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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly period ended Commission File Number:
March 31, 1996 0-20130
FIRST NATIONAL FINANCIAL CORPORATION
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(Exact name of small business issuer as specified in its charter)
Georgia 58-1853454
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Issuer's telephone number, including area code: (912) 888-5600
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Not applicable
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(Former name, Former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the last 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $5.00 Par 495,409
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Class Outstanding at May 1, 1996
Transitional Small Business Disclosure format (Check one):
Yes No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST NATIONAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
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<S> <C> <C>
Cash and due from banks $ 2,118,356 $ 2,474,112
Federal funds sold 3,100,000 4,450,000
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Total cash and cash equivalents $ 5,218,356 $ 6,924,112
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Securities
Available for sale at fair value $11,331,982 $11,399,640
Loans, net 35,015,157 32,969,161
Property and equipment 1,463,355 1,479,509
Other assets 834,840 878,446
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Total Assets $53,863,690 $53,650,868
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 6,710,216 $ 7,374,007
Interest bearing deposits 41,152,567 39,384,184
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Total deposits $47,862,783 $46,758,191
Other borrowings - - 1,000,000
Other liabilities 407,764 405,361
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Total Liabilities $48,270,547 $48,163,552
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Shareholders' Equity
Common stock, $5.00 par value, 10,000,000
shares authorized, 495,409 shares issued $ 2,477,045 $ 2,477,045
Additional paid in capital 2,396,134 2,396,134
Retained earnings 758,742 625,865
Unrealized (loss) on securities available
for sale (net of taxes) (38,778) (11,728)
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Total Shareholders' equity $ 5,593,143 $ 5,487,316
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Total liabilities and Shareholders' equity $53,863,690 $53,650,868
=========== ===========
Refer to notes to financial statements
</TABLE>
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FIRST NATIONAL FINANCIAL CORPORATION
CONSOLIDATED INCOME STATEMENTS
For the three months ended March 31,
<TABLE>
1996 1995
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Interest Income:
Interest and fees on loans $ 866,422 $756,644
Interest on investment securities 158,369 178,381
Interest on federal funds sold 46,496 2,600
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Total interest income $1,071,287 $937,625
Interest expense 538,548 392,976
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Net interest income $ 532,739 $544,649
Provision for possible loan losses 50,000 25,000
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Net interest income after provision
for loan losses $ 482,739 $519,649
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Other income:
Service charges on deposit accounts $ 100,912 $ 71,286
SBA fees and premiums 6,402 6,259
Other income 15,704 13,470
(Loss) on sale of securities - - (5,614)
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Total other income $ 123,018 $ 85,401
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Other expenses:
Salaries and employee benefits $ 213,049 $202,087
Equipment and occupancy expense 18,378 20,375
Depreciation and amortization expense 31,255 34,822
Data processing expense 21,838 20,678
Advertising and business development 5,860 5,526
Supplies and printing 12,549 11,636
Other operating expense 94,398 95,581
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Total other expense $ 397,327 $390,705
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Income before taxes $ 208,430 $214,345
Income tax expense 75,553 81,485
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Net income $ 132,877 $132,860
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Primary income per share $ 0.25 $ 0.25
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Fully diluted income per share $ 0.24 $ 0.25
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Refer to notes to financial statements
</TABLE>
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FIRST NATIONAL FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
For the three months ended March 31,
<TABLE>
1996 1995
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Cash flows from operating activities:
Net Income $ 132,877 $ 132,860
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 31,255 34,822
Deferred income taxes (14,109) - -
Net amortization of premiums on securities 5,474 5,493
Provision for possible loan losses 50,000 25,000
(Increase) decrease in other assets 87,664 (207,769)
Increase in other liabilities 2,403 196,690
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Net cash provided by operating activities $ 295,564 $ 187,096
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Cash flows from investing activities:
Proceeds from sale of securities $ - - $ 1,493,438
Proceeds from maturities of securities 500,000 1,500,000
Purchase of securities (500,000) (946,375)
(Increase) in loans (2,095,996) (2,602,502)
Purchase of premises and equipment (9,916) (12,839)
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Net cash (used) in investing activities $ (2,105,912) $ (568,278)
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Cash flows from financing activities
Issuance of common stock $ - - $ 31,500
(Decrease) in borrowings (1,000,000) - -
(Decrease) in federal funds purchased - - 600,000
Increase (decrease) in deposits 1,104,592 (1,211,727)
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Net cash provided (used) by financing activities $ 104,592 $ (580,227)
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Net (decrease) in cash and cash equivalents $ (1,705,756) $ (961,409)
Cash and cash equivalents, beginning of period 6,924,112 2,556,047
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Cash and cash equivalents, end of period $ 5,218,356 $ 1,594,638
============ ===========
SUPPLEMENTAL INFORMATION
Income taxes paid $ - - $ 77,331
Interest paid $ 543,917 $ 364,235
Refer to notes to financial statements
</TABLE>
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First National Financial Corporation
Notes to financial statements
NOTE 1 - SUMMARY OF ORGANIZATION
First National Financial Corporation, Albany, Georgia (the "Company"), was
incorporated under the laws of the State of Georgia on August 3, 1989, for the
purpose of becoming a bank holding company with respect to a proposed national
bank, First National Bank of South Georgia (the "Bank") located in Albany,
Georgia. Upon commencement of the Bank's principal operations on May 29, 1991,
the Company acquired 100 percent of the Bank's voting stock by injecting
$3,800,000 into the Bank's capital accounts.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Reclassification. The consolidated financial
statements include the accounts of the Company and the Bank. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Basis of Accounting. The accounting and reporting policies of the Company
conform to generally accepted accounting principles and to general practices in
the banking industry. The Company uses the accrual basis of accounting by
recognizing revenues when they are earned and recognizing expenses in the
period incurred, without regarding the time of receipt or payment of cash.
Investment Securities. The Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investment in Debt and
Equity Securities" ("SFAS 115") on January 1, 1994. SFAS 115 requires
investments in equity and debt securities to be classified into three
categories:
1. Held-to-maturity securities: These are securities which the
Company has the ability and intent to hold until maturity. These
securities are stated at cost, adjusted for amortization of
premiums and the accretion of discounts.
2. Trading securities: These are securities which are bought and
held principally for the purpose of selling in the near future.
Trading securities are reported at fair market value, and related
unrealized gains and losses are recognized in the income statement.
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First National Financial Corporation
Notes to financial statements
NOTE 2 - Continued
3. Available-for-sale securities: These are securities which are
not classified as either held-to-maturity or as trading securities.
These securities are reported at fair market value. Unrealized
gains and losses are reported, net of tax, as separate components
of shareholders' equity. Unrealized gains and losses are excluded
from the income statement.
Loans, Interest and Fee Income on Loans. Loans are stated at the
principal balance outstanding. Unearned discount, unamortized loan fees and
the allowance for possible loan losses are deducted from total loans in the
statement of condition. Interest income is recognized over the term of the
loan based on the principal amount outstanding. Points on real estate loans
are taken into income to the extent they represent the direct cost of
initiating a loan. The amount in excess of direct costs is deferred and
amortized over the expected life of the loan.
Loans are generally placed on non-accrual status when principal or
interest becomes ninety days past due, or when payment in full is not
anticipated. When a loan is placed on non-accrual status, interest accrued but
not received is generally reversed against interest income. If collectibility
is in doubt, cash receipts on non-accrual loans are not recorded as interest
income, but are used to reduce principal.
Allowance for Possible Loan Losses. The provisions for loan losses
charged to operating expense reflect the amount deemed appropriate by
management to establish an adequate reserve to meet the present and foreseeable
risk characteristics of the current loan portfolio. Management's judgement is
based on periodic and regular evaluation of individual loans, the overall risk
characteristics of the various portfolio segments, past experience with losses
and prevailing and anticipated economic conditions. Loans which are determined
to be uncollectible are charged against the allowance. Provisions for loan
losses and recoveries on loans previously charged-off are added to the
allowance.
Property and Equipment. Building, furniture and equipment are stated at
cost, net of accumulated depreciation. Depreciation is computed using the
straight line method over the estimated useful lives of the related assets.
Maintenance and repairs are charged to operations, while major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts, and gain or loss is included in income from operations.
Income Taxes. The consolidated financial statements have been prepared on
the accrual basis. When income and expenses are recognized in different
periods for financial reporting purposes and for purposes of computing income
taxes currently payable, deferred taxes are provided on such temporary
differences.
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First National Financial Corporation
Notes to financial statements
NOTE 2 - Continued
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under SFAS 109, deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been recognized in the
financial statements or tax return. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized or
settled.
Statement of Cash Flows. For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks and federal funds
sold. Generally, federal funds are purchased or sold for one day periods.
Earnings Per Share. The weighted average number of shares outstanding as
well as of all the common stock equivalents must be considered for purposes of
computing earnings per share. Note that common stock equivalents are
securities that enable their holders to obtain additional shares of common
stock. Options and warrants are common stock equivalents. They are used in
the computation of earnings per share only if, upon exercise, they dilute
earnings per share by 3% or more. To compute earnings per share, adjusted net
income is divided by the sum of weighted average shares of common stock
outstanding and of common stock equivalents.
Whenever the market price of a share of common stock exceeded the exercise
price of any warrant or option during the calendar years 1996 and 1995, an
increase equal to the number of shares which would be issuable on any such
exercise of warrants and stock options was reflected as a common stock
equivalent. However, the rule for the treasury stock method states that common
stock equivalents may not exceed 20% of the outstanding shares. Thus, if upon
exercise, excess funds were available to acquire more than the 20% limit on
common stock equivalents, any excess proceeds were assumed to be invested in
treasury securities and the income from those investments used to adjust net
income accordingly.
Purchases for purposes of the primary earnings per share calculation were
assumed to have been made at the average price of a share of common stock
during the corresponding calendar year, while purchases for purposes of the
fully diluted calculation were assumed to have been made at the quarter end
price of a share of stock.
NOTE 3 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. For further
information, refer to the financial statements and footnotes thereto included
in Form 10-KSB for the year ended December 31, 1995.
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Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Sources of Capital
The Company was incorporated on August 3, 1989 for the purpose of becoming a
bank holding company with respect to a proposed de novo national bank, First
National Bank of South Georgia (the "Bank") to be located in Albany, Georgia.
The Bank commenced operations on May 29, 1991. During the period from
inception until May 29, 1991, the Company was a development stage enterprise as
it devoted substantially all of its efforts toward organizing, incorporating,
and planning future actions, raising capital, building the headquarters and
recruiting personnel.
On May 29, 1991, the Bank was capitalized with a $3.8 million injection from
the parent holding company. At March 31, 1996, the Company's capital was $5.59
million or 10.38% of total assets. At March 31, 1996, the Company's risk based
capital ratio was 15% and its leverage ratio was 10%. Both of these ratios are
substantially above the minimum requirements established by regulatory
authorities.
Liquidity is the Company's ability to meet the funding needs of its customers.
This involves maintaining the ability to meet its customers' need to withdraw
funds while also providing for the credit needs of its borrowers. The Company
manages its liquidity through its short term investments. Another source of
liquidity is the repayment of installment and single payment loans. Should the
need arise, the Bank maintains relationships with correspondent banks who can
provide funds on short notice.
At March 31, 1996, the company had cash and cash equivalents of $5.2 million or
9.69% of total assets. Additionally the Company had $11.3 million of
investment securities that could be converted to cash if necessary. These
securities represent 21% of total assets. During the first quarter of 1996,
there is a slight change in the Company's asset mix. Net loans increased
$2.046 million or 6.2%. This increase was funded primarily by a $1.35 million
decrease in federal funds sold. Federal funds sold at March 31, 1996, were
$3.1 million or 5.76% of total assets. This change had a positive impact on
the company's earnings as loans have a higher yield than federal funds sold.
During the three months ended March 31, 1996, the Company also repaid the $1
million advance outstanding from the Federal Home Loan Bank. This repayment
had no adverse effect on the company's liquidity and will reduce interest
expense in future months. The company expects to maintain its loan growth and
anticipates funding it through deposit growth. There are no trends, demands,
commitments, events or uncertainties that will result in or are reasonably
likely to result in a material change in the Company's liquidity position.
During the three months ended March 31, 1996, net loans increased $2.046
million from the year end amount of almost $33 million to the quarter end
balance of $35 million. The March 31,1996 loans represented 65% of total
assets and 73% of total deposits. This compares favorably to the
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December 31, 1995, loan to deposit ratio of 71%. While management expects to
continue loan growth during 1996, it may not be at the current rate during the
remainder of the year.
Non-interest bearing deposits decreased during the first quarter by $664,000 to
just over $6.7 million. This represents 14% of total deposits. This decrease
was more than offset by an increase in interest bearing deposits which
increased $1.7 million to $41.2 million, or 4.5%. The primary source of
increase was in time deposits with balances under $100,000. This category
increased $1.2 million during the first quarter. The increase in this category
of deposits indicates that the Company is increasing its "core" deposits and
not relying upon large customers to fund the increase in loans. At March 31,
1996, "jumbo" certificates (those having balances of over $100,000) decreased
$155,000 to $6.3 million.
Results of operations
Interest income for the three months ended March 31, 1996, was $1.07 million as
compared to the 1995 amount of $938,000. This is an increase of $134,000. The
primary source of additional income was interest and fees on loans. This
category increased $110,000 to $866,000. The increased loan income in 1996 is
the result of the larger volume of outstanding loans. Also, interest on
federal funds sold increased in 1996 as a result of higher balances. Interest
on this category was $46,000 as compared to the 1995 amount of $3,000.
Interest expense for the first quarter of 1996 was $538,548 up from the 1995
level of $392,976. This increase is the result of a higher balance in the
interest bearing accounts in 1996 over the 1995 amount. Overall, net interest
income in the first quarter of 1996 was $532,739, down from the 1995 amount of
$544,649. This is a decrease of $11,910 or 2.75%. This decrease is a
reflection of the continuing trend in the banking industry as it must pay
higher rates to attract deposits and is unable to charge higher rates to its
borrowers.
During the first quarter of 1996, the provision for loan losses was $50,000 or
twice the 1995 amount. The provision for loan losses represents the amount of
expense management has allocated to the current period to provide for future
possible loan losses. At March 31, 1996, the allowance for loan losses was
$475,000 or 1.34% of gross loans. The increased expense in 1996 is a result of
a larger loan portfolio and hence a larger provision is required. Management
considers the current allowance to be adequate to absorb possible future losses;
however, there can be no assurance that future charge-offs or changes in local
economic conditions will require additional provisions.
The decrease in net interest income and the additional expense for the
provision for loan losses was more than offset by an increase in other income.
Total non-interest income increased in 1996 to $123,000 from the 1995 amount of
$85,000. This increase is due to increased charges on deposit accounts. This
category increased almost $30,000 or 42% to $100,912. This increase is the
result of a larger deposit base and is not the result of an overall increase
in the prices of the actual fees charged to individual customers.
Non-interest expense for the first quarter of 1996 was $397,327 as compared to
the 1995 amount of $390,705. This is a $6,600 increase or 1.69%. The only
major area of increase was salaries and employee
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benefits. This category increased $11,000 to $213,000 from the 1995 amount of
$202,000. This increase was offset in part by decreases in other expense
categories.
Overall, net income for the first quarter of 1996 remained nearly unchanged
from the 1995 level. First quarter earnings were $132,877 in 1996 as compared
to the 1995 amount of $132,860. Earnings per share were $ 0.25 in 1996 and
in 1995.
Subsequent Event
In April 1996, the Company entered into an agreement to be acquired by ABC
Bancorp of Moultrie, Georgia. ABC Bancorp is a multi-bank holding company for
five community banks located in southwest Georgia. This acquisition will be
accomplished by an exchange of stock, with First National Financial
Corporation stockholders receiving stock in ABC Bancorp. The acquisition is
subject to regulatory and stockholder approval. At the current time, the
Company is in the process of obtaining these approvals.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with this report:
2.1 - Agreement and Plan of Merger, dated as of April 15, 1996, by
and between ABC Bancorp and First National Financial
Corporation.
27.1 Financial Data Schedule(for SEC use only).
(b) Reports on Form 8-K. No report on Form 8-K was filed during the
quarter ended March 31, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST NATIONAL FINANCIAL CORPORATION
Dated: May 13, 1996 By: /s/ Raymond B. Phillips
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Raymond B. Phillips, President and Chief
Executive Officer (chief executive and financial
officer)
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EXHIBIT INDEX
Exhibit Number Description of Exhibit Sequential Page No.
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2.1 Agreement and Plan of Merger, dated April
15, 1996, by and between ABC Bancorp
and First National Financial Corporation
27.1 Financial Data Schedule(for SEC use only)
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ABC BANCORP
AND
FIRST NATIONAL FINANCIAL CORPORATION
AS OF APRIL 15, 1996
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TABLE OF CONTENTS
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Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 ARTICLES, BYLAWS, MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 MANNER OF CONVERTING AND EXCHANGING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Shares Held by TARGET or PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 TARGET Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Rights of Former TARGET Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Treatment of Options and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Authority; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 TARGET Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 TARGET Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
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4.19 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.20 Charter Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Authority; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 PURCHASER Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.9 PURCHASER Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.13 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.15 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.17 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.18 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.19 Charter Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Affirmative Covenants of TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Negative Covenants of TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Covenants of PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 7 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Registration Statement; Proxy Statement; Shareholder Approval . . . . . . . . . . . . . . . . . 31
7.2 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Filings with State Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5 Agreement as to Efforts to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Investigation and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.9 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.10 Agreement of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.11 Employee Benefits and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
7.12 Large Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.13 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.14 Irrevocable Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.15 Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.16 TARGET Options and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Conditions to Obligations of PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.3 Conditions to Obligations of TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 9 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.12 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
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<PAGE> 5
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
1. List of Holders (Section 3.7).
2. Form of agreement of affiliates of First National Financial Corporation (Section
7.10).
3. Irrevocable Proxy (Section 7.14).
4. Form of Noncompetition Agreement with Mr. Phillips (Section 7.15).
4A. Form of Noncompetition Agreement with Directors other than Mr. Phillips (Section
7.15).
5. Form of letter from Holders of Warrants (Section 7.16).
6. Form of letter from Holders of Options (Section 7.16).
7. Matters as to which Smith, Gambrell & Russell will opine (Section 8.2(d)).
8. Matters as to which Rogers & Hardin will opine (Section 8.3(d)).
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and
entered into as of April 15, 1996, by and between FIRST NATIONAL FINANCIAL
CORPORATION ("TARGET"), a corporation organized and existing under the laws of
the State of Georgia, with its principal office located in Albany, Georgia, and
ABC BANCORP ("PURCHASER"), a corporation organized and existing under the laws
of the State of Georgia, with its principal office located in Moultrie,
Georgia.
PREAMBLE
Certain terms used in this Agreement are defined in Section 10.1
hereof.
The Boards of Directors of TARGET and PURCHASER are of the opinion
that the transactions described herein are in the best interests of the parties
and their respective shareholders. This Agreement provides for the combination
of TARGET with PURCHASER pursuant to the merger of TARGET with and into
PURCHASER, as a result of which the outstanding shares of the capital stock of
TARGET shall be converted into the right to receive shares of common stock of
PURCHASER (except as provided herein), and the shareholders of TARGET shall
become shareholders of PURCHASER (except as provided herein). The transactions
described in this Agreement are subject to the approvals of the shareholders of
TARGET, the Board of Governors of the Federal Reserve System, the Georgia
Department of Banking and Finance and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that the Merger for federal income tax purposes shall qualify as
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
Following the Closing of the Merger, First National Bank of South
Georgia, a wholly-owned national bank subsidiary of TARGET (the "Bank"), will
be operated as a separate subsidiary of PURCHASER.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, TARGET shall be merged with and into
PURCHASER in accordance with the provisions of Section 14-2-1101 of the GBCC
and with the effect provided in Section 14-2-1106 of the GBCC (the "Merger").
PURCHASER shall be the Surviving Corporation resulting from the Merger. The
Merger shall be consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective Boards of Directors of TARGET and
PURCHASER.
<PAGE> 7
1.2 TIME AND PLACE OF CLOSING. The Closing shall take place at
10:00 a.m. on the date that the Effective Time occurs or at such other time as
the Parties, acting through their chief executive officers or chief financial
officers, may mutually agree (the "Closing Date"). The place of Closing shall
be at the offices of Rogers & Hardin, Atlanta, Georgia, or such other place as
may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Georgia Articles of Merger reflecting the Merger shall become
effective with the Secretary of State of the State of Georgia (the "Effective
Time"). Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by the chief executive officers of each Party, the
Parties shall use their reasonable efforts to cause the Effective Time to occur
on (a) the last business day of the month in which occurs the last to occur of
(i) the effective date (including expiration of any applicable waiting period)
of the last required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger and (ii) the date on which the
shareholders of TARGET approve this Agreement to the extent such approval is
required by applicable Law; or (b) such later date as may be mutually agreed
upon in writing by the chief executive officers or chief financial officers of
each Party.
ARTICLE 2
ARTICLES, BYLAWS, MANAGEMENT
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation
of PURCHASER in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until otherwise amended
or repealed.
2.2 BYLAWS. The Bylaws of PURCHASER in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of PURCHASER in
office immediately prior to the Effective Time shall serve as the directors of
the Surviving Corporation from and after the Effective Time in accordance with
the Bylaws of the Surviving Corporation. The officers of PURCHASER in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of PURCHASER from and
after the Effective Time in accordance with the Bylaws of PURCHASER. The
directors and officers of TARGET Bank immediately prior to the Effective Time
shall serve as the initial directors and officers of TARGET Bank from and after
the Effective Time in accordance with the Bylaws of TARGET Bank.
2
<PAGE> 8
ARTICLE 3
MANNER OF CONVERTING AND EXCHANGING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, the shares of PURCHASER and TARGET
shall be converted as follows:
(a) Each share of PURCHASER Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of TARGET Common Stock outstanding
immediately prior to the Effective Time, other than shares with respect to
which statutory dissenters' rights have been perfected (the "Dissenting
Shares") and shares held in TARGET'S treasury which shall be cancelled without
consideration at the Effective Time (the "Outstanding TARGET Shares"), shall
automatically be converted at the Effective Time into the right to receive
whole shares of PURCHASER Common Stock, plus cash in lieu of fractional shares
pursuant to subparagraph (c) below, if applicable, in an amount equal to (i)
the Merger Consideration, plus (ii) the Aggregate Option Consideration, divided
by (iii) the Aggregate TARGET Shares (the "Per Share Merger Consideration").
In accordance with the provisions of this Section 3.1, each TARGET shareholder
who does not dissent shall receive the number of shares, or such fractions of a
share (subject to paragraph (b) below), of PURCHASER Common Stock which shall
be equal to the (i) the Per Share Merger Consideration divided by the Base
Period Trading Price (the "Exchange Ratio"), (ii) multiplied by the aggregate
number of Outstanding TARGET Shares such shareholder holds as of the Effective
Time.
(c) Notwithstanding any other provision of this
Agreement, each holder of shares of TARGET Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of PURCHASER Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of PURCHASER
Common Stock multiplied by the Base Period Trading Price. No such holder will
be entitled to dividends, voting rights, or any other rights as a shareholder
in respect of any fractional shares.
(d) Each share of the TARGET Common Stock that is not
an Outstanding TARGET Share as of the Effective Time shall be cancelled without
consideration therefor.
(e) Outstanding TARGET Shares held by TARGET
shareholders who, prior to the Effective Time, have met the requirements of
Article 13 of the GBCC with respect to shareholders dissenting from the Merger
("Dissenting TARGET Shareholders") shall not be converted in the Merger, but
all such shares shall be cancelled and the holders thereof shall thereafter
have only such rights as are granted to dissenting shareholders under Article
13 of the
3
<PAGE> 9
GBCC; provided, however, that if any such shareholder fails to perfect his or
her rights as a dissenting shareholder with respect to his or her Outstanding
TARGET Shares in accordance with Article 13 of the GBCC, such shares held by
such shareholder shall, upon the happening of that event, be treated the same
as all other holders of TARGET Common Stock who have not dissented as to the
Merger.
3.2 EXCHANGE OF SHARES. Prior to the Effective Time, PURCHASER
shall select a bank or trust company reasonably acceptable to TARGET to act as
exchange agent (the "Exchange Agent") to effectuate the delivery of the Merger
Consideration to holders of TARGET Common Stock. Promptly following the
Effective Time, the Exchange Agent shall send to each holder of Outstanding
TARGET Shares immediately prior to the Effective Time a form of letter of
transmittal (the "Letter of Transmittal") for use in exchanging certificates
previously evidencing shares of TARGET Common Stock ("Old Certificates"). The
Letter of Transmittal will contain instructions with respect to the surrender
of Old Certificates and the distribution of cash and certificates representing
PURCHASER Common Stock, which certificates shall be deposited with the Exchange
Agent by PURCHASER as of the Effective time. If any certificates for shares of
PURCHASER Common Stock are to be issued in a name other than that for which an
Old Certificate surrendered or exchanged is issued, the Old Certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and the person requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificate surrendered or provide funds
for their purchase or establish to the satisfaction of the Exchange Agent that
such taxes are not payable. Unless and until Old Certificates (or evidence
that such certificates have been lost, stolen or destroyed accompanied by such
security or indemnity as shall be requested by TARGET) are presented to the
Exchange Agent, the holder thereof shall not be entitled to the consideration
to be paid in exchange therefor pursuant to the Merger, to any dividends
payable on any PURCHASER Common Stock to which he or she is entitled, or to
exercise any rights as a shareholder of PURCHASER Common Stock. Subject to
applicable law and to the extent that the same has not yet been paid to a
public official pursuant to applicable abandoned property laws, upon surrender
of his or her Old Certificates, the holder thereof shall be paid the
consideration to which he or she is entitled. All such property, if held by
the Exchange Agent for payment or delivery to the holders of unsurrendered Old
Certificates and unclaimed at the end of one (1) year from the Effective Time,
shall at such time be paid or redelivered by the Exchange Agent to PURCHASER
and after such time any holder of an Old Certificate who has not surrendered
such certificate shall, subject to applicable laws and to the extent that the
same has not yet been paid to a public official pursuant to applicable
abandoned property laws, look as a general creditor only to PURCHASER for
payment or delivery of such property. In no event will any holder of TARGET
Common Stock exchanged in the Merger be entitled to receive any interest on any
amounts held by the Exchange Agent or PURCHASER.
3.3 ANTI-DILUTION PROVISIONS. In the event TARGET or PURCHASER
changes the number of shares of TARGET Common Stock or PURCHASER Common Stock,
4
<PAGE> 10
respectively, issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend or similar recapitalization with respect to such
stock and the record date therefor (in the case of a stock dividend) or the
effective date therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the Exchange Ratio
shall be proportionately adjusted.
3.4 SHARES HELD BY TARGET OR PURCHASER. Each of the shares of
TARGET Common Stock held by any TARGET Company or by any PURCHASER Company, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.5 TARGET BANK. After consummation of the Merger, TARGET Bank
shall be a separate subsidiary of PURCHASER.
3.6 RIGHTS OF FORMER TARGET SHAREHOLDERS. At the Effective
Time, the stock transfer books of TARGET shall be closed as to holders of
TARGET Common Stock immediately prior to the Effective Time and no transfer of
TARGET Common Stock by any such holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 3.2
of this Agreement, each Old Certificate (other than shares to be canceled
pursuant to Section 3.1(d) of this Agreement) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Section 3.1 of this Agreement in exchange therefor.
To the extent permitted by Law, former shareholders of record of TARGET shall
be entitled to vote after the Effective Time at any meeting of shareholders of
PURCHASER the number of whole shares of PURCHASER Common Stock into which their
respective shares of TARGET Common Stock are converted, regardless of whether
such holders have exchanged their certificates representing TARGET Common Stock
for certificates representing PURCHASER Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by PURCHASER on the PURCHASER Common Stock, the record date for which
is at or after the Effective Time, the declaration shall include dividends or
other distributions on all shares issuable pursuant to this Agreement, but no
dividend or other distribution payable to the holders of record of PURCHASER
Common Stock as of any time subsequent to the Effective Time shall be delivered
to the holder of any certificate representing shares of TARGET Common Stock
issued and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 3.2 of this Agreement.
However, upon surrender of such TARGET Common Stock certificate, both the
PURCHASER Common Stock certificate (together with all such undelivered
dividends or other distributions without interest) and any undelivered cash
payments to be paid for fractional share interests (without interest) shall be
delivered and paid with respect to each share represented by such certificate.
5
<PAGE> 11
3.7 TREATMENT OF OPTIONS AND WARRANTS. Pursuant to Section
7.16 hereof, each option ("TARGET Option") or warrant ("TARGET Warrant") to
purchase shares of TARGET Common Stock issued by TARGET, outstanding and
unexercised immediately prior to the Effective Time, if any, is to be cancelled
upon consummation of the Merger, and all rights in respect thereof will cease
to exist. As consideration for the cancellation of all of the TARGET Options
and TARGET Warrants, each TARGET Option or TARGET Warrant shall automatically
be converted at the Effective Time into the right to receive whole shares of
PURCHASER Common Stock, plus cash in lieu of fractional shares pursuant to
subparagraph 3.1(c) above, if applicable, in an amount equal to (i) the
aggregate number of Option Shares which each holder (a "Holder") of TARGET
Options or TARGET Warrants, as the case may be, could have been converted into
immediately prior to the Effective Date (whether or not such TARGET Option or
TARGET Warrant is then exercisable), multiplied by (ii) the difference between
(A) the Per Share Merger Consideration and (B) the exercise price for each
Option Share subject to such TARGET Option or TARGET Warrant, divided by (iii)
the Base Period Trading Price. The name of each Holder and the number of
TARGET Options and TARGET Warrants owned by such Holder is set forth on Exhibit
1 hereto.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TARGET
TARGET hereby represents and warrants to PURCHASER as follows:
4.1 ORGANIZATION, STANDING AND POWER. TARGET is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Georgia, and is duly registered as a bank holding company under the
BHC Act. TARGET has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. TARGET is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on TARGET.
4.2 AUTHORITY; NO BREACH
(a) TARGET has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of TARGET, subject to the approval of this Agreement by the holders of a
majority of the outstanding TARGET Common Stock. Subject to such requisite
shareholder approval, this Agreement represents a legal, valid and binding
obligation of TARGET, enforceable against TARGET in
6
<PAGE> 12
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this
Agreement by TARGET, nor the consummation by TARGET of the transactions
contemplated hereby, nor compliance by TARGET with any of the provisions
hereof, will (i) conflict with or result in a breach of any provision of
TARGET's Articles of Incorporation or Bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any TARGET Company under, any Contract or Permit of
any TARGET Company, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET, or, (iii) subject to receipt of the
requisite approvals referred to in Section 8.1(b) of this Agreement, violate
any Law or Order applicable to any TARGET Company or any of their respective
Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and other than Consents required from Regulatory Authorities, and other
than notices to or filings with the Internal Revenue Service or the Pension
Benefit Guaranty Corporation with respect to any employee benefit plans, and
other than Consents, filings or notifications which, if not obtained or made,
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, no notice to, filing with, or Consent of any public
body or authority is necessary for the consummation by TARGET of the Merger and
the other transactions contemplated in this Agreement.
4.3 CAPITAL STOCK.
(a) The authorized capital stock of TARGET consists of
(i) 10,000,000 shares of TARGET Common Stock, of which 495,409 shares are
issued and outstanding as of the date of this Agreement, and (ii) 1,000,000
shares of Preferred Stock, none of which are issued or outstanding as of the
date of this Agreement. All of the issued and outstanding shares of capital
stock of TARGET are duly and validly issued and outstanding and are fully paid
and nonassessable under the GBCC. None of the outstanding shares of capital
stock of TARGET has been issued in violation of any preemptive rights of the
current or past shareholders of TARGET.
(b) Except as set forth in Section 4.3(a) of this
Agreement or as Previously Disclosed, there are no shares of capital stock or
other equity securities of TARGET outstanding and no outstanding options,
warrants, scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for,
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shares of the capital stock of TARGET or contracts, commitments,
understandings, or arrangements by which TARGET is or may be bound to issue
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock.
4.4 TARGET SUBSIDIARIES. TARGET has Previously Disclosed all
of the TARGET Subsidiaries as of the date of this Agreement. TARGET owns all
of the issued and outstanding shares of capital stock of TARGET Bank, and
TARGET Bank owns all of the issued and outstanding stock of each other TARGET
Subsidiary. No equity securities of any TARGET Subsidiary are or may become
required to be issued (other than to a TARGET Company) by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and there
are no Contracts by which any TARGET Subsidiary is bound to issue (other than
to a TARGET Company) additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock or by which any TARGET Company is or may be bound to transfer any shares
of the capital stock of any TARGET Subsidiary (other than to a TARGET Company).
There are no Contracts relating to the rights of any TARGET Company to vote or
to dispose of any shares of the capital stock of any TARGET Subsidiary. All of
the shares of capital stock of each TARGET Subsidiary held by a TARGET Company
are fully paid and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are
owned by the TARGET Company free and clear of any Lien. Each TARGET Subsidiary
is either a bank or a corporation, and is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and
authority necessary for it to own, lease and operate its Assets and to carry on
its business as now conducted. Each TARGET Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TARGET. Each TARGET Subsidiary
that is a depository institution is an insured institution as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder.
4.5 FINANCIAL STATEMENTS. TARGET has Previously Disclosed, and
delivered to PURCHASER prior to the execution of this Agreement, copies of all
TARGET Financial Statements for periods ended prior to the date hereof and will
deliver to PURCHASER copies of all TARGET Financial Statements prepared
subsequent to the date hereof. The TARGET Financial Statements (as of the
dates thereof and for the periods covered thereby) (a) are or, if dated after
the date of this Agreement, will be in accordance with the books and records of
the TARGET Companies, which are or will be, as the case may be, complete and
correct in all material respects and which have been or will have been, as the
case may be, maintained in
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accordance with good business practices, and (b) present or will present, as
the case may be, fairly the consolidated financial position of the TARGET
Companies as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows of the TARGET Companies for the
periods indicated, in accordance with GAAP (subject to any exceptions as to
consistency specified therein or as may be indicated in the notes thereto or,
in the case of interim financial statements, to normal recurring year-end
adjustments that are not material).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously
Disclosed, no TARGET Company has any Liabilities that are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET,
except Liabilities which are accrued or reserved against in the consolidated
balance sheet of TARGET as of December 31, 1995 included in the TARGET
Financial Statements or reflected in the notes thereto. Except as Previously
Disclosed, no TARGET Company has incurred or paid any Liability since December
31, 1995, except for such Liabilities incurred or paid in the ordinary course
of business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1995, (a) there have been no events, changes or occurrences which have had, or
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, and (b) the TARGET Companies have not taken any
action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of TARGET provided in Article 7 of this Agreement.
4.8 TAX MATTERS.
(a) All Tax returns required to be filed by or on
behalf of any of the TARGET Companies have been duly filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1995, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not reasonably
likely to have a Material Adverse Effect on TARGET, and all returns filed are
complete and accurate to the Knowledge of TARGET. All Taxes shown on filed
returns have been paid. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Material Adverse Effect on TARGET, except as reserved
against in the TARGET Financial Statements delivered prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
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(b) None of the TARGET Companies has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect, and no unpaid tax
deficiency has been asserted in writing against or with respect to any TARGET
Company, which deficiency is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(c) Adequate provision for any Taxes due or to become
due for any of the TARGET Companies for the period or periods through and
including the date of the respective TARGET Financial Statements has been made
and is reflected on such TARGET Financial Statements.
(d) Deferred Taxes of the TARGET Companies have been
provided for in accordance with GAAP.
(e) Each of the TARGET Companies is in compliance
with, and its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code, except for such instances of noncompliance and such omissions as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(f) Effective January 1, 1993, TARGET adopted
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes."
4.9 TARGET ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance
for possible loan or credit losses (the "TARGET Allowance") shown on the
consolidated balance sheets of TARGET included in the most recent TARGET
Financial Statements dated prior to the date of this Agreement was, and the
TARGET Allowance shown on the consolidated balance sheets of TARGET included in
the TARGET Financial Statements as of dates subsequent to the execution of this
Agreement will be, as of the dates thereof, adequate (within the meaning of
GAAP and applicable regulatory requirements or guidelines) to provide for
losses relating to or inherent in the loan and lease portfolios (including
accrued interest receivables) of the TARGET Companies and other extensions of
credit (including letters of credit and commitments to make loans or extend
credit) by the TARGET Companies as of the dates thereof except where the
failure of such TARGET Allowance to be so adequate is not reasonably likely to
have a Material Adverse Effect on TARGET.
4.10 ASSETS. Except as Previously Disclosed or as disclosed or
reserved against in the TARGET Financial Statements, or where the failure to
own good and marketable title is not reasonably likely to have a Material
Adverse Effect on TARGET, the TARGET Companies have good and marketable title,
free and clear of all Liens, to all of their respective Assets. All
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material tangible properties used in the businesses of the TARGET Companies are
in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with TARGET's past practices. All
Assets which are material to TARGET's business on a consolidated basis, held
under leases or subleases by any of the TARGET Companies are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. TARGET has Previously Disclosed,
and delivered to PURCHASER prior ot the execution of this Agreement, copies of
the policies of fire, theft, liability, and other insurance maintained with
respect to the Assets or businesses of the TARGET Companies and, in the opinion
of TARGET management, provide adequate coverage under current industry
practices against loss or Liability, and, in the opinion of TARGET management,
the fidelity and blanket bonds in effect as to which any of the TARGET
Companies is a named insured are reasonably sufficient. The Assets of the
TARGET Companies include all assets required to operate the business of the
TARGET Companies as presently conducted.
4.11 ENVIRONMENTAL MATTERS.
(a) Each TARGET Company, its Participation Facilities
and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET.
(b) There is no Litigation pending or, to the
Knowledge of TARGET, threatened before any court, governmental agency or
authority or other forum in which any TARGET Company or any of its
Participation Facilities has been or, with respect to threatened Litigation,
may be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material or oil, whether or not occurring at,
on, under or involving a site owned, leased or operated by any TARGET Company
or any of its Participation Facilities, except for such Litigation pending or,
to the Knowledge of TARGET, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(c) There is no Litigation pending or, to the
Knowledge of TARGET, threatened before any court, governmental agency or board
or other forum in which any of its Loan Properties (or any TARGET Company in
respect of such Loan Property) has been or, with respect to threatened
litigation, may be named as a defendant or potentially responsible party (i)
for alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the release into the environment of any Hazardous
Material or oil, whether or not
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occurring at, on, under or involving a Loan Property, except for such
Litigation pending or, to the Knowledge of TARGET, threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
(d) To the Knowledge of TARGET, there is no reasonable
basis for any Litigation of a type described in subsections (b) or (c), except
such as is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET.
(e) During the period of (i) any TARGET Company's
ownership or operation of any of their respective current properties, (ii) any
TARGET Company's participation in the management of any Participation Facility,
or (iii) any TARGET Company's holding of a security interest in a Loan
Property, there have been no releases of Hazardous Material or oil in, on,
under or affecting any such property, Participation Facility, or to the
Knowledge of TARGET Loan Property, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET.
(f) Prior to the period of (i) any TARGET Company's
ownership or operation of any of their respective current properties, (ii) any
TARGET Company's participation in the management of any Participation Facility,
or (iii) any TARGET Company's holding of a security interest in a Loan
Property, to the Knowledge of TARGET, there were no releases of Hazardous
Material or oil in, on, under or affecting any such property, Participation
Facility or Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
4.12 COMPLIANCE WITH LAWS.
(a) TARGET is duly registered as a bank holding
company under the BHC Act. Each TARGET Company has in effect all Permits
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(b) Except as Previously Disclosed no TARGET Company:
(i) is in violation of any Laws, Orders or
Permits applicable to its business or employees conducting its
business, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
TARGET; and
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(ii) has received any notification or
communication from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff thereof (A)
asserting that any TARGET Company is not in compliance with any of the
Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
TARGET, (B) threatening to revoke any Permits, the revocation of which
is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET, or (C) requiring any TARGET Company
to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business,
or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
4.13 LABOR RELATIONS. No TARGET Company is the subject of any
Litigation asserting that it or any other TARGET Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel it or any other TARGET Company to
bargain with any labor organization as to wages or conditions of employment,
nor is there any strike or other labor dispute involving any TARGET Company,
pending or, to its Knowledge, threatened, or to its Knowledge, is there any
activity involving any TARGET Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
4.14 EMPLOYEE BENEFIT PLANS.
(a) TARGET has Previously Disclosed, and delivered or
made available to PURCHASER prior to the execution of this Agreement, copies in
each case of all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or
other incentive plans all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, "employee benefit plans," as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any TARGET Company or Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "TARGET Benefit
Plans"). Any of the TARGET Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "TARGET ERISA Plan." Each TARGET ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j)) of the Internal Revenue Code) is
referred to herein as a "TARGET Pension Plan." No TARGET Pension Plan is or
has been a multi-employer plan within the meaning of Section 3(37) of ERISA.
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(b) All TARGET Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET. Each
TARGET ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and TARGET is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To the
Knowledge of TARGET, no TARGET Company has engaged in a transaction with
respect to any TARGET Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof would subject any TARGET Company to a
tax or penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(c) No TARGET ERISA Plan which is a defined benefit
pension plan has any "unfunded current liability," as that term is defined in
Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for
such plan's most recent actuarial valuation. Since the date of the most recent
actuarial valuation, there has been (i) no material change in the financial
position of any TARGET Pension Plan, (ii) no change in the actuarial
assumptions with respect to any TARGET Pension Plan, and (iii) no increase in
benefits under any TARGET Pension Plan as a result of plan amendments or
changes in applicable law, which is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on TARGET or materially adversely
affect the funding status of any such plan. Neither any TARGET Pension Plan
nor any "single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any TARGET Company, or the
single-employer plan of any entity which is considered one employer with TARGET
under Section 4001 of ERISA or Section 414 of the Internal Revenue Code or
Section 302 of ERISA (whether or not waived) (an "ERISA Affiliate") has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to
have a Material Adverse Effect on TARGET. No TARGET Company has provided, or
is required to provide, security to a TARGET Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of
the Code.
(d) Within the six-year period preceding the Effective
Time, no Liability under Subtitle C or D of Title IV or ERISA has been or is
expected to be incurred by any TARGET Company with respect to any ongoing,
frozen or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate, which Liability is reasonably likely to have a Material
Adverse Effect on TARGET. Except as Previously Disclosed, no TARGET Company
has incurred any withdrawal Liability with respect to a multi-employer plan
under Subtitle B of Title TV or ERISA (regardless of whether based on
contributions of an ERISA Affiliate), which Liability is reasonably likely to
have a Material Adverse Effect on TARGET. No notice of a "reportable event,"
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
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TARGET Pension Plan or by any ERISA Affiliate within the 12-month period ending
on the date hereof.
(e) No TARGET Company has any obligations for retiree
health and life benefits under any of the TARGET Benefit Plans and there are no
restrictions on the rights of such TARGET Company to amend or terminate any
such Plan without incurring any Liability thereunder, which Liability is
reasonably likely to have a Material Adverse Effect on TARGET.
(f) Except as Previously Disclosed, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of any TARGET Company
from any TARGET Company under any TARGET Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any TARGET Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued
deferred compensation entitlements (including, without limitation, entitlements
under any executive compensation, supplemental retirement, or employment
agreement) of employees and former employees of any TARGET Company and their
respective beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, have been fully reflected on the TARGET
Financial Statements to the extent required by and in accordance with GAAP.
4.15 MATERIAL CONTRACTS. Except as Previously Disclosed, or
otherwise reflected in the TARGET Financial Statements, none of the TARGET
Companies, nor any of their respective Assets, businesses or operations, is a
party to, or is bound or affected by, or receives benefits under, (a) any
employment, severance, termination, consulting or retirement Contract providing
for aggregate payments to any Person in any calendar year in excess of $50,000,
(b) any Contract relating to the borrowing of money by any TARGET Company or
the guarantee by any TARGET Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds, fully
secured repurchase agreements, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), and (c) any
Contracts between or among TARGET Companies (together with all Contracts
referred to in Sections 4.10 and 4.14(a) of this Agreement, the "TARGET
Contracts"). None of the TARGET Companies is in Default under any TARGET
Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET. All of
the indebtedness of any TARGET Company for money borrowed is prepayable at any
time by such TARGET Company without penalty or premium.
4.16 LEGAL PROCEEDINGS. Except as Previously Disclosed, there
is no Litigation instituted or pending or, to the Knowledge of TARGET,
threatened (or unasserted but
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considered probable of assertion and which, if asserted, would have at least a
reasonable probability of an unfavorable outcome) against any TARGET Company,
or against any Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any TARGET
Company, that are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on TARGET.
4.17 REPORTS. Since January 1, 1993, each TARGET Company has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (a) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied as to form in
all material respects with all applicable Laws. As of its respective date,
none of such reports and documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
4.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any TARGET Company
or any Affiliate thereof to PURCHASER pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to
be supplied by any TARGET Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by PURCHASER with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any TARGET Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to TARGET's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by any TARGET
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of TARGET, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication
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with respect to the solicitation of any proxy for the Shareholders' Meeting.
All documents that any TARGET Company or any Affiliate thereof is responsible
for filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
4.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Except as
Previously Disclosed, no TARGET Company or any Affiliate thereof has taken any
action or has any Knowledge of any fact or circumstance that is reasonably
likely to (a) prevent the transactions contemplated hereby, including the
Merger, from qualifying as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, or (b) materially impede or delay receipt
of any Consents of Regulatory Authorities referred to in Section 8.1 (b) of
this Agreement or result in the imposition of a condition or restriction of the
referred to in the second sentence of such Section. To the Knowledge of
TARGET, there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 8.1(b) of this Agreement cannot be received in
a timely manner without the imposition of any condition or restriction of the
type described in the second sentence of such Section 8.1(b).
4.20 CHARTER PROVISIONS. Each TARGET Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any TARGET Company or
restrict or impair the ability of PURCHASER to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of any TARGET Company that
may be acquired or controlled by it.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
PURCHASER hereby represents and warrants to TARGET as follows:
5.1 ORGANIZATION, STANDING AND POWER. PURCHASER is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Georgia, and is duly registered as a bank holding company
under the BHC Act. PURCHASER has the corporate power and authority to carry on
its business as now conducted and to own, lease and operate its Assets.
PURCHASER is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER.
5.2 AUTHORITY; NO BREACH.
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(a) PURCHASER has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of PURCHASER. This Agreement represents a legal, valid and binding
obligation of PURCHASER, enforceable against PURCHASER in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this
Agreement by PURCHASER, nor the consummation by PURCHASER of the transactions
contemplated hereby, nor compliance by PURCHASER with any of the provisions
hereof will (i) conflict with or result in a breach of any provision of
PURCHASER's Articles of Incorporation or Bylaws, or (ii) constitute or result
in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any PURCHASER Company under, any Contract
or Permit of any PURCHASER Company, where such Default or Lien, or any failure
to obtain such Consent, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, or, (iii) subject to receipt
of the requisite approvals referred to in Section 8.1(b) of this Agreement,
violate any Law or Order applicable to any PURCHASER Company or any of their
respective Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on PURCHASER, no notice to,
filing with, or Consent of any public body or authority is necessary for the
consummation by PURCHASER of the Merger and the other transactions contemplated
in this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of PURCHASER consists
of (i) 10,000,000 shares of PURCHASER Common Stock, of which 3,379,192 shares
are issued and outstanding as of the date of this Agreement, and (ii) 5,000,000
shares of Preferred Stock, none of which are issued or outstanding as of the
date of this Agreement. All of the issued and outstanding shares of PURCHASER
Common Stock are, and all of the shares of PURCHASER Common Stock to be issued
in exchange for shares of TARGET Common Stock upon consummation of
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the Merger, when issued in accordance with the terms of this Agreement, will
be, duly and validly issued and outstanding and fully paid and nonassessable
under the GBCC. None of the outstanding shares of PURCHASER Common Stock has
been, and none of the shares of PURCHASER Common Stock to be issued in exchange
for shares of TARGET Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past
shareholders of PURCHASER.
(b) Except as set forth in Section 5.3(a) of this
Agreement, or as Previously Disclosed, there are no shares of capital stock or
other equity securities of PURCHASER outstanding and no outstanding options,
warrants, scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of PURCHASER or contracts,
commitments, understandings, or arrangements by which PURCHASER is or may be
bound to issue additional shares of its capital stock or options, warrants, or
rights to purchase or acquire any additional shares of its capital stock.
5.4 PURCHASER SUBSIDIARIES. PURCHASER has Previously Disclosed
all of the PURCHASER Subsidiaries as of the date of this Agreement. PURCHASER
owns all of the issued and outstanding shares of capital stock of each
PURCHASER Subsidiary. No equity securities of any PURCHASER Subsidiary are or
may become required to be issued (other than to a PURCHASER Company) by reason
of any options, warrants, scrip, rights to subscribe to, calls, or commitments
of any character whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of the capital stock of any such Subsidiary,
and there are no Contracts by which any PURCHASER Subsidiary is bound to issue
(other than to a PURCHASER Company) additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any additional shares of
its capital stock or by which any PURCHASER Company is or may be bound to
transfer any shares of the capital stock of any PURCHASER Subsidiary (other
than to a PURCHASER Company). There are no Contracts relating to the rights of
any PURCHASER Company to vote or to dispose of any shares of the capital stock
of any PURCHASER Subsidiary. All of the shares of capital stock of each
PURCHASER Subsidiary held by a PURCHASER Company are fully paid and
nonassessable under the applicable corporation Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by the PURCHASER
Company free and clear of any Lien. Each PURCHASER Subsidiary is either a bank
or a corporation, and is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease and operate its Assets and to carry on its
business as now conducted. Each PURCHASER Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on
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PURCHASER. Each PURCHASER Subsidiary that is a depository institution is an
insured institution as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
5.5 FINANCIAL STATEMENTS. PURCHASER has Previously Disclosed
and delivered to TARGET prior to the execution of this Agreement copies of all
PURCHASER Financial Statements for periods ended prior to the date hereof and
will deliver to TARGET copies of all PURCHASER Financial Statements prepared
subsequent to the date hereof. The PURCHASER Financial Statements (as of the
dates thereof and for the periods covered thereby) (a) are or, if dated after
the date of this Agreement, will be in accordance with the books and records of
the PURCHASER Companies, which are or will be, as the case may be, complete and
correct in all material respects and which have been or will have been, as the
case may be, maintained in accordance with good business practices, and (b)
present or will present, as the case may be, fairly the consolidated financial
position of the PURCHASER Companies as of the dates indicated and the
consolidated results of operations, changes in shareholders' equity, and cash
flows of the PURCHASER Companies for the periods indicated, in accordance with
GAAP (subject to exceptions as to consistency specified therein or as may be
indicated in the notes thereto or, in the case of interim financial statements,
to normal recurring year-end adjustments that are not material).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No PURCHASER Company
has any Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, except Liabilities which are
accrued or reserved against in the consolidated balance sheet of PURCHASER as
of December 31, 1995 included in the PURCHASER Financial Statements or
reflected in the notes thereto. No PURCHASER Company has incurred or paid any
Liability since December 31, 1995, except for such Liabilities incurred or paid
in the ordinary course of business consistent with past business practice and
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1995, except as disclosed in SEC Documents filed by PURCHASER prior to the date
of this Agreement, (a) there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, and (b) the PURCHASER Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of PURCHASER provided in Article 7 of this Agreement.
5.8 TAX MATTERS.
(a) All Tax returns required to be filed by or on
behalf of any of the PURCHASER Companies have been timely filed or requests for
extensions have been timely
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filed, granted, and have not expired for periods ended on or before December
31, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on PURCHASER, and all returns filed are complete and accurate to
the Knowledge of PURCHASER. All Taxes shown on filed returns have been paid.
As of the date of this Agreement, there is no audit examination, deficiency, or
refund Litigation with respect to any Taxes that is reasonably likely to result
in a determination that would have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, except as reserved against in the
PURCHASER Financial Statements delivered prior to the date of this Agreement.
All Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) None of the PURCHASER Companies has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect, and no unpaid tax
deficiency has been asserted in writing against or with respect to any
PURCHASER Company, which deficiency is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on PURCHASER.
(c) Adequate provision for any Taxes due or to become
due for any of the PURCHASER Companies for the period or periods through and
including the date of the respective PURCHASER Financial Statements has been
made and is reflected on such PURCHASER Financial Statements.
(d) Deferred Taxes of the PURCHASER Companies have
been provided for in accordance with GAAP.
(e) Each of the PURCHASER Companies is in compliance
with, and its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code, except for such instances of noncompliance and such omissions as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(f) Effective January 1, 1993, PURCHASER adopted
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes."
5.9 PURCHASER ALLOWANCE FOR POSSIBLE LOAN LOSSES. The
allowance for possible loan or credit losses (the "PURCHASER Allowance") shown
on the consolidated balance sheets of PURCHASER included in the most recent
PURCHASER Financial Statements dated prior to the date of this Agreement was,
and the PURCHASER Allowance shown on the consolidated balance sheets of
PURCHASER included in the PURCHASER Financial
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Statements as of dates subsequent to the execution of this Agreement will be,
as of the dates thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for losses relating to or
inherent in the loan and lease portfolios (including accrued interest
receivables) of the PURCHASER Companies and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
the PURCHASER Companies as of the dates thereof except where the failure of
such PURCHASER Allowance to be so adequate is not reasonably likely to have a
Material Adverse Effect on PURCHASER.
5.10 ASSETS. Except as Previously Disclosed or as disclosed or
reserved against in the PURCHASER Financial Statements, the PURCHASER Companies
have good and marketable title, free and clear of all Liens, to all of their
respective Assets. All material tangible properties used in the businesses of
the PURCHASER Companies are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
PURCHASER's past practices. All Assets which are material to PURCHASER's
business on a consolidated basis, held under leases or subleases by any of the
PURCHASER Companies, are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. The
policies of fire, theft, liability, and other insurance maintained with respect
to the Assets or businesses of the PURCHASER Companies provide adequate
coverage under current industry practices against loss or Liability, and the
fidelity and blanket bonds in effect as to which any of the PURCHASER Companies
is a named insured are reasonably sufficient. The Assets of the PURCHASER
Companies include all assets required to operate the business of the PURCHASER
Companies as presently conducted.
5.11 ENVIRONMENTAL MATTERS.
(a) Each PURCHASER Company, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(b) There is no Litigation pending or, to the
Knowledge of PURCHASER, threatened before any court, governmental agency or
authority or other forum in which any PURCHASER Company or any of its
Participation Facilities has been or, with respect to threatened Litigation,
may be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material (as defined below) or oil, whether or
not occurring at, on, under or
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involving a site owned, leased or operated by any PURCHASER Company or any of
its Participation Facilities, except for such Litigation pending or, to the
Knowledge of Purchaser, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(c) There is no Litigation pending or, to the
Knowledge of Purchaser, threatened before any court, governmental agency or
board or other forum in which any of its Loan Properties (or any PURCHASER
Company in respect of such Loan Property) has been or, with respect to
threatened Litigation, may be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor), with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material or oil, whether or not occurring at, on, under or involving
a Loan Property, except for such Litigation pending or, to the Knowledge of
Purchaser, threatened that is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
(d) To the Knowledge of PURCHASER, there is no
reasonable basis for any Litigation of a type described in subsections (b) or
(c), except such as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(e) During the period of (i) any PURCHASER Company's
ownership or operation of any of their respective current properties, (ii) any
PURCHASER Company's participation in the management of any Participation
Facility, or (iii) any PURCHASER Company's holding of a security interest in a
Loan Property, there have been no releases of Hazardous Material or oil in, on,
under or affecting such property, Participation Facility or Loan Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(f) Prior to the period of (i) any PURCHASER Company's
ownership or operation of any of their respective current properties, (ii) any
PURCHASER Company's participation in the management of any Participation
Facility, or (iii) any PURCHASER Company's holding of a security interest in a
Loan Property, to the Knowledge of PURCHASER, there were no releases of
Hazardous Material or oil in, on, under or affecting any such property,
Participation Facility or Loan Property, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER.
5.12 COMPLIANCE WITH LAWS. PURCHASER is duly registered as a
bank holding company under the BHC Act. Each PURCHASER Company has in effect
all Permits necessary for it to own, lease or operate its Assets and to carry
on its business as now conducted, except for those Permits the absence of which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
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(a) No PURCHASER Company:
(i) is in violation of any Laws, Orders or
Permits applicable to its business or employees conducting its
business, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER; or
(ii) has received any notification or
communication from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff thereof (A)
asserting that any PURCHASER Company is not in compliance with any of
the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER, (B) threatening to revoke any Permits, the revocation of
which is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER, or (C) requiring any PURCHASER
Company to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business,
or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
5.13 LABOR RELATIONS. No PURCHASER Company is the subject of
any Litigation asserting that it or any other PURCHASER Company has committed
an unfair labor practice (within the meaning of the National Labor Relations
Act or comparable state law) or seeking to compel it or any other PURCHASER
Company to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving any
PURCHASER Company, pending or, to its Knowledge, threatened, or to its
Knowledge, is there any activity involving any PURCHASER Company's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) PURCHASER has Previously Disclosed and delivered
or made available to TARGET prior to the execution of this Agreement copies in
each case of all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or
other incentive plans, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, "employee benefit plans," as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any PURCHASER Company or Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees,
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dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "PURCHASER Benefit Plans). Any
of the PURCHASER Benefit Plans which is an "employee pension benefit plan," as
that term is defined in Section 3(2) of ERISA, is referred to herein as a
"PURCHASER ERISA Plan." Each PURCHASER ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j)) of the Internal Revenue Code) is
referred to herein as a "PURCHASER Pension Plan." No PURCHASER Pension Plan is
or has been a multi-employer plan within the meaning of Section 3(37) of ERISA.
(b) All PURCHASER Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER. Each
PURCHASER ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from
the Internal Revenue Service, and PURCHASER is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. To
the Knowledge of PURCHASER, no PURCHASER Company has engaged in a transaction
with respect to any PURCHASER Benefit Plan that, assuming the taxable period of
such transaction expired as of the date hereof would subject any PURCHASER
Company to a tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER.
(c) No PURCHASER ERISA Plan which is a defined benefit
pension plan has any "unfunded current liability," as that term is defined in
Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for
such plan's most recent actuarial valuation. Since the date of the most recent
actuarial valuation, there has been (i) no material change in the financial
position of any PURCHASER Pension Plan, (ii) no change in the actuarial
assumptions with respect to any PURCHASER Pension Plan, and (iii) no increase
in benefits under any PURCHASER Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER or materially
adversely affect the funding status of any such plan. Neither any PURCHASER
Pension Plan nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any PURCHASER
Company, or the single-employer plan of any ERISA Affiliate has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA, which is reasonably likely to have a Material
Adverse Effect on PURCHASER. No PURCHASER Company has provided, or is required
to provide, security to a PURCHASER Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV or
ERISA has been or is expected to be incurred by any PURCHASER Company with
respect to any ongoing, frozen or terminated single-employer plan or the
single- employer plan of any ERISA Affiliate, which
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Liability is reasonably likely to have a Material Adverse Effect on PURCHASER.
No PURCHASER Company has incurred any withdrawal Liability with respect to a
multi-employer plan under Subtitle B of Title IV or ERISA (regardless of
whether based on contributions of an ERISA Affiliate), which Liability is
reasonably likely to have a Material Adverse Effect on PURCHASER. No notice of
a "reportable event" within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any PURCHASER Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof
(e) Except as Previously Disclosed, (i) no PURCHASER
Company has any obligations for retiree health and life benefits under any of
the PURCHASER Benefit Plans and (ii) there are no restrictions on the rights of
such PURCHASER Company to amend or terminate any such Plan without incurring
any Liability thereunder, which Liability is reasonably likely to have a
Material Adverse Effect on PURCHASER.
(f) Except as Previously Disclosed, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of any PURCHASER
Company from any PURCHASER Company under any PURCHASER Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any PURCHASER
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(g) The actuarial present values of all accrued
deferred compensation entitlements (including, without limitation, entitlements
under any executive compensation, supplemental retirement, or employment
agreement) of employees and former employees of any PURCHASER Company and their
respective beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, have been fully reflected on the
PURCHASER Financial Statements to the extent required by and in accordance with
GAAP.
5.15 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of PURCHASER, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any PURCHASER
Company, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against any
PURCHASER Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
5.16 REPORTS. Since January 1, 1993, each PURCHASER Company has
timely filed all reports and statements, together with any amendments required
to be made with respect
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thereto, that it was required to file with (a) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8- K, and proxy statements, (b) other
Regulatory Authorities, and (c) any applicable state securities or banking
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER). As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied as to form in all material respects with all
applicable Laws. As of its respective date, none of such reports and documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
5.17 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any PURCHASER
Company or any Affiliate thereof to TARGET pursuant to this Agreement or any
other document, agreement or instrument referred to herein contains or will
contain any untrue statement of material fact or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the information supplied
or to be supplied by any PURCHASER Company or any Affiliate thereof for
inclusion in the Registration Statement to be filed by PURCHASER with the SEC,
will, when the Registration Statement becomes effective, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein not misleading. None of the information
supplied or to be supplied by any PURCHASER Company or any Affiliate thereof
for inclusion in the Proxy Statement to be mailed to TARGET's shareholders in
connection with the Shareholders' Meeting, and any other documents to be filed
by any PURCHASER Company or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and with respect to the
Proxy Statement, when first mailed to the shareholders of TARGET, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that any PURCHASER Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.18 ACCOUNTING, TAX AND REGULATORY MATTERS. No PURCHASER
Company or any Affiliate thereof has taken any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (a) prevent the
transactions contemplated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially impede or delay receipt of any Consents of Regulatory
Authorities
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referred to in Section 9.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the second sentence of
such Section. To the Knowledge of PURCHASER, there exists no fact,
circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without the
imposition of any condition or restriction of the type described in the second
sentence of such Section 9.1(b).
5.19 CHARTER PROVISIONS. Each PURCHASER Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any PURCHASER Company
or restrict or impair the ability of any TARGET shareholder to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of
PURCHASER Common Stock that may be acquired or controlled by it.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 AFFIRMATIVE COVENANTS OF TARGET. Unless the prior written
consent of PURCHASER shall have been obtained, and except as otherwise
contemplated herein, TARGET shall, and shall cause each of its Subsidiaries:
(a) to operate its business in the usual, regular, and ordinary course; (b) to
preserve intact its business organization and Assets and maintain its rights
and franchises; (c) to use its reasonable efforts to cause its representations
and warranties to be correct at all times; and (d) to take no action which
would (i) adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the second sentence of
Section 8.1(b) of this Agreement or (ii) adversely affect in any material
respect the ability of either Party to perform its covenants and agreements
under this Agreement.
6.2 NEGATIVE COVENANTS OF TARGET. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, TARGET covenants and agrees that it will not do or agree or commit
to do, or permit any of its Subsidiaries to do or agree or commit to do, any of
the following without the prior written consent of the chief executive officer
or chief financial officer of PURCHASER, which consent shall not be
unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or
other governing instruments of any TARGET Company; or
(b) incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a TARGET Company to
another TARGET Company) in excess of an aggregate of $50,000 (for the TARGET
Companies on a consolidated basis) except
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in the ordinary course of the business of TARGET Companies consistent with past
practices (which shall include, for TARGET Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal funds,
receipt of Federal Home Loan Bank advances, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or impose,
or suffer the imposition, on any share of stock held by any TARGET Company of
any Lien or permit any such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or
exchange (other than exchanges in the ordinary course under employee benefit
plans), directly or indirectly, any shares, or any securities convertible into
any shares, of the capital stock of any TARGET Company, or declare or pay any
dividend or make any other distribution in respect of TARGET's capital stock;
or
(d) except for the issuance of TARGET Options to
purchase 4,874 shares of TARGET Common Stock at an exercise price of $11.08 per
share to the Bank's President and Chief Executive Officer, Raymond D. Phillips
("Mr. Phillips"), or as otherwise permitted hereby, or as Previously
Disclosed, issue, sell, pledge, encumber, authorize the issuance of, or enter
into any Contract to issue, sell, pledge, encumber, or authorize the issuance
of or otherwise permit to become outstanding, any additional shares of TARGET
Common Stock or any other capital stock of any TARGET Company, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital
stock of any TARGET Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of TARGET Common Stock
or sell, lease, mortgage or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any TARGET Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another TARGET Company) or (ii) any
Asset having a book value in excess of $50,000 other than in the ordinary
course of business for reasonable and adequate consideration; or
(f) acquire direct or indirect control over any
Person, other than in connection with (i) internal reorganizations or
consolidations involving existing Subsidiaries, (ii) foreclosures in the
ordinary course of business, or (iii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to
the employees or officers of any TARGET Company (including such discretionary
increases as may be contemplated by existing employment agreements), except in
accordance with past practice Previously Disclosed or as required by Law; pay
any bonus except for any bonus properly payable to Mr. Phillips under the
Employment Agreement dated December 20, 1993 between the Bank and Mr. Phillips
or otherwise payable in accordance with past practice Previously
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Disclosed or the provisions of any applicable program or plan adopted by its
Board of Directors prior to the date of this Agreement; enter into or amend any
severance agreements with officers of any TARGET Company; grant any increase in
fees or other increases in compensation or other benefits to directors of any
TARGET Company or in accordance with past practice Previously Disclosed; or
(h) enter into or amend any employment Contract
between any TARGET Company and any Person (unless such amendment is required by
Law) that the TARGET Company does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered), at any
time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any TARGET
Company or make any material change in or to any existing employee benefit
plans of any TARGET Company other than any such change that is required by Law
or that, in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan; or
(j) make any significant change in any accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than in accordance
with past practice, settle any Litigation involving any Liability of any TARGET
Company for money damages in excess of $50,000 or which involves material
restrictions upon the operations of any TARGET Company; or
(l) except in the ordinary course of business, modify,
amend or terminate any material Contract or waive, release, compromise or
assign any material rights or claims.
6.3 COVENANTS OF PURCHASER. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
PURCHASER covenants and agrees that it shall continue to conduct its business
and the business of its Subsidiaries in a manner designed in its reasonable
judgment, to enhance the long-term value of the PURCHASER Common Stock and the
business prospects of the PURCHASER Companies and, to the extent consistent
therewith, to use all reasonable efforts to preserve intact the PURCHASER
Companies' core businesses and goodwill with their respective employees and the
communities they serve.
6.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries which (a) is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on it or (b) is reasonably
likely to cause or constitute a material breach of any of its representations,
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warranties, or covenants contained herein, and to use its reasonable efforts to
prevent or promptly to remedy the same.
6.5 REPORTS. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
material). As of their respective dates, such reports filed with the SEC will
comply in all material respects with the Securities Laws and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER
APPROVAL. As soon as practicable after execution of this Agreement, PURCHASER
shall file the Registration Statement with the SEC, and shall use its best
efforts to cause the Registration Statement to become effective under the 1933
Act and take any action required to be taken under the applicable state Blue
Sky or securities Laws in connection with the issuance of the shares of
PURCHASER Common Stock upon consummation of the Merger. TARGET shall furnish
all information concerning it and the holders of its capital stock as PURCHASER
may reasonably request in connection with such action. TARGET shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of the merger and this Agreement and such other related
matters as it deems appropriate. In connection with the Shareholders' Meeting,
(a) PURCHASER shall prepare and file on TARGET's behalf a Proxy Statement
(which shall be included in the Registration Statement) with the SEC and mail
it to its shareholders, (b) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection with
such Proxy Statement, (c) the Board of Directors of TARGET shall recommend
(subject to compliance with their fiduciary duties as advised by counsel) to
its shareholders that they approve this Agreement, and (d) the Board of
Directors and officers of TARGET shall use their reasonable efforts to obtain
such shareholders' approval (subject to compliance with their fiduciary duties
as advised by counsel).
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7.2 LISTING. PURCHASER shall use its best efforts to list,
prior to the Effective Time, on NASDAQ, the shares of PURCHASER Common Stock to
be issued to the holders of TARGET Common Stock pursuant to the Merger.
7.3 APPLICATIONS. PURCHASER shall promptly prepare and file,
and TARGET shall cooperate in the preparation and, where appropriate, filing
of, applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
7.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to
the conditions of this Agreement, PURCHASER shall execute and file the Georgia
Articles of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
7.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the
terms and conditions of this Agreement, each Party agrees to use, and to cause
its Subsidiaries to use, its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise
enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other Party hereto to that end (it being understood that any
amendments to the Registration Statement filed by PURCHASER in connection with
the PURCHASER Common Stock to be issued in the Merger or a resolicitation of
proxies as a consequence of an acquisition agreement by PURCHASER or any of its
Subsidiaries shall not violate this covenant), including, without limitation,
using its efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement. Each Party shall
use, and shall cause each of its Subsidiaries to use, its best efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
7.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party will keep
the other Party advised of all material developments relevant to its business
and to consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it and
its Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) Except as may be required by applicable Law or
legal process, and except for such disclosure to those of its directors,
officers, employees and representatives as
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may be appropriate or required in connection with the transactions contemplated
hereby, each Party shall hold in confidence all nonpublic information obtained
from the other Party (including work papers and other material derived
therefrom) as a result of this Agreement or in connection with the transactions
contemplated hereby (whether so obtained before or after the execution hereof)
until such time as the Party providing such information consents to its
disclosure or such information becomes otherwise publicly available. Promptly
following any termination of this Agreement, each of the Parties agrees to use
its best efforts to cause its respective directors, officers, employees and
representatives to destroy or return to the providing party all such nonpublic
information (including work papers and other material retrieved therefrom),
including all copies thereof. Each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return all documents and copies
thereof and all work papers containing confidential information received from
the other Party, except one copy of certain materials that can be retained for
legal files in accordance with the provisions of the Confidentiality
Agreements.
(c) Each Party agrees to give the other Party notice
as soon as practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent,
either a material breach of any representation, warranty, covenant or agreement
of the other Party or which has had or is reasonably likely to have a Material
Adverse Effect on the other Party.
(d) It is hereby agreed that this Section 7.6 shall
supersede in its entirety that certain Confidentiality Agreement dated April 9,
1996, between PURCHASER and TARGET.
7.7 PRESS RELEASES. Prior to the Effective Time, TARGET and
PURCHASER shall consult with each other as to the form and substance of any
press release or other public disclosure materially related to this Agreement
or any other transaction contemplated hereby; provided, however, that nothing
in this Section 7.7 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.
7.8 NO SOLICITATION. (a) TARGET shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any
officer, director of employee of, or any investment banker, attorney or other
advisor or representative of, TARGET or any of its Subsidiaries to, (i) solicit
or initiate, or encourage the submission of, any takeover proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any takeover proposal;
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provided, however, that, if in the opinion of its Board of Directors, after
consultation with counsel, such failure to act would be inconsistent with its
fiduciary duties to shareholders under applicable law, TARGET may, in response
to an unsolicited takeover proposal, and subject to compliance with
subparagraph (c) below, (A) furnish information with respect to TARGET to any
Person pursuant to a confidentiality agreement and (B) participate in
negotiations regarding such takeover proposal. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
immediately preceding sentence by any executive officer of TARGET or any of its
Subsidiaries or any investment banker, attorney or other advisor or
representative of TARGET or any of its Subsidiaries, whether or not such person
is purporting to act on behalf of TARGET or any of its Subsidiaries or
otherwise, shall be deemed to be a breach of this Section 7.8 by TARGET. For
purposes of this Agreement, "takeover proposal" means an inquiry, proposal or
acquisition or purchase of a substantial amount of assets of TARGET or any of
its Subsidiaries (other than investors in the ordinary course of business) or
of over 20% of any class of equity securities of TARGET or any of its
Subsidiaries or any tender offer or exchange offer that if consummated would
result in any Person beneficially owning 20% or more of any class of equity
securities of TARGET or any of its Subsidiaries, or any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving TARGET or any of its
Subsidiaries other than the transactions contemplated by this Agreement, or any
other transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or which would
reasonably be expected to dilute materially the benefits to PURCHASER of the
transactions contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors
of TARGET nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to PURCHASER, the approval or
recommendation of such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any takeover proposal or (iii) enter into any agreement with respect
to any takeover proposal. Notwithstanding the foregoing, if in the opinion of
the TARGET Board of Directors, after consultation with counsel, failure to do
so would be inconsistent with its fiduciary duties to TARGET shareholders under
applicable law, then, prior to the Shareholders' Meeting, the TARGET Board of
Directors may (subject to the terms of this and the following sentences)
withdraw or modify its approval or recommendation of this Agreement or the
Merger, approve or recommend a superior proposal, or enter into an agreement
with respect to a superior proposal, in each case at any time after the second
business day following PURCHASER'S receipt of written notice (a "Notice of
Superior Proposal") advising PURCHASER that the TARGET Board of Directors has
received a superior proposal, specifying the material terms and conditions of
such superior proposal and identifying the Person making such superior
proposal; provided that TARGET shall not enter into an agreement with respect
to a superior proposal unless TARGET shall have furnished PURCHASER with
written notice no later than 12:00 noon one (1) day in advance of any date that
it intends to enter into such agreement. In addition, if TARGET proposes to
enter into an agreement with respect to any takeover proposal,
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it shall concurrently with entering into such agreement pay, or cause to be
paid, to PURCHASER the Expenses and the Termination Fee (as defined in Section
10.2(b). For purposes of this Agreement, a "superior proposal" means any bona
fide takeover proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the shares of TARGET
Common Stock or TARGET Bank then outstanding or all or substantially all of the
assets of TARGET or TARGET Bank and otherwise on terms which the TARGET Board
of Directors determines in its good faith judgment (based on the advice of a
financial advisor of recognized reputation) to be more favorable to its
shareholders than the Merger.
(c) In addition to the obligations of TARGET set forth in
paragraph (b) above, TARGET shall immediately advise PURCHASER orally and in
writing of any request for information or of any takeover proposal, or any
inquiry with respect to or which could lead to any takeover proposal, the
material terms and conditions of such request, takeover proposal or inquiry,
and the identity of the person making any takeover proposal or inquiry. TARGET
shall keep PURCHASER fully informed of the status and details (including
amendments or proposed amendments) of any such request, takeover proposal or
inquiry.
(d) Nothing contained in this Section 7.8 shall prohibit TARGET
from making any disclosure to TARGET's shareholders if, in the opinion of the
TARGET Board of Directors, after consultation with counsel, failure to so
disclose would be inconsistent with its fiduciary duties to its shareholders
under applicable law; provided that TARGET does not, except as permitted by
subparagraph (b) above, withdraw or modify, or propose to withdraw or modify,
its position with respect to the Merger or approve or recommend, or propose to
approve or recommend, a takeover proposal.
7.9 TAX TREATMENT. Each of the Parties undertakes and agrees
to use its reasonable efforts to cause the Merger, and to take no action which
would cause the Merger not, to qualify for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes.
7.10 AGREEMENT OF AFFILIATES. TARGET has Previously Disclosed
all Persons whom it reasonably believes are "affiliates" of TARGET for purposes
of Rule 145 under the 1933 Act. TARGET shall use its reasonable efforts to
cause each such Person to deliver to PURCHASER not later than thirty (30) days
after the date of this Agreement, a written agreement, substantially in the
form of Exhibit 2 hereto, providing that such Person will not sell, pledge,
transfer, or otherwise dispose of the shares of TARGET Common Stock held by
such Person except as contemplated by such agreement or by this Agreement and
will not sell, pledge, transfer, or otherwise dispose of the shares of
PURCHASER Common Stock to be received by such Person upon consummation of the
Merger except in compliance with applicable provisions of the 1933 Act and the
rules and regulations thereunder. Regardless of whether each such affiliate
has provided the written agreement referred to in this Section, PURCHASER shall
be
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entitled to place restrictive legends upon certificates for shares of PURCHASER
Common Stock issued to affiliates of TARGET pursuant to this Agreement to
enforce the provisions of this Section.
7.11 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective
Time, PURCHASER shall provide generally to officers and employees of the TARGET
Companies employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of PURCHASER Common
Stock), on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the PURCHASER Companies to their
similarly situated officers and employees, provided that for a period of twelve
(12) months after the Effective Time, PURCHASER shall provide generally to
officers and employees of TARGET Companies severance benefits in accordance
with the policies of either (i) TARGET as Previously Disclosed, or (ii)
PURCHASER, whichever of (i) or (ii) will provide the greater benefit to the
officer or employee. For purposes of participation and vesting under such
employee benefit plans, the service of the employees of the TARGET Companies
prior to the Effective Time shall be treated as service with a PURCHASER
Company participating in such employee benefit plans. PURCHASER also shall
honor in accordance with their terms all employment, severance, consulting and
other compensation Contracts Previously Disclosed to PURCHASER between any
TARGET Company and any current or former director, officer, or employee thereof
and all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the TARGET Benefit Plans.
7.12 LARGE DEPOSITS. Prior to the Closing, TARGET will provide
PURCHASER with a list of all certificates of deposit or checking, savings or
other deposits owned by persons who, to the Knowledge of the TARGET, had
deposits aggregating more than $100,000 and a list of all certificates of
deposit or checking, savings or other deposits owned by directors and officers
of TARGET and the Bank and their affiliates in an amount aggregating more than
$100,000 as of the last day of the calendar month immediately prior to the
Closing.
7.13 INDEMNIFICATION. PURCHASER agrees that all rights to
indemnification and all limitations of liability existing in favor of the
officers and directors of TARGET and TARGET Bank ("Indemnified Parties") as
provided in their respective articles of incorporation and bylaws as of the
date hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect, without any
amendment thereto, for a period of not less than six (6) years from the
Effective Time; provided, however, that all rights to any indemnification in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim.
7.14 IRREVOCABLE PROXIES. Concurrent with the execution hereof,
TARGET shall obtain and deliver to PURCHASER irrevocable proxies in
substantially the form of Exhibit 3 hereto from each member of TARGET'S Board
of Directors.
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7.15 NONCOMPETITION AGREEMENTS. TARGET shall use its best
efforts to cause Mr. Phillips and each other member of its Board of Directors
to execute and deliver to PURCHASER, on or before the Closing Date,
Noncompetition Agreements substantially in the forms attached hereto as
Exhibits 4 and 4A, respectively.
7.16 TARGET OPTIONS AND WARRANTS. TARGET shall use its best
efforts to cause (i) each Holder of TARGET Warrants listed on Exhibit 1 hereto
to execute and deliver to PURCHASER, on or before the Closing Date, a letter in
the form of Exhibit 5 hereto signed by such Holder, and (ii) each Holder of
TARGET Options listed on Exhibit 1 hereto to execute and deliver to PURCHASER,
on or before the Closing Date, a letter in the form of Exhibit 6 hereto signed
by such Holder.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
10.6 of this Agreement:
(a) SHAREHOLDER APPROVAL. The shareholders of TARGET
shall have approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by Law
or by the provisions of any governing instruments.
(b) REGULATORY APPROVALS. All Consents of, filings
and registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made and
shall be in full force and effect, and all waiting periods required by Law
shall have expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including, without limitation,
requirements relating to the raising of additional capital or the disposition
of Assets) which, in the reasonable judgment of the Board of Directors of
either Party, would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement so as to render
inadvisable the consummation of the Merger; provided, however, that no such
condition or restriction shall be deemed to be materially adverse unless it
materially differs from terms and conditions customarily imposed by any
Regulatory Authority in connection with similar transactions.
(c) CONSENTS AND APPROVALS. Each Party shall have
obtained any and all Consents required for consummation of the Merger (other
than those referred to in Section 8.1(b) of this Agreement) or for the
preventing of any Default under any Contract or Permit of such
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Party which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on such Party.
(d) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits, materially
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(e) REGISTRATION STATEMENT. The Registration
Statement shall be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating to
the issuance or trading of the shares of PURCHASER Common Stock issuable
pursuant to the Merger shall have been received.
(f) NASDAQ LISTING. The shares of PURCHASER Common
Stock issuable pursuant to the Merger shall have been approved for listing on
NASDAQ.
(g) TAX MATTERS. TARGET shall have received a written
opinion of counsel from Rogers & Hardin, in form reasonably satisfactory to it,
substantially to the effect that for federal income tax purposes (a) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and (b) the exchange in the Merger of TARGET Common
Stock for PURCHASER Common Stock will not give rise to gain or loss to the
shareholders of TARGET with respect to such exchange (except to the extent of
any cash received).
8.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
PURCHASER to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by PURCHASER pursuant to Section 10.6(a) of
this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of TARGET set forth or referred to in this
Agreement shall be true and correct in all respects as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date), except (i) as expressly contemplated by
this Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 4.3 of this Agreement,
which shall be true in all respects) the inaccuracies of which relate to
matters that
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are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of TARGET to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior
to the Effective Time shall have been duly performed and complied with in all
material respects.
(c) TARGET shall have delivered to PURCHASER (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions of its obligations
set forth in Sections 8.2(a) and 8.2(b) of this Agreement have been satisfied,
and (ii) certified copies of resolutions duly adopted by TARGET's Board of
Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as PURCHASER and its counsel shall reasonably request.
(d) OPINION OF COUNSEL. TARGET shall have delivered
to PURCHASER an opinion of Smith, Gambrell & Russell, counsel to TARGET, dated
as of the Closing, in substantially the form of Exhibit 7 hereto.
(e) ACCOUNTANT'S LETTERS. PURCHASER shall have
received from Mauldin & Jenkins letters dated not more than five (5) days prior
to (i) the date of the Proxy Statement and (ii) the Effective Time, with
respect to certain financial information regarding TARGET, in form and
substance reasonably satisfactory to PURCHASER, which letters shall be based
upon customary specified procedures undertaken by such firm.
(f) NONCOMPETITION AGREEMENTS. Mr. Phillips and each
other member of TARGET'S Board of Directors shall have executed and delivered a
Noncompetition Agreement substantially in the forms of Exhibits 4 and 4A,
respectively.
(g) DISSENTING SHAREHOLDERS. Holders of not more than
seven and one-half (7.5%) percent of the issued and outstanding TARGET Common
Stock shall have timely filed written notice with TARGET that they intend to
demand payment for their shares.
(h) OPINION OF ACCOUNTANT. PURCHASER shall have
received an opinion of Mauldin & Jenkins to the effect that the Merger
qualifies for a pooling of interests within the meaning of APB No. 16 if
consummated in accordance with this Agreement.
(i) LETTERS FROM HOLDERS. PURCHASER shall have
received from each Holder of TARGET Warrants a letter substantially in the form
of Exhibit 5 hereto and shall
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have received from each Holder of TARGET Options a letter substantially in the
form of Exhibit 6 hereto, in each case signed by such Holder.
8.3 CONDITIONS TO OBLIGATIONS OF TARGET. The obligations of
TARGET to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by TARGET pursuant to Section 10.6(b) of
this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of PURCHASER set forth or referred to in this
Agreement shall be true and correct in all respects as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date), except (i) as expressly contemplated by
this Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 5.3 of this Agreement,
which shall be true in all respects) the inaccuracies of which relate to
matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of PURCHASER to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all material respects.
(c) CERTIFICATES. PURCHASER shall have delivered to
TARGET (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Section 8.3(a) and
8.3(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by PURCHASER's Board of Directors evidencing the
taking of all corporate action necessary to authorize the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as TARGET and its counsel
shall reasonably request.
(d) OPINION OF COUNSEL. PURCHASER shall have
delivered to TARGET an opinion of Rogers & Hardin, counsel to PURCHASER, dated
as of the Closing, in substantially the form of Exhibit 4 hereto.
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ARTICLE 9
TERMINATION
9.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of TARGET, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of
PURCHASER and the Board of Directors of TARGET; or
(b) By the Board of Directors of either Party
(provided that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any
representation or warranty contained in this Agreement which cannot be or has
not been cured within thirty (30) days after the giving of written notice to
the breaching Party of such breach and which breach would provide the
non-breaching party the ability to refuse to consummate the Merger under the
standard set forth in Section 8.2(a) of this Agreement in the case of PURCHASER
and Section 8.3(a) of this Agreement in the case of TARGET; or
(c) By the Board of Directors of either Party
(provided that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any covenant
or agreement contained in this Agreement which cannot be or has not been cured
within (30) days after the giving of written notice to the breaching Party of
such breach; or
(d) By the Board of Directors of either Party
(provided that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event (i) any Consent of any Regulatory Authority required
for consummation of the Merger and the other transactions contemplated hereby
has been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for
appeal, or (ii) if the shareholders of TARGET fail to approve this Agreement
and the transactions contemplated hereby as required by the GBCC at the
Shareholders' Meetings where the transactions were presented to such
shareholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the
event that the Merger shall not have been consummated by November 1, 1996 but
only if the failure to consummate the transactions contemplated hereby on or
before such date is not caused by any breach of this Agreement by the Party
electing to terminate pursuant to this Section 9.1 (e); or
(f) By the Board of Directors of either Party
(provided that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event that any of the conditions precedent to the
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obligations of such Party to consummate the Merger cannot be satisfied or
fulfilled by the date specified in Section 9.1(e) of this Agreement.
(g) By the Board of Directors of TARGET in connection
with entering into a definitive agreement in accordance with Section 7.8(b),
provided that it has complied with all provisions thereof, including the notice
provisions therein, and that it makes simultaneous payment of the Expenses and
the Termination Fee.
9.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1 of this Agreement, this
Agreement shall become void and have no effect, except (i) as provided in
Section 10.14, and (ii) a termination pursuant to Section 9.1 of this Agreement
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to
such termination.
ARTICLE 10
MISCELLANEOUS
10.1 DEFINITIONS. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the
stock or Assets of, or other business combination involving such Party or any
of its Subsidiaries or the acquisition of a substantial equity interest in, or
a substantial portion of the Assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean: (a) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or (b) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person.
"Aggregate Option Consideration" shall mean the aggregate exercise
price of all options and warrants to purchase TARGET Common Stock outstanding
immediately prior to the Effective Time (whether or not such option or warrant
is then exercisable).
"Aggregate TARGET Shares" shall mean the aggregate number of
outstanding shares of TARGET Common Stock plus the aggregate number of Option
Shares outstanding immediately prior to the Effective Time.
"Agreement" shall mean this Agreement and Plan of Merger and the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed,
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tangible or intangible, accrued or contingent, or otherwise relating to or
utilized in such Person's business, directly or indirectly, in whole or in
part, whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of such Person
and wherever located.
"Base Period Trading Price" shall mean the average of the daily high
and low sales prices of a share of PURCHASER Common Stock as reported on NASDAQ
for the twenty (20) consecutive trading days immediately preceding five (5)
consecutive calendar days immediately preceding the Effective Time; provided
however, that for purposes of this calculation, the Base Period Trading Price
shall be deemed to equal (i) $16.00 in the event the Base Period Trading Price
is greater than $16.00 or (ii) $12.00 in the event the Base Period Trading
Price is less than $12.00.
"Bank" shall have the meaning provided in the Preamble to this
Agreement.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"Closing Date" shall have the meaning provided in Section 1.2 of this
Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (a) any breach or violation of or default under
any Contract, Order or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (c) any
occurrence of any event that with or without the passage of or the giving of
notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"Dissenting Shares" shall have the meaning provided in Section 3.1(b)
of this Agreement.
"Dissenting TARGET Shareholders" shall have the meaning provided in
Section 3.1(l) of this Agreement.
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"Effective Time" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered,
interpreted or enforced by the United States Environmental Protection Agency
and state and local agencies with primary jurisdiction over pollution or
protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Plan" shall have the meaning provided in Section 4.14 of this
Agreement.
"Exchange Agent" shall have the meaning provided in Section 3.2 of
this Agreement.
"Exchange Ratio" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"Exhibits" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"Expenses" shall have the meaning provided in Section 10.2 of this
Agreement.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Georgia Articles of Merger" shall mean the Articles of Merger to be
executed by PURCHASER and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.3 of this
Agreement.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., or any similar federal, state or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" as used with respect to a Person shall mean the Knowledge
after reasonable due inquiry of the Chairman, President, Chief Financial
Officer, Chief Accounting Officer, Chief Credit Officer, or any Senior or
Executive Vice President of such Person.
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"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"Letter of Transmittal" shall have the meaning provided in Section 3.2
of this Agreement.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges
to secure deposits and other Liens incurred in the ordinary course of the
banking business, and (iii) Liens which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question, provided that any
specific monetary amount stated in this Agreement shall determine materiality
in that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (b) the ability of such Party to perform its
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obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "material adverse
impact" shall not be deemed to include the impact of (x) changes in banking and
similar Laws of general applicability or interpretations thereof by courts or
governmental authorities, (y) changes in generally accepted accounting
principles or regulatory accounting principles generally applicable to banks
and their holding companies, and (z) the Merger and compliance with the
provisions of this Agreement on the operating performance of the Parties.
"Merger" shall mean the merger of TARGET with and into PURCHASER
referred to in Section 1.1 of this Agreement.
"Merger Consideration" shall mean (i) (A) 2.265 times the lesser of
(1) 0.08 times the total assets of TARGET or (2) the Total Equity of TARGET,
plus (B) 1.0 times the amount, if any, by which the Total Equity of TARGET
exceeds 0.08 times the total assets of TARGET, based on the average of the
total assets of TARGET as of the close of business for each of the sixty (60)
calendar days immediately preceding the Closing Date.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the Nasdaq National Market.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Old Certificates" shall have the meaning provided in Section 3.2 of
this Agreement.
"Option Shares" shall mean the shares of TARGET Common Stock issuable
by TARGET in connection with the exercise of any TARGET Option or TARGET
Warrant (whether or not such option or warrant is then exercisable).
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Outstanding TARGET Shares" shall have the meaning provided in Section
3.1(b) of this Agreement.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
(including any property or facility held in a joint venture) and, where
required by the context, said term means the owner or operator of such facility
or property, but only with respect to such facility or property.
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"Party" shall mean either TARGET or PURCHASER, and "Parties" shall
mean both TARGET and PURCHASER.
"Per Share Merger Consideration" shall have the meaning set forth in
Section 3.1(b) of this Agreement.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any, Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its capital stock,
Assets, Liabilities, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Previously Disclosed" shall mean information (a) delivered in writing
prior to the date of this Agreement in the manner and to the Party and counsel
described in Section 10.8 of this Agreement and describing in reasonable detail
the matters contained therein, provided that in the case of Subsidiaries
acquired after the date of this Agreement, such information may be so delivered
by the acquiring Party to the other Party prior to the date of such
acquisition, or (b) disclosed prior to the date of this Agreement by one Party
to the other in an SEC Document delivered to such other Party in which the
specific information has been identified by the Party making the disclosure.
"Proxy Statement" shall mean the proxy statement used by TARGET to
solicit the approval of its shareholders of the transactions contemplated by
this Agreement and shall include the prospectus of PURCHASER relating to shares
of PURCHASER Common Stock to be issued to the shareholders of TARGET.
"PURCHASER Allowance" shall have the meaning provided in Section 5.9
of this Agreement.
"PURCHASER Benefit Plans" shall have the meaning set forth in Section
5.14 of this Agreement.
"PURCHASER Common Stock" shall mean the $1.00 par value common stock
of PURCHASER.
"PURCHASER Companies" shall mean, collectively, PURCHASER and all
PURCHASER Subsidiaries.
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"PURCHASER Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
PURCHASER as December 31, 1995, 1994 and 1993, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1995, 1994, and 1993, as filed by PURCHASER in SEC Documents and (ii) the
consolidated statements of condition of PURCHASER (including related notes and
schedules, if any) and related statements of income, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any) included
in SEC Documents filed with respect to periods ended subsequent to December 31,
1995.
"PURCHASER Stock Plans" shall mean the existing stock option and other
stock-based compensation plans.
"PURCHASER Subsidiaries" shall mean the Subsidiaries of PURCHASER.
"Record Date" shall have the meaning provided in Section 3.1(e) of
this Agreement.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by PURCHASER under the 1933
Act in connection with the transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, all state banking and other
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries, the NASD, and the SEC.
"SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, state blue sky
laws, and the rules and regulations of any Regulatory Authority promulgated
thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
TARGET to be held pursuant to Section 7.1 of this Agreement, including any
adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 5% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 5 % or more of the
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outstanding equity securities is owned directly or indirectly by its parent;
provided, however, there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"Surviving Corporation" shall mean PURCHASER as the surviving
corporation resulting from the Merger.
"TARGET Allowance" shall have the meaning provided in Section 4.9 of
this Agreement.
"TARGET Bank" shall mean First National Bank of South Georgia, Albany,
a Georgia state-chartered bank and a TARGET Subsidiary.
"TARGET Benefit Plans" shall have the meaning set forth in Section
5.14 of this Agreement.
"TARGET Common Stock" shall mean the $5.00 par value Common Stock of
TARGET.
"TARGET Companies" shall mean, collectively, TARGET and all TARGET
Subsidiaries.
"TARGET Financial Statements" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of TARGET as of December
31, 1995, 1994 and 1993, and the related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules, if
any) for each of the three fiscal years ended December 31, 1995, 1994, 1993, as
previously furnished by TARGET to Purchaser, and (b) the consolidated balance
sheets of TARGET (including related notes and schedules, if any) and related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) with respect to periods ended
subsequent to December 31, 1995.
"TARGET Option" shall have the meaning set forth in Section 3.7 of
this Agreement.
"TARGET Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of TARGET.
"TARGET Subsidiaries" shall mean the Subsidiaries of TARGET, which
shall include the TARGET Subsidiaries described in Section 4.4 of this
Agreement and any Person acquired as a Subsidiary of TARGET in the future and
owned by TARGET at the Effective Time.
"TARGET Warrant" shall have the meaning set forth in Section 3.7 of
this Agreement.
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"Taxes" shall mean any federal, state, county, local, foreign and
other taxes, assessments, charges, fares, and impositions, including interest
and penalties thereon or with respect thereto.
"Termination Fee" shall have the meaning provided in Section 10.2 of
this Agreement.
"Total Equity of TARGET" shall mean TARGET's total stockholders'
equity calculated under GAAP as of the close of business on the day immediately
preceding the Closing Date.
10.2 EXPENSES.
(a) Except as otherwise provided in this Section 10.2,
each of the Parties shall bear and pay all direct costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel (the "Expenses"), except that each of the
Parties shall bear and pay one-half of the filing fees payable in connection
with the Registration Statement and the Proxy Statement and printing costs
incurred in connection with the printing of the Registration Statement and the
Proxy Statement.
(b) TARGET shall pay, or cause to be paid, in same day
funds to PURCHASER the sum of (i) all of PURCHASER'S Expenses, plus (ii)
$200,000 (the "Termination Fee") upon demand if (A) TARGET terminates this
Agreement pursuant to Section 9.1(g) or (B) prior to the termination of this
Agreement (other than by TARGET pursuant to Section 9.1(b)), a takeover
proposal shall have been made and TARGET shall have entered into an agreement
with respect to, or approves or recommends or takes any action to facilitate,
such takeover proposal. The amount of Expenses so payable shall be the amount
set forth in an estimate delivered by PURCHASER, subject to an upward or
downward adjustment.
10.3 BROKERS AND FINDERS. Except as Previously Disclosed, each
of the Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon its representing or being retained by or
allegedly representing or being retained by TARGET or PURCHASER, each of TARGET
and PURCHASER, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral (except, as to Section
8.6(b) of this Agreement, with respect to the Confidentiality Agreements).
Nothing
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in this Agreement expressed or implied, is intended to confer upon any Person,
other than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Section 7.13 of this Agreement.
10.5 AMENDMENTS. To the extent permitted by Law, this Agreement
may be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties; provided, however,
that after any such approval by the holders of TARGET Common Stock, there shall
be made no amendment decreasing the consideration to be received by TARGET
shareholders without the further approval of such shareholders.
10.6 WAIVERS.
(a) Prior to or at the Effective Time, PURCHASER,
acting through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by TARGET, to waive or extend the
time for the compliance or fulfillment by TARGET of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of PURCHASER under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law.
No such waiver shall be effective unless in writing signed by a duly authorized
officer of PURCHASER.
(b) Prior to or at the Effective Time, TARGET, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by PURCHASER, to waive or extend the time for the
compliance or fulfillment by PURCHASER of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of TARGET under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of TARGET.
(c) The failure of any Party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other provision of
this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be or
construed as a further or continuing waiver of such condition or breach or a
waiver of any other condition or of the breach of any other term of this
Agreement.
10.7 ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party.
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Subject to the immediately preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by the Parties and their
respective successors and assigns.
10.8 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre- paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
PURCHASER: ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Telecopy Number: (912) 890-2235
Attention: President
Copy to Counsel: Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 525-2224
Attention: Steven E. Fox, Esq.
TARGET: First National Financial Corporation
2627 Dawson Road
Albany, Georgia 31707-1748
Telecopy Number: (912) 888-5359
Attention: President
Copy to Counsel: Smith, Gambrell & Russell
Suite 1800
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1010
Telecopy Number: (404) 815-3509
Attention: Robert T. Molinet, Esq.
10.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia, without regard
to any applicable conflicts of Laws, except to the extent that the federal laws
of the United States may apply to the Merger.
52
<PAGE> 58
10.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
10.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
10.13 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
10.14 SURVIVAL. The respective representations, warranties,
obligations, covenants and agreements of the Parties shall not survive the
Effective Time or the termination and abandonment of this Agreement, except
that (i) Articles Two, Three and Ten and Sections 7.6(b), 7.9, 7.11 and 7.13 of
this Agreement shall survive the Effective Time; and (ii) Sections 7.6(b),
7.8(b), 9.2, 10.2 and 10.14 shall survive the termination and abandonment of
this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.
ATTEST: ABC BANCORP
/s/ ?
_____________________________ By: /s/ ?
Secretary ______________________________
Its: /s/ ?
__________________________
[CORPORATE SEAL]
53
<PAGE> 59
ATTEST: FIRST NATIONAL FINANCIAL CORPORATION
/s/ ?
______________________ By: /s/ Raymond ?
Secretary ______________________________
Its: /s/ Chairman & President
______________________________
[CORPORATE SEAL]
54
<PAGE> 60
EXHIBIT 1
OUTSTANDING INCENTIVE STOCK OPTIONS GRANTED PURSUANT TO
1991 INCENTIVE STOCK OPTION PLAN
<TABLE>
<CAPTION>
Option Exercise
Option Holder Shares Price
- ------------------- ------ --------
<S> <C> <C>
Raymond B. Phillips 4,000 $10.50
4,000 $10.50
4,000 $12.00
John M. Hemphill 2,500 $10.50
2,500 $10.50
2,500 $12.00
JoAnn Kitchens 1,000 $10.50
1,000 $10.50
1,000 $12.00
Kathleen Lovelace 1,000 $10.50
1,000 $10.50
1,000 $12.00
Albert Vineyard 1,000 $10.50
1,000 $12.00
-----
Total 27,500
======
STOCK OPTIONS GRANTED PURSUANT TO EMPLOYMENT CONTRACT
Option Exercise
Option Holder Shares Price
- ------------------- ------ --------
Raymond B. Phillips 4,874 $10.00
4,874 $10.00
4,874 $10.00
4,874 $11.08
4,874* $11.08
-----
Total 24,370
======
</TABLE>
* Pursuant to the terms of Mr. Phillips' Employment Contract, these
options will be granted to Mr. Phillips at the expiration of the
Employment Contract on May 29, 1996.
<PAGE> 61
OUTSTANDING STOCK PURCHASE WARRANTS
<TABLE>
<CAPTION>
Number of Exercise
Warrant Holder Warrants Price
- -------------- --------- --------
<S> <C> <C>
Willie Adams, Jr., M.D. 10,000 $10.00
Robert V. Barkley 10,000 $10.00
John L. Gay 15,000 $10.00
Waddell M. Hagins, Jr. 10,300 $10.00
C. Alex Kemp 12,500 $10.00
Glenn A. Kirbo 15,000 $10.00
W. Thomas Mitcham 15,000 $10.00
R. Douglas Oliver 10,000 $10.00
Raymond B. Phillips 10,000 $10.00
W. Paul Wallace, Jr. 10,000 $10.00
------
Total 117,800
=======
</TABLE>
- 2 -
<PAGE> 62
EXHIBIT 2
AFFILIATE AGREEMENT
ABC Bancorp
310 First Street, S.E.
Moultrie, Georgia 31768
Attention: President
Ladies and Gentlemen:
The undersigned is a shareholder of First National Financial
Corporation ("Target"), a corporation organized under the laws of the State of
Georgia and located in Albany, Georgia, and will become a shareholder of ABC
Bancorp ("Purchaser") pursuant to the transactions described in the Agreement
and Plan of Merger, dated as of April 15, 1996 (the "Agreement"), by and
between Target and Purchaser. Under the terms of the Agreement, Target will be
merged into and with Purchaser (the "Merger"), and the shares of the $5.00 par
value common stock of Target ("Target Common Stock") will be converted into and
exchanged for shares of the $1.00 par value common stock of Purchaser
("Purchaser Common Stock"). This Affiliate Agreement represents an agreement
between the undersigned and Purchaser regarding certain rights and obligations
of the undersigned in connection with the shares of Purchaser to be received by
the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and Purchaser hereby agree as follows:
1. AFFILIATE STATUS. The undersigned understands and agrees
that as to Target the undersigned is an "affiliate" under Rule 145(c) as
defined in Rule 405 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act"),
and the undersigned anticipates that the undersigned will be such an
"affiliate" at the time of the Merger.
2. COVENANTS AND WARRANTIES OF UNDERSIGNED. The undersigned
represents, warrants and agrees that:
(a) The Purchaser Common Stock received by the
undersigned as a result of the Merger will be taken for his or her own account
and not for others, directly or indirectly, in whole or in part.
<PAGE> 63
(b) Purchaser has informed the undersigned that any
distribution by the undersigned of Purchaser Common Stock has not been
registered under the 1933 Act and that shares of Purchaser Common Stock
received pursuant to the Merger can only be sold by the undersigned (i)
following registration under the 1933 Act, or (ii) in conformity with the
volume and other requirements of Rule 145(d) promulgated by the SEC as the same
now exist or may hereafter be amended, or (iii) to the extent some other
exemption from registration under the 1933 Act might be available. The
undersigned understands that Purchaser is under no obligation to file a
registration statement with the SEC covering the disposition of the
undersigned's shares of Purchaser Common Stock.
(c) The undersigned agrees not to offer to sell, sell
or otherwise dispose of any shares of PURCHASER Common Stock until such time as
financial results covering at least 30 days of post-Merger combined operations
have been published, either by issuance of a quarterly earnings report on Form
10-Q or other public issuance (such as a press release) which includes such
information.
3. RESTRICTIONS ON TRANSFER.
(a) The undersigned understands and agrees that stop
transfer instructions with respect to the shares of Purchaser Common Stock
received by the undersigned pursuant to the Merger will be given to Purchaser's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate may not be sold,
transferred or otherwise disposed of except or unless (i) covered by
an effective registration statement under the Securities Act of 1933,
as amended, (ii) in accordance with (x) Rule 145(d) (in the case of
shares issued to an individual who is not an affiliate of Purchaser)
or (y) Rule 144 (in the case of shares issued to an individual who is
an affiliate of Purchaser) of the Rules and Regulations of such Act,
or (iii) in accordance with a legal opinion satisfactory to counsel
for Purchaser that such sale or transfer is otherwise exempt from the
registration requirements of such Act."
(b) Such legend will also be placed on any certificate
representing Purchaser securities issued subsequent to the original issuance of
the Purchaser Common Stock pursuant to the Merger as a result of any stock
dividend, stock split, or other recapitalization as long as the Purchaser
Common Stock issued to the undersigned pursuant to the Merger has not been
transferred in such manner to justify the removal of the legend therefrom. In
addition, if the provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the Purchaser Common Stock received by the
undersigned pursuant to the Merger, or at the expiration of the restrictive
period set forth in Rule 145(d), Purchaser, upon the request of the
undersigned, will cause the certificates representing the shares of Purchaser
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to the
2
<PAGE> 64
restrictions set forth in Rules 144 and 145(d) upon receipt by Purchaser of an
opinion of its counsel to the effect that such legend may be removed.
4. UNDERSTANDING OF RESTRICTIONS ON DISPOSITIONS. The
undersigned has carefully read the Agreement and this Affiliate Agreement and
discussed their requirements and impact upon his or her ability to sell,
transfer, or otherwise dispose of the shares of Purchaser Common Stock received
by the undersigned in connection with the Merger, to the extent he or she
believes necessary, with his or her counsel or counsel for Target.
5. FILING OF REPORTS BY PURCHASER. Purchaser agrees for a
period of three years after the effective date of the Merger, to file on a
timely basis all reports required to be filed by it pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended, so that the public information
provisions of Rule 145(d) promulgated by the SEC as the same are presently in
effect will be available to the undersigned in the event the undersigned
desires to transfer any shares of Purchaser Common Stock issued to the
undersigned pursuant to the Merger.
6. TRANSFER UNDER RULE 145(D). If the undersigned desires to
sell or otherwise transfer the shares of Purchaser Common Stock received by him
or her in connection with the Merger at any time during the restrictive period
set forth in Rule 145(d), the undersigned will provide the necessary
representation letter to the Transfer Agent for Purchaser Common Stock,
together with such additional information as the Transfer Agent may reasonably
request. If Purchaser's counsel concludes that such proposed sale or transfer
complies with the requirements of Rule 145(d), Purchaser shall cause such
counsel to provide such opinions as may be necessary to Purchaser's Transfer
Agent so that the undersigned may complete the proposed sale or transfer.
7. ACKNOWLEDGMENTS. The undersigned recognizes and agrees
that the foregoing provisions also apply with respect to Target Common Stock
held by, and Purchaser Common Stock issued in connection with the Merger to,
(a) the undersigned's spouse, (b) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (c) any trust or
estate in which the undersigned, the undersigned's spouse, and any such
relative collectively own at least a 10% beneficial interest or of which any of
the foregoing serves as trustee, executor or in any similar capacity, and (d)
any corporation or other organization in which the undersigned, the
undersigned's spouse and any such relative collectively own at least 10% of any
class of equity securities or of the equity interest. The undersigned further
recognizes that, in the event that the undersigned is a director or executive
officer of Purchaser or becomes a director or executive officer of Purchaser
upon consummation of the Merger, among other things, any sale of Purchaser
Common Stock by the undersigned within a period of less than six months
following the effective time of the Merger may subject the undersigned to
liability pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended.
8. MISCELLANEOUS. This Affiliate Agreement is the complete
agreement between Purchaser and the undersigned concerning the subject matter
hereof. Any notice required to be
3
<PAGE> 65
sent to any parry hereunder shall be sent by registered or certified mail,
return receipt requested, using the addresses set forth herein or such other
address as shall be furnished in writing by the parties. This Affiliate
Agreement shall be governed by the laws of the State of Georgia.
This Affiliate Agreement is executed as of the _____ day of
_________________, 1996.
Very truly yours,
----------------------------
Signature
----------------------------
Print Name
----------------------------
----------------------------
----------------------------
----------------------------
Address
----------------------------
Telephone No.
AGREED TO AND ACCEPTED as of
____________________, 1996
ABC BANCORP
By:
-------------------------
Its:
---------------------
4
<PAGE> 66
EXHIBIT 3
IRREVOCABLE PROXY
This Irrevocable Proxy is given by the undersigned,
______________ ("Shareholder"), in favor of ABC Bancorp, a Georgia corporation
("ABC"), as of the ____ day of April, 1996.
WHEREAS, ABC and First National Financial Corporation, a
Georgia corporation ("Target"), have entered into an Agreement and Plan of
Merger dated as of April 12, 1996 (the "Merger Agreement") (capitalized terms
used but not defined herein shall have the same meaning assigned to such terms
in the Merger Agreement), pursuant to which ABC proposes to acquire the entire
equity interest in Target by means of a merger (the "Merger") of Target with
and into ABC;
WHEREAS, Shareholder owns, as of the date hereof, _________
shares of Target Common Stock (the "Existing Shares", together with any shares
of Target Common Stock acquired after the date hereof and prior to the
termination hereof, hereinafter collectively referred to as the "Shares"); and
WHEREAS, ABC has entered into the Merger Agreement in
reliance on Shareholder's agreement to support the Merger, including the
granting of Shareholder's Irrevocable Proxy hereunder.
NOW, THEREFORE, with respect to the Merger Agreement and
the transactions contemplated thereby and in accordance with the Georgia
Business Corporation Code, Shareholder hereby irrevocably makes, constitutes
and appoints ABC to act as Shareholder's true and lawful proxy and
attorney-in-fact in the name and on behalf of Shareholder, solely for the
limited purpose set forth herein, with full power to appoint a substitute or
substitutes solely for the limited purpose set forth herein. Shareholder
further directs ABC, and ABC hereby agrees, to vote all of the Shares which are
entitled to vote at any meeting of the shareholders of Target (whether annual
or special and whether or not an adjourned meeting), or by written consent in
the place and stead of Shareholder, in favor of the Merger as set forth in the
Merger Agreement. ABC shall have no right to vote the shares with respect to
any other matters. By giving this proxy, Shareholder hereby revokes any other
proxy granted by Shareholder at any time with respect to the Shares and no
subsequent proxies will be given with respect thereto by Shareholder. THE
PROXY GRANTED HEREBY IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE. The proxy
granted hereby shall not be terminated by any act of Shareholder or by
operation of law, by lack of appropriate power of authority, or by the
occurrence of any other event or events and shall be binding upon all
beneficiaries, heirs at law, legatees, distributees, successors, assigns and
legal representatives of Shareholder. Shareholder agrees to use all good faith
efforts to cause any record owner of the Shares of which Shareholder is the
beneficial owner to grant to ABC a proxy of the same effect as that contained
herein. Shareholder shall perform such further acts and execute such further
documents as may be required to vest in ABC the sole power to vote the Shares
during
<PAGE> 67
the term of the proxy granted herein. The proxy granted herein shall expire on
the earlier of (i) the date on which ABC and Shareholder mutually consent in
writing to terminate this Irrevocable Proxy, (ii) the date of the Closing, or
(iii) the termination of the Merger Agreement in accordance with the terms
thereof. Notwithstanding anything herein to the contrary, the proxy granted
hereby and power herein conferred upon ABC (or any substitute or substitutes)
may not be exercised prior to the receipt by ABC and Target of the Consents of
the Regulatory Authorities (as contemplated by the Merger Agreement).
IN WITNESS WHEREOF, Shareholder has executed and delivered
this Irrevocable Proxy as of the date set forth above.
--------------------------------------
(Name)
--------------------------------------
(Signature)
2
<PAGE> 68
EXHIBIT 4
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") is executed as of the
___ day of ______________, 1996, by and between ABC BANCORP, a Georgia
corporation ("ABC"), and RAYMOND D. PHILLIPS (the "Shareholder").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of April
15, 1996 (the "Merger Agreement") by and among ABC and First National Financial
Corporation ("First National"), First National will merge with and into ABC
(the "Merger"), and each shareholder of First National will receive shares of
common stock of ABC in exchange for their shares of common stock of First
National;
WHEREAS, as a result of the Merger, ABC will acquire the business and
goodwill of First National and its wholly-owned subsidiary, First National Bank
of South Georgia (the "Bank");
WHEREAS, this Agreement has been entered into as a condition and
inducement to the Merger;
WHEREAS, the Bank is a full service bank, offering a wide range of
financial services, including deposit and credit services (the "Business");
WHEREAS, the Shareholder is a shareholder of First National, a
Director and executive officer of both First National and the Bank, and
possesses extensive knowledge of certain information that is deemed
confidential by First National and the Bank and is the subject of reasonable
efforts by First National and/or the Bank to maintain its confidentiality,
including, but not limited to, technical or non-technical data, formulas,
compilations, programs, methods, techniques, financial data, financial plans,
product plans and lists of actual or potential customers or suppliers (the
"Trade Secrets"); and
WHEREAS, as a shareholder of First National, the Shareholder will
benefit from the Merger.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties intending to be legally bound agree as follows:
<PAGE> 69
1. PAYMENT TO MR. PHILLIPS. Upon execution and delivery of
this Agreement, ABC shall pay to Mr. Phillips the sum of Twenty-Five Thousand
($25,000.00) Dollars and shall cause the Bank to transfer to Mr. Phillips title
to that certain 1994 Chevrolet S10 Blazer currently driven by him.
2. TERM. The term of this Agreement shall commence on the
date hereof and shall continue for a period of three (3) years thereafter.
3. NON-COMPETITION AGREEMENT. During the term of this
Agreement, the Shareholder shall not, directly or indirectly, by himself, on
behalf of or in conjunction with any other person or legal entity, or for or on
behalf of any person, company or other entity, engage in any business in
competition with the Business of the Bank as presently conducted. This
restriction shall apply to the geographic area consisting of Dougherty County,
Georgia (the "Territory"). The Shareholder is also prohibited during the term
of this Agreement from owning more than five percent (5%) of any bank or
financial institution that engages in any business in competition with the
Business of the Bank in the Territory. The Shareholder agrees that, because of
his knowledge of the Trade Secrets of the Bank, the Shareholder's competition
with the Bank in the foregoing manner would substantially and irreparably
damage and impair the Business of the Bank.
4. CUSTOMER PROTECTION. During the term of this Agreement,
the Shareholder will not directly or indirectly, by himself, on behalf of or in
conjunction with any other person or legal entity, or for or on behalf of any
other person, company or entity, solicit or accept, or attempt to solicit or
accept, any business from any of the Bank's customers, for the purpose of
providing products or services competitive with those provided by the Bank in
connection with the Business as presently conducted. This restriction shall
apply to the geographic area consisting of the Territory.
5. NON-SOLICITATION OF EMPLOYEES. During the term of this
agreement, the Shareholder, for his private purposes or as an employee,
officer, director, agent, customer, independent contractor or in any other
relationship to any person or entity, shall refrain from recruiting or hiring
directly any employee of the Bank, or assisting others in doing so, whether or
not such other employee has a written contract with the Bank.
6. NON-DISCLOSURE. During the term of this Agreement, without
ABC's prior written consent, the Shareholder will not directly or indirectly,
use, duplicate or record, disclose, divulge or communicate to any person or
entity in any manner, any Trade Secret or other confidential information of the
Bank.
7. INJUNCTIVE RELIEF. Breach of any covenant herein by the
Shareholder will result in irreparable harm to ABC for which there will be no
adequate remedy at law. Accordingly, upon any such breach, ABC will be
entitled to an injunction in action to any other
2
<PAGE> 70
rights and remedies, including the award of damages, available at law or in
equity. ABC will not have to prove money damages to enforce any provision of
this Agreement.
8. BENEFIT. This Agreement shall be binding upon the parties
hereto, and shall operate for the benefit of the Shareholder and ABC and any of
ABC's successors and assigns.
9. GOVERNING LAW AND SEVERABILITY. This Agreement shall be
governed by the laws of Georgia. In the event that any term or provision of
this Agreement is held to be unreasonable, the same shall not fail, but shall
be deemed amended only to the extent necessary to render it reasonable, and the
parties agree to be bound by the same as thus amended. If any provision is
determined by a court to be invalid or unenforceable, and the court refuses to
amend such provision to render it enforceable, such provision shall be deemed
severed from the remainder of the Agreement and the remaining provisions shall
continue in full force and effect.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties. Except as required pursuant to paragraph 8 hereof,
no waiver or modification of this Agreement of any covenant, condition or
limitation shall be valid unless in writing and signed by all parties.
11. ENFORCEMENT COSTS. If any legal action or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any provision
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, court costs and all expenses (including, without limitation,
all such fees, costs and expenses incident to arbitration, appellate,
bankruptcy and post-judgment proceedings), incurred in that action or
proceeding, in addition of any other relief to which such party or parties may
be entitled. Attorneys' fees shall include, without limitation, paralegal
fees, investigative fees, expert witness fees, administrative costs and all
other charges billed by the attorney to the prevailing party.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal, to be effective as of the date set forth above.
SHAREHOLDER:
________________________(SEAL)
[SIGNATURES CONTINUED ON PAGE 4]
3
<PAGE> 71
ABC BANCORP
By:
-------------------------------
Its:
-----------------------
4
<PAGE> 72
EXHIBIT 4A
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") is executed as of the
___ day of ______________, 1996, by and between ABC BANCORP, a Georgia
corporation ("ABC"), and __________________ (the "Shareholder").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of April
15, 1996 (the "Merger Agreement") by and among ABC and First National Financial
Corporation ("First National"), First National will merge with and into ABC
(the "Merger"), and each shareholder of First National will receive shares of
common stock of ABC in exchange for their shares of common stock of First
National;
WHEREAS, as a result of the Merger, ABC will acquire the business and
goodwill of First National and its wholly-owned subsidiary, First National Bank
of South Georgia (the "Bank");
WHEREAS, this Agreement has been entered into as a condition and
inducement to the Merger;
WHEREAS, the Bank is a full service bank, offering a wide range of
financial services, including deposit and credit services (the "Business");
WHEREAS, the Shareholder is a shareholder of First National, a
Director of both First National and the Bank, and possesses extensive knowledge
of certain information that is deemed confidential by First National and the
Bank and is the subject of reasonable efforts by First National and/or the Bank
to maintain its confidentiality, including, but not limited to, technical or
non-technical data, formulas, compilations, programs, methods, techniques,
financial data, financial plans, product plans and lists of actual or potential
customers or suppliers (the "Trade Secrets"); and
WHEREAS, as a shareholder of First National, the Shareholder will
benefit from the Merger.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties intending to be legally bound agree as follows:
12. TERM. The term of this Agreement shall commence on the
date hereof and shall continue for a period of three (3) years thereafter.
<PAGE> 73
13. NON-COMPETITION AGREEMENT. During the term of this
Agreement, the Shareholder shall not, directly or indirectly, by himself, on
behalf of or in conjunction with any other person or legal entity, or for or on
behalf of any person, company or other entity, engage in any business in
competition with the Business of the Bank as presently conducted. This
restriction shall apply to the geographic area consisting of Dougherty County,
Georgia (the "Territory"). The Shareholder is also prohibited during the term
of this Agreement from owning more than five percent (5%) of any bank or
financial institution that engages in any business in competition with the
Business of the Bank in the Territory. The Shareholder agrees that, because of
his knowledge of the Trade Secrets of the Bank, the Shareholder's competition
with the Bank in the foregoing manner would substantially and irreparably
damage and impair the Business of the Bank.
14. CUSTOMER PROTECTION. During the term of this Agreement,
the Shareholder will not directly or indirectly, by himself, on behalf of or in
conjunction with any other person or legal entity, or for or on behalf of any
other person, company or entity, solicit or accept, or attempt to solicit or
accept, any business from any of the Bank's customers, for the purpose of
providing products or services competitive with those provided by the Bank in
connection with the Business as presently conducted. This restriction shall
apply to the geographic area consisting of the Territory.
15. NON-SOLICITATION OF EMPLOYEES. During the term of this
agreement, the Shareholder, for his private purposes or as an employee,
officer, director, agent, customer, independent contractor or in any other
relationship to any person or entity, shall refrain from recruiting or hiring
directly any employee of the Bank, or assisting others in doing so, whether or
not such other employee has a written contract with the Bank.
16. NON-DISCLOSURE. During the term of this Agreement, without
ABC's prior written consent, the Shareholder will not directly or indirectly,
use, duplicate or record, disclose, divulge or communicate to any person or
entity in any manner, any Trade Secret or other confidential information of the
Bank.
17. INJUNCTIVE RELIEF. Breach of any covenant herein by the
Shareholder will result in irreparable harm to ABC for which there will be no
adequate remedy at law. Accordingly, upon any such breach, ABC will be
entitled to an injunction in action to any other rights and remedies, including
the award of damages, available at law or in equity. ABC will not have to
prove money damages to enforce any provision of this Agreement.
18. BENEFIT. This Agreement shall be binding upon the parties
hereto, and shall operate for the benefit of the Shareholder and ABC and any of
ABC's successors and assigns.
19. GOVERNING LAW AND SEVERABILITY. This Agreement shall be
governed by the laws of Georgia. In the event that any term or provision of
this Agreement is held to be unreasonable, the same shall not fail, but shall
be deemed amended only to the extent necessary
2
<PAGE> 74
to render it reasonable, and the parties agree to be bound by the same as thus
amended. If any provision is determined by a court to be invalid or
unenforceable, and the court refuses to amend such provision to render it
enforceable, such provision shall be deemed severed from the remainder of the
Agreement and the remaining provisions shall continue in full force and effect.
20. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties. Except as required pursuant to paragraph 8 hereof,
no waiver or modification of this Agreement of any covenant, condition or
limitation shall be valid unless in writing and signed by all parties.
21. ENFORCEMENT COSTS. If any legal action or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any provision
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, court costs and all expenses (including, without limitation,
all such fees, costs and expenses incident to arbitration, appellate,
bankruptcy and post-judgment proceedings), incurred in that action or
proceeding, in addition of any other relief to which such party or parties may
be entitled. Attorneys' fees shall include, without limitation, paralegal
fees, investigative fees, expert witness fees, administrative costs and all
other charges billed by the attorney to the prevailing party.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal, to be effective as of the date set forth above.
SHAREHOLDER:
________________________(SEAL)
ABC BANCORP
By:
----------------------------------
Its:
--------------------------
3
<PAGE> 75
EXHIBIT 5
___________________, 1996
- ----------------------
- ----------------------
______________________
RE: Warrants for Shares of Common Stock of
First National Financial Corporation
------------------------------------
Dear ________________:
As you know, First Financial Corporation ("First Financial") has
entered into an Agreement and Plan of Merger dated as of April 15, 1996 (the
"Merger Agreement") with ABC Bancorp ("ABC") which provides for the merger of
First National with and into ABC (the "Merger"). In connection with the
Merger, shareholders of First National will receive in exchange for each share
of common stock of First National ("First National Common Stock") shares of
common stock of ABC ("ABC Common Stock"). Pursuant to the terms of a Stock
Option Agreement between you and First National, you have options to purchase
____ shares of First National Common Stock. This letter will clarify the
status of your options in connection with the Merger.
The warrant price set forth in you Stock Option Agreement is $10.00
per share ("Warrant Price"). If you were to exercise your warrants prior to
the closing date of the Merger, you would receive in exchange for each share of
First National Common Stock your proportionate share of the Merger
Consideration (as defined in the Merger Agreement).
Paragraph 3(h) of your Stock Purchase Warrant provides as follows:
In case of ... the merger of the Company with any other
corporation or association ..., the Warrant shall after such ...
merger ... be exercisable, upon the terms and conditions specified in
this Agreement, for the number of shares of stock or other securities
or property to which a holder of the number of Warrant Shares
purchasable (at the time of such ... merger ...) upon exercise of such
Warrant would have been entitled upon such ... merger ...; and in any
such case, if necessary, the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the holder of
the Warrant shall be appropriately adjusted so as to be applicable, as
nearly as amy reasonably be, to any shares of
<PAGE> 76
stock or other securities or property thereafter deliverable on the
exercise of the Warrant ... The Company shall not effect any such ...
merger ... unless prior to or simultaneously with the consummation
thereof the successor corporation or association (if other than the
Company) resulting from such ... merger ... shall assume, by written
instrument executed and delivered to the Company, the obligation to
deliver to the holder of such Warrant such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder
may be entitled to purchase and the other obligations under this
Agreement.
In lieu of giving effect to the provisions of Paragraph 3(h) of your
Stock Purchase Warrant, ABC has agreed that it will issue ABC Common Stock to
you, plus cash in lieu of fractional shares, pursuant to Section 3.7 of the
Merger Agreement for each share of First National Common Stock which you have a
warrant to purchase, provided you have not previously exercised your warrants.
The issuance of ABC Common Stock described herein will be in lieu of your
rights pursuant to Paragraph 3(h) of your Stock Purchase Warrant and may be
taxable to you as ordinary compensation. You may wish to consult with your tax
advisor on the tax treatment of this transaction.
Please acknowledge your agreement with the terms of this letter by
signing where indicated below and returning the signed copy to us no later than
May 9, 1996. By signing hereunder, you agree not to exercise any of your
warrants prior to the effective date of the Merger and acknowledge that, upon
the consummation of the Merger, your warrants shall be cancelled, and all
rights thereunder shall cease to exist.
If you have any questions, please let me know.
Sincerely,
------------------------------
Acknowledged and agreed to this
_____ day of _______, 1996.
- ------------------------------
(Warrant Holder)
2
<PAGE> 77
EXHIBIT 6
___________________, 1996
______________________
- ----------------------
______________________
RE: Options for Shares of Common Stock of
First National Financial Corporation
------------------------------------
Dear ________________:
As you know, First Financial Corporation ("First Financial") has
entered into an Agreement and Plan of Merger dated as of April 15, 1996 (the
"Merger Agreement") with ABC Bancorp ("ABC") which provides for the merger of
First National with and into ABC (the "Merger"). In connection with the
Merger, shareholders of First National will receive in exchange for each share
of common stock of First National ("First National Common Stock") shares of
common stock of ABC ("ABC Common Stock"). Pursuant to the terms of a Stock
Option Agreement between you and First National, you have options to purchase
____ shares of First National Common Stock. This letter will clarify the
status of your options in connection with the Merger.
The option price set forth in you Stock Option Agreement is $______
per share ("Option Price"). If you were to exercise your options prior to the
closing date of the Merger, you would receive in exchange for each share of
First National Common Stock your proportionate share of the Merger
Consideration (as defined in the Merger Agreement).
Paragraph 10 of your Stock Option Agreement provides as follows:
In the case the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation,
or in case the property or stock of the Company is acquired by another
corporation, or in case of a reorganization, recapitalization or
liquidation of the Company, the Board of Directors of the Company, the
Board of Directors of any corporation assuming the obligations of the
Company hereunder, shall either (i) make appropriate provision for the
protection of the option granted hereunder by the substitution on an
equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be
issuable in
<PAGE> 78
respect to the shares of Common Stock of the Company, provided that
the excess of the aggregate fair market value of the shares subject to
option immediately after such substitution over the purchase price
thereof is not more than the excess of the aggregate fair market value
of the share subject to option immediately before such substitution
over the purchase price thereof, or (ii) upon written notice to the
Employee provide that the option must be exercised within sixty (60)
days of the date of such notice or it will be terminated.
In lieu of giving effect to the provisions of Paragraph 10 of your
Stock Option Agreement, ABC has agreed that it will issue ABC Common Stock to
you, plus cash in lieu of fractional shares, pursuant to Section 3.7 of the
Merger Agreement for each share of First National Common Stock which you have
an option to purchase, provided you have not previously exercised your options.
The issuance of ABC Common Stock described herein will be in lieu of your
rights pursuant to Paragraph 10 of your Stock Option Agreement and may be
taxable to you as ordinary compensation. You may wish to consult with your tax
advisor on the tax treatment of this transaction.
Please acknowledge your agreement with the terms of this letter by
signing where indicated below and returning the signed copy to us no later than
May 9, 1996. By signing hereunder, you agree not to exercise any of your
options prior to the effective date of the Merger and acknowledge that, upon
the consummation of the Merger, your options shall be cancelled, and all rights
thereunder shall cease to exist.
If you have any questions, please let me know.
Sincerely,
-------------------------------
Acknowledged and agreed to this
_____ day of _______, 1996.
- ------------------------------
(Option Holder)
2
<PAGE> 79
EXHIBIT 7
MATTERS AS TO WHICH
SMITH, GAMBRELL & RUSSELL WILL OPINE
1. Target is a corporation duly organized, existing and in
good standing under the laws of the State of Georgia with corporate power and
authority (a) to conduct its business as described in the proxy statement used
to solicit the approval by the shareholders of Target of the transactions
contemplated by the Agreement ("Proxy Statement"), and (b) to own and use its
Assets.
2. Target Bank is a national bank duly organized and validly
existing under the laws of the United States with all requisite power and
authority to conduct its business as described in the Proxy Statement, and to
own and use its Assets. The deposits of Target Bank are insured by the Federal
Deposit Insurance Corporation to the extent provided by law.
3. Target's authorized shares consist of 10,000,000 shares of
Common Stock, $5.00 par value, of which ________ shares were outstanding as of
_________________, 1996. The outstanding shares of Target Common Stock have
been duly authorized and validly issued, were not issued in violation of any
statutory preemptive rights of shareholders, and are fully paid and
nonassessable. To our Knowledge, except as Previously Disclosed, there are no
options, subscriptions, warrants, calls, rights or commitments obligating
Target to issue equity securities or acquire its equity securities.
4. Target owns directly or indirectly all the issued and
outstanding shares of the capital stock of Target Bank. To our Knowledge,
there are no options, subscriptions, warrants, calls, rights or commitments
obligating Target Bank to issue equity securities or acquire its equity
securities.
5. The execution and delivery by Target of the Agreement do
not, and if Target were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of Incorporation
or Bylaws of Target or the Articles of Incorporation or Bylaws of Target Bank
or, to our Knowledge, result in any breach of, or default or acceleration
under, any material Contract or Order to which Target or Target Bank is a party
or by which Target or Target Bank is bound.
6. Target has duly authorized the execution and delivery of
the Agreement and all performance by Target thereunder and has duly executed
and delivered the Agreement.
7. The Agreement is enforceable against Target.
<PAGE> 80
EXHIBIT 8
MATTERS AS TO WHICH
ROGERS & HARDIN WILL OPINE
1. Purchaser is a corporation duly organized, existing and in
good standing under the laws of the State of Georgia with corporate power and
authority (a) to conduct its business as described in the proxy statement used
to solicit the approval by the shareholders of Target of the transactions
contemplated by the Agreement ("Proxy Statement"), and (b) to own and use its
Assets.
2. Purchaser's authorized shares consist of 10,000,000 shares
of Common Stock, $1.00 par value, of which __________ shares were outstanding
as of _____________, 1996 and 5,000,000 shares of Preferred Stock, none of
which were outstanding as of ____________, 1996. The outstanding shares of
Purchaser Common Stock have been duly authorized and validly issued, were not
issued in violation of any statutory preemptive rights of shareholders, and are
fully paid and nonassessable. To our Knowledge, except as Previously
Disclosed, there are no options, subscriptions, warrants, calls, rights or
commitments obligating Purchaser to issue equity securities or acquire its
equity securities. The shares of Purchaser Common Stock to be issued to the
shareholders of Target upon consummation of the Merger have been registered
under the Securities Act of 1933, as amended, and when issued in accordance
with the Agreement, will be validly issued, fully paid and nonassessable.
3. The execution and delivery by Purchaser of the Agreement do
not, and if Purchaser were now to perform its obligations under the Agreement
such performance would not, result in any violation of the Articles of
Incorporation or Bylaws of Purchaser or, to our Knowledge, result in any breach
of, or default or acceleration under, any material Contract or Order to which
Purchaser is a party or by which Purchaser is bound.
4. Purchaser has duly authorized the execution and delivery of
the Agreement and all performance by Purchaser thereunder and has duly executed
and delivered the Agreement.
5. The Agreement is enforceable against Purchaser.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
NATIONAL FINANCIAL CORPORATION'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,029,850
<INT-BEARING-DEPOSITS> 88,506
<FED-FUNDS-SOLD> 3,100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,331,982
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 35,490,398
<ALLOWANCE> 475,241
<TOTAL-ASSETS> 53,863,690
<DEPOSITS> 47,862,783
<SHORT-TERM> 0
<LIABILITIES-OTHER> 407,764
<LONG-TERM> 0
0
0
<COMMON> 2,477,045
<OTHER-SE> 3,116,098
<TOTAL-LIABILITIES-AND-EQUITY> 53,863,690
<INTEREST-LOAN> 866,422
<INTEREST-INVEST> 158,369
<INTEREST-OTHER> 46,496
<INTEREST-TOTAL> 1,071,287
<INTEREST-DEPOSIT> 538,548
<INTEREST-EXPENSE> 538,548
<INTEREST-INCOME-NET> 532,739
<LOAN-LOSSES> 50,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 397,327
<INCOME-PRETAX> 208,430
<INCOME-PRE-EXTRAORDINARY> 208,430
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,877
<EPS-PRIMARY> .25
<EPS-DILUTED> .24
<YIELD-ACTUAL> 8.80
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 433,743
<CHARGE-OFFS> 8,502
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 475,241
<ALLOWANCE-DOMESTIC> 470,241
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,000
</TABLE>
