractional shares), and (iii) increased by the amount
of
gain recognized by a shareholder in the merger (other than gain recognized
with respect to fractional shares);
|
| · |
the
holding period of the shares of United common stock received by the
shareholders of Gwinnett will include the holding period of the shares
of
Gwinnett common stock exchanged, provided that the common stock of
Gwinnett is held as a capital asset on the date of the consummation
of the
merger; and
|
|
·
|
as
a result of the subsidiary merger of First Bank of the South into
United
Community Bank, no gain or loss shall be recognized to any of First
Bank
of the South, United Community Bank, Gwinnett, United or holders
of
Gwinnett common stock.
|
Consideration
Received for Gwinnett Options and SARs
Holders
of Gwinnett options and/or SARs issued to the holder in connection with their
employment by Gwinnett will recognize ordinary income upon their receipt of
cash
in exchange for or cancellation of each option or SAR, and may be subject to
payroll tax withholding on such payment. Holders of Gwinnett options or warrants
received other than in connection with their employment by Gwinnett will
recognize ordinary income or capital gain (or loss) upon the receipt of cash
in
exchange for or cancellation of such option or warrant depending on a variety
of
individual circumstances, including how long such options or warrants were
held
and the circumstances under which they were granted. No opinion has been
provided by Kilpatrick Stockton regarding the character of such income or gain
resulting from the receipt of cash with respect to such options or warrants,
and
such holders are advised to consult with their own tax advisors as to any tax
consequences of the exchange of their options or warrants.
No
ruling
will be requested from the Internal Revenue Service with respect to any Federal
income tax consequences of the merger.
The
preceding discussion relates to the material federal income tax consequences
of
the merger to Gwinnett shareholders generally. You are advised to consult your
own tax advisors as to any state, local, or other tax consequences of the
merger.
-31-
Gwinnett
retained Burke Capital Group, L.L.C. to act as its financial advisor in
connection with a possible business combination, and Burke acted as financial
advisor to Gwinnett in connection with its proposed merger with United and
participated in certain of the negotiations leading to the merger agreement.
In
connection with Burke’s engagement, Gwinnett asked Burke to evaluate the
fairness of the merger consideration to Gwinnett’s stockholders from a financial
point of view. At the February 5, 2007 meeting of the Gwinnett board to evaluate
the merger, Burke delivered to the board its oral and written opinion that,
based upon and subject to various matters set forth in its opinion, the merger
consideration was fair to Gwinnett’s stockholders from a financial point of
view. At this meeting, Gwinnett’s board voted to approve the merger and
subsequently executed the merger agreement. Burke has consented to the inclusion
of its opinion in these materials.
THE
FULL TEXT OF BURKE’S WRITTEN OPINION IS ATTACHED AS APPENDIX C TO THESE
MATERIALS.
THE OPINION OUTLINES MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS
ON
THE REVIEW UNDERTAKEN BY BURKE IN RENDERING ITS OPINION. THE DESCRIPTION OF
THE
OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
OPINION. WE URGE YOU TO READ THE ENTIRE OPINION CAREFULLY IN CONNECTION WITH
YOUR CONSIDERATION OF THE PROPOSED MERGER.
BURKE’S
OPINION SPEAKS ONLY AS OF THE DATE OF THE OPINION. THE OPINION WAS DIRECTED
TO
THE GWINNETT BOARD AND IS DIRECTED ONLY TO THE FAIRNESS OF THE MERGER
CONSIDERATION TO GWINNETT SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW. IT DOES
NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF GWINNETT TO ENGAGE IN THE MERGER
OR ANY OTHER ASPECT OF THE MERGER AND IS NOT A RECOMMENDATION TO ANY GWINNETT
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SHAREHOLDER MEETING
WITH RESPECT TO THE MERGER, OR ANY OTHER MATTER.
In
connection with rendering its February 5, 2007 opinion, Burke reviewed and
considered, among other things:
|
·
|
The
merger agreement and certain of the schedules in the related disclosure
memorandum;
|
|
·
|
Certain
publicly available financial statements and other historical financial
information of Gwinnett and United that it deemed relevant;
|
|
·
|
Projected
earnings estimates for Gwinnett for the years ending December 31,
2007
through 2011 that are not publicly available, prepared by and reviewed
with senior management of Gwinnett and the views of senior management
regarding Gwinnett’s business, financial condition, results of operations
and future prospects;
|
|
·
|
Internal
financial and operating information with respect to the business,
operations and prospects of Gwinnett furnished to Burke by Gwinnett
that
is not publicly available;
|
|
·
|
The
reported prices and trading activity of United common stock and compared
those prices and activity with other publicly-traded companies that
Burke
deemed relevant;
|
|
·
|
The
pro forma financial impact of the merger on United’s ability to complete a
transaction from a regulatory standpoint with an emphasis on the
pro forma
capital ratios, based on assumptions determined by senior management
of
Gwinnett and Burke;
|
-32-
|
·
|
The
financial terms of other recent business combinations in the commercial
banking industry, to the extent publicly
available;
|
|
·
|
The
current market environment generally and the banking environment
in
particular; and
|
|
·
|
Such
other information, financial studies, analyses and investigations
and
financial, economic and market criteria as it considered relevant.
|
Gwinnett’s
Board of Directors did not limit the investigations made or the procedures
followed by Burke in giving its opinion.
In
performing its reviews and analyses and in rendering its opinion, Burke assumed
and relied upon the accuracy and completeness of all the financial information,
analyses and other information that was publicly available or otherwise
furnished to, reviewed by or discussed with it and further relied on the
assurances of management of Gwinnett and United that they were not aware of
any
facts or circumstances that would make such information inaccurate or
misleading. Burke was not asked to and did not independently verify the accuracy
or completeness of such information and it did not assume responsibility or
liability for the accuracy or completeness of any of such information. Burke
did
not make an independent evaluation or appraisal of the assets, the collateral
securing assets or the liabilities, contingent or otherwise, of Gwinnett or
United or any of their respective subsidiaries, or the ability to collect any
such assets, nor was it furnished with any such evaluations or appraisals.
Burke
is not an expert in the evaluation of allowances for loan losses and it did
not
make an independent evaluation of the adequacy of the allowance for loan losses
of Gwinnett or United, nor did it review any individual credit files relating
to
Gwinnett or United. With Gwinnett’s consent, Burke assumed that the respective
allowances for loan losses for both Gwinnett and United were adequate to cover
such losses and will be adequate on a pro forma basis for the combined entity.
In addition, Burke did not conduct any physical inspection of the properties
or
facilities of Gwinnett or United. Burke is not an accounting firm and it relied
on the reports of the independent accountants of Gwinnett and the directors
of
United for the accuracy and completeness of the financial statements furnished
to it.
Burke’s
opinion was necessarily based upon market, economic and other conditions as
they
existed on, and could be evaluated as of, the date of its opinion. Burke
assumed, in all respects material to its analysis, that all of the
representations and warranties contained in the merger agreement and all related
agreements are true and correct, that each party to such agreements will perform
all of the covenants required to be performed by such party under such
agreements and that the conditions precedent in the merger agreement are not
waived. Burke also assumed that there has been no material change in Gwinnett’s
and United’s assets, financial condition, results of operations, business or
prospects since the date of the last financial statements made available to
them, that Gwinnett and United will remain as going concerns for all periods
relevant to its analyses.
In
rendering its February 5, 2007 opinion, Burke performed a variety of financial
analyses. The following is a summary of the material analyses performed by
Burke, but is not a complete description of all the analyses underlying Burke’s
opinion. The summary includes information presented in tabular format. In order
to fully understand the financial analyses, these tables must be read together
with the accompanying text. The tables alone do not constitute a complete
description of the financial analyses. The preparation of a fairness opinion
is
a complex process involving subjective judgments as to the most appropriate
and
relevant methods of financial analysis and the application of those methods
to
the particular circumstances. The process, therefore, is not necessarily
susceptible to a partial analysis or summary description. Burke believes that
its analyses must be considered as a whole and that selecting portions of the
factors and analyses considered without considering all factors and analyses,
or
attempting to ascribe relative weights to some or all such factors and analyses,
could create an incomplete view of the evaluation process underlying its
opinion. Also, no company included in Burke’s comparative analyses described
below is identical to Gwinnett or United and no transaction is identical to
the
merger. Accordingly, an analysis of comparable companies or transactions
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors
that
could affect the public trading values or merger transaction values, as the
case
may be, of Gwinnett or United and the companies to which they are being
compared.
-33-
The
earnings projections used and relied upon by Burke in its analyses were based
upon internal projections of Gwinnett. Burke assumed for purposes of its
analyses that such performance would be achieved. Burke expressed no opinion
as
to such financial projections or the assumptions on which they were based.
The
financial projections furnished to Burke by Gwinnett were prepared for internal
purposes only and not with a view towards public disclosure. These projections,
as well as the other estimates used by Burke in its analyses, were based on
numerous variables and assumptions which are inherently uncertain and,
accordingly, actual results could vary materially from those set forth in such
projections.
In
performing its analyses, Burke also made numerous assumptions with respect to
industry performance, business and economic conditions and various other
matters, many of which cannot be predicted and are beyond the control of
Gwinnett, United and Burke. The analyses performed by Burke are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Burke prepared its analyses
solely for purposes of rendering its opinion and provided such analyses to
the
Gwinnett board at the February 5, 2007 meeting. Estimates on the values of
companies do not purport to be appraisals or necessarily reflect the prices
at
which companies or their securities may actually be sold. Such estimates are
inherently subject to uncertainty and actual values may be materially different.
Accordingly, Burke’s analyses do not necessarily reflect the value of Gwinnett’s
common stock or United’s common stock or the prices at which Gwinnett’s or
United’s common stock may be sold at any time.
Summary
of Proposed Merger
Burke
reviewed the financial terms of the proposed transaction whereby the holders
of
Gwinnett common stock shall be entitled to receive, in exchange for their shares
of Gwinnett stock, 2.2545 shares of United common stock, $72.8865 in cash or
a
combination thereof subject to the limitations as described in the merger
agreement. Holders of outstanding options and SARs shall receive cash, equal
to
$72.8865 minus the applicable exercise price per option or SAR. Based upon
the
terms of the merger agreement and United’s closing stock price of $32.96 on
February 2, 2007, Burke calculated merger consideration of $220,089,447 and
a
special cash dividend of $6,369,527 for an aggregate transaction valuation
of
$226,458,974 or $76.24 per fully diluted Gwinnett share on February 5, 2007,
the
date of the Gwinnett board meeting.
-34-
Utilizing
Gwinnett’s December 31, 2006 unaudited financial information, Burke calculated
the following ratios:
|
|
Deal
Value Considerations:
|
|
|
Deal
Multiples:
|
|
|
||
|
|
Aggregate
Price/Fully Diluted Share
|
$
|
76.24
|
|
Transaction
Value/ 2006 Net Income
|
19.05
|
x
|
|
|
|
Merger
Consideration for Common Shares
|
$
|
209,924,226
|
|
Transaction
Value / Book Value
|
2.86
|
x
|
|
|
|
Merger
Consideration for Outstanding Opinions / SARs
|
$
|
10,165,221
|
|
Transaction
Value / Tangible Book Value
|
3.35
|
x
|
|
|
|
Aggregate
Cash Dividend(1)
|
$
|
6,369,527
|
|
Transaction
Value / Leveraged Book Value(2)
|
4.42
|
x
|
|
|
|
Total
Transaction Value
|
$
|
226,458,974
|
|
Core
Deposit Premium
|
33.6
|
%
|
| * |
Deal
multiples based on December 31, 2006 unaudited financial
result.
|
| (1) |
Represents
a $2.25 special cash dividend to all record Gwinnett shareholders
as of
December 31, 2006.
|
| (2) |
Assumes
tangible equity to tangible assets of 7%. Excess equity valued
at 1.0x.
|
The
fully
diluted share count is based upon Gwinnett’s 2,830,901 outstanding common
shares, 208,321 outstanding options to purchase common shares at a weighted
average exercise price of $28.72 and 22,000 stock appreciation rights at a
weighted average exercise price of $29.06. This analysis assumes no options
are
exercised prior to closing. Any exercise of options prior to closing would
change the fully diluted share count and would slightly change the per share
consideration, but not the total transaction valuation.
Analysis
of Gwinnett
Selected
Peer Group Analysis.
Burke
used publicly available information to compare selected financial information
for Gwinnett and a group of selected financial institutions. The group consisted
of Gwinnett and 68 banks, which we refer to as the “Gwinnett Peer Group”. The
Gwinnett Peer Group consisted of selected Southeast banks with assets between
$500 million and $1.5 billion and having earned at least 1.00% on average assets
for the trailing twelve months.
The
analysis compared the median performance of the Gwinnett Peer Group, based
upon
the latest publicly available financial data, to Gwinnett’s December 31, 2006
unaudited financial results. The table below sets forth the comparative data.
|
Revenues
|
Earnings
|
Capital
Implications
|
Asset
Quality
|
Employee
Productivity
|
Asset
Growth
|
|||||||||||||||||||||||||||||
|
Net
Interest Margin
|
Noninterest
Income/Average Assets
|
Efficiency
|
ROAA
(1)
|
ROAE
(2)
|
Pre-Provision,
Pre-Tax Margin
|
Equity
/ Assets
|
Asset
Utilization
|
NPAs/Total
Assets(3)
|
Assets
/ Employee
|
1-yr
|
||||||||||||||||||||||||
|
Peer
Group Median
|
4.31
|
%
|
0.90
|
%
|
56.22
|
%
|
1.21
|
%
|
15.05
|
%
|
2.18
|
%
|
8.68
|
%
|
93.31
|
%
|
0.20
|
%
|
3,925
|
12.70
|
%
|
|||||||||||||
|
Gwinnett
|
4.90
|
%
|
0.13
|
%
|
35.58
|
%
|
1.87
|
%
|
17.63
|
%
|
3.25
|
%
|
11.74
|
%
|
93.50
|
%
|
0.00
|
%
|
9,120
|
43.34
|
%
|
|||||||||||||
| (1) |
Return
on average assets.
|
| (2) |
Return
on average equity.
|
| (3) |
Non-performing
assets to total assets.
|
-35-
Gwinnett’s
performance is above the Gwinnett Peer Group.
Analysis
of Selected Merger Transactions
Southeastern
Transactions.
In
order to address the specific valuation considerations within the Southeastern
market that Gwinnett serves, Burke selected a group of comparable Southeastern
merger and acquisition transactions and compared the pricing multiples to the
multiples implied by the merger consideration. Specifically, Burke selected
bank
merger and acquisition transactions according to the following criteria:
|
·
|
Merger
and acquisition transactions announced after January 1,
2003.
|
|
·
|
Seller
located within the Southeastern United States - AL, AR, FL, GA, LA,
MS,
NC, SC, TN & VA.
|
|
·
|
Seller
assets between $500 million and $1.5
billion.
|
|
·
|
Seller
with ROAA greater than 1.25% in the latest quarter prior to announcement.
|
Burke
selected 10 transactions fitting the criteria listed above as being comparable
to the proposed merger. The 10 comparable transactions selected included the
following:
|
Buyer
|
State
|
Seller
|
State
|
|||
|
Banco
Sabadell SA
|
Spain
|
Transatlantic
Holding Corp.
|
FL
|
|||
|
Park
National Corp.
|
OH
|
Vision
Bancshares Inc.
|
FL
|
|||
|
Alabama
National BanCorp.
|
AL
|
PB
Financial Services Crop.
|
GA
|
|||
|
BB&T
Corp.
|
NC
|
First
Citizens Bancorp
|
TN
|
|||
|
Pinnacle
Financial Partners
|
TN
|
Cavalry
Bancorp Inc.
|
TN
|
|||
|
Synovus
Financial Corp.
|
GA
|
Riverside
Bancshares Inc.
|
GA
|
|||
|
Liberty
Bancshares Inc.
|
AR
|
Russellville
Bancshares Inc.
|
AR
|
|||
|
Boston
Private Equity Financial
|
MA
|
Gibraltar
Financial Corp.
|
FL
|
|||
|
Provident
Bankshares Corp.
|
MD
|
Southern
Financial Bancorp
|
VA
|
|||
|
Fulton
Financial Corp.
|
PA
|
Resource
Bankshares Corp.
|
VA
|
Burke
reviewed the multiples of transaction value at announcement to last twelve
months’ (“LTM”) earnings, transaction value to most recent quarterly (“MRQ”)
earnings annualized, transaction value to book value, transaction value to
tangible book value, transaction value to leveraged book value, and book premium
to core deposits and computed high, low, mean, median, and quartile multiples
and premiums for the transactions. These multiples and premiums were applied
to
Gwinnett’s financial information as of and for the period ended December 31,
2006 and were used to impute a transaction price. As illustrated in the
following table, Burke derived an imputed range of values per share of
Gwinnett’s common stock of $63.66 to $92.45 based upon the median and mean
multiples of the selected Southeastern transactions.
-36-
|
Median
Multiple
|
Implied
Value / Share |
Gwinnett
Merger Consideration
|
||||||||
|
Transaction
Value / LTM Earnings
|
19.96
|
x |
$
|
79.68
|
19.05
|
x | ||||
|
Transaction
Value / MRQ Earnings (annualized)
|
17.91
|
x |
$
|
72.76
|
18.76
|
x | ||||
|
Transaction
Value / Book Value
|
3.49
|
x |
$
|
92.45
|
2.86
|
x | ||||
|
Transaction
Value / Tangible Book Value
|
3.53
|
x |
$
|
80.12
|
3.35
|
x | ||||
|
Transaction
Value / Leveraged Book Value*
|
3.55
|
x |
$
|
63.66
|
4.42
|
x | ||||
|
Tangible
Book Premium / Core Deposits
|
26.41
|
%
|
$
|
64.96
|
33.66
|
%
|
||||
|
Average
Valuation
|
$
|
75.61
|
$
|
76.24
|
||||||
|
Implied
Range
|
$
|
63.66
|
$
|
92.45
|
||||||
| * |
Assumes
7%
tangible equity to tangible assets. Excess equity valued at
1.0x.
|
The
analysis showed that the merger consideration of $76.24 per fully diluted share
is within the range of values imputed by the mean and median multiples of the
comparable Southeastern transactions and slightly above the implied average
valuation of the comparables universe.
U.S.
Transactions. Burke,
in
addition to analyzing Southeastern transactions, selected a group of comparable
U.S. merger and acquisition transactions and compared the pricing multiples
to
the multiples implied by the merger consideration. Specifically, Burke selected
bank merger and acquisition transactions according to the following criteria:
|
·
|
Merger
and acquisition transactions announced after January 1,
2003.
|
|
·
|
Seller
located within the continental United
States.
|
|
·
|
Seller
assets between $500 million and $1.5
billion.
|
|
·
|
Seller
with ROAA greater than 1.25% in the latest quarter prior to
announcement.
|
-37-
Burke
selected 25 transactions fitting the criteria listed above as being comparable
to the proposed merger. The 25 comparable transactions selected included the
following:
|
Buyer
|
State
|
Seller
|
State
|
|||
|
Banco
Sabadell SA
|
Spain
|
Transatlantic
Holding Corp
|
FL
|
|||
|
Franklin
Bank Corp.
|
TX
|
First
NB of Bryan
|
TX
|
|||
|
Lehman
Brothers Holdings Inc.
|
NY
|
Capital
Crossing Bank
|
MA
|
|||
|
Sterling
Financial Corp.
|
WA
|
Northern
Empire Bancshares
|
CA
|
|||
|
Park
National Corp.
|
OH
|
Vision
Bancshares Inc.
|
FL
|
|||
|
Alabama
National BanCorp.
|
AL
|
PB
Financial Services Corp.
|
GA
|
|||
|
First
Republic Bank
|
CA
|
BWC
Financial Corp.
|
CA
|
|||
|
First
Community Bankcorp
|
CA
|
Community
Bancorp Inc.
|
CA
|
|||
|
Placer
Sierra Bancshares
|
CA
|
Southwest
Community Bancorp
|
CA
|
|||
|
Umpqua
Holdings Corp.
|
OR
|
Western
Sierra Bancorp
|
CA
|
|||
|
Grupo
Financiero Banorte
|
Mexico
|
INB
financial Corporation
|
TX
|
|||
|
BB&T
Corp.
|
NC
|
First
Citizens Bancorp
|
TN
|
|||
|
Marshall
& Ilsley Corp.
|
WI
|
Trustcorp
Financial
|
MO
|
|||
|
First
Community Bancorp
|
CA
|
Foothill
Independent Bancorp
|
CA
|
|||
|
First
Midwest Bancorp Inc.
|
IL
|
Bank
Calumet Inc.
|
IN
|
|||
|
Wintrust
Financial Corp.
|
IL
|
Hinsbrook
Bancshares Inc.
|
IL
|
|||
|
Rabobank
Nederland
|
Netherlands
|
Central
Coast Bancorp
|
CA
|
|||
|
Pinnacle
Financial Partners
|
TN
|
Cavalry
Bancorp Inc.
|
TN
|
|||
|
Synovus
Financial Corp.
|
GA
|
Riverside
Bancshares Inc.
|
GA
|
|||
|
Liberty
Bancshares Inc.
|
AR
|
Russellville
Bancshares Inc.
|
AR
|
|||
|
Boston
Private Financial
|
MA
|
Gibraltar
Financial Corp.
|
FL
|
|||
|
Westamerica
Bancorp.
|
CA
|
Redwood
Empire Bancorp
|
CA
|
|||
|
Southwest
Bankcorp. Of Texas
|
TX
|
Klein
Bancshares Inc.
|
TX
|
|||
|
Provident
Bankshares Corp.
|
MD
|
Southern
Financial Bancorp
|
VA
|
|||
|
Fulton
Financial Corp.
|
PA
|
Resource
Bankshares Corp.
|
VA
|
Burke
reviewed the multiples of transaction value at announcement to LTM earnings,
transaction value to MRQ earnings annualized, transaction value to book value,
transaction value to tangible book value, transaction value to leveraged book
value and book premium to core deposits and computed high, low, mean, median,
and quartile multiples and premiums for the transactions. These multiples and
premiums were applied to Gwinnett’s financial information as of and for the
period ended December 31, 2006 and were used to impute a transaction price.
As
illustrated in the following table, Burke derived an imputed range of values
per
share of Gwinnett’s common stock of $65.85 to $89.10 based upon the median and
mean multiples of the selected U.S. transactions.
-38-
|
Median
Multiple
|
Implied
Value
/ Share
|
Gwinnett
Merger
Consideration
|
||||||||
|
Transaction
Value / LTM Earnings
|
19.73
|
x |
$
|
78.79
|
19.05
|
x | ||||
|
Transaction
Value / MRQ Earnings (annualized)
|
17.62
|
x |
$
|
71.61
|
18.76
|
x | ||||
|
Transaction
Value / Book Value
|
3.36
|
x |
$
|
89.10
|
2.86
|
x | ||||
|
Transaction
Value / Tangible Book Value
|
3.53
|
x |
$
|
80.05
|
3.35
|
x | ||||
|
Transaction
Value / Leveraged Book Value*
|
3.70
|
x |
$
|
65.85
|
4.42
|
x | ||||
|
Tangible
Book Premium / Core Deposits
|
28.05
|
%
|
$
|
67.49
|
33.66
|
%
|
||||
|
Average
Valuation
|
$
|
75.20
|
$
|
76.24
|
||||||
|
Implied
Range
|
$
|
65.85
|
$
|
89.10
|
||||||
| * |
Assumes
7% tangible equity to tangible assets. Excess equity valued at
1.0x.
|
The
analysis showed that the merger consideration of $76.24 per fully diluted share
is within the range of values imputed by the mean and median multiples of the
comparable U.S. transactions and slightly above the implied average valuation
of
the comparables universe.
Discounted
Cash Flow Analysis
Using
a
discounted cash flow analysis, Burke estimated the present value of the future
stream of earnings and dividends that Gwinnett could produce based upon an
internal earnings and balance sheet forecast for 2007 through 2011. Burke
performed discounted cash flow analyses based upon terminal values to both
earnings and tangible equity.
In
order
to derive the terminal value of Gwinnett’s earnings stream beyond 2010, Burke
assumed terminal value multiples ranging from 15.0x to 18.0x of fiscal year
2011
net income. The dividend streams and terminal values were then discounted to
present values using different estimated discount rates (ranging from 14.0%
to
16.0%) chosen to reflect different assumptions regarding the required rates
of
return to holders or prospective buyers of Gwinnett common stock. This
discounted cash flow analysis indicated a value range between $55.43 and $70.35
per share of Gwinnett common stock.
The
value
of the consideration offered by United to Gwinnett in the merger is $76.24
per
fully diluted share of Gwinnett common stock on, which is above the range of
values imputed from the discounted cash flow analysis.
Contribution
Analysis
Burke
computed the contribution of United and Gwinnett to various elements of the
pro
forma entity’s income statement, excluding estimated cost savings and operating
synergies, balance sheet and franchise. The following table compares the pro
forma ownership in the combined company, assuming a hypothetical 100%
transaction, to each company’s respective contribution to each element of the
analysis.
-39-
|
Contribution
|
|||||||
|
Gwinnett
|
United
|
||||||
|
Pro
Forma Fully Diluted Ownership
|
13.26
|
%
|
86.74
|
%
|
|||
|
Earnings
(000’s)
|
|||||||
|
2006
Actual Earnings
|
14.73
|
%
|
85.27
|
%
|
|||
|
2007
Estimated Earnings
|
13.58
|
%
|
86.42
|
%
|
|||
|
Balance
Sheet (12/31/2006) (000’s)
|
|||||||
|
Loans,
net
|
9.00
|
%
|
91.00
|
%
|
|||
|
Assets
|
8.68
|
%
|
91.32
|
%
|
|||
|
Deposits
|
9.17
|
%
|
90.83
|
%
|
|||
|
Equity
|
11.38
|
%
|
88.62
|
%
|
|||
|
Tangible
Equity
|
13.07
|
%
|
86.93
|
%
|
|||
|
Branches
|
5.15
|
%
|
94.85
|
%
|
|||
The
contribution analysis indicated that the pro forma ownership of United common
stock issuable to Gwinnett shareholders assuming a hypothetical 100% stock
transaction in the merger was greater than loans, assets, deposits, equity,
tangible equity and branches and slightly less than earnings contributed to
United by Gwinnett.
Analysis
of United
Selected
Peer Group Analysis
Burke
used publicly available information to compare selected financial information
for United and a group of selected financial institutions. The group consisted
of United and 31 bank holding companies, which we refer to as the United Peer
Group. The United Peer Group consisted of selected publicly traded U.S. banks
with assets between $5 billion and $10 billion.
|
Peer
Group
Medians |
United
|
Quartile
|
||||||||
|
Trading
Characteristics
|
||||||||||
|
Price
/ Book
|
1.90
|
x |
2.29
|
x |
1
|
|||||
|
Price
/ Tangible Book
|
3.03
|
x |
3.11
|
x |
2
|
|||||
|
Price
/ LTM Core EPS(1)
|
16.60
|
x |
19.70
|
x |
1
|
|||||
|
Price
/ 2007 Estimated EPS
|
15.60
|
x |
17.50
|
x |
1
|
|||||
|
Price
/ 2008 Estimated EPS
|
14.20
|
x |
15.60
|
x |
1
|
|||||
|
Public
Market Data
|
||||||||||
|
Market
Capitalization (in millions)
|
$
|
1,357
|
$
|
1,410
|
2
|
|||||
|
Current
Dividend Yield
|
2.51
|
%
|
1.09
|
%
|
4
|
|||||
|
3-Month
Average Trading Volume
|
$
|
165,187
|
$
|
89,486
|
4
|
|||||
|
3-Month
Average Trading Volume (in thousands)
|
$
|
4,958
|
$
|
2,942
|
4
|
|||||
|
Weekly
Volume Shares Outstanding
|
1.61
|
%
|
1.04
|
%
|
4
|
|||||
| (1) |
Earnings
per share.
|
United’s
common stock trading characteristics are at the high end of the selected peer
group, while liquidity metrics are at the low end of the selected peer
group.
-40-
Relative
Stock Price Performance
Burke
analyzed the price performance of United common stock from February 1, 2006
to
February 2, 2007 and compared that performance to the performance of the S&P
Bank Index (WCB: BIX) and the S&P 500 Index (WCB: GSPC) over the same
period. The S&P Bank Index is a market cap weighted price index composed of
25 major financial company stocks. The S&P Bank Index is not traded but is
quoted under the symbol “BIX”. This analysis indicated the following cumulative
changes in price over the period:
|
United:
|
15.00%
|
|
S&P
Bank Index:
|
11.12%
|
|
S&P
500 Index:
|
12.15%
|
Burke
noted that United’s stock price outperformed both indices from February 1, 2006
to February 2, 2007, the prior trading day to Burke’s oral and written opinion.
Other
Factors And Analyses
Burke
took into consideration various other factors and analyses, including:
historical market prices and trading volumes for United’s common stock;
movements in the common stock of selected publicly-traded companies and
movements in the S&P Bank Index.
Information
Regarding Burke
Pursuant
to a letter agreement dated December 13, 2006, Gwinnett paid Burke a fee of
$50,000 upon the execution of the merger agreement. In addition, Gwinnett has
agreed to pay Burke a financial advisory fee that will fluctuate based upon
the
ultimate value received by Gwinnett at the closing of the merger, including
both
the merger consideration, consideration paid to the holders of Gwinnett options
and SARs, and the 2007 cash dividend that Gwinnett intends to pay prior to
closing of the merger. As of the date of the announcement of the merger, the
fee
payable to Burke at the closing of the merger would have been $2,214,190. In
addition, Gwinnett has agreed to reimburse Burke for its reasonable
out-of-pocket expenses and to indemnify Burke and certain related persons
against certain liabilities arising out of or in conjunction with its rendering
of services under its engagement, including certain liabilities under the
federal securities laws.
Burke
is
a nationally recognized investment banking firm whose principal business
specialty is financial institutions. In the ordinary course of its investment
banking business, Burke is regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and acquisitions
and other corporate transactions.
-41-
Financial
and other information about United is set forth on United’s Form 10-K for the
year ended December 31, 2006, as amended, (which includes certain
provisions of United’s Proxy Statement for its 2007 Annual Meeting) which is
incorporated herein by reference.
The
authorized capital stock of United currently consists of 100,000,000 shares
of
common stock, $1.00 par value per share and 10,000,000 shares of preferred
stock, $1.00 par value per share. As of May 1, 2007, 43,064,895 shares of
common stock were issued and outstanding, exclusive of 51,864 shares issuable
to
participants in United’s Deferred Compensation Plan and 3,086,625 shares
reserved for issuance upon the exercise of outstanding options and vesting
of
restricted stock. At that date, United had 32,200 shares of Series A
Non-Cumulative Preferred Stock issued and outstanding.
Common
Stock
All
voting rights are vested in the holders of the common stock. Each holder of
common stock is entitled to one vote per share on any issue requiring a vote
at
any meeting. The shares do not have cumulative voting rights. Subject to the
right of holders of United’s Series A Non-Cumulative Preferred Stock to receive
dividends, all shares of United common stock are entitled to share equally
in
any dividends that United’s board of directors may declare on United common
stock from sources legally available for distribution. The determination and
declaration of dividends is within the discretion of United’s board of
directors. Upon liquidation, holders of United common stock are entitled to
receive on a pro rata basis, after payment or provision for payment of all
debts
and liabilities of United, and after all distributions payments are made to
holders of United’s Series A Non-Cumulative Preferred Stock, all assets of
United available for distribution, in cash or in kind.
The
outstanding shares of United common stock are, and the shares of United common
stock to be issued by United in connection with the merger will be, duly
authorized, validly issued, fully paid, and nonassessable.
Preferred
Stock
United
is
authorized to issue 10,000,000 shares of preferred stock, issuable in specified
series and having specified voting, dividend, conversion, liquidation, and
other
rights and preferences as United’s board of directors may determine. The
preferred stock may be issued for any lawful corporate purpose without further
action by United shareholders. The issuance of any preferred stock that has
conversion rights might have the effect of diluting the interests of United’s
other shareholders. In addition, shares of preferred stock could be issued
with
certain rights, privileges, and preferences, which would deter a tender or
exchange offer or discourage the acquisition of control of United.
United’s
board of directors has designated 287,411 of the 10,000,000 authorized shares
of
preferred stock as “Series A Non-Cumulative Preferred Stock”, of which 32,200
remain outstanding. The Series A stock has a stated value of $10.00 per share,
and holders of Series A stock are entitled to a preferential annual dividend
of
6%, payable quarterly on each January 1, April 1, July 1 and October 1. The
declaration of dividends with respect to the Series A stock is within the
discretion of United’s board of directors.
-42-
In
addition, holders of the Series A stock are entitled to receive, on a pro rata
basis, distributions upon liquidation prior to any payment by United to the
holders of its common stock, in an amount equal to the stated value per share
of
the Series A stock, plus any accrued but unpaid dividends. The Series A stock
has no voting rights, except as required under the Georgia Business Corporation
Code, and is not convertible into shares of common stock or other securities
of
United. United may, at its option, redeem all or part of the Series A stock
outstanding by paying cash for such shares in an amount equal to the stated
value per share, plus any accrued but unpaid dividends.
6.75%
Subordinated
Notes due 2012
United
has outstanding $31.5 million aggregate principal amount of 6.75% Subordinated
Notes, due 2012. Interest is payable semi-annually in arrears in cash on June
15
and December 15 of each year. The notes may not be redeemed prior to their
maturity. No sinking fund is provided for the notes. The notes are general
unsecured obligations of United, subordinated to all existing and future secured
and senior indebtedness, and payment of principal of the notes may be
accelerated only in the case of bankruptcy, insolvency, receivership,
conservatorship or reorganization of United or one of United’s bank
subsidiaries.
Subordinated
Step-up Notes due 2015
United
has outstanding $35 million aggregate principal amount of Subordinated Step-up
Notes due 2015. The notes bear interest at a fixed rate of 6.25% through
September 30, 2010, and at a fixed rate of 7.5% thereafter until maturity or
earlier redemption. Interest is payable semi-annually in arrears in cash on
March 31 and September 30 of each year. The notes are callable at par on
September 30, 2010, and September 30 of each year thereafter until maturity
on
September 30, 2015. The notes are general unsecured obligations of United,
subordinated to all existing and future secured and senior indebtedness, and
payment of principal of the notes may be accelerated only in the case of
bankruptcy, insolvency, receivership, conservatorship or reorganization of
United or one of United’s bank subsidiaries.
Trust
Preferred Securities
United
has five wholly owned statutory trusts, which issued guaranteed preferred
interests in United’s junior subordinated deferrable interest debentures. The
debentures represent the sole asset of each of the trusts. These debentures
qualify as Tier I capital under Federal Reserve Board guidelines. All of the
common securities of the trusts are owned by United. United has entered into
contractual arrangements which, taken collectively, fully and unconditionally,
guarantee payment of: (1) accrued and unpaid distributions required to be paid
on the securities; (2) the redemption price with respect to any securities
called for redemption by the respective trust; and (3) payments due upon a
voluntary or involuntary dissolution, winding up or liquidation of the
respective trust. The following is a description of each trust preferred
security.
10.60%
Trust Preferred Securities
In
September 2000, United formed a wholly owned Connecticut statutory business
trust, United Community Statutory Trust I (“United Statutory Trust”), which
issued $5 million of guaranteed preferred beneficial interests in United’s
junior subordinated deferrable interest debentures. The proceeds from the
issuance of the securities were used by United Statutory Trust to purchase
$5.2
million of junior subordinated debentures of United, which carry a fixed
interest rate of 10.60%. The securities accrue and pay distributions
semiannually at a fixed rate of 10.60% per annum of the stated liquidation
value
of $1,000 per capital security and are mandatorily redeemable upon maturity
of
the debentures on September 7, 2030, or upon earlier redemption as provided
in
the indenture. United has the right to redeem the debentures purchased by United
Statutory Trust in whole or in part, on or after September 7, 2010. As specified
in the indenture, if the debentures are redeemed prior to maturity, the
redemption price will be the principal amount, any accrued but unpaid interest,
plus a premium ranging from 5.3% in 2010 to .53% beginning in 2019.
-43-
11.295%
Trust Preferred Securities
In
July
2000, United formed a wholly owned Delaware statutory business trust, United
Community Capital Trust II (“United Trust II”), which issued $10 million of
guaranteed preferred beneficial interests in United’s junior subordinated
deferrable interest debentures. The proceeds from the issuance of the securities
were used by United Trust II to purchase $10.3 million of junior subordinated
debentures of United, which carry a fixed rate of 11.295%. The securities accrue
and pay distributions at a fixed rate of 11.295% per annum of the stated
liquidation value of $1,000 per capital security. The securities are mandatorily
redeemable upon maturity of the debentures on July 19, 2030, or upon earlier
redemption as provided in the indenture. United has the right to redeem the
debentures purchased by United Trust II in whole or in part, on or after July
19, 2010. As specified in the indenture, if the debentures are redeemed prior
to
maturity, the redemption price will be the principal amount, any accrued but
unpaid interest, plus a premium ranging from 2.824% in 2010 to .565% beginning
in 2019.
8.125%
Trust Preferred Securities
In
July
1998, United formed a wholly owned Delaware statutory business trust, United
Community Capital Trust (“United Trust”), which issued $21 million of guaranteed
preferred beneficial interests in United’s junior subordinated deferrable
interest debentures. The proceeds from the issuance of the securities were
used
by United Trust to purchase $21.7 million of junior subordinated debentures
of
United that carry a fixed interest rate of 8.125%. The securities accrue and
pay
distributions semiannually at a fixed rate of 8.125% per annum of the stated
liquidation value of $1,000 per capital security. The securities are mandatorily
redeemable upon maturity of the debentures on July 15, 2028, or upon earlier
redemption as provided in the indenture. United has the right to redeem the
debentures purchased by United Trust: (1) in whole or in part, on or after
July
15, 2008, and (2) in whole (but not in part) at any time within 90 days
following the occurrence and during the continuation of a tax event, investment
company event or capital treatment time (as defined in the indenture). As
specified in the indenture, if the debentures are redeemed prior to maturity,
the redemption price will be the principal amount, any accrued but unpaid
interest, plus a premium ranging from 4.06% in 2008 to .41% in
2017.
Floating
Rate Trust Preferred Securities
In
June
2004, United acquired Fairbanco Holding Company, Inc. and its wholly owned
Delaware statutory business trust, Fairbanco Capital Trust I (“Fairbanco
Trust”), which issued $5 million of guaranteed preferred beneficial interests in
Fairbanco’s junior subordinated deferrable interest debentures. The proceeds
from the issuance of the securities were used by Fairbanco Trust to purchase
$5.2 million of junior subordinated debentures of Fairbanco that bear interest
at the rate of 3.65% per annum over the three-day London Interbank Offered
Rate,
as calculated quarterly pursuant to the indenture. The securities accrue and
pay
distributions quarterly at the then applicable interest rate. The securities
mature on July 30, 2032 unless the maturity date is accelerated pursuant to
the
indenture after June 30, 2007. United has the right to redeem the debentures
purchased by Fairbanco Trust: (1) in whole or in part, on or after June 30,
2007
at par, and (2) in whole (but not in part) at any time before June 30, 2007
within 60 days following the occurrence and during the continuation of a tax
event, investment company event or capital treatment time (as defined in the
indenture) at a premium of 3.00%. As specified in the indenture, if the
debentures are redeemed prior to maturity, the redemption price will include
any
accrued but unpaid interest.
-44-
In
September 2006, United acquired Southern Bancorp, Inc. (“SBC”) and its wholly
owned Delaware statutory trust, Southern Bancorp Capital Trust I (“SBC Trust”),
which issued $4.25 million of floating rate capital securities of SBC Trust
and
$132,000 in floating rate common securities to SBC. The proceeds from the
issuance of the securities were used by SBC Trust to purchase $4.382 million
of
junior subordinated debentures of SBC that bear interest at a rate, reset
quarterly, equal to the prime rate plus 100 basis points. The securities accrue
and pay distributions quarterly at the then applicable interest rate. The
securities mature on March 31, 2034 unless the maturity date is accelerated
pursuant to the indenture after March 31, 2009. United has the right to redeem
the debentures purchase by SBC Trust: (1) in whole or in part, on or after
March
31, 2009 at par, and (2) in whole (but not in part), at any time, within 90
days
following the occurrence and during the continuation of a tax event, an
investment company event or a capital treatment event at par. As specified
in
the debenture, if the debentures are redeemed prior to maturity, the redemption
price will include any accrued but unpaid interest.
Transfer
Agent and Registrar
The
transfer agent and registrar for United’s common stock and the debentures is
Computershare Ltd.
Ability
to Consider Other Constituencies
United’s
articles of incorporation permit its board of directors, in determining what
is
believed to be in the best interest of United and its shareholders, to consider
the interests of its employees, customers, suppliers and creditors, the
communities in which its offices and establishments are located and all other
factors that they consider pertinent, in addition to considering the effects
of
any actions on United and its shareholders. This provision permits United’s
board of directors to consider numerous judgmental or subjective factors
affecting a proposal, including some non-financial matters, and on the basis
of
these considerations may oppose a business combination or some other transaction
which, viewed exclusively from a financial perspective, might be attractive
to
some, or even a majority, of its shareholders.
Amendments
to Articles of Incorporation and Bylaws
United’s
articles of incorporation specifically provide that neither the articles of
incorporation nor the bylaws of United may be amended without the affirmative
vote the holders of two-thirds of the shares issued and outstanding and entitled
to vote thereon, except for provisions relating to increasing the number of
authorized shares of common and preferred stock of United. This provision could
allow the holders of 33.4% of the outstanding capital stock of United to
exercise an effective veto over a proposed amendment to the articles or bylaws,
despite the fact that the holders of 66.6% of the shares favor the proposal.
This provision protects, among other things, the defensive measures included
in
United’s articles of incorporation and bylaws by making more difficult future
amendments to the articles of incorporation and bylaws that could result in
the
deletion or revision of such defensive measures.
Supermajority
Approval of Interested Business Combinations
United’s
articles of incorporation provide that if a proposed business combination
between United and any interested shareholder is not approved by three-fourths
of all directors of United then in office, the business combination must be
approved by the affirmative vote of the holders of at least 75% of the
outstanding shares of United’s common stock, including the affirmative vote of
the holders of at least 75% of the outstanding shares of common stock held
by
shareholders other than the interested shareholder. This provision may
discourage attempts by other corporations or groups to acquire control of
United, without negotiation with management, through the acquisition of a
substantial number of shares of United’s stock followed by a forced merger. This
provision may also enable a minority of the shareholders of United to prevent
a
transaction favored by a majority of the shareholders, and may discourage tender
offers or other non-open market acquisitions of United’s common stock because of
the potentially higher vote requirements for shareholder approval of any
subsequent business combination. Additionally, in some circumstances, United’s
board of directors could, by withholding its consent to such a transaction,
cause the 75%/75% shareholder vote to be required to approve a business
combination, thereby enabling management to retain control over the affairs
of
United and their present positions with United.
-45-
Removal
of Directors
United’s
articles of incorporation provide that a member of United’s board of directors
may only be removed for cause, and only upon the affirmative vote of two-thirds
of the outstanding shares of capital stock of United entitled to vote thereon.
This provision may prevent a significant shareholder from avoiding board
scrutiny of a proposed business combination by merely removing directors with
conflicting views, and may encourage individuals or groups who desire to propose
takeover bids or similar transactions to negotiate with the board of directors.
However, outside of the context of an acquisition attempt, it may serve as
an
impediment to a more legitimate need to remove a director.
Gwinnett
is a Georgia corporation and a registered bank holding company in Lawrenceville,
Georgia. Gwinnett was formed in May 1999 and conducts its operations through
its
wholly owned subsidiary, First Bank of the South, a commercial bank organized
under the laws of the State of Georgia.
Gwinnett
had assets of $675 million, loans of $536 million, deposits of $583 million,
and
shareholders’ equity of $79 million as of December 31, 2006. Net income for the
year ended December 31, 2006 was approximately $11.9 million.
Gwinnett’s
business is conducted wholly through its subsidiary, First Bank of the South,
a
full service bank with its main office at 2230 Riverside Parkway, Lawrenceville,
Georgia. First Bank of the South operates branch locations at Embry Hills in
DeKalb County, Johns Creek in north Fulton County, and Buford and Snellville
in
Gwinnett County and a loan production office in Loganville, Walton County.
The
bank began its banking operations in May 2000, and offers a full range of
lending products and traditional banking products and services, including
commercial, real estate, and consumer loans, cash management services, and
savings and time deposit accounts.
With
an
emphasis on responsive and customized service, First Bank of the South offers
a
range of commercial and retail banking products and services including checking,
savings and time deposits, residential and commercial mortgages, home equity
loans, consumer loans, investment loans, small business loans, commercial lines
of credit and letters of credit, and commercial treasury management services.
First Bank of the South focuses on providing individual service and attention
to
its target customers, which include individuals and small- to medium-sized
businesses. First Bank of the South believes it responds to its customers’
credit requests more quickly and is more flexible in approving complex loans
because of the bank’s personal knowledge of its customers.
-46-
Gwinnett’s
principal business is to accept deposits from the public and to make loans
and
other investments. The principal sources of funds for the bank’s loans and
investments are demand, time, savings and other deposits, repayment of loans
and
borrowings. The principal source of income for the bank is interest collected
on
loans and other investments. The principal expenses of the bank are interest
paid on deposits, transaction processing costs, employee compensation, office
expenses and other overhead expenses.
Lending
Services
First
Bank of the South’s primary lending activity is making real estate loans,
particularly construction loans for new residential and commercial properties.
Gwinnett’s loan portfolio consists primarily of construction and development
loans, commercial real estate loans and residential real estate loans primarily
in and around DeKalb, Fulton, Gwinnett and Walton Counties. First Bank of the
South also makes non-real estate related commercial loans and consumer loans
to
individuals in and around DeKalb, Fulton and Gwinnett Counties. These loans
include certain commercial loans where the bank takes a security interest in
accounts receivable and furniture, fixtures and equipment as supplemental,
but
not principal, collateral. Home equity loans and lines of credit are classified
as consumer loans. The composition of First Bank of the South’s loan portfolio
at December 31, 2006 was as follows:
|
Loan
Category
|
Ratio
|
|||
|
Real
estate construction and acquisition and development
|
59
|
%
|
||
|
Commercial
and commercial real estate
|
39
|
%
|
||
|
Consumer
lending
|
2
|
%
|
Deposit
Services
First
Bank of the South seeks to establish core deposits, including checking accounts
and money market accounts, as well as a variety of time deposit accounts. The
primary sources of core deposits are residents of, and businesses and their
employees located in, Gwinnett’s primary market area. First Bank of the South
also obtains deposits through personal solicitation by the bank’s officers and
directors, direct mail solicitations, and local advertising. First Bank of
the
South makes deposit services accessible to customers by offering direct deposit,
wire transfer, internet banking, night depository, and banking by
mail.
Other
Banking Services
Given
client demand for increased convenience and account access, First Bank of the
South offers a range of products and services, including 24-hour internet
banking with free bill pay service, direct deposit, traveler’s checks, and
automatic account transfers. First Bank of the South also participates in a
shared network of automated teller machines and a debit card system that the
bank’s customers may use throughout Georgia and in other states.
-47-
First
Bank of the South competes with national and state banks, financial
institutions, brokerage firms and credit unions for loans and deposits primarily
in DeKalb, Fulton and Gwinnett Counties in the northeastern metropolitan Atlanta
area.
First
Bank of the South encounters competition in its three-county primary market
from
76 other FDIC-insured financial institutions with 673 branches. These
competitors offer a full range of banking services and vigorously compete for
all types of services, especially deposits. In addition, in certain aspects
of
its banking business, First Bank of the South also competes with credit unions,
small loan companies, consumer finance companies, brokerage firms, insurance
companies, money market funds and other financial institutions. Many of First
Bank of the South’s competitors enjoy competitive advantages, including greater
financial resources, a wider geographic presence, more accessible branch office
locations, the ability to offer additional services, more favorable pricing
alternatives and lower origination and operating costs. Some of First Bank
of
the South’s competitors have been in business for
many
years and have an established customer base and name recognition. In addition,
First Bank of the South’s competitors that are not depository institutions
are generally not subject to the extensive regulations that apply to
banks.
However, First Bank of the South believes that its competitive pricing,
personalized service and community involvement enable it to effectively compete
in the greater DeKalb/Fulton/Gwinnett County area.
First
Bank of the South currently employs 75 persons on a full-time or part-time
basis, including 31 officers. Gwinnett has no employees that are not also
employees of First Bank of the South.
From
time
to time, Gwinnett is involved in litigation relating to claims arising out
of
operations in the normal course of business. As of the date hereof, Gwinnett
is
not engaged in any legal proceedings that are expected, individually or in
the
aggregate, to have a material effect on Gwinnett.
-48-
The
following table sets forth information with respect to the beneficial ownership,
as of May 1, 2007, of shares of Gwinnett common stock by (1) each person
known by Gwinnett to be the beneficial owner of more than 5% of Gwinnett’s
issued and outstanding common stock, (2) each of Gwinnett’s directors and
executive officers, and (3) all directors and executive officers as a group.
Except as noted below, Gwinnett believes that each person listed below has
sole
investment and voting power with respect to the shares included in the table.
Because of the rules of beneficial ownership as defined by Rule 13d-3 under
the
Exchange Act, some shares are reported as being owned by multiple parties
in the
table below. Please see the footnotes to the table for further
information.
|
Name
|
Number
of
Shares(1) |
Number
of
Options
or
Warrants
Exercisable
within 60 Days |
Percent
of
Total
Outstanding |
|||||||
|
Directors
and Executive Officers:
|
||||||||||
|
David
J. Bowen
|
29,282
|
(2)
|
—
|
1.03
|
%
|
|||||
|
R.
Millard Bowen
|
74,970
|
(3)
|
—
|
2.65
|
%
|
|||||
|
Richard
B. Chandler, Jr.
|
6,948
|
—
|
0.25
|
%
|
||||||
|
Jacqueline
Embry Chiusano
|
213,096
|
(4)
|
—
|
7.53
|
%
|
|||||
|
Randall
W. Dixon
|
146,157
|
—
|
5.16
|
%
|
||||||
|
Thomas
P. Hughes
|
5,680
|
—
|
0.20
|
%
|
||||||
|
Doyle
Johnson
|
57,500
|
—
|
2.03
|
%
|
||||||
|
James
S. Kennedy
|
36,830
|
—
|
1.30
|
%
|
||||||
|
Randall
Pierce
|
36,951
|
—
|
1.31
|
%
|
||||||
|
Andrew
R. Pourchier
|
51,596
|
8,700
|
2.12
|
%
|
||||||
|
Wayne
T. Sikes
|
27,667
|
—
|
0.98
|
%
|
||||||
|
David
E. Snell
|
97,047
|
(5)
|
—
|
3.43
|
%
|
|||||
|
John
D. Stephens
|
172,134
|
(6)
|
—
|
6.08
|
%
|
|||||
|
Glenn
S. White
|
88,855
|
(7)
|
12,650
|
3.57
|
%
|
|||||
|
Steven
W. Williams
|
23,234
|
(8)
|
5,000
|
1.00
|
%
|
|||||
|
All
Gwinnett directors and executive officers
|
1,067,947
|
26,350
|
38.54
|
%
|
||||||
|
Additional
5% Shareholders:
|
||||||||||
|
Sarah
E. Embry
|
212,096
|
(9)
|
—
|
7.49
|
%
|
|||||
|
Wayne
H. Mason
|
187,100
|
—
|
6.61
|
%
|
||||||
|
(1)
|
The
information set forth in this table with respect to Gwinnett common
stock
ownership reflects “beneficial ownership” as determined in accordance with
Rule 13d-3 under the Exchange Act, as amended. “Beneficial
ownership” includes shares for which an individual, directly or
indirectly, has or shares voting or investment power or both and
also
includes options and warrants which are exercisable within 60 days
of the
date hereof. The percentages are based upon 2,830,901 shares outstanding.
The percentages for each of those parties who hold presently exercisable
options and warrants are based upon the sum of 2,830,901 shares plus
the
number of shares subject to presently exercisable options and or
warrants
held by each such party.
|
|
(2)
|
Includes
3,722 shares held by Mr. Bowen as custodian for his children and
17,986
shares held by Bowen Business Interests, LLC, in which Mr. Bowen
holds a
1% ownership interest and his children hold a 99% ownership
interest.
|
|
(3)
|
Includes
12,272 shares held by Mr. Bowen’s
spouse.
|
-49-
|
(4)
|
Includes 23,258
shares held by the 1976 Mary Jacqueline Embry Trust, Marlene C. Embry
and
Stuart Cashin, Trustees, of which Ms. Chiusano is a
beneficiary.
|
|
(5)
|
Includes
97,047 shares held by Snell Investments, LLC, in which Mr. Snell
holds a
9.6% ownership interest.
|
|
(6)
|
Includes
8,202 shares held by John D. Stephens & Sons, LP, in which Mr.
Stephens holds a 93.2% ownership
interest.
|
|
(7)
|
Includes
12,750 shares held by Mr. White’s
spouse.
|
|
(8)
|
Includes
1,000 shares held by his
children.
|
|
(9)
|
Includes
179,553 shares held by IAGO Enterprises, LLP, in which Ms. Embry
holds a
75% ownership interest and the 1976 Mary Jacqueline Embry Trust,
Marlene
C. Embry and Stuart Cashin, Trustees, holds a 25% ownership interest.
Ms.
Embry is a beneficiary of the 1976 Mary Jacqueline Embry
Trust.
|
Interests
of executive officers and directors of Gwinnett in the proposed merger are
discussed above under the heading “Details of the Proposed Merger-Interests of
the Directors and Officers of Gwinnett in the Merger”, at page 24.
Kilpatrick
Stockton LLP, counsel to United, has provided an opinion as to the legality
of
the United common stock to be issued in connection with the merger and the
income tax consequences of the merger. As of the date of these materials,
members of Kilpatrick Stockton LLP participating in this matter own an aggregate
of 32,949
shares of United common stock.
The
audited consolidated financial statements of United and its subsidiaries
incorporated by reference in these materials and elsewhere in the registration
statement have been audited by Porter Keadle Moore, LLP, independent registered
public accountants, as stated in their report, which is incorporated by
reference herein, and has been so incorporated in reliance upon the report
of
such firm given upon their authority as experts in accounting and
auditing.
Management
of Gwinnett knows of no other matters which may be brought before the special
shareholders’ meeting. If any matter other than the proposed merger or related
matters should properly come before the special meeting, however, the persons
named in the enclosed proxies will vote proxies in accordance with their
judgment on those matters.
United
is
subject to the information requirements of the Securities Exchange Act of 1934,
which means that they are required to file certain reports, proxy statements,
and other information, all of which are available at the Public Reference Room
of the Securities and Exchange Commission at 100 F. Street N.E., Washington,
D.C. 20549. You may also obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site at http://www.sec.gov where you can access reports, proxy,
information and registration statements, and other information regarding
registrants that file electronically with the SEC. Such filings are also
available at United’s Internet site at http://www.ucbi.com.
-50-
United
has filed a registration statement on Form S-4 to register the United common
stock to be issued to you in the merger. These materials are a part of
that
registration statement and constitute a prospectus of United in addition
to
being a proxy statement of Gwinnett for the special meeting of Gwinnett
shareholders to be held on June 1, as described herein. As allowed by SEC
rules, these materials do not contain all of the information you can find
in the
registration statement or the exhibits to the registration statement. These
materials summarize some of the documents that are exhibits to the registration
statement, and you should refer to the exhibits for a more complete description
of the matters covered by those documents.
This
document incorporates important business and financial information about United
that is not included in or delivered with these materials. The following
documents previously filed by United under the Securities Exchange Act of 1934
are incorporated herein by reference:
| · |
United’s
Form 10-K for the fiscal year ended December 31, 2006, as amended,
(which
incorporates certain portions of United’s Proxy Statement for the 2007
Annual Meeting);
|
| · |
All
other reports filed by United pursuant to Sections 13(a) or 15(d)
of the
Exchange Act since December 31, 2006 and prior to the date the merger
is
completed; and
|
| · |
All
documents subsequently filed pursuant to Sections 13(a), 13(c), 14
or
15(d) of the Exchange Act prior to the date the merger is
completed.
|
Documents
incorporated by reference are available from United without charge, excluding
all exhibits, unless an exhibit has been specifically incorporated by reference.
You may obtain documents incorporated by reference by requesting them in
writing
or by telephone from Investor Relations, United Community Banks, Inc., at
P.O.
Box 398, 63 Highway 515, Blairsville, Georgia 30512, telephone number (706)
745-2151. If you would like to request documents, please do so by May 25,
2007
to receive them before the special shareholders
meeting.
All
information concerning United and its subsidiaries has been furnished by United,
and all information concerning Gwinnett and its subsidiary has been furnished
by
Gwinnett. You should rely only on the information contained or incorporated
by
reference in these materials in making a decision to vote on the merger. No
person has been authorized to provide you with information that is different
from that contained in these materials.
These
materials are dated May 1, 2007. You should not assume that the information
contained in these materials is accurate as of any date other than such date,
and neither the mailing of these materials to shareholders nor the issuance
of
United common stock in the merger shall create any implication to the
contrary.
These
materials do not constitute an offer to sell, or a solicitation of an offer
to
buy, any securities, or the solicitation of a proxy, in any jurisdiction to
or
from any person to whom it is not lawful to make any such offer or solicitation
in such jurisdiction. Neither the delivery of these materials nor any
distribution of securities made hereunder shall, under any circumstances, create
an implication that there has been no change in the affairs of United or
Gwinnett since the date hereof, or that the information herein is correct as
of
any time subsequent to its date.
-51-
These
materials (and other documents to which they refer) contain forward-looking
statements regarding United and Gwinnett, including, without limitation,
statements relating to United’s and Gwinnett’s expectations with respect to
revenue, credit losses, levels of nonperforming assets, expenses, earnings
and
other measures of financial performance. Words such as “may”, “could”, “would”,
“should”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”,
“targets” or similar expressions are intended to identify forward-looking
statements. These statements are based on the beliefs, assumptions, and
expectations of United’s and Gwinnett’s management, and on information currently
available to those members of management. They are expressions based on
historical fact, but do not guarantee future performance. Forward-looking
statements include information concerning possible or assumed future results
of
operations of United after the proposed merger. Forward-looking statements
involve risks, uncertainties, and assumptions, and certain factors could cause
actual results to differ from results expressed or implied by the
forward-looking statements, including:
| · |
economic
conditions (both generally, and more specifically in the markets
where
United and Gwinnett operate);
|
| · |
competition
from other companies that provide financial services similar to those
offered by United and Gwinnett;
|
| · |
government
regulation and legislation;
|
| · |
changes
in interest rates;
|
| · |
unexpected
changes in the financial stability and liquidity of United’s and
Gwinnett’s credit customers;
|
| · |
combining
the businesses of United and Gwinnett may cost more or take longer
than
expected;
|
| · |
integrating
the businesses and technologies of United and Gwinnett may be more
difficult than expected;
|
| · |
retaining
key personnel of United and Gwinnett may be more difficult than
expected;
|
| · |
revenues
of the combined entity following the merger may be lower than expected,
and the operating costs of the combined entity may be higher than
expected;
|
| · |
expected
cost savings resulting from the merger may not be fully realized,
or may
not be realized as soon as expected;
and
|
| · |
technological
changes may increase competitive pressures and increase
costs.
|
We
believe these forward-looking statements are reasonable, but we caution that
the
foregoing list of factors is not exclusive and that you should not place undue
reliance on these forward-looking statements, because the future results and
shareholder values of United following completion of the merger may differ
materially from those expressed or implied by these forward-looking statements.
We do not intend to update any forward-looking statement, whether written or
oral, relating to the matters discussed in these materials.
-52-
APPENDIX
A
AGREEMENT
AND PLAN OF REORGANIZATION
THIS
AGREEMENT AND PLAN OF REORGANIZATION (the
“Agreement”)
is
made and entered into as of this 5th
day of
February, 2007, by and between GWINNETT
COMMERCIAL GROUP, INC.,
a
Georgia business corporation (“GCG”
and,
unless the context otherwise requires, the term “GCG” shall include GCG and its
wholly-owned subsidiary bank, FIRST
BANK OF THE SOUTH,
a
Georgia bank with its main office in Lawrenceville, Georgia (the “Bank”)),
and
UNITED
COMMUNITY BANKS, INC.,
a
Georgia business corporation (“United”).
WHEREAS,
the
respective boards of directors of GCG and United deem it advisable and
in the
best interests of each such entity and their respective shareholders
that GCG
merge with United (the “Merger”),
with
United being the surviving corporation, in a transaction valued at $216.6
million based on the thirty (30) day average closing price for United’s common
stock, $1.00 par value per share, (“United
Stock”)
of
$32.35 as of February 2, 2007, consisting of a combination of United
Stock and
cash. The Merger is conditioned upon the terms and conditions hereinafter
set
forth (including, without limitation, the purchase price adjustment provision
of
Article
XI)
and as
set forth in the Agreement and Plan of Merger attached hereto as Exhibit
A
and
incorporated herein by reference (the “Merger
Agreement”);
and
WHEREAS,
the
respective boards of directors of GCG and United deem it advisable and
in the
best interests of each such entity and their respective shareholders
that the
Bank merge with United’s Georgia banking subsidiary, United Community Bank
(“UCB
Georgia”),
with
UCB Georgia being the surviving bank (the “Bank
Merger”),
all
upon the terms hereinafter set forth and as set forth in the Agreement
and Plan
of Merger attached hereto as Exhibit
B
and
incorporated herein by reference (the “Bank
Merger Agreement”);
and
WHEREAS,
the
boards of directors of the respective entities believe that the merger
of GCG
and United and their subsidiary banks and the operating effectiveness
and
synergies produced thereby will enhance and strengthen the franchises
and future
prospects of both companies and each of the banks;
NOW,
THEREFORE,
for and
in consideration of the premises and the mutual covenants and agreements
herein
contained, and other good and valuable consideration, the receipt and
adequacy
of which as legally sufficient consideration are hereby acknowledged,
the
parties hereto agree as follows:
ARTICLE
I
CLOSING
The
transactions contemplated herein shall be consummated (the “Closing”)
at the
offices of Kilpatrick Stockton LLP, Suite 2800, 1100 Peachtree Street,
Atlanta,
Georgia, on the first business day following receipt of all approvals
from any
governmental authorities having jurisdiction over the transactions contemplated
by this Agreement, the Merger Agreement and the Bank Merger Agreement,
and the
expiration of any waiting or similar period required by applicable law
(the
“Closing
Date”),
or at
such other time and place as may be mutually satisfactory to the parties
hereto.
A-1
ARTICLE
II
MERGER
2.1 The
Merger.
Pursuant to the terms and conditions provided herein or otherwise in
the Merger
Agreement, on the Closing Date GCG shall be merged with and into United.
The
surviving corporation following the Merger will operate under the articles
of
incorporation of United. The Bank shall be merged with and into UCB Georgia
in
accordance with and in the manner set forth in the Bank Merger
Agreement.
2.2 Payment
of Purchase Price. Pursuant
to the terms and conditions provided herein or otherwise in the Merger
Agreement, United shall make available on or before the Closing Date
for
delivery to the holders of issued and outstanding shares of voting common
stock,
no par value per share, of GCG (“GCG
Stock”),
outstanding options to acquire GCG Stock (the “GCG
Stock Options”)
and
outstanding GCG stock appreciation rights (the “GCG
SARs”):
(a) a
sufficient number of shares of United Stock to be issued upon conversion
of the
shares of GCG Stock for stock elections in the Merger, and (b) sufficient
funds
to make cash election payments in the Merger (such cash election payments
and
the stock election payments described in (a) above, the “Merger
Consideration”),
cash
payments for outstanding GCG Stock Options and GCG SARs and payments
in lieu of
the issuance of fractional shares, as provided in the Merger Agreement;
provided,
however,
that no
more than 306,137 shares of GCG Stock may be exchanged for cash (the
“Maximum
Cash Election”)
and no
more than 2,524,764 shares of GCG Stock may be exchanged for United Stock
(the
“Maximum
Stock Election”).
If
any GCG Stock certificate, option or right shall have been lost, stolen
or
destroyed, United may, in its reasonable discretion and as a condition
precedent
to the issuance of any United Stock or cash payment, require the owner
of such
lost, stolen or destroyed GCG Stock certificate to provide a bond and
an
appropriate affidavit and indemnity agreement (reasonably satisfactory
to
United) as indemnification against any claim that may be made against
United
with respect to such GCG Stock certificate, option or right.
ARTICLE
III
OTHER
AGREEMENTS
3.1 Registration
and Listing of United Stock.
(a)
United agrees to file with the Securities and Exchange Commission (the
“SEC”)
as
soon as reasonably practicable a registration statement (the “United
Registration Statement”)
under
the Securities Act of 1933, as amended (the “1933
Act”),
on
Form S-4 or some other appropriate form covering the issuance of the
shares of
United Stock to the shareholders of GCG pursuant to this Agreement and
the
Merger Agreement and to use its reasonable best efforts to cause the
United
Registration Statement to become effective and to remain effective through
the
Closing Date. United agrees to take any action required to be taken under
the
applicable state securities laws in connection with the issuance of shares
of
United Stock upon consummation of the Merger. GCG agrees to provide United
reasonable assistance as necessary in the preparation of the United Registration
Statement, including, without limitation, providing United with all material
facts regarding the operations, business, assets, liabilities and personnel
of
GCG, together with the audited financial statements of GCG, all as and
to the
extent required by the 1933 Act and the rules, regulations and practices
of the
SEC, for inclusion in the United Registration Statement. The United Registration
Statement shall not cover resales of United Stock by any of the shareholders
of
GCG, and United shall have no obligation to cause the United Registration
Statement to continue to be effective after the Closing or to prepare
or file
any post-effective amendments to the United Registration Statement after
the
Closing.
A-2
(b) United
agrees to list on the Nasdaq Global Select Market, by the Closing Date,
the
shares of United Stock to be issued to the shareholders of GCG pursuant
to this
Agreement and the Merger Agreement.
3.2 Meeting
of GCG Shareholders.
GCG
shall call a special meeting of its shareholders (the “Special
Meeting”)
to be
held not more than thirty (30) days after the United Registration Statement
becomes effective under the 1933 Act for the purpose of submitting the
Merger
Agreement to such shareholders for their approval. In connection with
the
Special Meeting, United and GCG shall prepare and submit to the GCG shareholders
a notice of meeting, proxy statement and proxy (the “GCG
Proxy Materials”),
which
shall include the final prospectus from the United Registration Statement
in the
form filed with the SEC.
3.3 Access
to Properties, Books, Etc.
GCG
shall allow the United and its authorized representatives full access
during
normal business hours from and after the date hereof and prior to the
Closing
Date to all of GCG’s properties, books, contracts, commitments and records and
those of its subsidiaries and shall furnish the United and its authorized
representatives such information concerning its affairs and the affairs
of its
subsidiaries as United may reasonably request provided that such request
shall
be reasonably related to the transactions contemplated by this Agreement
and
shall not interfere unreasonably with normal operations. GCG shall cause
its and
its subsidiaries’ personnel, employees and other representatives to assist
United in making any such investigation. During such investigation, United
and
its authorized representatives shall have the right to make copies of
such
records, files, tax returns and other materials as it may deem advisable
and
shall advise GCG of those items of which copies are made. No investigation
made
heretofore or hereafter by either party and its authorized representatives
shall
affect the representations and warranties of either such party hereunder.
3.4 Confidentiality.
(a)
Prior to consummation of the Merger, the parties to this Agreement will
provide
one another with information which may be deemed by the party providing
the
information to be confidential. Each party agrees that it will hold confidential
and protect all information provided to it by the other party to this
Agreement
or such party’s affiliates, except that the obligations contained in this
Section
3.4
shall
not in any way restrict the rights of any party or person to use information
that: (a) was known to such party prior to the disclosure by the other
party;
(b) is or becomes generally available to the public other than by breach
of this
Agreement; (c) is provided by one party for disclosure concerning such
party in
the United Registration Statement; or (d) otherwise becomes lawfully
available
to a party to this Agreement on a non-confidential basis from a third
party who
is not under an obligation of confidence to the other party to this Agreement.
If this Agreement is terminated prior to the Closing, upon request each
party
hereto agrees to return all documents, statements and other written materials,
whether or not confidential, and all copies thereof, provided to it by
or on
behalf of the other party to this Agreement. The provisions of this Section
3.4
shall
survive termination, for any reason whatsoever, of this Agreement, and,
without
limiting the remedies of the parties hereto in the event of any breach
of this
Section
3.4,
the
parties hereto will be entitled to seek injunctive relief against the
other
party in the event of a breach or threatened breach of this Section
3.4.
3.5 Full
Cooperation.
The
parties shall cooperate fully with each other in connection with any
acts or
actions required to be taken as part of their respective obligations
under this
Agreement.
3.6 Expenses.
All of
the expenses incurred by United in connection with the authorization,
preparation, execution and performance of this Agreement and the Merger
Agreement including, without limitation, all fees and expenses of its
agents,
representatives, counsel and accountants and the fees and expenses related
to
filing the United Registration Statement and all regulatory applications
with
state and federal authorities in connection with the transactions contemplated
hereby and thereby, (the “United
Expenses”)
shall
be paid by United. All expenses incurred by GCG in connection with the
authorization, preparation, execution and performance of this Agreement,
the
Merger Agreement and the Bank Merger Agreement, including, without limitation,
all fees and expenses of its agents, representatives, counsel and accountants
(the “GCG
Expenses”),
shall
be paid by GCG. The cost of reproducing and mailing the GCG Proxy Materials
shall be shared by the parties, with each party paying 50 percent
(50%).
A-3
3.7 Preservation
of Goodwill.
Each
party hereto shall use its best efforts to preserve its business organization
and the business organization of its subsidiaries, to keep available
the
services of its present employees and of the present employees of its
subsidiaries, and to preserve the goodwill of customers and others having
business relations with such party or its subsidiaries.
3.8 Approvals
and Consents.
Each
party hereto represents and warrants to and covenants with the other
that it
will use its best efforts, and will cause its officers, directors, employees
and
agents and its subsidiaries and any subsidiary’s officers, directors, employees
and agents to use their best efforts, to obtain as soon as is reasonably
practicable all approvals and consents of state and federal departments
or
agencies required or deemed necessary for consummation of the transactions
contemplated by this Agreement and the Merger Agreement.
3.9 Agreements
by GCG Executive Officers, Directors and Shareholders.
(a)
Each of the directors and executive officers of GCG will, contemporaneously
with
the execution of this Agreement, execute and deliver to United an agreement,
the
form of which is attached hereto as Exhibit
C,
pursuant to which each of them agrees: (a) to recommend, subject to any
applicable fiduciary duty, to GCG shareholders approval of the Merger;
(b) to
vote the capital stock of GCG owned or controlled by them in favor of
the
Merger; (c) to transfer or assign shares of United Stock received by
them in
connection with the Merger only in compliance with the 1933 Act, applicable
state securities laws and the rules and regulations promulgated under
either;
and (d) with respect to directors only, to not compete with United for
a period
of two (2) years after the Closing Date. GCG agrees that it will use
its
reasonable best efforts to obtain an agreement in the form attached hereto
as
Exhibit
C
from any
beneficial owner of 5% or more of the issued and outstanding shares of
GCG Stock
who is not an officer or director.
3.10 Press
Releases.
Prior
to the Closing Date, United and GCG shall each approve the form and substance
of
any press release or other public disclosure materially related to this
Agreement or any other transaction contemplated hereby; provided,
however,
that
nothing in this Section
3.10
shall be
deemed to prohibit any party from making any disclosure which its counsel
deems
necessary or advisable in order to satisfy such party’s disclosure obligations
imposed by law.
3.11 Employee
Benefits.
(a)
Following the Closing Date, United shall provide generally to employees
of GCG
who continue employment with United (“GCG
Employees”)
medical, dental and long-term disability benefits, medical and dependent
care
flexible spending accounts and life insurance (collectively, “Employee
Benefits”),
on
terms and conditions which, when taken as a whole, are substantially
similar to
those then currently provided by United to its other similarly situated
employees. No GCG Employee shall be provided vacation benefits at a level
less
than he or she had attained with GCG immediately prior to the Closing
Date. For
purposes of eligibility to participate and any vesting determinations
(but not
benefit accruals) in connection with the provision of any such Employee
Benefits
by United to the GCG Employees, service with GCG prior to the Closing
Date shall
be counted. The GCG Employees’ prior service with GCG shall also be credited for
purposes of all waiting periods for participation in any of such Employee
Benefits; provided,
however,
that
United shall not impose a waiting period greater in duration than that
in effect
immediately prior to the Closing Date under GCG’s applicable Employee Benefit
plans with respect to those GCG Employees whose waiting periods had commenced
under any such plans prior to the Closing Date. United shall also waive
all
restrictions and limitations for preexisting conditions under United’s Employee
Benefit plans, to the extent such restrictions or limitations would not
apply to
the GCG Employees under GCG’s existing Employee Benefit plans.
A-4
(b) From
the
Closing Date through December 31, 2007, United shall provide Employee
Benefits
to GCG Employees by maintaining GCG’s existing Employee Benefit plans, subject
to United’s right to amend such plans as may be required by law and except as
provided in Section
3.12
below.
Thereafter, the GCG Employees shall be permitted to enroll in United’s Employee
Benefit plans.
3.12 401(k)
Plan.
Subject
to applicable legal requirements, United and GCG shall take such other
actions
prior to the Closing Date as may be reasonably necessary to enable the
employees
of GCG as soon as reasonably practicable after the Closing Date to transfer
the
amount credited to their accounts under the Gwinnett Commercial Group,
Inc.
401(k) and Employee Stock Ownership Plan (“GCG
401(k) Plan”)
through a rollover contribution into either the United Community Banks,
Inc.
Profit Sharing Plan (the “United
401(k) Plan”)
or a
separate third party individual retirement account, or to take a cash
distribution from the GCG 401(k) Plan, provided,
that
GCG’s
Board of Directors shall adopt resolutions to terminate the GCG 401(k)
Plan
prior to the Closing Date. For purposes of any vesting determinations
(but not
benefit accruals) in connection with the United 401(k) Plan, service
with GCG
prior to the Closing Date shall be counted. For purposes of eligibility
to
participate in any “Profit Sharing Contribution” or receive any “Matching
Contribution” (each as defined in the United 401(k) Plan) under the United
401(k) Plan, the one (1) year waiting period in the United 401(k) Plan
shall be
applied to all GCG Employees and only compensation earned for periods
after the
Closing Date shall be counted; provided,
that the
GCG
Employees’ prior service with GCG shall also be credited for purposes of such
waiting periods under the United 401(k) Plan. For calendar year 2007,
prior to
the Closing Date GCG shall make any necessary employer contributions
to the GCG
401(k) Plan due such GCG Employees for compensation paid by GCG during
calendar
year 2007.
3.13 Directors
and Officers Insurance Coverage. Prior
to
Closing, GCG shall purchase for, and on behalf of, its current and former
officers and directors, extended coverage under the current directors’ and
officers’ liability insurance policy maintained by GCG to provide for
continued coverage of such insurance for a period of three (3) years
from the
Closing Date, unless United’s directors’ and officers’ liability insurance
policy provides for coverage for such former officers and directors for
actions
taken prior to the Merger.
3.14 Governance
of United. Following
the Closing Date, United shall take all action necessary to (i) increase
the size of United’s Board of Directors from 11 members to 12 members, and
(ii) cause John D. Stephens to be named as a director of
United.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF GCG
As
an
inducement to United to enter into this Agreement and to consummate the
transactions contemplated hereby, GCG represents, warrants, covenants
and agrees
as follows:
4.1 Disclosure
Memorandum.
GCG has
delivered to United a memorandum (the “Disclosure
Memorandum”)
containing certain information regarding GCG as indicated at various
places in
this Agreement. All information set forth in the Disclosure Memorandum
or in
documents incorporated by reference in the Disclosure Memorandum is true,
correct and complete, does not omit to state any fact necessary in order
to make
the statements therein not misleading, and shall be deemed for all purposes
of
this Agreement to constitute part of the representations and warranties
of GCG
under this Article
IV.
The
information contained in the Disclosure Memorandum shall be deemed to
be part of
and qualify all representations and warranties contained in this Article
IV
and the
covenants in Article
V
to
A-5
the
extent applicable. All information in each of the documents and other
writings
furnished to United pursuant to this Agreement or the Disclosure Memorandum
is
or will be true, correct and complete and does not and will not omit
to state
any fact necessary in order to make the statements therein not misleading.
GCG
shall promptly provide United with written notification of any event,
occurrence
or other information necessary to maintain the Disclosure Memorandum
and all
other documents and writings furnished to United pursuant to this Agreement
as
true, correct and complete at all times prior to and including the Closing.
4.2 Corporate
and Financial.
4.2.1 Corporate
Status. GCG
is a
corporation duly organized, validly existing and in good standing under
the laws
of the State of Georgia and has no direct or indirect subsidiaries other
than
the Bank. The Bank is a bank duly organized, validly existing, and in
good
standing under the laws of the State of Georgia. GCG and the Bank have
all of
the requisite corporate power and authority and are entitled to own or
lease
their respective properties and assets and to carry on their businesses
as and
in the places where such properties or assets are now owned, leased or
operated
and such businesses are now conducted.
4.2.2 Authority.
Except
as set forth in the Disclosure Memorandum and subject to the required
regulatory
approvals, as stated in Section
4.6.1
and the
approval of GCG shareholders, the execution, delivery and performance
of this
Agreement and the other transactions contemplated or required in connection
herewith will not, with or without the giving of notice or the passage
of time,
or both:
(a) violate
any provision of federal or state law applicable to GCG, the violation
of which
could be reasonably expected to have an adverse effect on the business,
operations, properties, assets, financial condition or prospects of GCG;
(b) violate
any provision of the articles of incorporation or bylaws of GCG;
(c) conflict
with or result in a breach of any provision of, or termination of, or
constitute
a default under any instrument, license, agreement, or commitment to
which GCG
is a party, which, singly or in the aggregate, could reasonably be expected
to
have an adverse effect on the business, operations, properties, assets,
financial condition or prospects of GCG; or
(d) constitute
a violation of any order, judgment or decree to which GCG is a party,
or by
which GCG or any of its assets or properties are bound.
Assuming
this Agreement constitutes the valid and binding obligation of United,
this
Agreement constitutes the valid and binding obligation of GCG, and is
enforceable in accordance with its terms, except as limited by laws affecting
creditors’ rights generally and by the discretion of courts to compel specific
performance.
4.2.3 Capital
Structure.
(a) As
of the date of this Agreement, GCG has authorized capital stock consisting
solely of (i) 12,000,000 shares of GCG Stock, of which 2,830,901 shares
are
issued and outstanding as of the date hereof, exclusive of 208,321 shares
reserved for issuance upon exercise of outstanding GCG Stock Options,
and (ii)
2,000,000 shares of nonvoting common stock, no par value, none of which
is
issued and outstanding. The Bank has authorized capital stock consisting
solely
of 12,000,000 shares of common stock, $5.00 par value per share (“Bank
Stock”),
1,060,000 of which are issued and outstanding as of the date hereof.
All of the
issued and outstanding shares of GCG Stock and Bank Stock are duly and
validly
issued, fully paid and non-assessable and were offered, issued and sold
in
A-6
compliance
with all applicable federal and state securities laws. No person has
any right
of rescission or claim for damages under federal or state securities
laws with
respect to the issuance of any shares GCG Stock or Bank Stock previously
issued.
None of the shares of GCG Stock or Bank Stock has been issued in violation
of
any preemptive or other rights of its respective shareholders. All of
the issued
and outstanding shares of the Bank Stock are owned by GCG.
(b) Except
for the GCG Stock Options and as otherwise described in the Disclosure
Memorandum, GCG does not have outstanding any securities which are either
by
their terms or by contract convertible or exchangeable into capital stock
of
GCG, or any other securities or debt of GCG, or any preemptive or similar
rights
to subscribe for or to purchase, or any options or warrants or agreements
or
understandings for the purchase or the issuance (contingent or otherwise)
of, or
any calls, commitments or claims of any character relating to, its capital
stock
or securities convertible into its capital stock. Except as otherwise
described
in the Disclosure Memorandum, GCG is not subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire, or to register,
any
shares of its capital stock.
(c) Except
as
disclosed in the GCG Disclosure Memorandum and other than restrictions
required
by applicable federal and state securities laws, there is no agreement,
arrangement or understanding to which GCG is a party restricting or otherwise
relating to the transfer of any shares of capital stock of GCG.
(d) All
shares of common stock or other capital stock, or any other securities
or debt,
of GCG, which have been purchased or redeemed by GCG have been purchased
or
redeemed in accordance with all applicable federal, state and local laws,
rules,
and regulations, including, without limitation, all federal and state
securities
laws and rules and regulations of any securities exchange or system on
which
such stock, securities or debt are, or at such time were, traded, and
no such
purchase or redemption has resulted or will, with the giving of notice
or lapse
of time, or both, result in a default or acceleration of the maturity
of, or
otherwise modify, any agreement, note, mortgage, bond, security agreement,
loan
agreement or other contract or commitment of GCG.
(e) Except
as
set forth on the Disclosure Memorandum, no person beneficially owns more
than 5%
of the issued and outstanding shares of GCG Stock.
4.2.4 Corporate
Records.
The
stock records and minute books of GCG: (a) fully and accurately reflect
all
issuances, transfers and redemptions of the Common Stock; (b) correctly
show the
record addresses and the number of shares of such stock issued and outstanding
on the date hereof held by the shareholders of GCG; (c) correctly show
all
corporate action taken by the directors and shareholders of GCG (including
actions taken by consent without a meeting); and (d) contain true and
correct
copies or originals of the respective articles of incorporation or association
and all amendments thereto, bylaws as amended and currently in force,
and the
minutes of all meetings or consent actions of its directors and shareholders.
No
resolutions, regulations or bylaws have been passed, enacted, consented
to or
adopted by such directors or shareholders except those contained in the
minute
books. All corporate records have been maintained in accordance with
all
applicable statutory requirements and are complete and accurate.
4.2.5 Tax
Returns; Taxes.
(a) GCG
has duly filed: (i) all required federal and state tax returns and reports;
and
(ii) all required returns and reports of other governmental units having
jurisdiction with respect to taxes imposed upon its income, properties,
revenues, business, franchises, operations or other assets or taxes imposed
which might create a material lien or encumbrance on any of such assets.
Such
returns or reports were true, complete and correct, and GCG has paid,
to the
extent such taxes or other governmental charges required to be have become
due,
all taxes and other governmental charges set forth in such returns or
reports.
All unpaid federal, state and local taxes and
A-7
other
governmental charges payable by GCG have been accrued or reserved on
its books
in accordance with generally accepted accounting principles applied on
a basis
consistent with prior periods (“GAAP”).
Adequate reserves for the payment of taxes have been established on the
books of
GCG for all periods through the date hereof, whether or not due and payable
and
whether or not disputed. Until the Closing Date, GCG shall continue to
provide
adequate reserves for the payment of expected tax liabilities in accordance
with
GAAP. GCG has not received any notice of a tax deficiency or assessment
of
additional taxes of any kind and, to the knowledge of GCG, there is no
threatened claim against GCG or any basis for any such claim, for payment
of any
additional federal, state, local or foreign taxes for any period prior
to the
date of this Agreement in excess of the accruals or reserves with respect
to any
such claim shown in the GCG Financial Statements (as defined in Section
4.2.6)
or
disclosed in the notes thereto. There are no waivers or agreements by
GCG for
the extension of time for the assessment of any taxes. No federal or
state
income, employment or property tax return is currently the subject of
an audit
or other governmental investigation or inquiry.
(b) Except
as
set forth in the Disclosure Memorandum, proper and accurate amounts have
been
withheld by GCG from its employees for all periods in full and complete
compliance with the tax withholding provisions of applicable federal,
state and
local tax laws, and proper and accurate federal, state and local tax
returns
have been filed by GCG for all periods for which returns were due with
respect
to withholding, social security and unemployment taxes, and the amounts
required
to be shown thereon to be due and payable have been paid in full.
4.2.6 Financial
Statements.
(a) GCG
has delivered to United true, correct and complete copies, including
notes, of
the financial statements of GCG for the years ended December 31, 2006,
2005,
2004 and 2003, including consolidated balance sheets, consolidated statements
of
earnings, consolidated statements of cash flows, consolidated statements
of
comprehensive income and consolidated statements of changes in shareholders’
equity (the financial statements for the years ended December 31, 2006,
2005,
2004 and 2003 being herein referred to as the “GCG
Financial Statements”).
All
of such financial statements have been prepared in accordance with GAAP,
and
present fairly the assets, liabilities and financial condition of GCG
as of the
dates indicated therein and the results of its operations for the respective
periods indicated therein.
(b) GCG
has
maintained a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance
with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity
with
GAAP and to maintain accountability for assets, (iii) access to assets
is
permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is
taken with
respect to any differences. No changes have been made to GCG’s internal control
over financial reporting, as defined in Rule 13a-15(f) and Rule 15d-15(f)
of the
Securities Exchange Act of 1934, as amended (the “1934
Act”),
since
December 31, 2006 that materially affected, or are reasonably likely
to
materially affect, its internal control over financial reporting.
4.2.7 Regulatory
Reports.
GCG has
made available to United for review and inspection the year-end and quarterly
Reports of Condition and Income filed by the Bank with the Federal Deposit
Insurance Corporation (the “FDIC”)
and
the Forms F.R. Y-6 and F.R. Y-9C filed
by
GCG with the Board of Governors of the Federal Reserve System (the “Federal
Reserve”)
for
each of the three (3) years ended December 31, 2006, 2005 and 2004, together
with all such other reports filed by GCG and the Bank for the same three-year
period with the Georgia Department of the Banking and Finance (the “Georgia
Department”),
if
any, and
with
any other applicable regulatory or governmental agencies (collectively,
the
“GCG
Reports”).
All
of the GCG Reports have been prepared in accordance with applicable rules
and
regulations applied on a basis consistent with prior periods and contain
all
information required to be presented therein in accordance with such
rules and
regulations.
A-8
4.2.8 Accounts. The
Disclosure Memorandum contains a list of each and every bank and other
institution in which GCG maintains an account or safety deposit box,
the account
numbers, and the names of all persons who are presently authorized to
draw
thereon, have access thereto or give instructions regarding distribution
of
funds or assets therein.
4.2.9 Notes
and Obligations.
(a)
Except as set forth in the Disclosure Memorandum or as provided for in
the loss
reserve described in subsection (b) below, all notes receivable or other
obligations owned by GCG or due to it shown in the GCG Financial Statements
and
any such notes receivable and obligations on the date hereof and on the
Closing
Date are and will be genuine, legal, valid and collectible obligations
of the
respective makers thereof and are not and will not be subject to any
offset or
counterclaim. Except as set forth in subsection (b) below, all such notes
and
obligations are evidenced by written agreements, true and correct copies
of
which will be made available to United for examination prior to the Closing
Date. All such notes and obligations were entered into by GCG in the
ordinary
course of its business and in compliance with all applicable laws and
regulations.
(b) GCG
has
established a loss reserve in the GCG Financial Statements and as of
the date of
this Agreement and will establish a loss reserve as of the Closing Date
which is
adequate to cover losses reasonably anticipated to result from such items
as the
insolvency or default of borrowers or obligors on such loans or obligations,
defects in the notes or evidences of obligation (including losses of
original
notes or instruments), offsets or counterclaims properly chargeable to
such
reserve, or the availability of legal or equitable defenses which might
preclude
or limit the ability of GCG to enforce the note or obligation, and the
representations set forth in subsection (a) above are qualified in their
entirety by the aggregate of such loss reserve. At the Closing Date,
the ratio
of the loss reserve to total loans outstanding at such time shall not
exceed the
ratio of the loan loss reserve to the total loans outstanding as reflected
in
the December 31, 2006 GCG Financial Statements.
4.2.10
Liabilities.
GCG has
no debt, liability or obligation of any kind required to be shown pursuant
to
GAAP on the consolidated balance sheet of GCG, whether accrued, absolute,
known
or unknown, contingent or otherwise, including, but not limited to: (a)
liability or obligation on account of any federal, state or local taxes
or
penalty, interest or fines with respect to such taxes; (b) liability
arising
from or by virtue of the distribution, delivery or other transfer or
disposition
of goods, personal property or services of any type, kind or variety;
(c)
unfunded liabilities with respect to the GCG 401(k) Plan or any other
any
pension, profit sharing or employee stock ownership plan, whether operated
by
GCG or any other entity covering employees of GCG; or (d) environmental
liabilities, except: (i) those reflected in the GCG Financial Statements;
and
(ii) as disclosed in the Disclosure Memorandum.
4.2.11
Absence
of Changes.
Except
as specifically provided for in this Agreement or specifically set forth
in the
Disclosure Memorandum, since December 31, 2006:
(a) there
has
been no change in the business, assets, liabilities, results of operations
or
financial condition of GCG, or in any of its relationships with customers,
employees, lessors or others, other than changes in the ordinary course
of
business, none of which individually or in the aggregate has had, or
which could
reasonably be expected to have, an adverse effect on such businesses
or
properties;
(b) there
has
been no damage, destruction or loss to the assets, properties or business
of
GCG, whether or not covered by insurance, which has had, or which may
reasonably
be expected to have, an adverse effect thereon;
A-9
(c) the
business of GCG has been operated in the ordinary course, and not
otherwise;
(d) the
properties and assets of GCG used in its business have been maintained
in good
order, repair and condition, ordinary wear and tear excepted;
(e) the
books, accounts and records of GCG have been maintained in the usual,
regular
and ordinary manner;
(f) there
has
been no declaration, setting aside or payment of any dividend or other
distribution on or in respect of the capital stock of GCG;
(g) there
has
been no increase in the compensation or in the rate of compensation or
commissions payable or to become payable by GCG to any director or executive
officer, or to any employee earning $50,000 or more per annum, or any
general
increase in the compensation or in the rate of compensation payable or
to become
payable to employees of GCG earning less than $50,000 per annum (“general
increase”
for
the
purpose hereof meaning any increase generally applicable to a class or
group of
employees, but not including increases granted to individual employees
for
merit, length of service, change in position or responsibility or other
reasons
applicable to specific employees and not generally to a class or group
thereof),
or any increase in any payment of or commitment to pay any bonus, profit
sharing
or other extraordinary compensation to any employee;
(h) there
has
been no change in the charter or bylaws of GCG or the Bank;
(i) there
has
been no labor dispute, unfair labor practice charge or employment discrimination
charge, nor, to the knowledge of GCG, any organizational effort by any
union, or
institution or threatened institution, of any effort, complaint or other
proceeding in connection therewith, involving GCG, or affecting its
operations;
(j) there
has
been no issuance, sale, repurchase, acquisition, or redemption by GCG
of any of
its capital stock except as set forth on the Disclosure Memorandum, bonds,
notes, debt or other securities, and there has been no modification or
amendment
of the rights of the holders of any outstanding capital stock, bonds,
notes,
debt or other securities thereof;
(k) there
has
been no mortgage, lien or other encumbrance or security interest (other
than
liens for current taxes not yet due or purchase money security interests
arising
in the ordinary course of business) created on or in (including without
limitation, any deposit for security) any asset or assets of GCG or assumed
by
it with respect to any asset or assets;
(l) there
has
been no indebtedness or other liability or obligation (whether absolute,
accrued, contingent or otherwise) incurred by GCG which would be required
to be
reflected on a balance sheet of GCG prepared as of the date hereof in
accordance
with GAAP, except as incurred in the ordinary course of business;
(m) no
obligation or liability of GCG has been discharged or satisfied, other
than in
the ordinary course of business;
(n) there
have been no sales, transfers or other dispositions of any asset or assets
of
GCG, other than sales in the ordinary course of business; and
A-10
(o) there
has
been no amendment, termination or waiver of any right of GCG under any
contract
or agreement or governmental license, permit or permission which has
had, or
could reasonably be expected to have, an adverse effect on its business
or
properties.
4.2.12
Litigation
and Proceedings.
Except
as set forth on the Disclosure Memorandum, there are no actions, decrees,
suits,
counterclaims, claims, proceedings or governmental actions or investigations,
pending or, to the knowledge of GCG, threatened against, by or affecting
GCG, or
any officer, director, employee or agent in such person’s capacity as an
officer, director, employee or agent of GCG or relating to the business
or
affairs of GCG, in any court or before any arbitrator or governmental
agency,
and no judgment, award, order or decree of any nature has been rendered
against
or with respect thereto by any agency, arbitrator, court, commission
or other
authority, nor does GCG have, to the knowledge of GCG, any unasserted
contingent
liabilities which are reasonably likely to have an adverse effect on
its assets
or on the operation of its businesses or which could reasonably be expected
to
prevent or impede the consummation of the transactions contemplated by
this
Agreement.
4.2.13
Proxy
Materials. Neither
the GCG Proxy Materials nor other materials furnished by GCG to the GCG
shareholders in connection with the transactions contemplated by this
Agreement
or the Merger Agreement, or in any amendments thereof or supplements
thereto,
will, at the times such documents are distributed to the holders of shares
of
GCG Stock and through the acquisition of shares of GCG Stock by United
pursuant
to the Merger, contain with respect to GCG any untrue statement of a
material
fact or omit to state any information required to be stated therein or
omit to
state any material fact necessary in order to make the statements therein,
in
light of the circumstances under which they are made, not
misleading.
4.2.14
No
Adverse Change.
Since
December 31, 2005, there has not been any change in the condition of GCG, any
contracts entered into by GCG, or other changes in the operations of
GCG which,
in any case, has had, or is reasonably likely to have, an adverse effect
on GCG
on a consolidated basis taken as a whole.
4.3 Business
Operations.
4.3.1
Customers.
To the
knowledge of GCG, there are no presently existing facts which could reasonably
be expected to result in the loss of any borrower or depositor or in
GCG’s
inability to collect amounts due therefrom or to return funds deposited
thereby,
except as set forth on the Disclosure Memorandum.
4.3.2 Permits;
Compliance with Law.
(a) GCG
has all permits, licenses, approvals, authorizations and registrations
under all
federal, state, local and foreign laws required for GCG to carry on its
business
as presently conducted, and all of such permits, licenses, approvals,
authorizations and registrations are in full force and effect, and no
suspension
or cancellation of any of them is pending or, to the knowledge of GCG,
threatened.
(b) GCG
has
complied with all laws, regulations, ordinances, rules, and orders applicable
to
it or its business, except for any non-compliance which could not reasonably
be
expected to have a material adverse effect on GCG. The Disclosure Memorandum
contains a list of any known violations of such laws, regulations, ordinances,
rules or orders by any present officer, director, or employee of GCG,
and which
resulted in any order, proceeding, judgment or decree which would be
required to
be disclosed pursuant to Item 401(f) of Regulation S-K promulgated by
the SEC.
No past violation of any such law, regulation, ordinance, rule or order
has
occurred which could impair the right or ability of GCG to conduct its
business.
A-11
(c) Except
as
set forth in the Disclosure Memorandum, no notice, inquiry or warning
from any
governmental authority with respect to any failure or alleged or possible
failure of GCG to comply in any respect with any law, regulation, ordinance,
rule or order has been received, nor, to the knowledge of GCG, is any
such
notice or warning proposed or threatened.
4.3.3 Environmental.
(a)
Except as set forth in the Disclosure Memorandum:
(i)
GCG
has
not caused or permitted the generation, manufacture, use, or handling
or the
release or presence of, any Hazardous Material (as defined below) on,
in, under
or from any properties or facilities currently owned or leased by GCG
or
adjacent to any properties so owned or leased that requires notification,
investigation or remediation pursuant to any environmental law;
(ii)
to
the
knowledge of GCG, there are no non-compliance orders, warning letters
or notices
of violations, actions, suits or other claims asserted or threatened
against GCG
or administrative or judicial investigations arising from or relating
to the
environmental condition of any property currently owned or leased by
GCG or the
generation, manufacture, use, or handling or the release or presence
of, any
Hazardous Material at any property currently owned or leased by
GCG;
(iii)
GCG
has
complied in all material respects with, and has kept all records and
made all
filings or reports required by, and is otherwise in compliance with all
applicable federal, state and local laws, regulations, orders, permits
and
licenses relating to the generation, treatment, manufacture, use, handling,
release or presence of any Hazardous Material on, in, under or from any
properties or facilities currently owned or leased by GCG; and
(iv)
to
the
knowledge of GCG, the improvements on the property are free from the
presence or
growth of mold, fungi, spores or bacteria that could be reasonably expected
to
cause property damage or personal injury, and the improvements on the
property
are, and have been, reasonably free of conditions that could lead to
the growth
or presence of mold, fungi, spores or bacteria, including, without limitation,
air conditioner malfunction, water intrusion, water leaks, sewage backflows
and
construction defects.
(v) to
the
knowledge of GCG, there are not now nor have there ever been any underground
storage tanks for the storage of Hazardous Material on, in or under any
properties or facilities currently owned or leased by GCG.
(b) Neither
GCG nor, to the knowledge of GCG, any of its officers, directors, employees
or
agents, in the course of such individual’s employment by GCG, has given advice
with respect to, or participated in any respect in, the management or
operation
of any entity or concern regarding the generation, storage, handling,
disposal,
transfer, production, use or processing of Hazardous Material.
(c) To
the
knowledge of GCG, except as set forth in the GCG Disclosure Memorandum,
GCG has
not foreclosed on any property on which there is a threatened release
of any
Hazardous Material or on which there has been a release and remediation
has not
been completed to the extent required by environmental laws.
A-12
(d) Except
as
set forth in the Disclosure Memorandum, neither GCG nor any of its executive
officers or directors is aware of, has been told of, or has observed,
the
presence of any Hazardous Material on, in, under, or around property
on which
GCG holds a legal or security interest, in violation of, or creating
a liability
under, federal, state, or local environmental statutes, regulations,
or
ordinances.
(e) GCG
has
delivered to United true, correct and complete copies of all reports
or tests
with respect to compliance of any of the properties or facilities currently
owned or operated by GCG with any environmental laws or the presence
of
Hazardous Materials that were prepared for GCG or prepared for other
persons and
are in the possession, custody or control of GCG.
(f) The
term
“Hazardous
Material”
means
any substance whose nature, use, manufacture, or effect render it subject
to
federal, state or local regulation governing that material’s investigation,
remediation or removal as a threat or potential threat to human health
or the
environment and includes, without limitation, any substance within the
meaning
of “hazardous
substances”
under
the Comprehensive Environmental Response, Compensation and Liability
Act, 42
U.S.C. § 9601, “hazardous
wastes”
within
the meaning of the Resource Conservation and Recovery Act, 42 U.S.C.
§ 6921, any
petroleum product, including any fraction of petroleum, or any friable
asbestos
containing materials. However, the term “Hazardous
Material”
shall
not include those substances which are normally and reasonably used or
present
in connection with the development, occupancy or operation of office
buildings
(such as cleaning fluids, and supplies normally used in the day to day
operation
of business offices) in quantities reasonable in relation to such use
and in
compliance with applicable law or such that may be naturally occurring
in any
ambient air, surface water, ground water, land surface or subsurface
strata.
4.3.4 Insurance.
The
Disclosure Memorandum contains a complete list and description (including
the
expiration date, premium amount and coverage thereunder) of all policies
of
insurance and bonds presently maintained by, or providing coverage for,
GCG or
through GCG for any of its officers, directors and employees, all of
which are,
and will be maintained through the Closing Date, in full force and effect,
together with a complete list of all pending claims under any of such
policies
or bonds. All material terms, obligations and provisions of each of such
policies and bonds have been complied with, all premiums due thereon
have been
paid, and no notice of cancellation with respect thereto has been received.
Except as set forth in the Disclosure Memorandum, such policies and bonds
provide coverage to insure the properties and businesses of GCG and the
activities of its officers, directors and employees against such risks
and in
such amounts as are customary. GCG will not as of the Closing Date have
any
liability for premiums or for retrospective premium adjustments for any
period
prior to the Closing Date. GCG has heretofore made available to United
a true,
correct and complete copy of each insurance policy and bond in effect
since
January 1, 2003 with respect to the business and affairs of GCG.
4.4 Properties
and Assets.
4.4.1 Contracts
and Commitments.
The
Disclosure Memorandum contains a list identifying and briefly describing
all
written contracts, purchase orders, agreements, security deeds, guaranties
or
commitments (other than loans, loan commitments and deposits made by
or with GCG
in the ordinary course of business), to which GCG is a party or by which
it may
be bound involving the payment or receipt, actual or contingent, of more
than
$25,000 or having a term or requiring performance over a period of more
than
ninety (90) days. Each such contract, agreement, guaranty and commitment
of GCG
is in full force and effect and is valid and enforceable in accordance
with its
terms, and constitutes a legal and binding obligation of the respective
parties
thereto and is not the subject of any notice of default, termination,
partial
termination or of any ongoing, pending, completed or threatened
A-13
investigation,
inquiry or other proceeding or action that may give rise to any notice
of
default, termination or partial termination. GCG has complied with the
provisions of such contracts, agreements, guaranties and commitments.
A true and
complete copy of each such document has been or will be made available
to United
for examination.
4.4.2 Licenses;
Intellectual Property.
GCG has
all patents, trademarks, trade names, service marks, copyrights, trade
secrets
and know-how reasonably necessary to conduct its business as presently
conducted
and, except as described in the Disclosure Memorandum, GCG is not a party,
either as licensor or licensee, to any agreement for any patent, process,
trademark, service mark, trade name, copyright, trade secret or other
confidential information and there are no rights of third parties with
respect
to any trademark, service mark, trade secrets, confidential information,
trade
name, patent, patent application, copyright, invention, device or process
owned
or used by GCG or presently expected to be used by it in the future.
All
patents, copyrights, trademarks, service marks, trade names, and applications
therefor or registrations thereof, owned or used by GCG, are listed in
the
Disclosure Memorandum. GCG has complied with all applicable laws relating
to the
filing or registration of “fictitious
names”
or
trade names.
4.4.3 Personal
Property.
GCG has
good and marketable title to all of its personal property, tangible and
intangible, reflected in the most recent GCG Financial Statements (except
as
since sold or otherwise disposed of by it in the ordinary course of business),
free and clear of all encumbrances, liens or charges of any kind or character,
except: (a) those referred to in the notes to the GCG Financial Statements
as
securing specified liabilities (with respect to which no default exists
or, to
the knowledge of GCG, is claimed to exist); (b) those described in the
Disclosure Memorandum; and (c) liens for taxes not due and payable.
4.4.4 GCG
Leases.
(a) All
leases (the “GCG
Leases”)
pursuant to which GCG is lessor or lessee of any real or personal property
(such
property, the “Leased
Property”)
are
valid and enforceable in accordance with their terms; there is not under
any of
the GCG Leases, to the knowledge of GCG, any default or any claimed default
by
GCG, or event of default or event which with notice or lapse of time,
or both,
would constitute a default by GCG and in respect of which adequate steps
have
not been taken to prevent a default on its part from occurring.
(b) The
copies of the GCG Leases heretofore furnished or made available by GCG
to United
are true, correct and complete, and the GCG Leases have not been modified
in any
respect other than pursuant to amendments, copies of which have been
concurrently delivered or made available to United, and are in full force
and
effect in accordance with their terms.
(c) Except
as
set forth in the Disclosure Memorandum, there are no contractual obligations,
agreements in principle or present plans for GCG to enter into new leases
of
real property or to renew or amend existing GCG Leases prior to the Closing
Date.
4.4.5 Real
Property.
(a) GCG
does not own any interest in any real property (other than as lessee)
except as
set forth in the Disclosure Memorandum (such properties being referred
to herein
as “GCG
Realty”).
Except as disclosed in the Disclosure Memorandum, GCG has good title
to the GCG
Realty and the titles to the GCG Realty are covered by title insurance
policies
providing coverage in the amount of the original purchase price, true,
correct
and complete copies of which have been or will be furnished to United
with the
Disclosure Memorandum. GCG has not encumbered the GCG Realty since the
effective
dates of the respective title insurance policies.
A-14
(b) Except
as
set forth in the Disclosure Memorandum, the interests of GCG in the GCG
Realty
and in and under each of the GCG Leases are free and clear of any and
all liens
and encumbrances and are subject to no present claim, contest, dispute,
action
or, to the knowledge of GCG, threatened action at law or in equity.
(c) The
present and past use and operations of, and improvements upon, the GCG
Realty
and all real properties included in the Leased Properties (the “GCG
Leased Real Properties”)
are in
compliance with all applicable building, fire, zoning and other applicable
laws,
ordinances and regulations and with all deed restrictions of record,
no notice
of any violation or alleged violation thereof has been received, and
there are
no proposed changes therein that would affect the GCG Realty, the GCG
Leased
Real Properties or their uses.
(d) Except
as
set forth in the Disclosure Memorandum, no rent has been paid in advance
and no
security deposit has been paid by, nor is any brokerage commission payable
by or
to, GCG with respect to any Lease pursuant to which it is lessor or
lessee.
(e) GCG
is
not aware of any proposed or pending change in the zoning of, or of any
proposed
or pending condemnation proceeding with respect to, any of the GCG Realty
or the
GCG Leased Real Properties which may adversely affect the GCG Realty
or the GCG
Leased Real Properties or the current or currently contemplated use
thereof.
(f) The
buildings and structures owned, leased or used by GCG are, taken as a
whole, in
good operating order (except for ordinary wear and tear), usable in the
ordinary
course of business, and are sufficient and adequate to carry on the business
and
affairs of GCG.
4.5 Employees
and Benefits.
4.5.1 Directors
or Officers of Other Corporations.
Except
as set forth in the Disclosure Memorandum, no director, officer, or employee
of
GCG serves, or in the past five (5) years has served, as a director or
officer
of any other corporation on behalf of or as a designee of GCG.
4.5.2 Employee
Benefits. (a) Except
as
set forth in the Disclosure Memorandum, (i) GCG does not provide and
is not
obligated to provide, directly or indirectly, any benefits for employees,
including, without limitation, any pension, profit sharing, stock option,
retirement, bonus, hospitalization, medical, insurance, vacation or other
employee benefits under any practice, agreement or understanding, and
(ii) GCG
does not have any employment, severance, change in control or similar
agreements
with any of its employees.
(b) The
Disclosure Memorandum lists separately any employee benefit plan within
the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974,
as amended (“ERISA”),
sponsored, maintained or contributed to by GCG (collectively, “ERISA
Plans”).
True,
correct and complete copies of all ERISA Plans and, to the extent applicable,
all related trust agreements, insurance contracts, summary plan descriptions,
Internal Revenue Service determination letters and filings, the past
three (3)
years of actuarial reports and valuations, annual reports and Form 5500
filings
(including attachments), and any other related documents requested by
United or
its counsel have been, or prior to the Closing Date will be, made available
to
United.
(c) GCG
is
not currently and has never been in the past required to contribute to
a
multiemployer plan as defined in Section 3(37)(A) of ERISA. GCG does
not
maintain or contribute to, nor within the past six (6) years has it maintained
or contributed to, an employee pension benefit plan as defined in Section
3(2)
of ERISA that is or was subject to Title IV of ERISA.
A-15
(d) Each
ERISA Plan has been operated and administered in accordance with, and
has been
amended to comply in all material respects with (unless such amendment
is not
yet required), all applicable laws, rules and regulations, including,
without
limitation, ERISA, the Internal Revenue Code (the “Code”),
and
the regulations issued under ERISA and the Code. With respect to each
ERISA
Plan, other than routine claims for benefits submitted in the ordinary
course of
the benefits process, no litigation or administrative or other proceeding
is
pending or, to the knowledge of GCG, threatened involving such ERISA
Plan or any
of its fiduciaries. With respect to each ERISA Plan, neither GCG nor
any of its
directors, officers, employees or agents, nor any “party
in interest”
or
“disqualified
person”
(as
such terms are defined in Section 3(14) of ERISA and Section 4975 of
the Code)
has been engaged in or been a party to any transaction relating to the
ERISA
Plan which would constitute a breach of fiduciary duty under ERISA or
a
“prohibited
transaction”
(as
such term is defined in Section 406 of ERISA or Section 4975 of the Code),
unless such transaction is specifically permitted under Sections 407
or 408 of
ERISA, Section 4975 of the Code or a class or administrative exemption
issued by
the Department of Labor. Each ERISA Plan that is a group health plan
within the
meaning of Section 607(l) of ERISA and Section 4980B of the Code is in
material
compliance with the continuation coverage requirements of Section 501
of ERISA
and Section 4980B of the Code.
(e) Of
the
ERISA Plans, only the GCG 401(k) Plan is an “employee
pension benefit plan”
within
the meaning of Section 3(2) of ERISA. With respect to the GCG 401(k)
Plan,
except as set forth on the Disclosure Memorandum: (i) the GCG 401(k)
Plan
constitutes a qualified plan within the meaning of Section 401(a) of
the Code
and the trust is exempt from federal income tax under Section 501(a)
of the
Code; (ii) the GCG 401(k) Plan has been maintained and operated in compliance
in
all material respects with all applicable provisions of Sections 409
and 4975 of
the Code and Sections 406 and 408 of ERISA and the regulations and rulings
thereunder; (iii) all contributions required by such plan have been made
or will
be made on a timely basis; and (iv) no termination, partial termination
or
discontinuance of contributions has occurred without a determination
by the IRS
that such action does not affect the tax-qualified status of such
plan.
(f) As
of the
Closing Date, with respect to each ERISA Plan, GCG will have provided
adequate
reserves, or insurance or qualified trust funds, to provide for all payments
and
contributions required, or reasonably expected to be required, to be
made under
the provisions of such ERISA Plan or required to be made under applicable
laws,
rules and regulations, with respect to any period prior to the Closing
Date to
the extent reserves are required under GAAP, based on an actuarial valuation
satisfactory to the actuaries of GCG representing a projection of claims
expected to be incurred under such ERISA Plan.
(g) Except
as
disclosed on the Disclosure Memorandum, GCG does not provide and has
no
obligation to provide benefits, including, without limitation, death,
health or
medical benefits (whether or not insured) with respect to current or
former
employees of GCG beyond their retirement or other termination of service
with
GCG other than: (i) coverage mandated by applicable Law; (ii) benefits
under the
GCG 401(k) Plan; or (iii) benefits the full cost of which is borne by
the
current or former employee or his beneficiary.
(h) Except
as
set forth in the Disclosure Memorandum, neither this Agreement nor any
transaction contemplated hereby will: (i) entitle any current or former
employee, officer or director of GCG to severance pay, unemployment compensation
or any similar or other payment, (ii) accelerate the time of payment
or vesting
of, or increase the amount of compensation or benefits due any such employee,
officer or director, or (iii) cause the payment of any “excess parachute
payment” (as defined in Section 280G of the Code).
A-16
(i) Each
plan
or agreement listed pursuant to Section
4.5.2
that is
subject to Section 409A of the Code has been administered and operated
in
compliance, in all material respects, with Section 409A and the regulations
and
rulings thereunder.
4.5.3 Employment
and Labor Matters.
Except
as described in the Disclosure Memorandum, GCG is not, and has not been,
a party
to any collective bargaining agreement or agreement of any kind with
any union
or labor organization or to any agreement with any of its employees which
is not
terminable at will or upon ninety (90) days notice at the election of,
and
without cost or penalty to, GCG. GCG has not received at any time in
the past
five (5) years, any demand for recognition from any union, and no attempt
has
been made, or will have been made as of the Closing Date, to organize
any of its
employees. GCG has complied in all material respects with all obligations
under
the National Labor Relations Act, as amended, the Age Discrimination
in
Employment Act, as amended, and all other federal, state and local labor
laws
and regulations applicable to employees. Except as described in the Disclosure
Memorandum, (i) there are no unfair labor practice charges pending or
threatened
against GCG, and (ii) there are, and in the past three (3) years there
have
been, no charges, complaints, claims or proceedings, pending, threatened
against, or involving, as the case may be, GCG with respect to any alleged
violation of any wage and hour laws, age discrimination act laws, employment
discrimination laws or any other claims arising out of any employment
relationship as to any of GCG’s employees or as to any person seeking employment
therefrom, and no such violations exist.
4.5.4 Related
Party Transactions.
Except
for: (a) loans and extensions of credit made on substantially the same
terms,
including interest rates and collateral, as those prevailing at the time
for
comparable transactions by GCG with other persons who are not affiliated
with
GCG, and which do not involve more than the normal risk of repayment
or present
other unfavorable features; (b) deposits, all of which are on terms and
conditions identical to those made available to all customers of GCG
at the time
such deposits were entered into; and (c) transactions specifically described
in
the Disclosure Memorandum, there are no contracts with or commitments
to present
or former five percent (5%) or greater shareholders, directors, officers,
or
employees involving the expenditure of more than $60,000 as to any one
individual, including with respect to any business directly or indirectly
controlled by any such person, or $100,000 for all such contracts or
commitments
in the aggregate for all such individuals (other than contracts or commitments
relating to services to be performed by any officer, director or employee
as a
currently-employed employee of GCG).
4.6 Other
Matters.
4.6.1 Approvals,
Consents and Filings.
Except
for the Federal Reserve, the FDIC and the Georgia Department, or as set
forth in
the Disclosure Memorandum, neither the execution and delivery of this
Agreement
nor the consummation of the transactions contemplated hereby or thereby
will:
(a) require any consent, approval, authorization or permit of, or filing
with or
notification to, any governmental or regulatory authority; or (b) violate
any
order, writ, injunction, decree, statute, rule or regulation applicable
to GCG,
or any of GCG’s assets.
4.6.
Default.
(a)
Except for those consents described in or set forth pursuant to Section
4.6.1
above
and as described in the Disclosure Memorandum, neither the execution
of this
Agreement nor consummation of the transactions contemplated herein:
(i)
constitutes
a breach of or default under any contract or commitment to which GCG
is a party
or by which any of GCG’s properties or assets are bound;
A-17
(ii)
does
or
will result in the creation or imposition of any security interest, lien,
encumbrance, charge, equity or restriction of any nature whatsoever in
favor of
any third party upon any assets of GCG; or
(iii)
constitutes
an event permitting termination of any agreement or the acceleration
of any
indebtedness of GCG.
(b) GCG
is
not in violation of its charter documents or bylaws or in default under
any term
or provision of any material security deed, mortgage, indenture or security
agreement, or of any other material contract or instrument to which GCG
is a
party or by which it or any of its material properties is bound.
4.6.3 Representations
and Warranties.
No
representation or warranty contained in this Article
IV
or in
any written statement delivered by or at the direction of GCG pursuant
hereto or
in connection with the transactions contemplated hereby contains or will
contain
any untrue statement, nor will such representations and warranties taken
as a
whole omit any statement necessary in order to make any statement not
misleading. Copies of all documents that have been or will be furnished
to
United in connection with this Agreement or pursuant hereto are or shall
be
true, correct and complete.
4.6.4 Absence
of Brokers.
Except
for Burke Capital Group, L.L.C. (“Burke”),
which
has provided financial advisory services to GCG, no broker, finder or
other
financial consultant has acted on GCG’s behalf in connection with this Agreement
or the transactions contemplated hereby.
4.6.5 Opinions.
Prior
to
the execution of this Agreement, GCG has received an opinion from Burke
to the
effect that, as of the date of such opinion and based on and subject
to the
matters set forth in such opinion, the Merger Consideration is fair to
the
shareholders of GCG from a financial point of view. Such opinion has
not been
amended or rescinded as of the date of this Agreement. GCG has provided
United
with a true and complete copy of such opinion for informational
purposes.
ARTICLE
V
CONDUCT
OF BUSINESS OF GCG PENDING CLOSING
Except
as
expressly otherwise provided herein or in the Disclosure Memorandum,
GCG
covenants and agrees that, without the prior written consent of United
between
the date hereof and the Closing Date:
5.1 Conduct
of Business.
GCG
will conduct its business only in the ordinary course, without the creation
of
any indebtedness for borrowed money (other than deposit and similar accounts
and
customary credit arrangements between banks in the ordinary course of
business).
5.2 Maintenance
of Properties.
GCG
will maintain its properties and assets in good operating condition,
ordinary
wear and tear excepted.
5.3 Insurance.
GCG
will maintain and keep in full force and effect all of the insurance
referred to
in Section
4.3.4
hereof
or other insurance equivalent thereto.
A-18
5.4 Capital
Structure.
No
change will be made in the authorized or issued capital stock or other
securities of GCG, and GCG will not issue or grant any right or option
to
purchase or otherwise acquire any of the capital stock or other securities
of
GCG. This Section
5.4
prohibits, without limitation, the issuance or sale by GCG of any GCG
Stock to
the GCG 401(k) Plan.
5.5 Dividends.
No
dividend, distribution or payment will be declared or made in respect
to the GCG
Stock other than cash dividends payable prior to Closing not to exceed,
in the
aggregate, $3.80 per share of GCG Stock to record holders as of February
5,
2007, and GCG will not, directly or indirectly, redeem, purchase or otherwise
acquire any of its capital stock.
5.6 Amendment
of Articles of Incorporation or Bylaws; Corporate
Existence.
GCG
will not amend its articles of incorporation or bylaws, and GCG will
maintain
its corporate existence and powers.
5.7 No
Acquisitions.
GCG
shall not, without the express written consent of United, acquire by
merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or
by any other manner, any business or any corporation, partnership, association
or other entity or division thereof or otherwise acquire or agree to
acquire any
assets which are material, individually or in the aggregate, to
GCG.
5.8 No
Real Estate Acquisitions or Dispositions.
GCG
will not sell, mortgage, lease, buy or otherwise acquire, transfer or
dispose of
any real property or interest therein (except for sales in the ordinary
course
of business) and GCG will not, except in the ordinary course of business,
sell
or transfer, mortgage, pledge or subject to any lien, charge or other
encumbrance any other tangible or intangible asset.
5.9 Banking
Arrangements.
No
change will be made in the banking and safe deposit arrangements referred
to in
Section
4.2.8
hereof.
5.10
Contracts.
GCG
will not, without the express written consent of United, enter into any,
renew
or cancel or terminate any contract of the kind described in Section
4.4.1
hereof.
5.11
Books
and Records.
The
books and records of GCG will be maintained in the usual, regular and
ordinary
course.
5.12
Advice
of Changes.
GCG
shall promptly advise United orally and in writing of any change or event
having, or which could reasonably be expected to have, a material adverse
effect
on the assets, liabilities, business, operations or financial condition
of
GCG.
5.13
Reports.
GCG
shall file all reports required to be filed with any regulatory or governmental
agencies between the date of this Agreement and the Closing Date and
shall
deliver to United copies of all such reports promptly after the same
are
filed.
5.14
Benefit
Plans and Programs; Severance or Termination Payments.
GCG
shall not adopt any new benefit plans or programs or amend any existing
benefit
plans or programs, the effect of which is to increase benefits to employees
or
the liabilities of GCG or its successors. GCG shall not grant or institute
any
new severance pay, termination pay, retention pay or transaction or deal
bonus
or arrangement.
A-19
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF UNITED
As
an
inducement to GCG to enter into this Agreement and to consummate the
transactions contemplated hereby, United represents, warrants, covenants
and
agrees as follows:
6.1 Corporate
Status. United
is
a corporation duly organized, validly existing and in good standing under
the
laws of the State of Georgia. United is entitled to own or lease its
properties
and to carry on its business in the places where such properties are
now owned,
leased or operated and such business is now conducted.
6.2 Authority.
Subject
to the required regulatory approvals and notice filing, as stated in
Section
4.6.1,
and the
approval of GCG shareholders, the execution, delivery and performance
of this
Agreement and the other transactions contemplated or required in connection
herewith will not, with or without the giving of notice or the passage
of time,
or both:
(a) violate
any provision of federal or state law applicable to United, the violation
of
which could be reasonably expected to have an adverse effect on the business,
operations, properties, assets, financial condition or prospects of
United;
(b) violate
any provision of the articles of incorporation or bylaws of United;
(c) conflict
with or result in a breach of any provision of, or termination of, or
constitute
a default under any instrument, license, agreement, or commitment to
which
United is a party, which, singly or in the aggregate, could reasonably
be
expected to have an adverse effect on the business, operations, properties,
assets, financial condition or prospects of United; or
(d) constitute
a violation of any order, judgment or decree to which United is a party,
or by
which United or any of its assets or properties are bound.
Assuming
this Agreement constitutes the valid and binding obligation of GCG, this
Agreement constitutes the valid and binding obligation of United, and
is
enforceable in accordance with its terms, except as limited by laws affecting
creditors’ rights generally and by the discretion of courts to compel specific
performance.
6.3 Capital
Structure.
(a) As
of the date of this Agreement, United has authorized capital stock consisting
solely of 100,000,000 shares of common stock, par value $1.00 per share,
of
which 42,990,645 shares are issued and outstanding as of the date hereof,
exclusive of 33,834 shares issuable to participants in United’s Deferred
Compensation Plan and 1,436,362 shares reserved for issuance upon the
exercise
of outstanding options and vesting of restricted stock (the “United
Stock Options and Awards”)
and
10,000,000 shares of preferred stock, par value $1.00 per share (the
“Preferred
Stock”),
of
which 32,200 shares are issued and outstanding as of the date hereof.
All of the
issued and outstanding shares of United Stock are duly and validly issued,
fully
paid and nonassessable and were offered, issued and sold in compliance
with all
applicable federal or state securities laws. No person has any right
of
rescission or claim for damages under federal or state securities laws
with
respect to the issuance of shares of United Stock previously issued.
None of the
shares of United Stock have been issued in violation of the preemptive
or other
rights of its shareholders.
(b) Except
for the United Stock Options and Awards, United does not have outstanding
any
securities which are either by their terms or by contract convertible
or
exchangeable into United Stock or Preferred Stock, or any other securities
or
debt, of United, or any preemptive or similar
A-20
rights
to
subscribe for or to purchase, or any options or warrants or agreements
or
understandings for the purchase or the issuance (contingent or otherwise)
of, or
any calls, commitments or claims of any character relating to, its capital
stock
or securities convertible into its capital stock. United is not subject
to any
obligation (contingent or otherwise) to repurchase or otherwise acquire
or
retire, or to register, any shares of its capital stock.
(c) There
is
no material agreement, arrangement or understanding to which United is
a party
restricting or otherwise relating to the transfer of any shares of United
Stock
other than restrictions required by applicable federal and state securities
laws.
(d) All
shares of common stock or other capital stock, or any other securities
or debt,
of United, which have been purchased or redeemed by United have been
purchased
or redeemed in accordance with all applicable federal, state and local
laws,
rules, and regulations, including, without limitation, all federal and
state
securities laws and rules and regulations of any securities exchange
or system
on which such stock, securities or debt are, or at such time were, traded,
and
no such purchase or redemption has resulted or will, with the giving
of notice
or lapse of time, or both, result in a default or acceleration of the
maturity
of, or otherwise modify, any agreement, note, mortgage, bond, security
agreement, loan agreement or other contract or commitment of
United.
6.4 Disclosure
Reports.
United
has a class of securities registered pursuant to Section 12(g) of the
1934 Act.
United’s (a) Annual Report on Form 10-K for its fiscal year ended December 31,
2005; (b) Proxy Statement for its 2006 Annual Meeting of Shareholders;
(c)
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006, June
30, 2006 and September 30, 2006; and (d) other reports filed by United
pursuant
to Sections 13(a) or 15(d) of the Exchange Act since December 31, 2005
(collectively, the “United
SEC Reports”),
taken
together, correctly describe, among other things, the business, operations
and
principal properties of United in accordance with the requirements of
the
applicable report forms of the SEC. As of the respective dates of filing
(or, if
amended or superseded by a filing prior to the date of this Agreement,
then on
the date of such amended or superceded filing), none of the United SEC
Reports
contained any untrue statement of a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made,
not misleading.
6.5 No
Adverse Change.
Since
the date of its latest published financial statements included in the
United SEC
Reports, there has not been any change in the condition of United or
other
changes in the operations of United which, in any case, have had, or
are
reasonably likely to have, an adverse effect on United on a consolidated
basis
taken as a whole.
6.6 Representations
and Warranties.
No
representation or warranty contained in this Article
VI
or in
any written statement delivered by or at the direction of United pursuant
hereto
or in connection with the transactions contemplated hereby contains or
will
contain any untrue statement, nor will such representations and warranties
taken
as a whole omit any statement necessary in order to make any statement
not
misleading. Copies of all documents that have been or will be furnished
to GCG
in connection with this Agreement or pursuant hereto are or shall be
true,
correct and complete.
6.7 Proxy
Materials.
Neither
the GCG Proxy Materials nor other materials furnished by United to the
GCG
shareholders in connection with the transactions contemplated by this
Agreement
or the Merger Agreement, or in any amendments thereof or supplements
thereto,
will, at the times such documents are distributed to the holders of shares
of
GCG Stock and through the acquisition of shares of United Stock by GCG
pursuant
to the Merger, contain with respect to United any untrue statement of
a material
fact or omit to state any information required to be stated therein or
omit to
state any material fact necessary in order to make the statements therein,
in
light of the circumstances under which they are made, not
misleading.
A-21
ARTICLE
VII
CONDITIONS
TO OBLIGATIONS OF UNITED
All
of
the obligations of United under this Agreement are subject to the fulfillment
prior to or at the Closing Date of each of the following conditions,
any one or
more of which may be waived by United:
7.1 Veracity
of Representations and Warranties.
The
representations and warranties of GCG contained herein or in any certificate,
schedule or other document delivered pursuant to the provisions hereof,
or in
connection herewith, shall be true as of the date when made and shall
be deemed
to be made again at and as of the Closing Date and shall be true at and
as of
such time, except as a result of changes or events expressly permitted
or
contemplated herein or where the failure to be so, either individually
or in the
aggregate, is not reasonably likely to have a material adverse effect
on the
business, operations or financial condition of GCG on a consolidated
basis.
7.2 Performance
of Agreements.
GCG
shall have performed and complied with all agreements and conditions
required by
this Agreement to be performed or complied with by it prior to or on
the Closing
Date.
7.3 Compliance
by GCG Executive Officers and Directors.
The
directors and executive officers of GCG shall have complied in full with
the
requirements of Section
3.9
hereof.
7.4 Certificates,
Resolutions, Opinion.
GCG
shall have delivered to United:
(a) a
certificate executed by the Chief Executive Officer or President of GCG,
dated
as of the Closing Date, and certifying in such detail as United may reasonably
request to the fulfillment of the conditions specified in Sections
7.1
and
7.2
hereof;
(b) a
certificate executed by the Secretary of GCG, dated as of the Closing
Date,
certifying and attesting to the: (i) articles of incorporation of GCG;
(ii)
bylaws of GCG; and (iii) duly adopted resolutions of the Board of Directors
and
shareholders of GCG (1) authorizing and approving the execution of this
Agreement and the Merger Agreement and the consummation of the transactions
contemplated herein and therein in accordance with their respective terms,
and
(2) authorizing all other necessary and proper corporate action to enable
GCG to
comply with the terms hereof and thereof;
(c) certificates
executed by the Secretary or equivalent officer of the Bank, dated as
of the
Closing Date, certifying and attesting to the: (i) articles of incorporation
of
the Bank; (ii) bylaws of the Bank; and (iii) duly adopted resolutions
of the
Board of Directors and sole shareholder of the Bank (1) authorizing and
approving the execution of the Bank Merger Agreement and the consummation
of the
transactions contemplated herein and therein, and (2) authorizing all
other
necessary and proper corporate action to enable the bank to comply with
the
terms hereof and thereof;
(d) a
certificate executed by the Chief Executive Officer or President of GCG,
dated
as of the Closing Date, enabling Kilpatrick Stockton LLP to provide the
opinion
referred to in Section
8.3(d);
(e) certificates
of the valid existence of GCG and the Bank under the laws of the State
of
Georgia, executed by the Secretary of State of Georgia, and dated not
more than
ten (10) business days prior to the Closing Date;
A-22
(f) certificates
from the appropriate public officials of the State of Georgia, dated
not more
than ten (10) business days prior to the Closing Date, certifying that
GCG has
filed all corporate tax returns required by the laws of such state and
has paid
all taxes shown thereon to be due; and
(g) an
opinion of Powell Goldstein LLP, counsel for GCG, dated the Closing Date,
in the
form attached hereto as Exhibit
D.
7.5 Accountants’
Letter.
United
shall have received a letter from Mauldin & Jenkins, LLC, dated the Closing
Date, to the effect that: At the request of GCG they have carried out
procedures
to a specified date not more than five (5) business days prior to the
Closing
Date, which procedures did not constitute an examination in accordance
with
generally accepted auditing standards, of the financial statements of
GCG, as
follows:
(a) read
the
unaudited consolidated balance sheets, consolidated statements of earnings,
consolidated statements of cash flows, consolidated statements of comprehensive
income and consolidated statements of changes in shareholders’ equity, of GCG
from December 31, 2005 through the date of the most recent monthly financial
statements available in the ordinary course of business;
(b) read
the
minutes of the meetings of shareholders and Board of Directors of GCG
from
December 31, 2005 to said date not more than five (5) business days prior
to the Closing Date; and
(c) consulted
with certain officers and employees of GCG responsible for financial
and
accounting matters and, based on such procedures, nothing has come to
their
attention which would cause them to believe that:
(i)
such
unaudited financial statements are not fairly presented in conformity
with
GAAP;
(ii)
as
of
said date not more than five (5) business days prior to the Closing Date,
the
shareholders’ equity, long-term debt, reserve for possible loan losses and total
assets of GCG, in each case as compared with the amounts shown in the
December
31, 2005 GCG Financial Statements, are not different except as set forth
in such
letter, or
(iii)
for
the
period from December 31, 2005 to said date not more than five (5) business
days
prior to the Closing Date, the net interest income, total and per-share
amounts
of consolidated income and net income of GCG, as compared with the corresponding
portion of the preceding twelve (12) month period, are not different
except as
set forth in such letter.
ARTICLE
VIII
CONDITIONS
TO OBLIGATIONS OF GCG
All
of
the obligations of GCG under this Agreement are subject to the fulfillment
prior
to or at the Closing Date of each of the following conditions, any one
or more
of which may be waived by it:
A-23
8.1 Veracity
of Representations and Warranties.
The
representations and warranties of United contained herein or in any certificate,
schedule or other document delivered pursuant to the provisions hereof,
or in
connection herewith, shall be true as of the date when made and shall
be deemed
to be made again at and as of the Closing Date and shall be true at and
as of
such time, except as a result of changes or events expressly permitted
or
contemplated herein or where the failure to be so, either individually
or in the
aggregate, is not reasonably likely to have a material adverse effect
on the
business, operations or financial condition of United on a consolidated
basis.
8.2 Performance
of Agreements.
United
shall have performed and complied with all agreements and conditions
required by
this Agreement to be performed or complied with by it prior to or at
the Closing
Date.
8.3 Certificates,
Resolutions, Opinion.
United
shall have delivered to GCG:
(a) a
certificate executed by the President or an Executive Vice President
of United,
dated the Closing Date, certifying in such detail as GCG may reasonably
request
to the fulfillment of the conditions specified in Sections
8.1
and
8.2
hereof;
(b) a
certificate executed by the Secretary or an Assistant Secretary of United,
dated
as of the Closing Date, certifying and attesting to the: (i) articles
of
incorporation of United; (ii) bylaws of United; and (iii) duly adopted
resolutions of the board of directors of United (1) authorizing and approving
the execution of this Agreement and the Merger Agreement on behalf of
United,
and the consummation of the transactions contemplated herein and therein
in
accordance with their respective terms, and (2) authorizing all other
necessary
and proper corporate actions to enable United to comply with the terms
hereof
and thereof;
(c) a
certificate of the valid existence of United, under the laws of the State
of
Georgia executed by the Secretary of State of the State of Georgia, dated
not
more than five (5) business days prior to the Closing Date;
(d) an
opinion of Kilpatrick Stockton LLP, counsel for United, dated the Closing
Date,
in the form attached hereto as Exhibit
E;
(e) a
certificate executed by the President or an Executive Vice President
of United,
dated as of the Closing Date, enabling Kilpatrick Stockton LLP to provide
the
opinion referred to in Section
8.3(d);
and
(f) certificates
from the appropriate public officials of the State of Georgia, dated
not more
than five (5) business days prior to the Closing Date, certifying that
United
has filed all corporate tax returns required by the laws of such state
and has
paid all taxes shown thereon to be due.
8.4 Tax
Opinion.
GCG
shall have received from Kilpatrick Stockton LLP its opinion, in form
and
substance reasonably satisfactory to GCG, to the effect that:
(a) The
Merger and the issuance of shares of United Stock in connection therewith,
as
described herein and in the Merger Agreement, will constitute a tax-free
reorganization under Section 368(a)(1)(A) of the Code;
(b) No
gain
or loss will be recognized by GCG as a result of the Merger;
A-24
(c) No
gain
or loss will be recognized by holders of GCG Stock upon the exchange
of such
stock for United Stock as a result of the Merger;
(d) Gain
or
loss will be recognized by holders of GCG Stock upon their receipt of
cash,
including cash (i) as a result of a cash election, (ii) in lieu of fractional
shares of United Stock, and (iii) upon their exercise of dissenters’
rights;
(e) The
aggregate tax basis of United Stock received by shareholders of GCG pursuant
to
the Merger will be the same as the tax basis of the shares of GCG Stock
exchanged (i) decreased by any portion of such tax basis allocated to
fractional
shares of United Stock that are treated as redeemed by United, (ii) decreased
by
the amount of cash received by a GCG shareholder in the Merger (other
than cash
received with respect to fractional shares), and (iii) increased by the
amount
of gain recognized by a GCG shareholder in the Merger (other than gain
recognized with respect to fractional shares);
(f) The
holding period of the shares of United Stock received by the shareholders
of GCG
will include the holding period of the shares of GCG Stock exchanged,
provided
that the stock of GCG is held as a capital asset on the date of the consummation
of the Merger; and
(g) No
gain
or loss will be recognized by GCG or the Bank in connection with the
Bank
Merger.
ARTICLE
IX
CONDITIONS
TO OBLIGATIONS OF BOTH PARTIES
9.1 Shareholder
Approval.
The
Merger Agreement shall have been approved by the vote of the holders
of at least
a majority of the issued and outstanding shares of GCG Stock.
9.2 Regulatory
Approvals.
Any and
all governmental authorities, bodies or agencies having jurisdiction
over the
transactions contemplated by this Agreement, the Merger Agreement and
the Bank
Merger Agreement, including, but not limited to the Federal Reserve,
the FDIC
and the Georgia Department shall have granted such consents, authorizations
and
approvals as are necessary for the consummation hereof and thereof, and
all
applicable waiting or similar periods required by law shall have
expired.
9.3 Effective
Registration Statement.
The
United Registration Statement shall have been declared effective by the
SEC and
no stop order shall have been entered with respect thereto.
9.4 Certificate
of Merger.
The
Secretary of State of the State of Georgia shall have issued a certificate
of
merger, with respect to the Merger, in accordance with the provisions
of the
Georgia Business Corporation Code, and with respect to the Bank Merger,
in
accordance with the Financial Institution Code of Georgia.
ARTICLE
X
WARRANTIES,
NOTICES, ETC.
10.1
Warranties.
All
statements contained in any certificate or other instrument delivered
by or on
behalf of GCG or United pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties hereunder
by
them. Unless the context otherwise requires, the representations and
warranties
required of GCG shall be required to be made, and shall be considered
made, on
behalf of GCG and the Bank.
A-25
10.2
Survival
of Provisions.
All
representations, warranties, covenants, and agreements made by either
party
hereto in or pursuant to this Agreement or in any instrument, exhibit,
or
certificate delivered pursuant hereto shall be deemed to have been material
and
to have been relied upon by the party to which made, but, except as set
forth
hereafter or specifically stated in this Agreement, such representations,
warranties, covenants, and agreements shall expire and be of no further
force
and effect upon the consummation of the Merger; provided,
however,
that the
following shall survive consummation of the Merger and the transactions
contemplated hereby:
(a) the
opinions of counsel referred to in Sections
7.4(g)
and
8.3(d)
of this
Agreement;
(b) any
intentional misrepresentation of any material fact made by either party
hereto
in or pursuant to this Agreement or in any instrument, document or certificate
delivered pursuant hereto; and
(c) the
covenant with respect to the confidentiality of certain information contained
in
Section
3.4
hereof.
10.3
Notices.
All
notices or other communications required or permitted to be given or
made
hereunder shall be in writing and delivered personally or sent by pre-paid,
first class certified or registered mail, return receipt requested, or
by
facsimile transmission, to the intended recipient thereof at its address
or
facsimile number set out below. Any such notice or communication shall
be deemed
to have been duly given immediately (if given or made in person or by
facsimile
confirmed by mailing a copy thereof to the recipient in accordance with
this
Section
10.3
on the
date of such facsimile), or five (5) days after mailing (if given or
made by
mail), and in proving same it shall be sufficient to show that the envelope
containing the same was delivered to the delivery service and duly addressed,
or
that receipt of a facsimile was confirmed by the recipient. Either party
may
change the address to which notices or other communications to such party
shall
be delivered or mailed by giving notice thereof to the other party hereto
in the
manner provided herein.
|
To
GCG:
|
Gwinnett
Commercial Group, Inc.
2230
Riverside Parkway
Lawrenceville,
Georgia 30043
Attention: Glenn
S. White
Facsimile:
(770) 237-9261
|
|
| With copies to: |
Powell
Goldstein LLP
One
Atlantic Center - Fourteenth Floor
1201
West Peachtree Street, NW
Atlanta,
Georgia 30309
Attention: Kathryn
Knudson
Facsimile:
(404) 572-6999
|
A-26
|
To
United:
|
United
Community Banks, Inc.
P.O.
Box 398
Blairsville,
Georgia 30514
Attention: Jimmy
C. Tallent
Facsimile:
(706) 745-1335
|
|
|
With
copies to:
|
Kilpatrick
Stockton LLP
Suite
2800
1100
Peachtree Street
Atlanta,
Georgia 303039-4530
Attention:
Richard R. Cheatham
Facsimile:
(404) 815-6555
|
10.4
Entire
Agreement.
This
Agreement and the Merger Agreement supersede all prior discussions and
agreements between GCG and United with respect to the Merger and the
other
matters contained herein and therein, and this Agreement and the Merger
Agreement contain the sole and entire agreement between GCG and United
with
respect to the transactions contemplated herein and therein.
10.5
Waiver;
Amendment.
Prior
to or on the Closing Date, United shall have the right to waive any default
in
the performance of any term of this Agreement by GCG, to waive or extend
the
time for the fulfillment by GCG of any or all of GCG’s obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of United under this Agreement, except any condition which,
if not
satisfied, would result in the violation of any law or applicable governmental
regulation. Prior to or on the Closing Date, GCG shall have the right
to waive
any default in the performance of any term of this Agreement by United,
to waive
or extend the time for the fulfillment by United of any or all of United’s
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of GCG under this Agreement, except any
condition
which, if not satisfied, would result in the violation of any law or
applicable
governmental regulation. This Agreement may be amended by a subsequent
writing
signed by the parties hereto, provided,
however,
that the
provisions of Section
9.2
requiring regulatory approval shall not be amended by the parties hereto
without
regulatory approval.
ARTICLE
XI
TERMINATION
AND PRICE ADJUSTMENT
11.1
Material
Adverse Change.
(a) This
Agreement may be terminated at any time prior to or on the Closing Date
by
United upon written notice to GCG, if, after the date hereof, a material
adverse
change in the financial condition or business of GCG shall have occurred,
or if
GCG shall have suffered a material loss or damage to any of its properties
or
assets, which change, loss or damage materially affects or impairs its
ability
to conduct its business.
(b) This
Agreement may be terminated at any time prior to or on the Closing Date
by GCG
upon written notice to United, if, after the date hereof, a material
adverse
change in the financial condition or business of United shall have occurred
which change would reasonably be expected to have a material adverse
effect on
the market price of United Stock, or if United shall have suffered a
material
loss or damage to any its properties or assets, which change, loss or
damage
materially affects or impairs its ability to conduct its business.
A-27
11.2
Noncompliance.
(a) This
Agreement may be terminated at any time prior to or on the Closing Date
by
United upon written notice to GCG, (i) if the terms, covenants or conditions
of
this Agreement to be complied with or performed by GCG before the Closing
shall
not have been substantially complied with or substantially performed
at or
before the Closing Date and such noncompliance or nonperformance shall
not have
been waived by United; or (ii) in the event of a material breach by GCG
of any
covenant, agreement, or obligation contained in this Agreement which
breach has
not been cured within twenty (20) days after the giving of written notice
to
United of such breach or, if such breach is not capable of being cured
within
twenty (20) days, GCG has not begun to cure such breach within twenty
(20) days
after such written notice; provided,
however,
that in
no event shall the cure periods provided in this Section
11.2
extend
past the time period in Section
11.5
or
otherwise limit United’s rights thereunder.
(b) This
Agreement may be terminated at any time prior to or on the Closing Date
by GCG
upon written notice to United, (i) if the terms, covenants or conditions
of this
Agreement to be complied with or performed by United before the Closing
shall
not have been substantially complied with or substantially performed
at or
before the Closing Date and such noncompliance or nonperformance shall
not have
been waived by GCG; or (ii) in the event of a material breach by United
of any
covenant, agreement, or obligation contained in this Agreement which
breach has
not been cured within twenty (20) days after the giving of written notice
to GCG
of such breach or, if such breach is not capable of being cured within
twenty
(20) days, United has not begun to cure such breach within twenty (20)
days
after such written notice; provided,
however,
that in
no event shall the cure periods provided in this Section
11.2
extend
past the time period in Section
11.5
or
otherwise limit GCG’s rights thereunder.
11.3
Failure
to Disclose.
(a) This
Agreement may be terminated at any time prior to or on the Closing Date
by
United upon written notice to GCG, if it learns of any fact or condition
not
disclosed in this Agreement, the Disclosure Memorandum, or the GCG Financial
Statements, which was required to be disclosed by GCG pursuant to the
provisions
of this Agreement with respect to the business, properties, assets or
earnings
of GCG which materially and adversely affects such business, properties,
assets
or earnings or the ownership, value or continuance thereof.
(b) This
Agreement may be terminated at any time prior to or on the Closing Date
by GCG
upon written notice to United,
if it
learns of any fact or condition not disclosed in this Agreement or the
United
SEC Reports, which was required to be disclosed by United pursuant to
the
provisions of this Agreement with respect to the business, properties,
assets or
earnings of United which materially and adversely affects such business,
properties, assets or earnings or the ownership, value or continuance
thereof.
11.4
Adverse
Proceedings.
This
Agreement may be terminated at any time prior to or on the Closing Date
by
either party upon written notice to the other party, if any action, suit
or
proceeding shall have been instituted or threatened against either party
to this
Agreement to restrain or prohibit, or to obtain substantial damages in
respect
of, this Agreement or the consummation of the transactions contemplated
herein,
which, in the good faith opinion of the terminating party makes consummation
of
the transactions herein contemplated inadvisable.
11.5
Termination
Date.
This
Agreement may be terminated at any time prior to or on the Closing Date
by
either party upon written notice to the other party, if the Closing Date
shall
not have occurred on or before July 31, 2007.
A-28
11.6
Dissenters.
This
Agreement may be terminated at any time prior to or on the Closing Date
by
United upon written notice to GCG, if the holders of more than five percent
(5%)
of the shares of the outstanding GCG Stock elect to exercise their statutory
right to dissent from the Merger and demand payment in cash for the
“fair
value”
of
their shares.
11.7
Shareholders
Vote.
This
Agreement may be terminated at any time prior to or on the Closing Date
by
either party upon written notice to the other party, if the Merger Agreement
is
not approved by the vote of the holders of GCG Stock as required by applicable
law.
11.8
Change
in Price of United Stock.
(a) If
the
Average Closing Price of United is less than $32.33, this Agreement may
be
terminated prior to the Closing Date by GCG if 2.00 minus the United
Change (the
“United
Decrease”)
is
greater than 1.10 and the United Decrease is greater than 2.00 minus
the Peer
Change (the “Peer
11.8(a) Variation”),
subject to the following provisions of this Section
11.8(a).
If GCG
elects to exercise its termination right pursuant to the immediately
preceding
sentence, it shall give prompt written notice of such election to United.
During
the Decision Period, United may elect to adjust the Merger Consideration
by
paying additional shares of United Stock and/or cash, as determined by
United in
its sole discretion, by increasing the Stock Exchange Ratio (as defined
in the
Merger Agreement) and/or the Cash Exchange Rate (as defined in the Merger
Agreement) as necessary to cause the Merger Consideration to be increased
by the
result determined by subtracting the Stock Consideration from the product
of the
Stock Consideration multiplied by the factor equal to 1.00 plus the lesser
of
(i) the United Decrease minus 1.10 or (ii) the United Decrease minus
the Peer
11.8(a) Variation. Such adjustment, if any, shall be reflected in the
payment of
the adjusted Merger Consideration as provided in accordance with the
Merger
Agreement. If United decides to make such adjustment within the Decision
Period,
it shall give prompt written notice to GCG of such adjustment, whereupon
GCG
shall have no right to terminate the Agreement pursuant to this Section
11.8(a)
and this
Agreement shall remain in full force and effect in accordance with its
terms.
(b) If
the
Average Closing Price of United is greater than $32.33, during the Election
Period United may elect to adjust the Merger Consideration if the United
Change
minus 1.00 (the “United
Increase”)
is
greater than 0.10 and the United Increase is greater than the Peer Change
minus
1.00 (the “Peer
11.8(b) Variation”),
subject to the following provisions of this Section
11.8(b).
If
United elects to adjust the Merger Consideration pursuant to the immediately
preceding sentence, United shall give prompt written notice of such election
to
GCG, and this Agreement may be terminated prior to the Closing Date by
GCG. If
United makes an election under this Section
11.8(b),
United
may adjust the Merger Consideration by paying less shares of United Stock
and/or
cash, as determined by United in its sole discretion, by decreasing the
Stock
Exchange Ratio (as defined in the Merger Agreement) and/or the Cash Exchange
Rate (as defined in the Merger Agreement) as necessary to cause the Merger
Consideration to be decreased by the result determined by subtracting
from the
Stock Consideration the product of the Stock Consideration multiplied
by the
factor equal to 1.00 minus the lesser of (i) the United Increase minus
0.10 or
(ii) the United Increase minus the Peer 11(b) Variation. Such adjustment,
if
any, shall be reflected in the payment of the adjusted Merger Consideration
as
provided in accordance with the Merger Agreement. If United does not
decide to
make such adjustment within the Election Period, GCG shall have no right
to
terminate the Agreement pursuant to this Section
11.8(b)
and this
Agreement shall remain in full force and effect in accordance with its
terms.
(c) For
purposes of this Section
11.8,
the
following terms shall have the following meanings:
A-29
(i)
“Average
Closing Price”
means
the average closing price of United Stock, as reported on the NASDAQ
Stock
Market (as reported by the Wall Street Journal or, if not reported thereby,
another authoritative source), and the common stock of the companies
comprising
the Peer Group, as reported on the consolidated transaction reporting
system for
the market or exchange on which common stock is listed (as reported by
the Wall
Street Journal or, if not reported thereby, another authoritative source),
for
the thirty (30) consecutive Trading Days prior to the Determination Date.
(ii)
“Decision
Period”
means
the three (3) day period commencing with United’s receipt of such a termination
notice from GCG pursuant to Section
11.8(a).
(iii)
“Determination
Date”
means
the day which is six (6) Trading Days prior to the Closing Date.
(iv)
“Election
Period”
means the
three
(3) day period commencing on the Determination Date.
(v) “Peer
Change”
means
the average change of all companies comprising the Peer Group as of the
Determination Date whereas the change in stock price for a company is
calculated
by dividing the Average Closing Price by the average closing price for
the
thirty (30) consecutive trading days as of January 9, 2007.
(vi) “Peer
Group”
means
the group set forth in the Disclosure Memorandum, the common stock of
all of
which shall be publicly traded and as to which there shall have not been
a
publicly announced proposal for the acquisition of 20% or more of any
such
company’s outstanding shares or as to which any such company shall have
made a proposal to acquire another company in which 20% or more of its
outstanding shares would be issued, in each case at any time during the
period
beginning on the date of this Agreement and ending on the Determination
Date. In
the event that, at any time during the period beginning on the date of
this
Agreement and ending on the Determination Date, the common stock of any
such
company ceases to be publicly traded, a proposal to acquire 20% or more
of any
such company ‘s common stock is announced, or such company announces an
acquisition proposal in which 20% or more of such company’s outstanding shares
are to be issued, such company will be removed from the Peer Group.
(vii)
“Stock
Consideration”
means
the aggregate value of $184,025,000.
(viii)
“Trading
Day”
means
any day on which the NASDAQ Stock Market is open for trading.
(ix)
“United
Change”
means
the Average Closing Price of United divided by $32.33.
11.9
Termination
Fee.
(a) If,
while a Competing Offer (as defined in (b) below) is outstanding or after
such
an offer has been accepted, (i) either party terminates this Agreement
pursuant
to Section
11.7,
(ii)
GCG terminates this Agreement other than pursuant to Section
11.1(b),
11.2(b)
or
11.3(b),
or
(iii) United terminates this agreement pursuant to Section 11.2(a),
11.3(a)
or
11.4,
then
GCG shall pay, or cause to be paid to United, at the time of the termination
of
this Agreement, an amount equal to $7.5 million (the “Termination
Fee”),
which
shall be the sole and exclusive remedy of United for all claims under
this
Agreement.
A-30
(b) “Competing
Offer”
means
any inquiry, proposal or offer, whether in writing or otherwise, from
anyone
other than United to acquire beneficial ownership (as determined under
Rule
13d-3 of the 1934 Act) of all or a material portion of the assets of
GCG or the
Bank or 15% or more of any class of equity securities of GCG or the Bank
pursuant to a merger, consolidation or other business combination, sale
of
shares of capital stock, sale of assets, tender offer, exchange offer
or similar
transaction with respect to either GCG or the Bank, including any single
or
multi-step transaction or series of related transactions, which is structured
to
permit such party to acquire beneficial ownership of any material portion
of the
assets of, or 15% or more of the equity interest in either GCG or the
Bank.
11.10
Effect
of Termination.
Except
as set forth in Section
11.10,
in the
event of the termination of this Agreement pursuant to this Article
XI,
this
Agreement shall become void and have no effect, and neither party shall
have any
liability of any nature whatsoever under this Agreement or in connection
with
the transactions contemplated by this Agreement except that (i) the provisions
of this Article
XI
and
Section
3.4
shall
survive any such termination and (ii) such termination shall not relieve
any
party from liability arising from any willful breach of any provision
of this
Agreement
ARTICLE
XII
COUNTERPARTS,
HEADINGS, ETC.
This
Agreement may be executed simultaneously in any number of counterparts,
each of
which shall be deemed an original, but all of which shall constitute
one and the
same instrument. The headings herein set out are for convenience of reference
only and shall not be deemed a part of this Agreement. A pronoun in one
gender
includes and applies to the other genders as well.
ARTICLE
XIII
NO
THIRD PARTY BENEFICIARY
No
provision of this Agreement shall be deemed to create any third party
beneficiary rights in any anyone, including any employee or former employee
of
GCG (including any beneficiary or dependent thereof).
ARTICLE
XIV
BINDING
EFFECT
This
Agreement shall be binding upon and shall inure to the benefit of the
parties
hereto and their respective successors and assigns; provided,
however,
that
this Agreement may not be assigned by either party without the prior
written
consent of the other.
ARTICLE
XV
GOVERNING
LAW
The
validity and effect of this Agreement and the Merger Agreement and the
rights
and obligations of the parties hereto and thereto shall be governed by
and
construed and enforced in accordance with the laws of the State of
Georgia.
A-31
IN
WITNESS WHEREOF,
GCG and
United have caused this Agreement to be executed by their respective
duly
authorized corporate officers and their respective corporate seals to
be affixed
hereto as of the day and year first above written.
|
GWINNETT
COMMERCIAL GROUP, INC
|
|
|
(CORPORATE
SEAL)
|
|
|
ATTEST:
|
|
|
By:
/s/
Glenn S.
White
|
|
|
/s/ Andrew R.
Pourchier
|
Name:
Glenn
S. White
|
|
Secretary
|
Title:
Chief
Executive Officer
|
|
UNITED
COMMUNITY BANKS, INC.
|
|
|
(CORPORATE
SEAL)
|
|
|
ATTEST:
|
|
|
/s/ Lori
McKay
|
By:
/s/
Jimmy C
.Tallent
|
|
Assistant
Secretary
|
Name:
Jimmy
C .Tallent
|
|
|
Title:
President & Chief Executive
Officer
|
A-32
EXHIBIT
A
AGREEMENT
AND PLAN OF MERGER
(Merger
Agreement)
THIS
AGREEMENT AND PLAN OF MERGER (the
“Agreement”)
is
made and entered into as of this 5th
day of
February, 2007, by and between UNITED
COMMUNITY BANKS, INC.,
a
Georgia corporation (“United”)
and
GWINNETT
COMMERCIAL GROUP, INC.,
a
Georgia corporation (“GCG”,
and
together with United, the “Constituent
Corporations”).
WHEREAS,
the
authorized capital stock of United consists of 100,000,000 shares of
Common
Stock, $1.00 par value per share (the “United
Stock”),
of
which 42,990,645 shares are issued and outstanding and 10,000,000 shares
of
Preferred Stock, $1.00 par value per share, of which 32,200 shares are
issued
and outstanding; and
WHEREAS,
the
authorized capital stock of GCG consists of 12,000,000 shares of voting
Common
Stock, no par value per share, of which 2,830,901 shares are issued and
outstanding (the “GCG
Stock”)
and
2,000,000 shares of nonvoting common stock, no par value per share, none
of
which is issued and outstanding; and
WHEREAS,
the
respective Boards of Directors of the Constituent Corporations deem it
advisable
and in the best interests of each such corporation and its shareholders
that GCG
merge with and into United, with United being the surviving corporation;
and
WHEREAS,
the
respective Boards of Directors of the Constituent Corporations, by resolutions
duly adopted, have approved and adopted this Agreement, and the Board
of
Directors of GCG, by resolution duly adopted, has directed that this
Agreement
be submitted to the shareholders of GCG for their approval; and
WHEREAS,
United
has agreed to issue shares of United Stock which shareholders of GCG
will be
entitled to receive, according to the terms and conditions contained
herein, on
or after the Effective Date (as defined herein) of the merger provided
for
herein.
NOW,
THEREFORE,
for and
in consideration of the premises and the mutual agreements herein contained,
and
other good and valuable consideration, the receipt and adequacy of which
as
legally sufficient consideration are hereby acknowledged, the parties
hereto
have agreed and do hereby agree, as follows:
|
1.
|
Merger.
|
Pursuant
to and with the effects provided in the applicable provisions of Article
11 of
the Georgia Business Corporation Code, as amended (Chapter 2 of Title
14 of the
Official Code of Georgia), GCG (sometimes referred to as the “Merged
Corporation”)
shall
be merged with and into United (the “Merger”).
United shall be the surviving corporation (the “Surviving
Corporation”)
and
shall continue under the name “United Community Banks, Inc.” On the Effective
Date (as defined herein) of the Merger, the individual existence of the
Merged
Corporation shall cease and terminate.
A-33
|
2.
|
Actions
to be Taken.
|
The
acts
and things required to be done by the Georgia Business Corporation Code
in order
to make this Agreement effective, including the submission of this Agreement
to
the shareholders of the Merged Corporation and the filing of the certificate
of
merger in Georgia, relating hereto in the manner provided in said laws,
shall be
attended to and done by the proper officers of the Constituent Corporations
with
the assistance of counsel as soon as practicable.
|
3.
|
Effective
Date.
|
The
Merger shall be effective upon the approval of this Agreement by the
shareholders of the Merged Corporation and the filing of the certificate
of
merger in Georgia, relating hereto in the manner provided in the Georgia
Business Corporation Code (the “Effective
Date”).
| 4. |
Articles
of Incorporation and Bylaws of the Surviving
Corporation.
|
(a) The
Amended and Restated Articles of Incorporation of United, as heretofore
amended,
shall on the Effective Date be the Articles of Incorporation of the Surviving
Corporation.
(b) Until
altered, amended or repealed, as therein provided, the Amended and Restated
Bylaws of United as in effect on the Effective Date shall be the Bylaws
of the
Surviving Corporation.
|
5.
|
Manner
and Basis of Converting Shares of Capital Stock; Capital Structure
of the
Surviving Corporation.
|
Unless
amended pursuant to Section 11.8 of that certain Agreement and Plan of
Reorganization of even date herewith by and between GCG and United (the
“Acquisition
Agreement”),
the
manner and basis of converting the shares of capital stock of each of
the
Constituent Corporations into shares of the Surviving Corporation shall
be as
follows:
(a) In
the
Merger, the holders of GCG Stock shall be entitled to elect to receive,
in
exchange for their shares of GCG Stock, shares of United Stock, cash
or a
combination thereof, in the amounts specified by such holders in accordance
with
the provisions of Section
5(b)
below,
and each share of GCG Stock outstanding immediately prior to the Effective
Date
shall, by virtue of the Merger, be converted on the Effective Date into
fully
paid and nonassessable shares of United Stock and/or cash as follows,
subject to
any adjustments occurring after the date hereof as contemplated by Section
5(d)
below:
(1) 2.2545
shares of United Stock for each outstanding share of GCG Stock (the
“Stock
Exchange Ratio”);
(2) $72.8865
in cash, without interest, per share of GCG Stock (the “Cash
Exchange Rate”);
or
(3) any
combination thereof;
provided,
however,
that no
more than 306,137 shares
of
GCG Stock may be exchanged for cash (the “Maximum
Cash Election”)
and no
more than 2,524,764 shares of GCG Stock may be exchanged for United Stock
(the
“Maximum
Stock Election”)
and
any shares of GCG Stock elected to be exchanged for cash above the Maximum
Cash
Election or stock above the Maximum Stock Election shall be subject to
proration
as provided in Section
5(b)
below.
A-34
(b) At
the
same time that the notice of special meeting of GCG shareholders (the
“Special
Meeting”)
is
first mailed to GCG shareholders, a form of election shall also be mailed
to
each GCG shareholder (the date of such form of election being referred
to herein
as the “Mailing
Date”).
Each
GCG shareholder shall indicate thereon his, her or its preference as
to the
proportion of United Stock and/or cash which he, she or it desires to
receive in
exchange for his, her or its GCG Stock, and shall return the form to
the
Secretary of GCG prior to the date of the Special Meeting. If a GCG shareholder
does not make such an election by the date of the Special Meeting, such
shareholder shall receive cash as set forth in Section
5(a)(2)
above
unless the number of shares for which cash elections have been received
exceeds
the Maximum Cash Election, in which case such shareholder shall receive
United
Stock as set forth in Section
5(a)(1)
above.
If holders of GCG Stock elect to receive cash for a number of shares
of GCG
Stock in excess of the Maximum Cash Election or elect to receive United
Stock
for an aggregate number of shares of GCG Stock in excess of the Maximum
Stock
Election, then the number of shares exchanged for cash or United Stock,
respectively, by each shareholder so electing will be reduced such that
the
amount of shares exchanged for cash equals the Maximum Cash Election
and the
amount of shares exchanged for United Stock equals the Maximum Stock
Election,
based on the ratio that the number of shares elected to be exchanged
by such
shareholder bears to the total number of shares elected to be exchanged
for cash
or United Stock by all GCG shareholders. To the extent a GCG shareholder
does
not receive the number of shares of United Stock determined pursuant
to
Section
5(a)
above
for each share of GCG Stock such shareholder elected to be exchanged
for United
Stock or the amount in cash determined pursuant to Section
5(a)
above
for each share of GCG Stock such shareholder elected to be exchanged
for cash
due to the proration provided in this Section
5(b),
such
shareholder shall be entitled to receive the amount in cash determined
pursuant
to Section
5(a)
above
for each remaining share of GCG Stock not exchanged for United Stock
or the
number of shares of United Stock determined pursuant to Section
5(a)
for each
remaining share of GCG Stock not exchanged for cash, respectively.
(c) Upon
the
Effective Date, all rights with respect to GCG Stock pursuant to stock
options
(the “GCG
Stock Options”)
and
stock appreciation rights (the “GCG
SARs”)
granted by GCG which are outstanding at the Effective Date, whether or
not
exercisable, shall be converted on the Effective Date, subject to any
adjustments occurring after the date hereof as contemplated by Section
5(d)
below,
into an amount in cash, without interest, equal to the result of $72.8865
minus
the
applicable “Exercise Price” or “Strike Price” for such GCG Stock Options or GCG
SARs, respectively, as defined in the applicable stock option or stock
appreciation right agreement.
(d) If
either
party should change the number of its outstanding shares as a result
of a stock
split, stock dividend, or similar recapitalization with respect to such
shares
prior to the Effective Date then the shares to be issued hereunder to
holders of
GCG Stock shall be proportionately adjusted.
(e) No
scrip
or fractional share certificates of United Stock shall be issued in connection
with the Merger and an outstanding fractional share interest will not
entitle
the owner thereof to vote, to receive dividends or to have any of the
rights of
a shareholder with respect to such fractional interest. In lieu of any
fractional interest, there shall be paid in cash, without interest, an
amount
(computed to the nearest cent) equal to such fraction multiplied by
$32.33.
(f) As
soon
as practicable after the Effective Date, each holder as of the Effective
Date of
any of the shares of GCG Stock to be converted by such holder as elected
by such
holder as above provided, upon presentation and surrender of the certificates
representing such shares to United, shall be entitled to receive in exchange
therefor a certificate representing the number of shares of United Stock,
and
cash, to which such shareholder shall be entitled according to the terms
of this
Agreement. Until such surrender, each such outstanding certificate which
prior
to the Effective Date represented GCG Stock shall be deemed for all corporate
purposes to evidence ownership of the number of shares of United Stock
into
which the same shall have been converted as elected by such holder as
above
provided, the right to receive cash by such holder as above provided,
and the
right to receive payment for fractional shares.
A-35
(g) Upon
the
Effective Date, each share of United Stock issued and outstanding immediately
prior to the Effective Date shall continue unchanged and shall continue
to
evidence a share of common stock of the Surviving Corporation.
(h) Except
as
otherwise provided in this Section
5,
in no
event shall the total number of shares of United Stock issued in connection
with
the Merger exceed 5,692,082.
6. Termination
of Separate Existence.
Upon
the
Effective Date, the separate existence of the Merged Corporation shall
cease and
the Surviving Corporation shall possess all of the rights, privileges,
immunities, powers and franchises, as well of a public nature as of a
private
nature, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due on whatever account, and all other
choses
in action, and all and every other interest of or belonging to or due
to each of
the Constituent Corporations shall be taken and deemed to be transferred
to and
vested in the Surviving Corporation without further act or deed, and
the title
to any real estate or any interest therein, vested in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of
the Merger.
The Surviving Corporation shall thenceforth be responsible and liable
for all
the liabilities, obligations and penalties of each of the Constituent
Corporations; and any claim existing or action or proceeding, civil or
criminal,
pending by or against either of said Constituent Corporations may be
prosecuted
as if the Merger had not taken place, or the Surviving Corporation may
be
substituted in its place, and any judgment rendered against either of
the
Constituent Corporations may thenceforth be enforced against the Surviving
Corporation; and neither the rights of creditors nor any liens upon the
property
of either of the Constituent Corporations shall be impaired by the
Merger.
7. Further
Assignments.
If
at any
time the Surviving Corporation shall consider or be advised that any
further
assignments or assurances in law or any other things are necessary or
desirable
to vest in said corporation, according to the terms hereof, the title
to any
property or rights of the Merged Corporation, the proper officers and
directors
of the Merged Corporation shall and will execute and make all such proper
assignments and assurances and do all things necessary and proper to
vest title
in such property or rights in the Surviving Corporation, and otherwise
to carry
out the purposes of this Agreement.
8. Conditions
Precedent to Consummation of the Merger.
This
Agreement is subject to, and consummation of the Merger is conditioned
upon, the
fulfillment as of the Effective Date of each of the following
conditions:
(a) Approval
of this Agreement by the affirmative vote of the holders of a majority
of the
outstanding voting shares of GCG Stock; and
(b) All
the
terms, covenants, agreements, obligations and conditions of the Acquisition
Agreement to be complied with, satisfied and performed on or prior to
the
Closing Date (as defined therein), shall have been complied with, satisfied
and
performed in all material respects unless accomplishment of such covenants,
agreements, obligations and conditions has been waived by the party benefited
thereby.
A-36
| 9. |
Termination.
|
This
Agreement may be terminated and the Merger abandoned in accordance with
the
terms of the Acquisition Agreement, at any time before or after adoption
of this
Agreement by the directors of either of the Constituent Corporations,
notwithstanding favorable action on the Merger by the shareholders of
the Merged
Corporation, but not later than the issuance of the certificate of merger
by the
Secretary of State of the State of Georgia with respect to the Merger
in
accordance with the provisions of the Georgia Business Corporation
Code.
| 10. |
Counterparts;
Title; Headings.
|
This
Agreement may be executed simultaneously in any number of counterparts,
each of
which shall be deemed an original, but all of which shall constitute
one and the
same instrument. The title of this Agreement and the headings herein
set out are
for the convenience of reference only and shall not be deemed a part
of this
Agreement.
|
11.
|
Amendments;
Additional Agreements.
|
At
any
time before or after approval and adoption by the shareholders of GCG,
this
Agreement may be modified, amended or supplemented by additional agreements,
articles or certificates as may be determined in the judgment of the
respective
Boards of Directors of the Constituent Corporations to be necessary,
desirable
or expedient to further the purposes of this Agreement, to clarify the
intention
of the parties, to add to or modify the covenants, terms or conditions
contained
herein or to effectuate or facilitate any governmental approval of the
Merger or
this Agreement, or otherwise to effectuate or facilitate the consummation
of the
transactions contemplated hereby; provided,
however,
that no
such modification, amendment or supplement shall reduce to any extent
the
consideration into which shares of GCG Stock shall be converted in the
Merger
pursuant to Section
5
hereof.
A-37
IN
WITNESS WHEREOF,
the
Constituent Corporations have each caused this Agreement to be executed
on their
respective behalfs and their respective corporate seals to be affixed
hereto as
of the day and year first above written.
|
(CORPORATE
SEAL)
ATTEST:
__________________________________
Secretary
|
GWINNETT
COMMERCIAL GROUP, INC.
By:
________________________________
Name:
______________________________
Title:
_______________________________
|
|
(CORPORATE
SEAL)
ATTEST:
__________________________________
Assistant
Secretary
|
UNITED
COMMUNITY BANKS, INC.
By:
________________________________
Name:
______________________________
Title:
_______________________________ |
A-38
EXHIBIT
B
AGREEMENT
AND PLAN OF MERGER
(the
Bank
Merger Agreement)
THIS
AGREEMENT AND PLAN OF MERGER
(the
“Agreement”)
is
made and entered into as of this 5th
day of
February 2007, by and between UNITED
COMMUNITY BANK,
a
Georgia bank (“UCB
Georgia”),
and
FIRST
BANK OF THE SOUTH,
a
Georgia bank with its main office in Lawrenceville, Georgia (the “Bank”,
and
together with United, the “Constituent
Banks”).
WHEREAS,
the Bank
has authorized capital stock consisting solely of 1,060,000 shares of
common
stock, par value $5.00 per share (the “Bank
Stock”);
and
WHEREAS,
the
authorized capital stock of UCB Georgia consists of 100,000 shares of
common
stock, $10.00 par value per share, of which 85,000 shares are issued
and
outstanding (the “UCB
Georgia Stock”);
and
WHEREAS,
the
respective Boards of Directors of the Constituent Banks deem it advisable
and in
the best interests of each such bank and its shareholders that the Bank
merge
with UCB Georgia, with UCB Georgia being the surviving bank; and
WHEREAS,
the
respective Boards of Directors of the Constituent Banks, by resolutions
duly
adopted, have unanimously approved and adopted this Agreement and directed
that
it be submitted to the sole shareholder of each of the Bank and UCB Georgia
for
their approval;
NOW,
THEREFORE,
for and
in consideration of the premises and the mutual agreements herein contained,
and
other good and valuable consideration, the receipt and adequacy of which
as
legally sufficient consideration are hereby acknowledged, the parties
hereto
have agreed and do hereby agree, as follows:
|
1.
|
Merger.
|
Pursuant
to and with the effects provided in the applicable provisions of Article
2 of
the Financial Institution Code of Georgia, Chapter 1 of Title 7 of the
Official
Code of Georgia (the “Code”),
the
Bank (sometimes referred to as the “Merged
Bank”)
shall
be merged with and into UCB Georgia (the “Merger”).
UCB
Georgia shall be the surviving bank (the “Surviving
Bank”)
and
shall continue under the name “United
Community Bank”.
On the
Effective Date (as defined herein) of the Merger, the individual existence
of
the Merged Bank shall cease and terminate.
|
2.
|
Actions
to be Taken.
|
The
acts
and things required to be done by the Code in order to make this Agreement
effective, including the submission of this Agreement to the shareholders
of the
Constituent Banks and the filing of the articles of merger relating hereto
in
the manner provided in said Code, shall be attended to and done by the
proper
officers of the Constituent Banks with the assistance of counsel as soon
as
practicable.
A-39
|
3.
|
Effective
Date.
|
The
Merger shall be effective upon the approval of this Agreement by the
shareholder
of the Merged Bank and the filing of the articles of merger relating
to each
merger in the manner provided in the Code (the “Effective
Date”).
|
4.
|
Articles
of Incorporation and Bylaws of the Surviving Bank.
|
(a) The
Articles of Incorporation of UCB Georgia, as heretofore amended, as in
effect on
the Effective Date shall be the Articles of Incorporation of the Surviving
Bank.
(b) Until
altered, amended or repealed, as therein provided, the Bylaws of UCB
Georgia as
in effect on the Effective Date shall be the Bylaws of the Surviving
Bank.
| 5. |
Directors.
|
Upon
the
Merger contemplated herein becoming effective, the directors of the Surviving
Bank shall be the individuals set forth on Attachment
1
hereto.
Said persons shall hold office until the next annual meeting of the shareholder
of the Surviving Bank and until their successors are elected in accordance
with
the Bylaws of the Surviving Bank. If on the Effective Date any vacancy
shall
exist on the Board of Directors of the Surviving Bank, such vacancy shall
be
filled in the manner specified in the Bylaws of the Surviving Bank.
|
6.
|
Cancellation
of Shares of Merged Bank; Capital Structure of the Surviving
Bank.
|
(a) Upon
the
Effective Date, each share of the respective Merged Bank’s Bank Stock
outstanding on the Effective Date shall be cancelled.
(b) Upon
the
Effective Date, each share of the Surviving Bank issued and outstanding
immediately prior to the Effective Date shall remain outstanding.
|
7.
|
Termination
of Separate Existence.
|
Upon
the
Effective Date, the separate existence of the Merged Bank shall cease
and the
Surviving Bank shall possess all of the rights, privileges, immunities,
powers
and franchises, as well of a public nature as of a private nature, of
each of
the Constituent Banks; and all property, real, personal and mixed, and
all debts
due on whatever account, and all other choses in action, and all and
every other
interest of or belonging to or due to each of the Constituent Banks shall
be
taken and deemed to be transferred to and vested in the Surviving Bank
without
further act or deed, and the title to any real estate or any interest
therein,
vested in either of the Constituent Banks shall not revert or be in any
way
impaired by reason of the Merger. The Surviving Bank shall thenceforth
be
responsible and liable for all the liabilities, obligations and penalties
of
each of the Constituent Banks; and any claim existing or action or proceeding,
civil or criminal, pending by or against either of said Constituent Banks
may be
prosecuted as if the Merger had not taken place, or the Surviving Bank
may be
substituted in its place, and any judgment rendered against either of
the
Constituent Banks may thenceforth be enforced against the Surviving Bank;
and
neither the rights of creditors nor any liens upon the property of either
of the
Constituent Banks shall be impaired by the Merger.
A-40
|
8.
|
Further
Assignments.
|
If
at any
time the Surviving Bank shall consider or be advised that any further
assignments or assurances in law or any other things are necessary or
desirable
to vest in said bank, according to the terms hereof, the title to any
property
or rights of the Merged Bank, the proper officers and directors of the
Merged
Bank shall and will execute and make all such proper assignments and
assurances
and do all things necessary and proper to vest title in such property
or rights
in the Surviving Bank, and otherwise to carry out the purposes of this
Agreement.
|
9.
|
Condition
Precedent to Consummation of the Merger.
|
This
Agreement is subject to, and consummation of the Merger is conditioned
upon, the
fulfillment as of the Effective Date of approval of this Agreement by
the
affirmative vote of the sole shareholders of each of UCB Georgia and
the
Bank.
|
10.
|
Termination.
|
This
Agreement may be terminated and the Merger abandoned at any time before
or after
adoption of this Agreement by the directors of either of the Constituent
Banks,
notwithstanding favorable action on the Merger by the shareholders of
the Merged
Bank, but not later than the issuance of the certificates of merger by
the
Secretary of State of Georgia with respect to the Merger in accordance
with the
provisions of the Code.
|
11.
|
Counterparts;
Title; Headings.
|
This
Agreement may be executed simultaneously in any number of counterparts,
each of
which shall be deemed an original, but all of which shall constitute
one and the
same instrument. The title of this Agreement and the headings herein
set out are
for the convenience of reference only and shall not be deemed a part
of this
Agreement.
|
12.
|
Amendments;
Additional Agreements.
|
At
any
time before or after approval and adoption by the shareholder of the
Bank, this
Agreement may be modified, amended or supplemented by additional agreements,
articles or certificates as may be determined in the judgment of the
respective
Boards of Directors of the Constituent Banks to be necessary, desirable
or
expedient to further the purposes of this Agreement, to clarify the intention
of
the parties, to add to or modify the covenants, terms or conditions contained
herein or to effectuate or facilitate any governmental approval of the
Merger or
this Agreement, or otherwise to effectuate or facilitate the consummation
of the
transactions contemplated hereby; provided,
however,
that no
such modification, amendment or supplement shall reduce to any extent
the
consideration into which shares of the Bank Stock shall be converted
in the
Merger pursuant to Section
6
hereof.
A-41
IN
WITNESS WHEREOF,
the
Constituent Banks have each caused this Agreement to be executed on their
respective behalfs and their respective bank seals to be affixed hereto
as of
the day and year first above written.
|
(BANK
SEAL)
ATTEST:
__________________________________
Assistant
Secretary
|
UNITED
COMMUNITY BANK
By:
________________________________
Name:
______________________________
Title:
_______________________________ |
|
(BANK
SEAL)
ATTEST:
__________________________________
Secretary
|
FIRST
BANK OF THE SOUTH
By:
________________________________
Name:
______________________________
Title:
_______________________________ |
A-42
ATTACHMENT
1
Directors
of the Surviving Bank
Billy
M.
Decker
Dr.
G.
David Gowder III
Robert
L.
Head, Jr.
Charles
E. Hill
Jack
C.
Lance, Sr.
W.C.
Nelson, Jr.
Paul
B.
Owenby
Jimmy
C.
Tallent
Andrew
M.
Williams III
A-43
EXHIBIT
C
FORM
OF OFFICER, DIRECTOR AND SHAREHOLDER AGREEMENT
February
5, 2007
United
Community Banks, Inc.
P.O.
Box
398
Blairsville,
GA 30514
Ladies
and Gentlemen:
To
induce
you to agree to the proposed merger (the “Merger”)
of
Gwinnett Commercial Group, Inc. (“GCG”)
with
and into United Community Banks, Inc. (“United”),
pursuant to the Agreement and Plan of Reorganization of even date herewith
between United and GCG (the “Acquisition
Agreement”),
the
undersigned hereby covenants, represents and warrants as follows:
1. Recommendation
for Merger and Voting of GCG Stock.
Subject
to any applicable fiduciary duty, the undersigned agrees to recommend
to all
holders of the capital stock of GCG (“GCG
Stock”)
that
they vote in favor of the Merger. In addition, the undersigned agrees
to vote
any and all shares of GCG Stock owned or controlled by him or her in
favor of
the Merger.
2. Compliance
with Securities Laws.
The
undersigned acknowledges that he or she will be subject to the restrictions
on
resales contained in Rule 145 of the Rules and Regulations of the Securities
and
Exchange Commission (“SEC”)
under
the Securities Act of 1933, as amended, and agrees to sell, transfer
or
otherwise dispose of any shares of capital stock of United (“United
Stock”)
received by him or her pursuant to the Merger only in compliance with
the
provisions of such Act and Rule. The undersigned acknowledges that United
is not
under any obligation to file a registration statement with the SEC covering
the
disposition of the undersigned’s shares of United Stock to be received pursuant
to the Merger.
3. Restrictive
Legend.
The
undersigned agrees that the certificates representing shares of United
Stock to
be issued to the undersigned pursuant to the Merger will be stamped or
otherwise
imprinted with a legend in substantially the following form:
The
shares represented by this certificate may not be sold, transferred or
otherwise
disposed of except in a transaction covered by an effective registration
statement under the Securities Act of 1933, as amended, or in accordance
with
Rule 145 promulgated thereunder, or in accordance with a legal opinion
satisfactory to United that such sale or transfer is otherwise exempt
from the
requirements of such Act.
4. [This
provision only in director form.] Covenant
Not to Compete.
(a) The
undersigned agrees that during for a period of two (2) years after the
date the
Merger is consummated, he or she will not, directly or indirectly, individually,
or on behalf of any Person other than the United or its Georgia bank
subsidiary,
United Community Bank (the “Bank”):
(i)
solicit
any customers of the Bank for the purpose of providing services identical
to or
reasonably substitutable for the Bank’s Business;
(ii)
solicit
or induce, or in any manner attempt to solicit or induce, any Person
employed by
the Bank or United to leave such employment, whether or not such employment
is
pursuant to a written contract with the Bank or United or is at will;
A-44
(iii)
engage
in
the Bank’s Business within the Territory, accept employment or an engagement as
a director, advisory board member, officer, executive, manager, or business
consultant for, or engage in any activities as an organizer of, or in
connection
with the organization of, any Person or proposed to be engaged or prepared
to be
engaged in the Bank’s Business anywhere within the Territory; or
(iv)
knowingly
or intentionally damage or destroy the goodwill and esteem of United,
the Bank,
the Bank’s Business or United’s or the Bank’s suppliers, employees, patrons,
customers, and others who may at any time have or have had relations
with United
or the Bank.
(b) For
purposes of this Agreement, the following terms shall have the meanings
specified below:
(i)
“Bank’s
Business”
means
the business of operating a commercial or retail bank, savings association,
mutual thrift or credit union.
(ii)
“Person”
means
any individual, corporation, bank, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or other
entity.
(iii)
“Territory”
means
Gwinnett County, Georgia and any county adjacent to Gwinnett
County.
This
Agreement is the complete agreement between United and the undersigned
concerning the subject matters hereof and shall be governed by and construed
and
enforced in accordance with the laws of the State of Georgia, without
regard to
its conflicts of laws provisions.
|
Sincerely,
[Director,
Executive Officer or 5%
Shareholder]
|
A-45
EXHIBIT
D
(1) GCG
was
duly organized as a corporation, and is existing and in good standing,
under the
laws of the State of Georgia. The Bank was duly organized as a bank,
and is
existing and in good standing, under the laws of the State of Georgia.
(2) GCG
has
the corporate power to execute and deliver the Acquisition Agreement
and Merger
Agreement to perform its obligations thereunder, to own and use its assets
and
to conduct its business.
(3) GCG
has
duly authorized the execution and delivery of the Acquisition Agreement
and the
Merger Agreement and all performance by GCG thereunder, and has duly
executed
and delivered the Acquisition Agreement and the Merger Agreement.
(4) No
consent, approval, authorization or other action filed by, or filing
with, any
governmental authority of the United States or the State of Georgia is
required
for GCG’s execution and delivery of the Acquisition Agreement and the Merger
Agreement and consummation of the Transaction, which consent, approval
or
authorization has not been previously received.
(5) The
Acquisition Agreement and the Merger Agreement are enforceable against
GCG.
(6) The
authorized capital stock of GCG consists of (i) 12,000,000 shares of
voting
common stock, no par value per share, (“GCG
Stock”)
with
2,830,901 shares issued and outstanding, exclusive of 208,321 shares
reserved
for issuance upon exercise of currently outstanding options (the “GCG
Stock Options”),
and
(ii) 2,000,000 shares of nonvoting common stock, no par value, none of
which is
issued and outstanding. The authorized capital stock of the Bank consists
of
12,000,000 shares of common stock, $5.00 par value per share, (“Bank
Stock”)
1,060,000 of which are issued and outstanding. All of the issued and
outstanding
shares of GCG Stock and Bank Stock are duly and validly issued, fully
paid and
non-assessable and, to our knowledge and based on the certificates of
officers
of GCG, were offered, issued and sold in compliance with all applicable
federal
and state securities laws. To our knowledge, no person has any right
of
rescission or claim for damages under federal or state securities laws
with
respect to the issuance of any shares GCG Stock or Bank Stock previously
issued.
None of the shares of GCG Stock or Bank Stock has been issued in violation
of
any preemptive or other rights of its respective shareholders. All of
the issued
and outstanding shares of the Bank Stock are owned by GCG.
A-46
EXHIBIT
E
(1) United
was duly organized as a corporation, and is existing and in good standing,
under
the laws of the State of Georgia.
(2) United
has the corporate power to execute and deliver the Acquisition Agreement
and
Merger Agreement to perform its obligations thereunder, to own and use
its
Assets and to conduct its business.
(3) United
has duly authorized the execution and delivery of the Acquisition Agreement
and
the Merger Agreement and all performance by United thereunder, and has
duly
executed and delivered the Acquisition Agreement and Merger
Agreement:
(4) No
consent, approval, authorization or other action filed by, or filing
with, any
governmental authority of the United States or the State of Georgia is
required
for United’s execution and delivery of the Acquisition Agreement and the Merger
Agreement and consummation of the Transaction, which consent, approval
or
authorization has not been previously received.
(5) The
Acquisition Agreement and the Merger Agreement are enforceable against
United.
(6) The
shares of United Stock to be issued upon consummation of the Merger have
been
duly authorized and upon issuance as contemplated in the Merger Agreement,
will
be validly issued, fully paid and non-assessable
A-47
APPENDIX
B
GEORGIA
DISSENTERS’ RIGHTS STATUTE
14-2-1301.
Definitions.
As
used
in this article, the term:
(1) “Beneficial
shareholder” means the person who is a beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) “Corporate
action” means the transaction or other action by the corporation that creates
dissenters’ rights under Code Section 14-2-1302.
(3) “Corporation”
means the issuer of shares held by a dissenter before the corporate
action, or
the surviving or acquiring corporation by merger or share exchange
of that
issuer.
(4) “Dissenter”
means a shareholder who is entitled to dissent from corporate action
under Code
Section 14-2-1302 and who exercises that right when and in the manner
required
by Code Sections 14-2-1320 through 14- 2-1327.
(5) “Fair
value,” with respect to a dissenter’s shares, means the value of the shares
immediately before the effectuation of the corporate action to which
the
dissenter objects, excluding any appreciation or depreciation in anticipation
of
the corporate action.
(6) “Interest”
means interest from the effective date of the corporate action until
the date of
payment, at a rate that is fair and equitable under all the
circumstances.
(7) “Record
shareholder” means the person in whose name shares are registered in the records
of a corporation or the beneficial owner of shares to the extent of
the rights
granted by a nominee certificate on file with a corporation.
(8) “Shareholder”
means the record shareholder or the beneficial shareholder. (Code 1981,
§
14-2-1301, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1993, p.1231, §
16.)
14-2-1302.
Right to dissent.
(a) A
record
shareholder of the corporation is entitled to dissent from, and obtain
payment
of the fair value of his or her shares in the event of, any of the
following
corporate actions:
(1) Consummation
of a plan of merger to which the corporation is a party:
(A) If
approval of the shareholders of the corporation is required for the
merger by
Code Section 14-2-1103 or the articles of incorporation and the shareholder
is
entitled to vote on the merger, unless:
(i)
The
corporation is merging into a subsidiary corporation pursuant to Code
Section
14-2-1104;
(ii)
Each
shareholder of the corporation whose shares were outstanding immediately
prior
to the effective time of the merger shall receive a like number of
shares of the
surviving corporation, with designations, preferences, limitations
and relative
rights identical to those previously held by each shareholder;
and
B-1
(iii)
The
number and kind of shares of the surviving corporation outstanding
immediately
following the effective time of the merger, plus the number and kind
of shares
issuable as a result of the merger and by conversion of securities
issued
pursuant to the merger, shall not exceed the total number and kind
of shares of
the corporation authorized by its articles of incorporation immediately
prior to
the effective time of the merger; or
(B) If
the
corporation is a subsidiary that is merged with its parent under Code
Section
14-2-1104;
(2) Consummation
of a plan of share exchange to which the corporation is a party as
the
corporation whose shares will be acquired, if the shareholder is entitled
to
vote on the plan;
(3) Consummation
of a sale or exchange of all or substantially all of the property of
the
corporation if a shareholder vote is required on the sale or exchange
pursuant
to Code Section 14-2-1202, but not including a sale pursuant to court
order or a
sale for cash pursuant to a plan by which all or substantially all
of the net
proceeds of the sale will be distributed to the shareholders within
one year
after the date of sale;
(4) An
amendment of the articles of incorporation with respect to a class
or series of
shares that reduces the number of shares of a class or series owned
by the
shareholder to a fraction of a share if the fractional share so created
is to be
acquired for cash under Code Section 14-2-604; or
(5) Any
corporate action taken pursuant to a shareholder vote to the extent
that Article
9 of this chapter, the articles of incorporation, bylaws, or a resolution
of the
board of directors provides that voting or nonvoting shareholders are
entitled
to dissent and obtain payment for their shares.
(b) A
shareholder entitled to dissent and obtain payment for his or her shares
under
this article may not challenge the corporate action creating his or
her
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws
of the
corporation or the vote required to obtain approval of the corporate
action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter’s rights.
(c) Notwithstanding
any other provision of this article, there shall be no right of dissent
in favor
of the holder of shares of any class or series which, at the record
date fixed
to determine the shareholders entitled to receive notice of and to
vote at a
meeting at which a plan of merger or share exchange or a sale or exchange
of
property or an amendment of the articles of incorporation is to be
acted on,
were either listed on a national securities exchange or held of record
by more
than 2,000 shareholders, unless:
(1) In
the
case of a plan of merger or share exchange, any holders of shares of
the class
or series are required under the plan of merger or share exchange to
accept for
their shares:
(A) Anything
except shares of the surviving corporation or another publicly held
corporation
which at the effective date of the merger or share exchange are either
listed on
a national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares;
or
(B) Any
shares of the surviving corporation or another publicly held corporation
which
at the effective date of the merger or share exchange are either listed
on a
national securities exchange or held of record by more than 2,000 shareholders
that are different, in type or exchange ratio per share, from the shares
to be
provided or offered to any other holder of shares of the same class
or series of
shares in exchange for such shares; or
B-2
(2) The
articles of incorporation or a resolution of the board of directors
approving
the transaction provides otherwise. (Code 1981, § 14-2-1302, enacted by Ga. L.
1988, p. 1070, § 1; Ga. L. 1989, p. 946, § 58; Ga. L. 1999, p. 405, § 11; Ga. L.
2003, p. 897, § 11.)
14-2-1303.
Dissent by nominees and beneficial owners.
A
record
shareholder may assert dissenters’ rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose
behalf he
asserts dissenters’ rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and
his other
shares were registered in the names of different shareholders. (Code
1981, §
14-2-1303, enacted by Ga. L. 1988, p. 1070, § 1.)
14-2-1320.
Notice of dissenters’ rights.
(a) If
proposed corporate action creating dissenters’ rights under Code Section
14-2-1302 is submitted to a vote at a shareholders’ meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters’ rights
under this article and be accompanied by a copy of this article.
(b) If
corporate action creating dissenters’ rights under Code Section 14- 2-1302 is
taken without a vote of shareholders, the corporation shall notify
in writing
all shareholders entitled to assert dissenters’ rights that the action was taken
and send them the dissenters’ notice described in Code Section 14- 2-1322 no
later than ten days after the corporate action was taken. (Code 1981,
§
14-2-1320, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1993, p. 1231, §
17.)
14-2-1321.
Notice of intent to demand payment.
(a) If
proposed corporate action creating dissenters’ rights under Code Section
14-2-1302 is submitted to a vote at a shareholders’ meeting, a record
shareholder who wishes to assert dissenters’ rights:
(1) Must
deliver to the corporation before the vote is taken written notice
of his intent
to demand payment for his shares if the proposed action is effectuated;
and
(2) Must
not
vote his shares in favor of the proposed action.
(b) A
record
shareholder who does not satisfy the requirements of subsection (a)
of this Code
section is not entitled to payment for his shares under this article.
(Code
1981, § 14-2-1321, enacted by Ga. L. 1988, p. 1070, § 1.)
14-2-1322.
Dissenters’ notice.
(a) If
proposed corporate action creating dissenters’ rights under Code Section
14-2-1302 is authorized at a shareholders’ meeting, the corporation shall
deliver a written dissenters’ notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The
dissenters’ notice must be sent no later than ten days after the corporate
action was taken and must:
(1) State
where the payment demand must be sent and where and when certificates
for
certificated shares must be deposited;
(2) Inform
holders of uncertificated shares to what extent transfer of the shares
will be
restricted after the payment demand is received;
B-3
(3) Set
a
date by which the corporation must receive the payment demand, which
date may
not be fewer than 30 nor more than 60 days after the date the notice
required in
subsection (a) of this Code section is delivered; and
(4) Be
accompanied by a copy of this article. (Code 1981, § 14-2-1322, enacted by Ga.
L. 1988, p. 1070, § 1.)
14-2-1323.
Duty to demand payment.
(a) A
record
shareholder sent a dissenters’ notice described in Code Section 14-2-1322 must
demand payment and deposit his certificates in accordance with the
terms of the
notice.
(b) A
record
shareholder who demands payment and deposits his shares under subsection
(a) of
this Code section retains all other rights of a shareholder until these
rights
are canceled or modified by the taking of the proposed corporate
action.
(c) A
record
shareholder who does not demand payment or deposit his share certificates
where
required, each by the date set in the dissenters’ notice, is not entitled to
payment for his shares under this article. (Code 1981, § 14-2-1323, enacted by
Ga. L. 1988, p. 1070, § 1.)
14-2-1324.
Share restrictions.
(a) The
corporation may restrict the transfer of uncertificated shares from
the date the
demand for their payment is received until the proposed corporate action
is
taken or the restrictions released under Code Section 14-2-1326.
(b) The
person for whom dissenters’ rights are asserted as to uncertificated shares
retains all other rights of a shareholder until these rights are canceled
or
modified by the taking of the proposed corporate action. (Code 1981,
§
14-2-1324, enacted by Ga. L. 1988, p. 1070, § 1.)
14-2-1325.
Offer of payment.
(a) Except
as
provided in Code Section 14-2-1327, within ten days of the later of
the date the
proposed corporate action is taken or receipt of a payment demand,
the
corporation shall by notice to each dissenter who complied with Code
Section
14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to
be the fair value of his or her shares, plus accrued interest.
(b) The
offer
of payment must be accompanied by:
(1) The
corporation’s balance sheet as of the end of a fiscal year ending not more than
16 months before the date of payment, an income statement for that
year, a
statement of changes in shareholders’ equity for that year, and the latest
available interim financial statements, if any;
(2) A
statement of the corporation’s estimate of the fair value of the
shares;
(3) An
explanation of how the interest was calculated;
(4) A
statement of the dissenter’s right to demand payment under Code Section
14-2-1327; and
(5) A
copy of
this article.
(c) If
the
shareholder accepts the corporation’s offer by written notice to the corporation
within 30 days after the corporation’s offer or is deemed to have accepted such
offer by failure to respond within said 30 days, payment for his or
her shares
shall be made within 60 days after the making of the offer or the taking
of the
proposed corporate action, whichever is later. (Code 1981, § 14-2-1325, enacted
by Ga. L. 1988, p. 1070, § 1; Ga. L. 1989, p. 946, § 59; Ga. L. 1993, p. 1231, §
18.)
B-4
14-2-1326.
Failure to take action.
(a) If
the
corporation does not take the proposed action within 60 days after
the date set
for demanding payment and depositing share certificates, the corporation
shall
return the deposited certificates and release the transfer restrictions
imposed
on uncertificated shares.
(b) If,
after
returning deposited certificates and releasing transfer restrictions,
the
corporation takes the proposed action, it must send a new dissenters’ notice
under Code Section 14-2-1322 and repeat the payment demand procedure.
(Code
1981, § 14-2-1326, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1990, p. 257, §
20.)
14-2-1327.
Procedure if shareholder dissatisfied with payment or
offer.
(a) A
dissenter may notify the corporation in writing of his own estimate
of the fair
value of his shares and amount of interest due, and demand payment
of his
estimate of the fair value of his shares and interest due, if:
(1) The
dissenter believes that the amount offered under Code Section 14- 2-1325
is less
than the fair value of his shares or that the interest due is incorrectly
calculated; or
(2) The
corporation, having failed to take the proposed action, does not return
the
deposited certificates or release the transfer restrictions imposed
on
uncertificated shares within 60 days after the date set for demanding
payment.
(b) A
dissenter waives his or her right to demand payment under this Code
section and
is deemed to have accepted the corporation’s offer unless he or she notifies the
corporation of his or her demand in writing under subsection (a) of
this Code
section within 30 days after the corporation offered payment for his
or her
shares, as provided in Code Section 14-2-1325.
(c) If
the
corporation does not offer payment within the time set forth in subsection
(a)
of Code Section 14-2-1325:
(1) The
shareholder may demand the information required under subsection (b)
of Code
Section 14-2-1325, and the corporation shall provide the information
to the
shareholder within ten days after receipt of a written demand for the
information; and
(2) The
shareholder may at any time, subject to the limitations period of Code
Section
14-2-1332, notify the corporation of his own estimate of the fair value
of his
shares and the amount of interest due and demand payment of his estimate
of the
fair value of his shares and interest due. (Code 1981, § 14-2-1327, enacted by
Ga. L. 1988, p. 1070, § 1; Ga. L. 1989, p. 946, § 60; Ga. L. 1990, p. 257, § 21;
Ga. L. 1993, p. 1231, § 19.)
14-2-1330.
Court action.
(a) If
a
demand for payment under Code Section 14-2-1327 remains unsettled,
the
corporation shall commence a proceeding within 60 days after receiving
the
payment demand and petition the court to determine the fair value of
the shares
and accrued interest. If the corporation does not commence the proceeding
within
the 60 day period, it shall pay each dissenter whose demand remains
unsettled
the amount demanded.
(b) The
corporation shall commence the proceeding, which shall be a nonjury
equitable
valuation proceeding, in the superior court of the county where a corporation’s
registered office is located. If the surviving corporation is a foreign
corporation without a registered office in this state, it shall commence
the
proceeding in the county in this state where the registered office
of the
domestic corporation merged with or whose shares were acquired by the
foreign
corporation was located.
B-5
(c) The
corporation shall make all dissenters, whether or not residents of
this state,
whose demands remain unsettled parties to the proceeding, which shall
have the
effect of an action quasi in rem against their shares. The corporation
shall
serve a copy of the petition in the proceeding upon each dissenting
shareholder
who is a resident of this state in the manner provided by law for the
service of
a summons and complaint, and upon each nonresident dissenting shareholder
either
by registered or certified mail or statutory overnight delivery or
by
publication, or in any other manner permitted by law.
(d) The
jurisdiction of the court in which the proceeding is commenced under
subsection
(b) of this Code section is plenary and exclusive. The court may appoint
one or
more persons as appraisers to receive evidence and recommend decision
on the
question of fair value. The appraisers have the powers described in
the order
appointing them or in any amendment to it. Except as otherwise provided
in this
chapter, Chapter 11 of Title 9, known as the “Georgia Civil Practice Act,”
applies to any proceeding with respect to dissenters’ rights under this
chapter.
(e) Each
dissenter made a party to the proceeding is entitled to judgment for
the amount
which the court finds to be the fair value of his shares, plus interest
to the
date of judgment. (Code 1981, § 14-2-1330, enacted by Ga. L. 1988, p. 1070, § 1;
Ga. L. 1989, p. 946, § 61; Ga. L. 1993, p. 1231, § 20; Ga. L. 2000, p. 1589, §
3.)
14-2-1331.
Court costs and counsel fees.
(a) The
court
in an appraisal proceeding commenced under Code Section 14- 2-1330
shall
determine all costs of the proceeding, including the reasonable compensation
and
expenses of appraisers appointed by the court, but not including fees
and
expenses of attorneys and experts for the respective parties. The court
shall
assess the costs against the corporation, except that the court may
assess the
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The
court
may also assess the fees and expenses of attorneys and experts for
the
respective parties, in amounts the court finds equitable:
(1) Against
the corporation and in favor of any or all dissenters if the court
finds the
corporation did not substantially comply with the requirements of Code
Sections
14-2-1320 through 14-2-1327; or
(2) Against
either the corporation or a dissenter, in favor of any other party,
if the court
finds that the party against whom the fees and expenses are assessed
acted
arbitrarily, vexatiously, or not in good faith with respect to the
rights
provided by this article.
(c) If
the
court finds that the services of attorneys for any dissenter were of
substantial
benefit to other dissenters similarly situated, and that the fees for
those
services should not be assessed against the corporation, the court
may award to
these attorneys reasonable fees to be paid out of the amounts awarded
the
dissenters who were benefited. (Code 1981, § 14-2-1331, enacted by Ga. L. 1988,
p. 1070, § 1.)
14-2-1332.
Limitation of actions.
No
action
by any dissenter to enforce dissenters’ rights shall be brought more than three
years after the corporate action was taken, regardless of whether notice
of the
corporate action and of the right to dissent was given by the corporation
in
compliance with the provisions of Code Section 14-2-1320 and Code Section
14-2-1322. (Code 1981, § 14-2-1332, enacted by Ga. L. 1988, p. 1070, §
1.)
B-6
APPENDIX
C
FAIRNESS
OPINION
Burke
Capital Group, L.L.C.
February
5, 2007
Board
of
Directors
Gwinnett
Commercial Group, Inc.
2230
Riverside Parkway
Lawrenceville,
GA 30043
Members
of the Board of Directors:
Gwinnett
Commercial Group, Inc. ("GCG") and United Community Banks, Inc. (“United”) are
considering entering into an Agreement and Plan of Merger (the “Agreement”),
dated as of the 5th day of February, 2007, whereby GCG will merge with
and into
United (the “Merger”), with United being the surviving corporation. Pursuant to
the terms of the Agreement, holders of GCG Stock shall be entitled
to elect to
receive, in exchange for their shares of GCG Stock, $72.8865 in cash,
2.2545
shares of United (“United Stock”) or a combination thereof subject to the
limitations as described in the Agreement. Holders of outstanding options
to
acquire GCG Stock (the “GCG Stock Options”) and holders of outstanding GCG stock
appreciation rights (the “GCG SARs”) shall receive cash, equal to the result of
$72.8865 minus the applicable exercise price for such GCG Stock Options
or GCG
SARs. In addition to the terms described above, record holders of GCG
Stock as
of December 31, 2006 shall receive a special cash dividend payable
prior to
closing not to exceed $2.25 per share. This cash dividend is in addition
to the
$1.55 regularly scheduled dividend payable in March. The terms and
conditions of
the Merger are more fully set forth in the Agreement. You have requested
our
opinion as to the fairness, from a financial point of view, as of the
date
hereof, of the Merger consideration that United will render.
Burke
Capital Group, L.L.C. (“BCG”) is an investment banking firm which specializes in
financial institutions in the United States. GCG has retained us to
render our
opinion to its Board of Directors.
In
connection with this opinion, we have reviewed, among other things:
| (i) |
The
Agreement and certain of the schedules thereto;
|
|
(ii)
|
Certain
publicly available financial statements and other historical
financial
information of GCG and United that it deemed relevant;
|
|
(iii)
|
Projected
earnings estimates for GCG for the years ending December
31, 2007 through
2011 prepared by and reviewed with senior management of GCG
and the views
of senior management regarding GCG’s business, financial condition,
results of operations and future prospects;
|
|
(iv)
|
Internal
financial and operating information with respect to the business,
operations and prospects of GCG furnished to BCG by GCG that
is not
publicly available;
|
C-1
Board
of
Directors - Gwinnett Commercial Group, Inc.
February
5, 2007
Page
2
|
(v)
|
The
reported prices and trading activity of United’s common stock and compared
those prices and activity with other publicly-traded companies
that BCG
deemed relevant;
|
|
(vi)
|
The
pro forma financial impact of the merger on United’s ability to complete a
transaction from a regulatory standpoint, based on assumptions
determined
by senior management of GCG and BCG;
|
|
(vii)
|
The
financial terms of other recent business combinations in
the commercial
banking industry, to the extent publicly available;
|
|
(viii)
|
The
current market environment generally and the banking environment
in
particular;
|
|
(ix)
|
Such
other information, financial studies, analyses and investigations
and
financial, economic and market criteria as it considered
relevant.
|
In
performing our review, we have relied upon the accuracy and completeness
of the
financial and other information that was available to us from public
sources,
that GCG and United or their respective representatives provided to
us or that
was otherwise reviewed. We have further relied on the assurances of
management
of GCG and United that they are not aware of any facts or circumstances
that
would make any of such information inaccurate or misleading. We have
not been
asked to and have not undertaken an independent verification of any
of such
information and we do not assume any responsibility or liability for
the
accuracy or completeness thereof. We did not make an independent evaluation
or
appraisal of the specific assets, the collateral securing assets or
the
liabilities (contingent or otherwise) of GCG, United or any of their
subsidiaries, or the collectibility of any such assets, nor have we
been
furnished with any such evaluations or appraisals. We did not make
an
independent evaluation of the adequacy of the allowance for loan losses
of GCG
or United, nor have we reviewed any individual credit files relating
to GCG or
United. We have assumed, with your consent, that the respective allowances
for
loan losses for both GCG and United are adequate to cover such losses
and will
be adequate on a pro forma basis for the combined entity. With respect
to the
earnings estimates for GCG and United and all projections of transaction
costs,
purchase accounting adjustments and expected cost savings that we reviewed
with
the management of GCG, BCG assumed, with your consent, that they reflected
the
best currently available estimates and judgments of the respective
managements
of the respective future financial performances of GCG and United and
that such
performances will be achieved. We express no opinion as to such earnings
estimates or financial projections or the assumptions on which they
are based.
We have assumed in all respects material to our analysis that GCG and
United
will remain as going concerns for all periods relevant to our analyses,
that all
of the representations and warranties contained in the Agreement and
all related
agreements are true and correct, that each party to the Agreement and
such other
related agreements will perform all of the covenants they are required
to
perform thereunder and that the conditions precedent in the Agreement
and such
other related agreements are not waived.
Our
opinion is necessarily based on financial, economic, market and other
conditions
as in effect on, and the information made available to us as of, the
date
hereof. Events occurring after the date hereof could materially affect
this
opinion. We have not undertaken to update, revise, reaffirm or withdraw
this
opinion or otherwise comment upon events occurring after the date hereof.
We are
expressing no opinion herein as to what the price at which GCG’s common stock
may trade at any time.
C-2
Board
of
Directors - Gwinnett Commercial Group, Inc.
February
5, 2007
Page
3
We
will
receive a fee for our services as financial advisor to GCG and for
rendering
this opinion. BCG does not have an investment banking relationship
with United;
nor does it have any contractual relationship with United.
This
opinion is directed to the Board of Directors of GCG and may not be
reproduced,
summarized, described or referred to or given to any other person without
our
prior consent.
Based
upon and subject to the foregoing, it is our opinion that, as of the
date
hereof, the amount of the Merger consideration is fair from a financial
point of
view.
Very
Truly Yours,
/s/
Burke
Capital Group, L.L.C.
Burke
Capital Group, L.L.C.
C-3
PART
II.
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
20. Indemnification of Directors and Officers.
United’s
Articles of Incorporation, as amended, provide that no director of United shall
be personally liable to United or its shareholders for breach of his or her
duty
of care or other duty as a director, but only to the extent permitted from
time
to time by the Georgia Business Corporation Code.
United’s
Bylaws require it to indemnify its directors, officers, employees, and agents
against judgments, fines, penalties, amounts paid in settlement, and expenses,
including attorney’s fees, resulting from various types of legal actions or
proceedings instituted by third parties if the actions of the director, officer,
employee, or agent being indemnified meet the standards of conduct specified
therein.
In
addition, United’s Bylaws require it to indemnify its directors, officers,
employees, and agents for expenses actually and reasonably incurred in
connection with legal actions or proceedings instituted by or in the right
of
United to procure a judgment in its favor, if the actions of the director,
officer, employee, or agent being indemnified meet the standards of conduct
set
forth therein. However, United will not indemnify a director, officer, employee,
or agent for such expenses if such person is adjudged liable to United, unless
so ordered by the court in which the legal action or proceeding is
brought.
A
determination concerning whether or not the applicable standard of conduct
has
been met by a director, officer, employee, or agent seeking indemnification
must
be made by (1) a disinterested majority of the board of directors, (2) United’s
legal counsel, if a quorum of disinterested directors is not obtainable or
if
the disinterested directors so order, or (3) an affirmative vote of a majority
of shares held by the shareholders. No indemnification may be made to or on
behalf of a director, officer, employee or agent in connection with any other
proceeding in which such person was adjudged liable on the basis that personal
benefit was improperly received by him or her.
As
provided under Georgia law, the liability of a director may not be eliminated
or
limited (1) for any appropriation, in violation of his duties, of any business
opportunity of United, (2) for acts or omissions which involve intentional
misconduct or a knowing violation of law, (3) for unlawful corporate
distributions, or (4) for any transaction from which the director received
an
improper benefit.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to United’s directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, United has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
United’s
directors and officers are insured against losses arising from any claim against
them as such for wrongful acts or omissions, subject to certain
limitations.
Item
21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
|
Exhibit
No.
|
Exhibit
|
|
|
2.1
|
Agreement
and Plan of Reorganization, dated as of February 5, 2007, by and
between
United and Gwinnett.*
|
|
|
3.1
|
Restated
Articles of Incorporation of United Community Banks, Inc., (incorporated
herein by reference to Exhibit 3.1 to United Community Banks, Inc.’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001,
File
No. 0-21656, filed with the Commission on August 14,
2001).
|
|
|
3.2
|
Amendment
to the Restated Articles of Incorporation of United Community Banks,
Inc.
(incorporated herein by reference to Exhibit 3.3 to United Community
Banks, Inc.’s Registration Statement on Form S-4, File
No. 333-118893, filed with the Commission on September 9,
2004).
|
|
|
3.3
|
Amended
and Restated Bylaws of United Community Banks, Inc., dated September
12,
1997 (incorporated herein by reference to Exhibit 3.1 to United Community
Banks, Inc.’s Annual Report on Form 10-K, for the year ended December 31,
1997, File No. 0-21656, filed with the Commission on March 27,
1998).
|
|
|
4.1
|
See
Exhibits 3.1, 3.2 and 3.2 for provisions of Restated Articles of
Incorporation, as amended, and Amended and Restated Bylaws, which
define
the rights of the Shareholders.
|
|
|
4.2
|
Junior
Subordinated Indenture between United Community Banks, Inc. and The
Chase
Manhattan Bank, as Trustee, dated as of July 20, 1998 (incorporated
herein
by reference to Exhibit 4.1 to United’s Registration Statement on Form
S-4, File No. 333-64911, filed with the Commission on September 30,
1998).
|
|
|
4.3
|
Form
of Certificate of Junior Subordinated Debenture (incorporated herein
by
reference to Exhibit 4.2 to United’s Registration Statement on Form S-4,
File No. 333-64911, filed with the Commission on September 30,
1998).
|
|
|
4.4
|
Certificate
of Trust of United Community Capital Trust (incorporated herein by
reference to Exhibit 4.3 to United’s Registration Statement on Form S-4,
File No. 333-64911, filed with the Commission on September 30,
1998).
|
|
|
4.5
|
Amended
and Restated Trust Agreement among United Community Banks, Inc.,
as
depositor, The Chase Manhattan Bank, as Property Trustee, and Chase
Manhattan Bank Delaware, as Delaware Trustee, dated as of July 20,
1998
(incorporated herein by reference to Exhibit 4.4 to United’s Registration
Statement on Form S-4, File No. 333-64911, filed with the Commission
on
September 30, 1998).
|
|
|
4.6
|
Form
of New Capital Security Certificate for United Community Capital
Trust
(incorporated herein by reference to Exhibit 4.5 to United’s Registration
Statement on Form S-4, File No. 333-64911, filed with the Commission
on
September 30, 1998).
|
|
4.7
|
Guarantee
Agreement between United Community Banks, Inc., as Guarantor, and
The
Chase Manhattan Bank, as Guarantee Trustee, dated as of July 20,
1998
(incorporated herein by reference to Exhibit 4.6 to United’s Registration
Statement on Form S-4, File No. 333-64911, filed with the Commission
on
September 30, 1998).
|
|
Exhibit
No.
|
Exhibit
|
|
|
4.8
|
Registration
Rights Agreement dated July 20, 1998 among United Community Banks,
Inc.,
United Community Capital Trust and Wheat First Securities, Inc.
as Initial
Purchaser of 8.125% Junior Subordinated Deferrable Interest Debentures
Due
July 15, 2028 (incorporated herein by reference to Exhibit 4.7
to United’s
Registration Statement on Form S-4, File No. 333-64911, filed with
the
Commission on September 30, 1998).
|
|
|
4.9
|
Indenture,
dated November 26, 2002, by and between United and Marshall & Ilsley
Trust Company, N.A., as Trustee (incorporated herein by reference
to
Exhibit 4.9 to United’s Registration Statement on Form S-4/A, File No.
333-103024, filed with the Commission on February 21,
2003).
|
|
|
4.10
|
Form
of 6.75% Subordinated Notes due 2012 (incorporated herein by reference
to
Exhibit 4.10 to United’s Registration Statement on Form S-4/A, File No.
333-103024, filed with the Commission on February 21,
2003).
|
|
|
|
||
|
4.11
|
Indenture,
dated September 24, 2003, by and between United and Marshall & Ilsley
Trust Company, N.A. as Trustee (incorporated herein by reference
to
Exhibit 4.12 to United’s Annual Report on Form 10-K for the year ended
December 31, 2003, File No. 0-21656).
|
|
|
4.12
|
Form
of Subordinated Step-up Notes due 2015 (incorporated herein by
reference
to Exhibit 4.13 to United’s Annual Report on Form 10-K for the year ended
December 31, 2003, File No. 0-21656).
|
|
|
4.13
|
Indenture,
dated March 9, 2004, by and between Southern Bancorp, Inc. and
Wilmington
Trust Company as Trustee.*
|
|
|
4.14
|
Form
of Floating Rate Junior Subordinated Debentures due March 31, 2034
(included as part of Exhibit 4.13).
|
|
|
4.15
|
First
Supplemental Indenture, dated March 8, 2007, by and between United
and
Wilmington Trust Company as Trustee.*
|
|
|
5.1
|
Opinion
and Consent of Kilpatrick Stockton, LLP.*
|
|
|
8.1
|
Opinion
and Consent of Kilpatrick Stockton, LLP as to the federal income
tax
consequences to the merger of United and Gwinnett.
|
|
|
23.1
|
Consent
of Porter Keadle Moore, LLP.
|
|
|
23.2
|
Consent
of Kilpatrick Stockton, LLP (included as part of Exhibits 5 and
8).
|
|
|
23.3
|
Consent
of Burke Capital Group, L.L.C.*
|
|
|
23.4
|
Consent of John D. Stephens. | |
|
24.1
|
Power
of Attorney.*
|
|
|
99.1
|
Form
of Proxy.
|
|
|
99.2
|
Form
of Election.*
|
____________
*
Prevously filed.
(b) Financial
Statement Schedules: No financial statements schedules are required to be filed
as part of
this
Registration Statement.
|
(c)
|
Report,
Opinion or Appraisal: The opinion of Burke Capital Group is included
as
Appendix C to the materials filed as a part of this Registration
Statement.
|
|
*
|
Previously
filed.
|
Item
22. Undertakings
(a) The
undersigned registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be
the initial bona
fide
offering
thereof.
(b) The
undersigned registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given,
the
latest annual report to security holders that is incorporated by reference
in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to
be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(c) The
undersigned registrant hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who
is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the
other items of the applicable form.
(d) The
undersigned registrant hereby undertakes that every prospectus (i) that is
filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933, as amended,
and is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) The
undersigned registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date
of responding to the request.
(f) The
undersigned registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
(g) Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the
securities being registered, the registrant will, unless in the opinion of
its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it
is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, United Community Banks,
Inc.
has duly caused this Amendment No. 2 to Registration Statement to be signed
on
its behalf by the undersigned, thereunto duly authorized, in the City of
Blairsville, State of Georgia, on May 1, 2007.
|
UNITED
COMMUNITY BANKS, INC.
|
||
| |
|
|
| By: | /s/ Jimmy C. Tallent | |
|
|
||
|
Jimmy
C. Tallent
President and Chief Executive Officer |
||
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Amendment
No. 2 to Registration Statement has been signed by the following persons in
the
capacities indicated on May 1, 2007.
|
Signature
|
Title
|
|
|
/s/
Jimmy C. Tallent
|
President,
Chief Executive Officer and Director
(Principal
Executive Officer)
|
|
|
Jimmy
C. Tallent
|
||
|
*
|
Executive
Vice President and Chief Financial Officer
(Principal
Financial Officer)
|
|
|
Rex
S. Schuette
|
||
|
*
|
Senior
Vice President, Controller and Chief Accounting Officer (Principal
Accounting Officer)
|
|
|
Alan
H. Kumler
|
||
|
*
|
Chairman
of the Board
|
|
|
Robert
L. Head, Jr.
|
||
|
*
|
Vice
Chairman of the Board
|
|
|
W.
C. Nelson, Jr.
|
||
|
*
|
Director
|
|
|
A.
William Bennett
|
||
|
*
|
Director
|
|
|
Robert
Blalock
|
[signatures
continued on next page]
[signatures
continued from previous page]
|
*
|
Director
|
|
|
Guy
W. Freeman
|
||
|
*
|
Director
|
|
|
Thomas
C. Gilliland
|
||
|
*
|
Director
|
|
|
Charles
Hill
|
||
|
*
|
Director
|
|
|
Hoyt
O. Holloway
|
||
|
*
|
Director
|
|
|
Clarence
W. Mason, Sr.
|
||
|
*
|
Director
|
|
|
Tim
Wallis
|
|
By:
|
/s/
Jimmy C. Tallent
|
|||
|
Jimmy
C. Tallent
Attorney-in-fact
|
EXHIBIT
INDEX
|
Exhibit
|
Description
of Exhibit
|
|
|
8.1
|
Opinion
and Consent of Kilpatrick Stockton, LLP as to the federal income
tax
consequences to the merger of United and Gwinnett.
|
|
|
23.1
|
Consent
of Porter Keadle Moore, LLP.
|
|
|
23.4
|
Consent of John D. Stephens. | |
|
99.1
|
Form
of Proxy.
|
Exhibit
8.1
 |
Atlanta
GA 30309-4530
t
404 815 6500 f 404 815 6555
www.KilpatrickStockton.com
|
Gwinnett
Commercial Group, Inc.
Lawrenceville,
Georgia 30043
Ladies
and Gentlemen:
We
have
been requested to render our opinion expressed below in connection with
the
proposed merger (the “Merger”) of Gwinnett Commercial Group, Inc. (“Gwinnett”),
a Georgia corporation, with and into United Community Banks, Inc. (“United”), a
Georgia corporation, with United being the surviving entity, pursuant to
the
terms and conditions of that certain Agreement and Plan of Reorganization
dated
February 5, 2007, (the “Agreement”), by and between Gwinnett and United. You
have also requested that we render an opinion of the tax consequences of
the
simultaneous proposed merger (the “Subsidiary Merger”) of First Bank of the
South, a Georgia bank and wholly-owned subsidiary of Gwinnett, into United
Community Bank, a Georgia bank and a wholly-owned subsidiary of United,
with
United Community Bank as the surviving entity as set forth in the Agreement.
Unless otherwise indicated, terms used herein shall have the same meaning
as
defined in the Agreement.
In
rendering our opinion, we have examined the Agreement, the Merger Agreement,
applicable law, regulations, rulings and decisions.
Our
opinions set forth below are subject to the following assumptions,
qualifications, and exceptions:
A. During
the course of all of the foregoing examinations, we have assumed (i) the
genuineness of all signatures, (ii) the authenticity of all documents submitted
to us as originals, (iii) the legal capacity of all individuals, (iv) the
conformity to original documents of all documents submitted to us as certified,
conformed, or photo static copies, and (v) the authority of each person
or
persons who executed any document on behalf of another person.
B. As
to
various factual matters that are material to our opinions set forth herein,
we
have relied upon the factual representations and warranties set forth in
the
Agreement and related documents. We have not independently verified, nor
do we
assume any responsibility for, the factual accuracy or completeness of
any such
representations, warranties, statements, or
certificates.
 |
Gwinnett
Commercial Group, Inc.
May
1, 2007
Page
2
|
Based
on
and in reliance on the foregoing and the further qualifications set forth
below,
and provided that the Merger is consummated in accordance with the Agreement,
it
is our opinion that:
|
1.
|
The
Merger and the issuance of shares of United common stock in connection
therewith, as described in the Agreement, will constitute a tax-free
reorganization under Section 368(a)(1)(A) of the Internal Revenue
Code of
1986, as amended (the “Code”).
|
|
2.
|
No
gain or loss will be recognized by Gwinnett as a result of the
Merger.
|
|
3.
|
No
gain or loss will be recognized by holders of Gwinnett common stock
upon
the exchange of Gwinnett common stock solely for United common
stock as a
result of the Merger.
|
|
4.
|
If
pursuant
to the Merger a Gwinnett shareholder exchanges all of his or her
shares of
Gwinnett common stock for a combination of United stock and cash,
the
Gwinnett shareholder will generally recognize gain (but not loss)
in an
amount equal to the lesser of (i) the amount of gain realized
(i.e.,
the excess of the sum of the amount of cash, but not cash received
in lieu
of a fractional share, and the fair market value of the United
common
stock received pursuant to the Merger over such shareholder’s adjusted tax
basis in its shares of Gwinnett common stock surrendered) and
(ii) the amount of cash (but not cash in lieu of a fractional share)
received pursuant to the Merger. Any recognized gain will generally
be
long-term capital gain if the Gwinnett shareholder’s holding period with
respect to the Gwinnett common stock surrendered is more than one
year.
If, however, the cash received has the effect of the distribution
of a
dividend, the gain would be treated as a dividend to the extent
of the
holder’s ratable share of Gwinnett’s
accumulated earnings and profits as calculated for federal income
tax
purposes.
|
|
5.
|
Gain
or loss will be recognized pursuant to Section 302 of the Internal
Revenue
Code of 1986, as amended, by Gwinnett common stockholders upon
their
receipt of solely cash for their shares of Gwinnett common stock,
including cash received (i) as a result of a cash election, (ii)
in lieu
of fractional shares of United common stock, and (iii) upon their
exercise
of dissenters’ rights.
|
| 6. |
The
aggregate tax basis of United common stock received by shareholders
of
Gwinnett pursuant to the Merger will be the same as the tax basis
of the
shares of Gwinnett common stock exchanged therefor, (i) decreased
by any
portion of such tax basis allocated to fractional shares of United
common
stock that are treated as redeemed by United, (ii) decreased by
the amount
of cash received by a shareholder in the Merger (other than cash
received
with respect to fractional shares), and (iii) increased by the
amount of
gain recognized by a shareholder in the Merger (other than gain
recognized
with respect to fractional
shares).
|
| |
Gwinnett
Commercial Group, Inc.
May
1, 2007
Page
3
|
|
7.
|
The
holding period of the shares of United common stock received
by the
shareholders of Gwinnett will include the holding period of the
shares of
Gwinnett common stock exchanged therefor, provided that the common
stock
of Gwinnett is held as a capital asset on the date of the consummation
of
the Merger.
|
|
8.
|
As
a result of the Subsidiary Merger, no gain or loss shall be recognized
to
any of First Bank of the South, United Community Bank, Gwinnett,
United or
holders of Gwinnett common stock.
|
In
the
event that a Gwinnett shareholder has shares of Gwinnett common stock acquired
at different times or with differing tax basis, the above determinations
will
need to be made separately with respect to each such share (or block of
shares)
exchanged by such shareholder in the Merger.
In
general, cash received by holders of Gwinnett common stock exercising their
dissenters’ rights will be treated as amounts received from the sale of their
shares of Gwinnett common stock, and (provided that such Gwinnett common
stock
is a capital asset in the hands of such shareholders) each such shareholder
will
recognize capital gain or loss (short or long term, as appropriate) measured
by
the difference between the sale price of such Gwinnett common stock and
such
shareholder’s tax basis in such Gwinnett common stock.
We
express no opinion as to the following: (a) the tax consequences that might
be
relevant to a particular holder of Gwinnett common stock who is subject
to
special treatment under certain federal income tax laws, such as dealers
in
securities, banks, insurance companies, tax-exempt organizations, non-United
States persons, persons who do not hold their Gwinnett common stock as
“capital
assets” within the meaning of section 1221 of the Code, and persons who acquired
their Gwinnett common stock pursuant to the exercise of options or otherwise
as
compensation, or (b) other than the validity of the Merger for state law
purposes and its qualification as a tax free reorganization under Section
368(a)(1)(A) of the Code, any consequences arising under the laws of any
state,
locality, or foreign jurisdiction, or (c) the tax consequences that might
be
relevant to a holder of Gwinnett stock options or stock appreciation rights
receiving cash in exchange for such options or rights.
| |
Gwinnett
Commercial Group, Inc.
May
1, 2007
Page
4
|
|
Sincerely,
|
|
|
KILPATRICK
STOCKTON LLP
|
|
|
By:/s/
Scott M.
Dayan
|
|
|
Scott M. Dayan, a Partner
|
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
have
issued our report dated February 27, 2006, included in the Annual Report
of
United Community Banks, Inc. and subsidiaries on Form 10-K, for the year
ended
December 31, 2006. We hereby consent to the incorporation by reference of
said
report in this Registration Statement of United Community Banks, Inc. on
Form
S-4 and to the use of our name as it appears under the caption
“Experts.”
|
/s/
Porter Keadle Moore, LLP
Porter
Keadle Moore, LLP
|
Atlanta,
Georgia
May
1,
2007
Exhibit
23.4
Rule
438 Consent
I
will
become a director of United Community Banks, Inc. (“United”) after consummation
of the merger of Gwinnett Commercial Group, Inc. with and into United and am
so
designated in the Registration Statement on Form S-4 filed by United with the
SEC. I hereby consent to being so designated in the Registration
Statement.
|
/s/
John D. Stephens
John
D. Stephens
|
May
1,
2007
Exhibit
99.1
REVOCABLE
PROXY
GWINNETT
COMMERCIAL GROUP, INC.
x
PLEASE
MARK VOTES AS IN THIS EXAMPLE
THIS
PROXY IS SOLICITED ON BEHALF OF
THE
BOARD OF DIRECTORS OF THE COMPANY
The
undersigned, being a holder of shares of common stock of Gwinnett Commercial
Group, Inc. (the “Company”), acknowledges receipt of the notice of the special
meeting of stockholders of the Company to be held on June 1, 2007, and the
accompanying proxy statement, and appoints Glenn S. White and Andrew R.
Pourchier, and either of them, the attorneys of the undersigned, with power
of
substitution, for and in the name of the undersigned, to vote as proxies
for the
undersigned to the number of shares of Company common stock the undersigned
would be entitled to vote if personally present at the special meeting of
the
Company, as stated, and at any adjournment and adjournments thereof, upon
the
following matters (Management recommends a “For” vote on item No.
1):
|
For
|
Withhold
|
Abstain
|
|
|
1.
Approval
of the Agreement and Plan of Reorganization,
dated as of February 5, 2007, by and between United
Community Banks, Inc. and Gwinnett Commercial Group,
Inc.
|
o
|
o
|
o
|
|
2.
Other
Matters to Come Before the Meeting.
|
The
shares covered by this proxy will be voted in accordance with the selection
indicated. IF
NO SELECTION IS MADE, THEY WILL BE VOTED IN FAVOR OF APPROVAL OF THE AGREEMENT
AND PLAN OF REORGANIZATION.
Please
sign exactly as your name appears on the stock certificate. When signing
as an
attorney, executor, administrator, trustee or guardian, please give full
title
as such. If signer is a corporation, sign full corporate name by duly authorized
officer.
If shares are held in the name of two or more persons, all should
sign.
|
Please
be sure to sign and date
this
Proxy in the box below
|
Date
|
|
|
|
|
Shareholder
sign above
|
Co-holder (if any) sign above |
|
PLEASE
ACT PROMPTLY
SIGN,
DATE & MAIL YOUR PROXY
CARD
|
IF
YOUR
ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW.