<PAGE>
Registration No. 333-31997
Rule 424(b)(3)
Dear Shareholder:
This booklet contains the Notice of Meeting and Proxy Statement for
a Special Meeting of the Shareholders (the "Special Meeting") of First
Clayton Bancshares, Inc. ("First Clayton") to be held on September 10,
1997, commencing at 2:00 p.m., at the office of First Clayton Village
Shopping Center, Highway 441, Clayton, Georgia.
The purpose of the meeting is to consider and vote upon the
Agreement and Plan of Merger (the "Merger Agreement") described in the
accompanying Proxy Statement pursuant to which First Clayton would be
merged into United Community Banks, Inc., a Georgia corporation
("United"), with United being the surviving entity (the "Merger"). If
the Merger Agreement is approved, each shareholder of First Clayton will
be entitled to receive 1.6136 shares of common stock of United, $1.00 par
value per share (the "United Stock"), for each share of First Clayton
common stock, $1.00 par value per share ("First Clayton Stock"),
outstanding on the effective date of the Merger. In lieu of the issuance
of fractional shares of the United Stock, there will be paid in cash an
amount (computed to the nearest cent) equal to the fraction multiplied by
$22.00.
The accompanying Proxy Statement includes a description of the terms
and conditions of the proposed merger and a description of the rights of
dissenting First Clayton shareholders. A copy of the Merger Agreement is
attached as Appendix A to the Proxy Statement. Enclosed with this Proxy
Statement is a separately bound booklet containing: (a) the United 1997
Proxy Statement which contains United's 1996 Annual Report, (b) the
United Form 10-Q for the Quarter ended March 31, 1997, (c) the First
Clayton Annual Report on Form 10-KSB for the year ended December 31,
1996, and (d) the First Clayton Form 10-QSB for the Quarter ended March
31, 1997.
Section 14-2-1301 et seq. of the Official Code of Georgia Annotated,
reproduced as Appendix B to the attached Proxy Statement, sets forth the
rights of shareholders who dissent from the Merger. Any First Clayton
shareholder desiring to dissent from the Merger and receive payment of
the fair value of his or her First Clayton Stock must, among other
things, deliver to First Clayton prior to the time of the shareholder
vote on the Merger, a written notice of intent to demand payment for his
or her shares of First Clayton Stock if the Merger is consummated. A
First Clayton shareholder who fails to submit such written notice to
First Clayton prior to the shareholder vote will lose the right to
dissent to the Merger and demand payment for his or her shares of First
Clayton Stock.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE
BEST INTEREST OF FIRST CLAYTON AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE
FOR THE ADOPTION OF THE MERGER AGREEMENT.
<PAGE>
The affirmative vote of the holders of a majority of the outstanding
First Clayton Stock entitled to vote at the Special Meeting is required
to approve the Merger Agreement. Directors and executive officers of
First Clayton who own or control 135,772 shares, or approximately 34% of
the outstanding shares, of First Clayton Stock have agreed to vote their
shares of First Clayton Stock in favor of the Merger.
A form of proxy is enclosed, and you are urged to complete, sign and
return it to First Clayton as soon as possible in the enclosed stamped
envelope. If you attend the Special Meeting you may revoke your proxy at
that time simply by requesting the right to vote in person.
Sincerely,
__________________________________________
John Martin
Chairman of the Board
<PAGE>
FIRST CLAYTON BANCSHARES, INC.
Village Shopping Center, Hwy. 441
P.O. Box 1250
Clayton, Georgia 30525
_____________________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SETPEMBER 10, 1997
_____________________________________________________
Notice is hereby given that a Special Meeting of Shareholders of
First Clayton Bancshares, Inc. ("First Clayton") will be held on
September 10, 1997, commencing at 2:00 p.m., (the "Special Meeting"),
at the offices of First Clayton at Village Shopping Center, Highway 441,
Clayton, Georgia, for the purpose of considering and voting upon:
(1) An Agreement and Plan of Merger, a copy of which is attached
as Appendix A to the Proxy Statement accompanying this
Notice, providing for the merger (the "Merger") of First
Clayton with and into United Community Banks, Inc.
("United"), a Georgia corporation and multi-bank holding
company, with United being the surviving entity; and
(2) Such other business as may lawfully come before the meeting
or any adjournments thereof.
In connection with the Merger, each shareholder of First Clayton
will be entitled to receive 1.6136 shares of common stock of United,
$1.00 par value per share (the "United Stock"), for each share of First
Clayton common stock, $1.00 par value per share ("First Clayton Stock"),
outstanding on the effective date of the Merger. In lieu of the issuance
of fractional shares of United Stock, there will be paid in cash an
amount (computed to the nearest cent) equal to the fraction multiplied by
$22.00.
If the Merger is consummated, shareholders dissenting therefrom
will be entitled to be paid the "fair value" of their shares in cash,
provided that they shall have filed a written notice of intent to demand
payment for their shares before the vote of shareholders is taken
thereon, have not voted their shares in favor of the Merger and have
complied with the provisions of Section 14-2-1301 et seq. of the Official
Code of Georgia Annotated regarding the rights of dissenting
shareholders, all as more fully set forth under "THE PROPOSED MERGER --
Rights of Dissenting Shareholders" and in Appendix B to the attached
Proxy Statement.
Only shareholders of record at the close of business on
August 5, 1997 will be entitled to notice of and to vote at the
Special Meeting or any adjournments thereof.
A form of proxy and a Proxy Statement are enclosed. The approval
of the Merger requires the affirmative vote of the holders of at least a
majority of the First Clayton Stock entitled to vote at the Special
Meeting. To assure representation at the Special Meeting, you are
requested to sign, date and return the proxy promptly in the enclosed,
stamped envelope. If you attend the Special Meeting you may revoke your
proxy at that time simply by requesting the right to vote in person.
Prior to the Special Meeting you may withdraw a previously submitted
<PAGE>
proxy by notifying the Secretary of First Clayton in writing or
submitting an executed, later dated proxy to First Clayton, as more fully
described under "INTRODUCTION" in the Proxy Statement.
By Order of the Board of Directors,
____________________________________
Ronald E. Vandiver
Secretary
August 6, 1997
Clayton, Georgia
<PAGE>
First Clayton Bancshares, Inc.
PROXY STATEMENT
Special Meeting of Shareholders to be held on September 10, 1997
United Community Banks, Inc.
PROSPECTUS
646,555 shares of common stock of United Community Banks, Inc. which may
be issued in connection with the merger of First Clayton Bancshares, Inc.
with and into United Community Banks, Inc.
UNITED COMMUNITY BANKS, INC. HAS FILED A REGISTRATION
STATEMENT/PROSPECTUS WITH THE SECURITIES AND EXCHANGE COMMISSION COVERING
THE SHARES OF ITS COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER
OF FIRST CLAYTON BANCSHARES, INC. WITH UNITED COMMUNITY BANKS, INC. THIS
PROXY STATEMENT ALSO CONSTITUTES A PROSPECTUS OF UNITED COMMUNITY BANKS,
INC. FILED AS PART OF SUCH REGISTRATION STATEMENT.
_____________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
_____________________
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT
TO UNITED COMMUNITY BANKS, INC. AND ITS SUBSIDIARIES WAS SUPPLIED BY
THOSE ENTITIES, AND ALL INFORMATION WITH RESPECT TO FIRST CLAYTON
BANCSHARES, INC. AND ITS SUBSIDIARY WAS SUPPLIED BY THOSE ENTITIES.
_____________________
THE SHARES OF COMMON STOCK OF UNITED COMMUNITY BANKS, INC. TO BE ISSUED
IN CONNECTION WITH THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS, AND ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________
SHARES OF THE COMMON STOCK OF UNITED COMMUNITY BANKS, INC. ARE EQUITY
SECURITIES AND ARE NOT SAVINGS ACCOUNTS OR DEPOSITS. INVESTMENT IN SUCH
SHARES IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement/Prospectus is August 6, 1997
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . 1
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Business of First Clayton and United . . . . . . . . . . . . . . . 4
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . 5
The Special Meeting of Shareholders; Vote Required . . . . . . . . 5
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . 6
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . 6
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 6
Markets for Capital Stock . . . . . . . . . . . . . . . . . . . . 6
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Certain Differences in Shareholders' Rights . . . . . . . . . . . 7
Interests of Management in the Transaction . . . . . . . . . . . . 8
Conditions, Termination and Effective Date . . . . . . . . . . . . 8
COMPARATIVE SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . 9
SUMMARY CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . 10
SELECTED PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . . . . . . 12
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . 13
THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 21
Background of and Reasons for the Merger . . . . . . . . . . . . 21
The Agreement and Plan of Reorganization and the Agreement and
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . 23
Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . 26
Conduct of Business of First Clayton Pending Closing . . . . . . 27
Interest of Management in the Transaction; Conduct of Business
After the Merger . . . . . . . . . . . . . . . . . . . . . 28
Effect of the Merger on First Clayton Shareholders and
Comparison of the Securities of First Clayton and United . 29
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 30
Resales of United Stock . . . . . . . . . . . . . . . . . . . . 31
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 31
-i-<PAGE>
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . 31
Certain Federal Income Tax Consequences of the Merger and
Opinion of Tax Counsel . . . . . . . . . . . . . . . . . . 33
INFORMATION ABOUT FIRST CLAYTON BANCSHARES, INC. . . . . . . . . . . 34
Description of Business . . . . . . . . . . . . . . . . . . . . 34
INFORMATION ABOUT UNITED COMMUNITY BANKS, INC. . . . . . . . . . . . 35
Description of Business . . . . . . . . . . . . . . . . . . . . 35
Recent Developments . . . . . . . . . . . . . . . . . . . . . . 35
Description of Securities of United . . . . . . . . . . . . . . 36
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
APPENDICES
Agreement and Plan of Merger . . . . . . . . . . . . . . . Appendix A
Georgia Dissenters' Rights Statutes (O.C.G.A. Sec. 14-2-1301
et seq.) . . . . . . . . . . . . . . . . . . Appendix B
-ii-
<PAGE>
AVAILABLE INFORMATION
United has filed with the Securities and Exchange
Commission, Washington, D.C. 20549, a Registration Statement on
Form S-4 under the Securities Act with respect to the securities
offered hereby. This Proxy Statement/Prospectus, which is part
of the Registration Statement does not contain all of the
information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with
respect to United and the securities offered hereby, reference is
made to the Registration Statement and the exhibits and schedules
filed therewith. Statements contained in this Proxy
Statement/Prospectus as to the contents of any contract or any
other document to which reference is made are not necessarily
complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration
Statement may be inspected without charge at the offices of the
Securities and Exchange Commission in Washington, D.C. 20549, and
copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W. Washington, D.C.
20549, upon the payment of the fees prescribed by the Securities
and Exchange Commission.
United and First Clayton are subject to certain
informational reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission").
Such periodic reports, proxy statements and other information
filed by United and First Clayton with the Commission can be
inspected and copied at the public reference facilities
maintained by the Commission's regional offices in New York (7
World Trade Center, Suite 1300, New York, New York 10048) and
Chicago (Citicorp Center, 500 W. Madison, Suite 1400, Chicago,
Illinois 60661), and copies of such material can be obtained
from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at the Commission's web
site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by United and
First Clayton under the Exchange Act are incorporated herein by
reference:
(a) United's and First Clayton's annual reports on
Form 10-K and 10-KSB, respectively, for the fiscal year ended
December 31, 1996;
(b) All other reports filed by United or First Clayton
pursuant to sections (13)(a), or 15(d) of the Exchange Act since
December 31, 1996.
Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes hereof to the extent that
a statement contained herein (or any subsequently filed document
that is or is deemed to incorporated by reference herein)
-1-
<PAGE>
modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY
REFERENCE THE AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF
JUNE 12, 1997, (AS AMENDED, THE "ACQUISITION AGREEMENT") BETWEEN
UNITED AND FIRST CLAYTON BANCSHARES, INC., A GEORGIA CORPORATION
("FIRST CLAYTON"), AND THE AGREEMENT AND PLAN OF MERGER, DATED AS OF
JUNE 12, 1997, (THE "MERGER AGREEMENT") BETWEEN FIRST CLAYTON AND
UNITED, BOTH OF WHICH WERE FILED WITH THE SEC ON JULY 24, 1997 AS
EXHIBITS TO UNITED'S REGISTRATION STATEMENT ON FORM S-4 WITH
RESPECT TO THE MERGER, AS DEFINED BELOW, COMMISSION FILE NO.
333-31997. ALTHOUGH THE ACQUISITION AGREEMENT IS NOT
PRESENTED HEREIN, OR DELIVERED HEREWITH, COPIES, OTHER THAN
EXHIBITS ATTACHED THERETO, MAY BE OBTAINED BY WRITING CHRIS
BLEDSOE, CHIEF FINANCIAL OFFICER, UNITED COMMUNITY BANKS, INC.,
P.O. BOX 398, 59 HIGHWAY 515, BLAIRSVILLE, GEORGIA 30512.
TELEPHONE REQUESTS MAY BE DIRECTED TO (706) 745-2151. IN ORDER
TO ASSURE TIMELY DELIVERY, ANY REQUEST SHOULD BE MADE BY
AUGUST 29, 1997.
INTRODUCTION
This Proxy Statement/Prospectus is furnished in
connection with the solicitation by the Board of Directors of
First Clayton of proxies for use at the special meeting of
shareholders of First Clayton (the "Special Meeting"), at the
time, date and place set forth in the Notice of Special Meeting
and at any adjournments thereof. The Special Meeting has been
called for the purpose of considering and acting upon the
proposed merger of First Clayton with and into United (the
"Merger") pursuant to the Merger Agreement, a copy of which is
attached as Appendix A hereto and incorporated herein by
reference, and the related Acquisition Agreement which is
incorporated herein by reference.
HOLDERS OF COMMON STOCK OF FIRST CLAYTON ARE REQUESTED
TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY TO FIRST CLAYTON IN THE POSTAGE PAID ENVELOPE PROVIDED.
Any proxy given pursuant to this solicitation may be
revoked at any time before it is voted by so notifying Ronald E.
Vandiver, Secretary, in writing or by submitting an executed,
later-dated proxy to First Clayton: P.O. Box 1250, Clayton,
Georgia 30525, Attention: Ronald E. Vandiver, Secretary, prior to
the Special Meeting or by appearing at the Special Meeting and
requesting the right to vote in person, without compliance with
any other formalities. If the proxy is properly signed and
returned by a shareholder and is not revoked, it will be
-2-
<PAGE>
voted at the Special Meeting in the manner specified therein. IF
NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR THE
APPROVAL OF THE MERGER AGREEMENT, AND IN THE DISCRETION OF THE
PROXY HOLDER AS TO ANY OTHER MATTER WHICH MAY PROPERLY COME
BEFORE THE SPECIAL MEETING.
All of the expenses incurred by United in connection
with the authorization, preparation, execution and performance of
the Acquisition Agreement and the Merger Agreement including,
without limitation, all fees and expenses of its agents,
representatives, counsel and accountants and the fees and
expenses related to filing regulatory applications with state and
federal authorities in connection with the transactions
contemplated thereby, will be paid by United. All expenses
incurred by First Clayton in connection with the authorization,
preparation, execution and performance of the Acquisition
Agreement and the Merger Agreement, including, without
limitation, all fees and expenses of agents, representatives,
counsel and accountants for First Clayton and the cost of
reproducing and mailing this Proxy Statement/Prospectus, will be
paid by First Clayton.
As of June 30, 1997, First Clayton had issued and
outstanding 400,691 shares of common stock, par value $1.00 per
share ("First Clayton Stock"). Each holder of First Clayton
Stock is entitled to one vote per share owned. Only shareholders
of record at the close of business on August 5, 1997 are
entitled to notice of and to vote at the Special Meeting or any
adjournments thereof.
Statements contained in this Proxy Statement/Prospectus
as to the contents of any agreement or other document, or similar
statements as to the content of any agreement or other document
contained in any document incorporated by reference herein, are
in each such instance qualified in their entirety by reference to
each such agreement or other document.
-3-
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain features of, and
information relating to, the proposed Merger, which is qualified
in its entirety by reference to the Merger Agreement, the
Acquisition Agreement and the other more detailed textual
information and financial data set forth elsewhere in this
Prospectus/Proxy Statement and in the accompanying booklet which
contains additional information about First Clayton and United.
BUSINESS OF FIRST CLAYTON AND UNITED
First Clayton is a one-bank holding company
headquartered in Clayton, Georgia. First Clayton's subsidiary,
First Clayton Bank & Trust Company ("First Clayton Bank"), is a
full-service commercial bank with its office located in Clayton,
Georgia. First Clayton Bank provides customary types of banking
services such as checking accounts, savings accounts and time
deposits. It also engages in commercial and consumer lending,
makes secured and unsecured loans and provides other financial
services. The mailing address of the principal executive offices
of First Clayton is P.O. Box 1250, Clayton, Georgia 30525 and
its telephone number is (706) 782-7100. At June 30, 1997, First
Clayton had total assets of $64 million, net loans of
approximately $48 million, total deposits of approximately $58
million and shareholders' equity of approximately $6 million.
United Community Banks, Inc. ("United") is a registered
bank holding company headquartered in Blairsville, Georgia. All
of United's activities are conducted by its wholly-owned
subsidiaries, United Community Bank (formerly Union County Bank)
("UCB"), Carolina Community Bank, Murphy, North Carolina
("Carolina"), which United acquired in 1990, Towns County Bank,
Hiawassee, Georgia ("Towns"), which United acquired in 1992,
Peoples Bank, Blue Ridge, Georgia ("Peoples"), which United
acquired in 1992, and White County Bank, Cleveland, Georgia
("White") which United acquired in 1995 (UCB, Carolina, Peoples,
Towns and White are collectively referred to herein as the
"Banks"). United operates a finance company United Family
Finance, Inc. with offices in Blue Ridge and Hiawassee.
In May 1997, United completed an offering to the public
of 300,000 shares of United Common Stock registered under the
Securities Act of 1933, as amended (the "Securities Act")
pursuant to which $6,476,000 in additional capital was raised.
United used the proceeds of that offering to invest additional
capital in UCB and Carolina and for general corporate purposes.
On December 31, 1996, United completed a private
placement of $3,500,000 of Floating Rate Convertible Subordinated
Payable-in-Kind Debentures due December 31, 2006, the proceeds of
which were used to invest additional capital in Carolina, and for
general corporate purposes. See "DESCRIPTION OF SECURITIES -
Debentures."
On July 1, 1996, UCB established a branch in Dahlonega,
Lumpkin County, Georgia, and on September 28, 1996, UCB purchased
and assumed certain assets and liabilities and established a
branch in Cornelia, Habersham County, Georgia.
-4-
<PAGE>
In August 1995, United completed an offering to the
public of 215,515 shares of United Stock registered under the
Securities Act pursuant to which $2,434,000 in additional capital
was raised. United used the proceeds of that offering primarily
to invest additional capital in Carolina and Towns.
At June 30, 1997, United had total assets of
approximately $989 million, net loans of approximately $679
million, total deposits of approximately $859 million and
shareholders' equity of approximately $63 million. The principal
executive office of United is located at 59 Highway 515,
Blairsville, Georgia 30512, and its telephone number at that
address is (706) 745-2151. See "UNITED COMMUNITY BANKS, INC."
Additional information on United and First Clayton is
included in the booklet accompanying this Proxy
Statement/Prospectus which contains the 1997 Proxy Statement and
March 31, 1997 10-Q Quarterly Report for United and the 1996 10-
KSB Annual Report and March 31, 1997 10-QSB Quarterly Report for
First Clayton.
TERMS OF THE MERGER
Pursuant to the Acquisition Agreement, First Clayton
will be merged with and into United with United as the surviving
entity. As a result of the Merger, each share of First Clayton
Stock outstanding on the effective date of the Merger will be
converted into 1.6136 shares of common stock of United, $1.00 par
value per share (the "United Stock").
In lieu of the issuance of fractional shares of United
Stock, there will be paid in cash an amount (computed to the
nearest cent) equal to such fraction multiplied by $22.00. The
number of shares of the United Stock to be received pursuant to
the Merger is subject to appropriate adjustment in the event of
any stock dividend, stock split, recapitalization or
reclassification of United Stock.
THE SPECIAL MEETING OF SHAREHOLDERS; VOTE REQUIRED
The Special Meeting of First Clayton will be held on
September 10, 1997, commencing at 2:00 p.m., at the office of
First Clayton at Village Shopping Center, Highway 441, Clayton,
Georgia for the purpose of voting on the Merger. Only First
Clayton shareholders of record at the close of business on
August 5, 1997 will be entitled to notice of and to vote at
the Special Meeting or any adjournments thereof. The approval of
the Merger requires the affirmative vote of the holders of a
majority of the outstanding First Clayton Stock entitled to vote
at the Special Meeting. Directors and executive officers of
First Clayton who have agreed to vote their shares of First
Clayton Stock in favor of the Merger own or control 135,772
shares or approximately 34% of the outstanding shares of First
Clayton Stock (based on 400,691 shares outstanding).
Shareholders of United are not required to approve of the Merger.
-5-
<PAGE>
RIGHTS OF DISSENTING SHAREHOLDERS
If the Merger is consummated, First Clayton
shareholders dissenting therefrom will be entitled to be paid the
"fair value" of their shares in cash, provided that they comply
with certain statutory provisions regarding the rights of
dissenting shareholders. See "THE PROPOSED MERGER -- Rights of
Dissenting Shareholders." Under the Acquisition Agreement,
United has the right not to consummate the Merger if the holders
of more than 15,000 shares (4%) of the outstanding shares of
First Clayton Stock dissent therefrom. See "THE PROPOSED MERGER
- -- Reasons for the Merger".
FEDERAL INCOME TAX CONSEQUENCES
First Clayton has received an opinion from Kilpatrick
Stockton LLP to the effect that, assuming that the Merger is
consummated in accordance with the terms of the Acquisition
Agreement and the Merger Agreement under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), no
gain or loss will be recognized for federal income tax purposes
by First Clayton or the shareholders of First Clayton who receive
United Stock in connection with the proposed Merger. No ruling
to that effect will be requested from the Internal Revenue
Service. Cash received by holders of First Clayton Stock in lieu
of fractional shares and by holders exercising their dissenters'
rights will be treated as amounts distributed in redemption of
their First Clayton Stock and will be taxable under the
provisions of Section 302 of the Code as either ordinary income
or capital gain or loss, depending upon the circumstances of the
individual shareholder. See "THE PROPOSED MERGER -- Certain
Federal Income Tax Consequences of the Merger."
ACCOUNTING TREATMENT
United will account for the Merger as a "pooling of
interests" transaction in accordance with generally accepted
accounting principles.
MARKETS FOR CAPITAL STOCK
United Stock is not currently traded on an established
public market. From January 1, 1997 through June 30, 1997,
management of United is aware of 139 trades aggregating 59,700
shares of United Stock, ranging from a block of 5 shares to a
block of 10,000 shares, at prices ranging from $22 to $25 per
share. On March 7, 1997, United commenced an offering of 250,000
shares of United Stock to the public at $22.00 per share pursuant
to a registration statement filed with the SEC which offering was
subsequently increased to 300,000 shares. The offering
terminated in May 1997 with all of the offered shares sold at the
offering price. Management of United is aware of approximately
256 trades of United Stock during 1996, ranging from one share to
a block of 2,500 shares, at prices ranging from $10.00 to $42.00
per share. Management of United is aware of 29 trades of United
Stock during 1995, ranging from a block of 15 shares to a block
of 1,000 shares, at prices ranging from $10.00 to $11.50 per
share. The last sales price of United Stock known to United's
management prior to the announcement of the Merger on June 23,
1997 was $22 per share on June 17, 1997.
-6-<PAGE>
First Clayton Stock is not traded on an established
public trading market. As of June 30, 1997, there were 400,691
shares of First Clayton Stock outstanding and 402 holders of such
shares. From January 1, 1997 through June 30, 1997, management
of First Clayton is aware of 24 trades aggregating 8,047 shares
of First Clayton Stock, ranging from a block of 11 shares to a
block of 6,000 shares, at prices ranging from $20.00 per share to
$21.00 per share. Management is aware of 30 trades of First
Clayton Stock during 1996 ranging from a block of 58 shares to a
block of 15,000 shares with prices ranging from $17.00 per share
to $20.00 per share. In 1995 management is aware of 27 trades of
First Clayton Stock ranging from a block of 23 shares to a block
of 1,000 shares with prices ranging from $15.00 per share to
$17.00 per share. The last sale of First Clayton Stock known to
management prior to the announcement of the Merger on June 23,
1997 was $21.00 per share on June 3, 1997.
DIVIDENDS
In each of the first two quarters of 1997 United
declared cash dividends of $.025 per share. United paid semi-
annual cash dividends of $.08 per share of United Stock to
shareholders of record in 1996 and $.07 per share of United Stock
to shareholders of record in 1995. For information with respect
to cash dividends paid in each of the last five years, see
"SUMMARY CONSOLIDATED FINANCIAL INFORMATION." Although United
intends to continue paying cash dividends, the amount and
frequency of cash dividends will be determined by United's Board
of Directors after consideration of earnings, capital
requirements and the financial condition of United. No
assurances can be given that cash dividends will be declared in
the future. Additionally, United's ability to pay cash dividends
will be dependent on cash dividends paid to it by the Banks. The
ability of the Banks to pay dividends to United is restricted by
applicable regulatory requirements.
First Clayton paid a per share cash dividend of $.44
during 1996 and $.40 during 1995. No assurances can be given
that dividends will be declared in the future.
Whether or not the Merger Agreement is approved by the
shareholders of First Clayton and the Merger is consummated,
future dividend policy for United and First Clayton will depend
upon each company's earnings, financial condition, appropriate
legal restrictions and other factors relevant at the time the
respective Boards of Directors consider such dividends.
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
Upon consummation of the Merger, First Clayton
shareholders, whose rights are governed by First Clayton's
Articles of Incorporation and Bylaws, will automatically become
United shareholders, and their rights as United shareholders will
be governed by United's Articles of Incorporation and Bylaws.
Certain differences exist between the rights of First Clayton
shareholders and United Shareholders. See "THE PROPOSED MERGER -
Effect of the Merger on Clayton Shareholders and Comparison of
Securities of Clayton and United."
-7-
<PAGE>
INTERESTS OF MANAGEMENT IN THE TRANSACTION
After the consummation of the Merger, J. Mark Smith,
President of First Clayton, and Rodney Hickox, Executive Vice
President of First Clayton, will each be granted options to
purchase 12,102 shares of United Stock at the market price as of
the date of grant. In addition, Messrs. Smith and Hickox have
entered into deferred compensation agreements with First Clayton
which will be assumed by United in the Merger and which provide
that they will each receive deferred compensation in the amount
of $108,750. See "THE PROPOSED MERGER -- Interest of Management
in the Transaction."
CONDITIONS, TERMINATION AND EFFECTIVE DATE
The Merger is subject to a number of conditions and may
be terminated by any of the parties upon the occurrence or
failure of certain events. See "THE PROPOSED MERGER -- The
Agreement and Plan of Reorganization and The Agreement and Plan
of Merger." The Merger is subject to approval by the First
Clayton shareholders and the receipt of required approval by the
Board of Governors of the Federal Reserve System (the "Federal
Reserve") and the Department of Banking and Finance of the State
of Georgia (the "DBF"). See "THE PROPOSED MERGER -- Regulatory
Approvals."
The closing of the Merger (the "Effective Date") will
occur following approval of the Merger Agreement by First
Clayton's shareholders, approval of the transaction by the
regulators referenced above and the expiration of any waiting or
similar period required by applicable law or such other time as
the parties may mutually agree.
-8-
<PAGE>
COMPARATIVE SHARE DATA
The following table sets forth selected comparative
unaudited per share data for United on a historical basis (the
"United Historical"), for First Clayton on a historical basis
(the "First Clayton Historical"), for United and First Clayton on
a pro forma basis assuming the Merger had been effective for the
periods indicated (the "United and First Clayton Pro Forma"), and
for First Clayton on a pro forma equivalent basis (the "First
Clayton Pro Forma Equivalent"). The Merger will be accounted for
as a "pooling of interests" transaction in accordance with
generally accepted accounting principles. See "THE PROPOSED
MERGER - Accounting Treatment."
Equivalent earnings per share amounts for First Clayton
have been calculated by multiplying the pro forma combined
earnings per share by the exchange ratio (1.6136 shares of the
United Stock for each share of First Clayton Stock). The First
Clayton pro forma equivalent cash dividends per common share
represent historical dividends declared by United multiplied by
the applicable exchange ratio. The purpose of the pro forma
equivalent per-share amounts is for informational purposes only
to show the pro forma net earnings that would have been earned
for each share of First Clayton had the Merger been consummated
for the periods indicated. This data should be read in
conjunction with the historical financial statements of First
Clayton and United, including the respective notes thereto
included elsewhere herein and incorporated by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
As of and For the
As of and For the
Three Months Ended
Year Ended
March 31, 1997
December 31,
-----------------
------------
1996
1995 1994
----
---- ----
<S> <C> <C>
<C> <C>
NET EARNINGS PER COMMON SHARE
United Historical $0.33 1.31
1.04 0.93
First Clayton Historical 0.48 1.78
1.46 1.18
United and First Clayton Pro Forma Combined <F1> 0.32 1.29
1.03 0.91
First Clayton Pro Forma Equivalent <F2> 0.52 2.08
1.66 1.47
CASH DIVIDENDS PER COMMON SHARE
United Historical $0.025 0.080
0.072 0.040
First Clayton Historical - 0.440
0.400 0.350
United and First Clayton Pro Forma Combined <F1><F3> 0.025 0.080
0.072 0.040
First Clayton Pro Forma Equivalent <F4> 0.040 0.129
0.116 0.065
BOOK VALUE PER COMMON SHARE (END OF PERIOD)
United Historical $8.37 8.14
7.03 5.41
First Clayton Historical 13.57 13.19
12.21 10.95
United and First Clayton Pro Forma Combined 8.38 8.14
7.09 5.56
First Clayton Pro Forma Equivalent <F2> 13.52 13.13
11.44 8.97
<FN>
<F1> Computed giving effect to the Merger.
<F2> Computed based on the First Clayton per share exchange ratio
of 1.6136 shares of United Stock for each share of First
Clayton Stock.
<F3> Represents historical dividends paid by United as it is
assumed that United willnot change its dividend policy
as a result of the Merger.
<F4> Represents historical dividends paid per share by United
multiplied by the exchange ratio of 1.6136 shares of United
Stock for each share of First Clayton Stock.
</FN>
</TABLE>
-9-
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following tables present certain selected historical
financial information for United and First Clayton. The data
should be read in conjunction with the historical financial
statements, including the respective notes thereto, and other
financial information concerning United and First Clayton
incorporated by reference in or accompanying this Proxy
Statement/Prospectus. Interim unaudited data for the three
months ended March 31, 1997 and 1996, of United and First Clayton
reflect, in the opinion of the respective management of United
and First Clayton, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such
data. Results for the three months ended March 31, 1997, are not
necessarily indicative of results which may be expected for any
other interim period or for the year as a whole. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
-10-<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
As of and For the Year Ended December 31,
----------------
- --------------------------------------------------
1997 1996 1996
1995 1994 1993 1992
---- ---- ----
---- ---- ---- ----
<S> <C> <C> <C>
<C> <C> <C> <C>
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
BALANCE SHEET DATA
Total assets $ 891,516 682,718
828,030 659,669 456,936 393,632 332,013
Loans 635,457 464,846
591,398 449,595 341,621 283,611 224,057
Deposits 778,898 611,374
720,726 590,656 393,270 349,765 300,020
Long term debt 10,170 11,026
10,453 11,309 9,400 7,400 7,800
Stockholders' equity 53,912 45,327
52,401 44,027 30,217 25,449 20,942
STATEMENT OF EARNINGS DATA
Net interest income 8,954 6,892
31,368 22,919 18,217 14,516 11,131
Provision for loan losses 564 279
1,411 1,040 935 842 472
Noninterest income 1,462 1,320
5,368 4,264 3,762 3,700 2,157
Noninterest expense 3,767 5,351
23,313 17,854 13,902 11,705 8,635
Net earnings 2,100 1,673
8,201 6,051 5,200 4,202 3,126
PER SHARE DATA
Book value (period end) <F1> 8.37 7.24
8.14 7.03 5.41 4.55 3.81
Net earnings 0.33 0.27
1.31 1.04 0.93 0.76 0.57
Dividends 0.025 -
0.080 0.072 0.040 0.036 0.046
Total shares outstanding 6,438,848 6,260,280
6,438,848 6,260,280 5,589,365 5,589,365 5,500,110
Weighted average shares outstanding 6,438,848 6,260,280
6,260,769 5,813,615 5,589,365 5,545,110 5,492,435
RATIOS
Return on average assets 1.00% 1.00% 1.10%
1.08% 1.22% 1.16% 1.04%
Return on average stockholders' equity 16.00% 15.03% 17.01%
16.30% 18.68% 18.12% 16.07%
Average equity to average assets 6.18% 6.69% 6.60%
6.60% 6.51% 6.41% 6.47%
Average loans to average deposits 81.81% 78.54% 79.49%
79.38% 82.23% 77.20% 74.46%
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
BALANCE SHEET DATA
Total assets $ 63,273 52,078
58,073 52,629 39,591 33,851 29,397
Loans, net 44,940 32,734
41,778 30,426 25,015 21,560 17,986
Deposits 57,570 46,482
52,574 47,176 34,728 29,155 25,169
Long term debt - - -
- - - -
Stockholders' equity 5,432 5,326
5,280 5,180 4,654 4,427 4,116
STATEMENT OF EARNINGS DATA
Net interest income 697 564
2,448 2,096 1,850 1,508 1,193
Provision for loan losses 33 25
186 77 63 89 104
Noninterest income 76 67
298 259 200 218 216
Noninterest expense 447 350
1,531 1,350 1,223 1,106 1,090
Net earnings 192 174
726 618 501 407 215
PER SHARE DATA
Book value (period end) <F1> 13.57 12.55
13.19 12.21 10.95 10.36 9.62
Net earnings <F2> 0.48 0.41
1.78 1.46 1.18 0.92 0.48
Dividends - -
0.44 0.40 0.35 0.30 -
Total shares outstanding 400,391 424,393
400,391 424,393 424,850 427,327 427,827
Weighted average shares outstanding <F2> 400,391 424,393
408,198 424,919 424,850 441,916 448,710
SELECTED RATIOS
Return on average assets 1.28% 1.35%
1.36% 1.36% 1.35% 1.29% 0.77%
Return on average stockholders' equity 14.54% 13.43%
13.80% 12.39% 10.82% 9.37% 5.37%
Average equity to average assets 8.83% 10.03%
9.85% 10.96% 12.49% 13.77% 14.29%
Average loans to average deposits 78.73% 67.44%
75.84% 70.65% 72.19% 72.86% 71.98%
<FN>
<F1> Represents stockholders' equity divided by the number of outstanding
shares at period end.
<F2> 1993 and 1992 amounts include effect of 159,257 shares of common stock
represented by warrants which expired June 1, 1993 without being
exercised.
</FN>
</TABLE>
-11- <PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data gives
effect to the acquisition of First Clayton as of the date or at
the beginning of the period indicated, assuming the acquisition
is accounted for as a pooling of interests. The pro forma
balance sheet information has been prepared as if the acquisition
had been consummated on March 31, 1997. The pro forma operating
data has been prepared as if the acquisition had been consummated
on January 1, 1994. The unaudited pro forma financial data is
presented for informational purposes only and is not necessarily
indicative of the combined financial position or results of
operations which actually would have occurred if the transaction
had been consummated at the date and for the periods indicated or
which may be obtained in the future.
<TABLE>
<CAPTION>
SELECTED PRO FORMA FINANCIAL
DATA
(Dollars in thousands, except per
share amounts)
As of and For the
For The Year Ended
Three Months Ended March 31,
December 31,
----------------------------
- -----------------------------
1997 1996 1996
1995 1994
<S> <C> <C> <C>
<C> <C>
BALANCE SHEET DATA
Total assets $954,789 - -
- -
Federal funds sold 18,470 - -
- -
Investment securities 178,292 - -
- -
Loans 680,397 - -
- -
Deposits 836,468 - -
- -
Other borrowings 43,424 - -
- -
Long-term debt 10,170 - -
- -
Stockholders' equity 59,344 - -
- -
EARNINGS DATA
Interest income $19,811 $15,524 $67,907
$53,209 $36,844
Interest expense 10,160 8,068 34,091
28,194 16,776
Net interest income 9,651 7,456 33,816
25,015 20,068
Provision for loan losses 597 304 1,597
1,116 998
Noninterest income 1,538 1,387 5,666
4,523 3,962
Noninterest expense 7,184 5,701 24,844
19,204 15,125
Income taxes 1,117 991 4,114
2,549 2,206
Net earnings 2,291 1,847 8,927
6,669 5,701
Earnings per common share 0.32 0.27 1.29
1.03 0.91
</TABLE>
-12-
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet
(the "pro forma balance sheet") as of March 31, 1997, and the
unaudited pro forma consolidated statements of earnings (the "pro
forma earnings statements") for the three months ended March 31,
1997, and for each of the three years in the period ended
December 31, 1996, combine the historical financial statements of
United with First Clayton after giving effect to the Merger to
using the pooling of interests method of accounting. Pro forma
adjustments to the balance sheet are computed as if the
transaction occurred at March 31, 1997, while the pro forma
adjustments to the statements of earnings are computed as if the
transactions were consummated on January 1994, the earliest
period presented. In addition, the following financial
statements do not reflect any anticipated cost savings, which may
be realized by United after consummation of the Merger.
The pro forma information does not purport to represent what
United's and First Clayton's combined results of operations
actually would have been if the Merger had occurred on January 1,
1994.
-13-
<PAGE>
UNITED COMMUNITY BANKS, INC.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1997
<TABLE>
<CAPTION>
Historical Historical
Pro Forma
United First Clayton
Adjustments Consolidated
---------- -------------
- ----------- ------------
<S> <C> <C>
<C> <C>
ASSETS
Cash and due from banks $ 27,562 2,486
- 30,048
Federal funds sold 17,170 1,300
- 18,470
------------- -----------
- ---------- ---------
Cash and cash equivalents 44,732 3,786
- 48,470
Investment securities 166,357 11,935
- 178,292
Mortgage loans held for sale 5,523 -
- 5,523
Loans 643,613 45,399
- 689,012
Less: Allowance for loan (8,156) (459)
- (8,615)
------------- -----------
- ---------- ---------
Loans, net 635,457 44,940
- 680,397
Premises and equipment 19,297 1,436
- 20,733
Other assets 20,150 1,176
- 21,326
------------- -----------
- ---------- ---------
$ 891,516 63,273
- 954,789
============= ===========
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 80,737 5,527
- 86,264
Interest-bearing 698,161 52,043
- 750,204
------------- -----------
- ---------- ---------
Total deposits 778,898 57,570
- 836,468
Borrowed funds 43,424 -
- 43,424
Long-term debt 10,170 -
- 10,170
Other liabilities 5,112 271
- - 5,383
------------- -----------
- ---------- ---------
Total liabilities 837,604 57,841
- - 895,445
Stockholders' equity:
Preferred stock - -
- - -
Common stock 6,439 428
(428) 7,085
646
Capital surplus 15,341 3,850
(3,850) 18,522
3,180
Retained earnings 32,634 1,658
34,292
Unrealized securities losses (502) (53)
- (555)
------------- -----------
- ---------- ---------
53,912 5,883
(451) 59,344
Less: Cost of 27,436 shares of treasury - (451)
451 -
stock ------------- -----------
- ---------- ---------
Total stockholders' equity 53,912 5,432
- 59,344
------------- -----------
- ---------- ---------
$ 891,516 63,273
- 954,789
============= ===========
========== =========
Outstanding common shares 6,438,848 400,391
7,084,919
Book value per common share 8.37 13.57
8.38
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-14-
<PAGE>
UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
Historical Historical
Pro Forma
United First Clayton
Adjustments Consolidated
---------- -------------
----------- ------------
<S> <C> <C>
<C> <C>
Interest income $ 18,449 1,362
- 19,811
Interest expense 9,495 665
- 10,160
---------- --------
-------- -------
Net interest income 8,954 697
- 9,651
---------- --------
-------- -------
Provision for loan losses 564 33
- 597
---------- --------
-------- -------
Net interest income after provision
for loan losses 8,390 664
- 9,054
---------- --------
-------- -------
Noninterest income 1,462 76
- 1,538
Noninterest expense 6,737 447
- 7,184
---------- --------
-------- -------
Earnings before income taxes 3,115 293
- 3,408
Income taxes 1,015 102
- 1,117
---------- --------
-------- -------
Net earnings $ 2,100 191
- 2,291
========== ========
======== =======
Earnings per common share 0.33 0.48
0.32
Weighted average shares outstanding 6,438,848 400,391
7,084,919
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-15-
<PAGE>
UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Historical Historical
Pro Forma
United First Clayton
Adjustment Consolidated
---------- -------------
---------- ------------
<S> <C> <C>
<C> <C>
Interest income $ 14,379 1,145
- 15,524
Interest expense 7,487 581
- 8,068
----------- ----------
-------- --------
Net interest income 6,892 564
- 7,456
----------- ----------
-------- --------
Provision for loan losses 279 25
- 304
----------- ----------
-------- --------
Net interest income after provision for loan 6,613 539
- 7,152
----------- ----------
-------- --------
Noninterest income 1,320 67
- 1,387
Noninterest expense 5,351 350
5,701
----------- ----------
-------- --------
Earnings before income taxes 2,582 256
- 2,838
Income taxes 909 82
- 991
----------- ----------
-------- --------
Net earnings $ 1,673 174
- 1,847
=========== ==========
======== ========
Earnings per common share 0.27 0.41
0.27
Weighted average shares outstanding 6,260,280 424,393
6,945,081
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-16-
<PAGE>
UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Historical Historical
Pro Forma
United First Clayton
Adjustments Consolidated
---------- -------------
----------- ------------
<S> <C> <C>
<C> <C>
Interest income 63,126 4,781
- 67,907
Interest expense 31,758 2,333
- 34,091
---------- --------
---------- ---------
Net interest income 31,368 2,448
- 33,816
---------- --------
----------- ---------
Provision for loan losses 1,411 186
- 1,597
---------- --------
----------- ---------
Net interest income after provision for 29,957 2,262
- 32,219
loan losses
Noninterest income 5,368 298
- 5,666
Noninterest expense 23,313 1,531
24,844
---------- --------
----------- ---------
Earnings before income taxes 12,012 1,029
- 13,041
Income taxes 3,811 303
- 4,114
---------- --------
----------- ---------
Net earnings $ 8,201 726
- 8,927
========== ========
=========== =========
Earnings per common share 1.31 1.78
1.29
Average shares outstanding 6,260,769 408,198
6,919,437
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-17-<PAGE>
UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Historical Historical
Pro Forma
United First Clayton
Adjustments Consolidated
---------- -------------
------------ ------------
<S> <C> <C>
<C> <C>
Interest income $ 49,127 4,082
- 53,209
Interest expense 26,208 1,986
- 28,194
------------ -----------
---------- ---------
Net interest income 22,919 2,096
- 25,015
------------ -----------
---------- ---------
Provision for loan losses 1,040 76
- 1,116
------------ -----------
---------- ---------
Net interest income after provision for 21,879 2,020
- 23,899
loan losses ------------ -----------
---------- ---------
Noninterest income 4,264 259
- 4,523
Noninterest expense 17,854 1,350
19,204
------------ -----------
---------- ---------
Earnings before income taxes 8,289 929
- 9,218
Income taxes 2,238 311
- 2,549
------------ -----------
---------- ---------
Net earnings $ 6,051 618
- 6,669
============ ===========
========== =========
Earnings per common share 1.04 1.46
1.03
Average shares outstanding 5,813,615 424,919
259,703 6,499,264
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-18-<PAGE>
UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
Historical Historical
Pro Forma
United First Clayton
Adjustments Consolidated
---------- -------------
------------ ------------
<S> <C> <C>
<C> <C>
Interest income $ 33,855 2,989
- 36,844
Interest expense 15,638 1,138
- 16,776
------------ -----------
---------- ---------
Net interest income 18,217 1,851
- 20,068
------------ -----------
---------- ---------
Provision for loan losses 935 63
- 998
------------ -----------
---------- ---------
Net interest income after provision for 17,282 1,788
- 19,070
loan losses ------------ ----------
---------- ---------
Noninterest income 3,762 200
- 3,962
Noninterest expense 13,902 1,223
15,125
------------ -----------
---------- ---------
Earnings before income taxes 7,142 765
- 7,907
Income taxes 1,942 264
- 2,206
------------ -----------
---------- ---------
Net earnings $ 5,200 501
- 5,701
============ ===========
========== =========
Earnings per common share 0.93 1.18
0.91
Average shares outstanding 5,589,365 424,919
6,275,014
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-19-<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) The unaudited pro forma consolidated balance sheet as of March
31, 1997 and consolidated statements of earnings for the three
months ended March 31, 1997 and 1996 and for the years ended
December 31, 1996, 1995 and 1994 have been prepared based on the
historical consolidated balance sheets and statements of
earnings, which give effect to the merger of United with First
Clayton accounted for as a pooling of interests, based on the
exchange of 1.6136 shares of United for each outstanding common
share of First Clayton.
(2) In the opinion of management of the respective companies
included above, all adjustments considered necessary for a fair
presentation of the financial position and results for the
period presented have been included. Adjustments, if any, are
normal and recurring in nature.
-20-<PAGE>
THE PROPOSED MERGER
BACKGROUND OF AND REASONS FOR THE MERGER
During the first quarter of 1997, the Chief Executive
Officer of United and the Chief Executive Officer of First
Clayton began to explore the possibility of combining First
Clayton with United. On April 17, 1997 at the regularly
scheduled quarterly meeting of the Board of Directors of United,
United's management presented to United's Board an analysis of
certain strategic options of United, one of which pertained to a
possible merger with First Clayton. After a discussion by
and among United's management and directors, United's Chief
Executive Officer was authorized to submit a preliminary proposal
to First Clayton.
On April 11, 1997, after the regularly scheduled Annual
Shareholder Meeting for First Clayton, the full board of First
Clayton reviewed publicly filed information pertaining to United
after which meeting the board issued an invitation for the Chief
Executive Officer of United to make a presentation to the full
board of First Clayton.
On April 29, 1997, at a called meeting of the board of
First Clayton, the Chief Executive Officer of United submitted a
proposal. This proposal, which generally outlined the terms of
the Merger, was discussed at length together with the benefits of
the Merger. Subsequent to his presentation, the Chief Executive
Officer of United was excused and the Board continued its
discussion of the Merger. The board of directors of First
Clayton authorized the Chairman of the Board and the Chief
Executive Officer and any other interested board member to meet
with the First Clayton's legal counsel to further discuss the
terms of the merger as well as the benefits.
On May 22, 1997, both parties executed a
Confidentiality Agreement as the final terms of the Merger were
being negotiated.
On June 9, 1997, the Board of United approved the
execution of the Acquisition Agreement, subject to satisfactory
completion of its due diligence examination of First Clayton. On
June 11, 1997, on site due diligence of First Clayton was
conducted by representatives of United. Similarly, off-site due
diligence of United was conducted by financial advisors of First
Clayton on June 20, 1997. Subsequently, both companies undertook
additional off-site due diligence and discussions with legal
counsel and financial advisors.
At a Board of Directors meeting held on June 12, 1997,
the Board of First Clayton considered a number of factors in
evaluating the Merger. Without assigning any relative or specific
weights to the factors, the Board of Directors of First Clayton
considered the following material factors:
(a) The alternatives to the Merger, including
remaining an independent institution in light of
the current economic condition of the market and
-21-
<PAGE>
the competitive disadvantages as compared to the
larger financial institutions operating in the
market;
(b) The value of the consideration to be received by
First Clayton shareholders relative to the book
value and earnings per share of First Clayton
Stock;
(c) Certain information concerning the financial
condition, results of operations and business
prospects of United;
(d) The financial terms of recent business
combinations in the financial services industry
and a comparison of the multiples of selected
combinations with the terms of the proposed
transaction with United;
(e) The marketability of First Clayton Stock;
(f) The competitive and regulatory environment for
financial institutions generally;
(g) The fact that the Merger will enable First Clayton
shareholders to exchange their shares of First
Clayton Stock, in a tax-free transaction, for
shares of common stock of a regional company; and
(h) United's ability to provide comprehensive
financial services through First Clayton Bank to
the Rabun County market.
On June 12, 1997, the parties executed the Acquisition
Agreement and on June 23, 1997 after completion of due diligence
and the delivery of the disclosure memorandum by both parties, a
joint press release announcing the execution of the Acquisition
Agreement was issued. On July 24, 1997, the parties amended the
Acquisition Agreement to provide that certain options that were to
be granted by First Clayton to the President and an Executive Vice
President of First Clayton prior to the Merger would be granted by
United after the Merger.
The Board of Directors of First Clayton believes the
Merger is in the best interest of its shareholders because the
Merger will permit them to exchange their ownership interest in
First Clayton for an equity interest in United, which has greater
financial resources than First Clayton. The Board of Directors
of First Clayton also believes that the terms of the Merger,
including the basis of exchange, 1.6136 shares of United Stock
for each share of First Clayton Stock, which was determined
through arms-length negotiations between United and the Board of
Directors of First Clayton, are fair and equitable and take into
account the relative earning power of United and First Clayton,
historic and anticipated operations, the economies of scale to be
achieved through the Merger, the trading prices of the stocks of
the respective companies and other pertinent factors. The
exchange ratio of 1.6136 shares of United Stock for each share of
First Clayton Stock represents a multiple of 2.616 times First
-22-
<PAGE>
Clayton's book value as of March 31, 1997 and 19.19 times
trailing twelve months earning per share if United Stock is
valued at $22 a share.
The Board of Directors of First Clayton believes that
the size of the combined organization, approximately
$1,053,000,000 in assets as of June 30, 1997, is sufficiently
large to take advantage over time of significant economies of
scale, but is still small enough to maintain the competitive
advantages management believes are afforded community-oriented
banks over the larger regional and super-regional banks. It has
become increasingly apparent to the management of First Clayton
that in the current regulatory and competitive environment,
larger organizations with their greater economies of scale,
including their ability to spread largely fixed regulatory
compliance costs over a larger gross income base and their
ability to attract management talent who are able to compete in a
more sophisticated financial-services environment, will be more
successful than smaller organizations such as First Clayton
separately. Management of United and First Clayton believe that
there is a future for community banks in the banking industry,
but that community banks will be required to achieve a critical
size to maintain above-average economic performance.
THE AGREEMENT AND PLAN OF REORGANIZATION AND THE AGREEMENT AND
PLAN OF MERGER
The material features of the Acquisition Agreement and
the Merger Agreement are summarized below. This summary does not
purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to,
the Acquisition Agreement which is incorporated herein and the
Merger Agreement which is attached as Appendix A hereto.
EFFECTIVE DATE. The Merger Agreement provides that the
Merger will be effective on the first business day following the
receipt of all required approvals from any governmental
authorities and following the expiration of any waiting period
required by law or at such other time as the parties may mutually
agree. The Merger is subject to approval by the Federal Reserve
and the DBF. See "THE PROPOSED MERGER -- Regulatory Approvals."
It is anticipated that the Merger will become effective prior to
September 30, 1997.
TERMS OF THE MERGER. On the Effective Date, each
outstanding share of First Clayton Stock first will be converted
into and exchanged for 1.6136 shares of United Stock. If, prior
to the Effective Date, the outstanding shares of the United Stock
are increased by means of any stock dividend, stock split,
subdivision, recapitalization or reclassification of shares, or
are combined into a lesser number of shares by reclassification,
recapitalization or reduction of capital, the number of shares of
United Stock to be delivered pursuant to the Merger in exchange
for a share of First Clayton Stock will be proportionately
adjusted.
No scrip or fractional share certificate of United
Stock will be issued in connection with the Merger, and an
outstanding fractional share interest will not entitle the owner
thereof to vote, to receive dividends or to any rights of a
shareholder of United with respect to such fractional interest.
-23-
<PAGE>
In lieu of the issuance of any fractional shares of United Stock,
United will pay in cash an amount (computed to the nearest cent)
equal to such fraction multiplied by $22.00 per share.
If the Merger is consummated, shareholders of First
Clayton will become shareholders of United, and First Clayton
will be merged with and into United. The Articles of
Incorporation, Bylaws, corporate identity and existence of United
will not be changed as a result of the Merger, but First Clayton
will cease to exist as a separate entity following the Merger.
TERMINATION AND CONDITIONS OF CLOSING. The Merger
Agreement and the Acquisition Agreement may be terminated and the
Merger abandoned at any time either before or after approval of
the Merger Agreement by the shareholders of First Clayton, but
not later than the Effective Date:
(i) by United, if there is any material adverse change
in the financial condition or business of First Clayton
which change would reasonably be expected to have a material
adverse effect on the market price of First Clayton Stock,
or if First Clayton suffers a material loss or damage to any
of its properties or assets, which change, loss or damage
materially affects or impairs the ability of First Clayton
to conduct its business; or by First Clayton, if there is
any material adverse change in the financial condition or
business of United which change would reasonably be expected
to have a material adverse effect on the market price of
United Stock, or if United suffers a material loss or damage
to any of its properties or assets, which change, loss or
damage materially affects or impairs United's ability to
conduct its business;
(ii) by United, if the terms, covenants or conditions
of the Acquisition Agreement are not complied with or
performed by First Clayton at or before the closing of the
transactions contemplated therein and such noncompliance or
nonperformance is not waived by United; or by First Clayton,
if the terms, covenants and conditions of the Acquisition
Agreement are not complied with or performed by United at or
before the closing of the transactions contemplated therein
and such noncompliance or nonperformance is not waived by
First Clayton;
(iii) by United, if it learns of any fact or
condition not disclosed in the Acquisition Agreement, or the
documents delivered in connection therewith, which was
required to be disclosed by First Clayton pursuant to the
provisions of the Acquisition Agreement at or prior to the
date of execution thereof with respect to the business,
properties, assets or earnings of First Clayton, which
materially and adversely affects such business, properties,
assets or earnings or the ownership, value or continuance
thereof; or by First Clayton, if it learns of any fact or
condition not disclosed in the Acquisition Agreement, or the
documents delivered in connection therewith, which was
required to be disclosed by United pursuant to the
provisions of the Acquisition Agreement at or prior to the
date of execution thereof with respect to the business,
-24-
<PAGE>
properties, assets or earnings of United, which materially
and adversely affects such business, properties, assets or
earnings or the ownership, value or continuance thereof;
(iv) by First Clayton or United, if any action, suit or
proceeding is instituted or threatened against any party to
restrain or prohibit, or to obtain substantial damages in
respect of, the Acquisition Agreement, or the consummation
of the transactions contemplated therein, which, in the good
faith opinion of First Clayton or United, makes consummation
of the transactions contemplated therein inadvisable;
(v) by any party, if the date of Closing of the Merger
does not occur on or before November 30, 1997;
(vi) by United, if the holders of more than 15,000 of
the outstanding shares of First Clayton Stock elect to
exercise their statutory right to dissent from the Merger
and demand payment in cash;
(vii) by either party, if the Merger Agreement is
not approved by the vote of the holders of First Clayton
Stock as required by applicable law;
(viii) by United, if it learns of any potential
liability of First Clayton arising from non-compliance with
any federal, state or local environmental law by First
Clayton, or any potential liability of First Clayton arising
from any environmental condition of the properties or assets
of First Clayton, including any properties or assets in
which First Clayton holds a security interest; and
(ix) by First Clayton, if it learns of any potential
liability of United arising from non-compliance with any
federal, state or local environmental law by United, or any
potential liability of United arising from any environmental
condition of the properties or assets of United, including
any properties or assets in which United holds a security
interest.
Among the required conditions of closing are:
(i) the accuracy and veracity, in all material
respects, of the representations and warranties of all
parties contained in the Acquisition Agreement or in any
certificate, schedule or other document delivered in
connection therewith as of the date when made and the
Effective Date;
(ii) the performance of all agreements and conditions
required by the Acquisition Agreement;
(iii) the delivery of certain officers
certificates, resolutions and legal opinions to First
Clayton and United.
(iv) approval of the Merger by the vote of the holders
of a majority of the First Clayton Stock entitled to vote at
the Special Meeting;
-25-
<PAGE>
(v) the obtaining from any and all governmental
authorities, bodies or agencies having jurisdiction over the
transactions contemplated in the Acquisition Agreement and
the Merger Agreement, including, but not limited to the
Federal Reserve (or its lawful delegate) and the DBF, such
consents, authorizations and approvals as are necessary for
the consummation thereof and all applicable waiting or
similar periods required by law shall have expired;
(vi) the declaration by the Securities and Exchange
Commission of the effectiveness of the Registration
Statement of United, of which this Proxy Statement is a
part, and the absence of any stop order entered with respect
thereto;
(vii) the receipt by First Clayton of the tax
opinion of Kilpatrick Stockton LLP as described in the
Acquisition Agreement; and
(viii) the issuance of a certificate of merger by
the Secretary of State of Georgia with respect to the Merger
in accordance with the provisions of Georgia law.
SURRENDER OF CERTIFICATES. As soon as practicable
after the Effective Date, each holder as of the Effective Date of
any shares of First Clayton Stock will, upon presentation and
surrender of the certificates representing such shares to
United's transfer agent, SunTrust Bank, Atlanta, be entitled to
receive in exchange therefor a certificate or certificates
representing the number of whole shares of United Stock to which
such holder shall be entitled based upon the above-described
basis of exchange, together with the amount of cash payable in
lieu of a fractional interest in United Stock. Until so
surrendered, the certificates representing shares of First
Clayton Stock will be deemed to represent the number of shares of
United Stock into which the same shall have been converted. A
SHAREHOLDER OF FIRST CLAYTON WHO IS ENTITLED TO RECEIVE UNITED
STOCK IN EXCHANGE FOR HIS FIRST CLAYTON STOCK WILL NOT BE
ENTITLED TO RECEIVE PAYMENT OF ANY DIVIDENDS OR OTHER
DISTRIBUTIONS ON SHARES OF UNITED STOCK INTO WHICH HIS SHARES OF
FIRST CLAYTON STOCK HAVE BEEN CONVERTED OR TO RECEIVE ANY NOTICES
SENT BY UNITED TO ITS SHAREHOLDERS WITH RESPECT TO, OR TO VOTE,
SUCH SHARES, UNTIL THE CERTIFICATES REPRESENTING HIS SHARES OF
FIRST CLAYTON STOCK HAVE BEEN SURRENDERED TO UNITED. Upon
surrender of any certificate which prior to the Merger
represented shares of First Clayton Stock, the holder thereof
shall be entitled to receive any dividends or other distributions
(without interest) which shall have become payable after the
Merger but prior to the surrender of such shares and which shall
not have been paid with respect to the number of shares of United
Stock represented by the certificate issued upon such surrender.
-26-
<PAGE>
SHAREHOLDER APPROVAL
The affirmative vote of the holders of at least a
majority of the outstanding shares of First Clayton Stock
entitled to vote at the Special Meeting is required for approval
of the Merger. Abstentions from voting and broker non-votes will
be included in determining whether a quorum is present and will
have the effect of a vote against the Merger Agreement.
On August 5, 1997, the record date for the
determination of shareholders entitled to notice of, and to vote
at, the Special Meeting, the outstanding voting securities of
First Clayton consisted of 400,691 shares of First Clayton Stock
with registered holders thereof being entitled to one vote per
share. Certain executive officers and members of the First
Clayton's Board of Directors, who have entered into agreements
with United to vote their shares of First Clayton Stock in favor
of the Merger, own or control 135,772 shares or the approximately
34% of the outstanding shares of First Clayton.
CONDUCT OF BUSINESS OF FIRST CLAYTON PENDING CLOSING
The Acquisition Agreement provides that, pending
consummation of the Merger, First Clayton, except with the
written consent of United, will:
(i) conduct its business only in the ordinary course,
without the creation of any indebtedness for borrowed money
(other than deposit and similar accounts and customary
credit arrangements between banks in the ordinary course of
business);
(ii) maintain its properties and assets in good
operating condition, ordinary wear and tear excepted;
(iii) maintain and keep in full force and effect
all of its current insurance policies or other insurance
policies equivalent thereto in all material respects;
(iv) not make any change in the authorized or issued
capital stock or other securities of First Clayton, and
First Clayton will not issue or grant any right or option to
purchase or otherwise acquire any of the capital stock or
other securities of First Clayton;
(v) not declare or make any dividend, distribution or
payment in respect to the capital stock of First Clayton, and
First Clayton will not, directly or indirectly, redeem, purchase
or otherwise acquire any of its capital stock;
(vi) not amend its Articles of Incorporation or Bylaws,
and will maintain its corporate existence and powers;
(vii) not acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation,
partnership, association or other entity or division thereof
or otherwise acquire or agree to acquire any assets which
-27-
<PAGE>
are material, individually or in the aggregate, to it;
(viii) not sell, mortgage, lease, buy or otherwise
acquire, transfer or dispose of any real property or
interest therein (except for sales in the ordinary course of
business) and will not, except in the ordinary course of
business, sell or transfer, mortgage, pledge or subject to
any lien, charge or other encumbrance any other tangible or
intangible asset;
(ix) not change any of its banking arrangements;
(x) not enter into any new material contracts;
(xi) maintain its books and records in the usual,
regular and ordinary course; and
(xii) advise United of any material adverse change
in First Clayton's business.
INTEREST OF MANAGEMENT IN THE TRANSACTION; CONDUCT OF BUSINESS
AFTER THE MERGER
Except as set forth below, no director or officer of
First Clayton, or any of their associates has any direct or
indirect material interest in the Merger, except that such
persons may own shares of First Clayton Stock which will be
converted in the Merger into United Stock. The directors of
United currently anticipate that after the Merger, one director
of First Clayton will be elected to serve on United's Board of
Directors. It is not anticipated that the Merger will result in
any material change in compensation to employees of First
Clayton. After the consummation of the Merger, each of J. Mark
Smith, President of First Clayton, and Rodney Hickox, Executive
Vice President of First Clayton, will be granted an option to
purchase 12,102 shares of United Stock at the market price on the
date of grant. Each option will expire on the earlier of the
tenth anniversary of the date of grant or three months following
the date the optionee terminates employment unless the optionee
dies while employed, in which case the option will continue for
the original term and may be exercised to the extent exerciseable
by the optionee's estate. The options will be exercisable immediately
and may be exercised for cash, certified check or by cashless exercise.
Messrs. Smith and Hickox have also entered into deferred compensation
agreements with First Clayton which provide that they will each receive
deferred compensation in the amount of $108,750. These agreements
are the unfunded obligations of First Clayton which will be assumed by
United in the Merger. The payment for this obligation will be made in
cash in a lump sum after the earliest to occur of the following
events: (1) passage of ten years; (2) termination of employment
other than for "Cause;" and (3) a change in control (other than a
change in control of First Clayton). "Cause" for the purposes of
this obligation means (1) conviction of the employee of a felony
or (2) conduct of the employee that results in the removal from
his position as employee of First Clayton pursuant to a written
order of any regulatory agency with authority or jurisdiction
over First Clayton or United or its subsidiaries. In addition,
the Acquisition Agreement provides an explicit agreement by
United to continue employee benefits for First Clayton employees
that are substantially similar to those United currently provides
to its employees and that United will indemnify each person
-28-
<PAGE>
entitled to indemnification by First Clayton or First Clayton
Bank for liabilities arising from acts or omissions arising prior
to the effective date of the Merger.
EFFECT OF THE MERGER ON FIRST CLAYTON SHAREHOLDERS AND COMPARISON
OF THE SECURITIES OF FIRST CLAYTON AND UNITED
At the Effective Time, holders of First Clayton Stock
(other than dissenting shareholders) will become shareholders of
United. The following is a summary of material differences
between the rights of holders of United Stock and holders of
First Clayton Stock. Since United and First Clayton are both
organized under the laws of Georgia, any such differences arise
from differing provisions of the corporations' respective
articles of incorporation and bylaws.
The following summary does not purport to be a complete
statement of the provisions affecting, and differences between,
the rights of holders of United Stock and those of holders of
First Clayton Stock. This summary is qualified in its entirety
by reference to the governing corporate instruments of United and
First Clayton, to which the shareholders of First Clayton are
referred.
DIRECTORS
UNITED. The United Bylaws, as amended, provide for a
board of directors consisting of eleven (11) members. Under the
United Bylaws, United directors may be removed with or without
cause by the vote of a majority of the outstanding shares of the
corporation.
FIRST CLAYTON. The First Clayton Bylaws provide for a
board of directors consisting of nine (9) members. The First
Clayton Articles provide for the board to be divided into three
classes serving staggered terms as long as the board consists of
nine or more members. Under the First Clayton Articles, a
director may be removed without cause only by the vote of the
holders of not less than sixty-six and two-thirds percent (66
2/3%) of the outstanding common stock of the corporation.
NOTICE OF SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
UNITED. The United Articles and the United Bylaws
provide no limitations or procedures relating to shareholders
nominations for directors or shareholder proposals.
FIRST CLAYTON. The First Clayton Articles provide that
any shareholder entitled to vote for the election of directors
may make nominations for the election of directors only by giving
written notice to the secretary of the corporation at least 30
days but not more than 60 days prior to the annual meeting at
which directors are to be elected.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
United. Neither the United Articles nor the United
Bylaws provide for procedures relating to mergers, share
exchanges or sales of assets. In general, the Georgia Business
-29-
<PAGE>
Corporation Code requires that any merger, share exchange or
transfer of substantially all the assets other than in the
ordinary course of business of a Georgia corporation be approved
by a majority of the votes entitled to be cast within each voting
group entitled to vote on the proposed transaction.
FIRST CLAYTON. The First Clayton Articles provide that
the vote of the holders of not less than sixty-six and two-thirds
percent (66 2/3%) of the outstanding common stock of First
Clayton is required to approve (i) the merger or consolidation
with any other corporation, partnership, trust, estate or
association if such other corporation and its affiliates in the
aggregate are directly or indirectly the beneficial owners of
more than five percent (5%) of the outstanding shares of common
stock of First Clayton (a "Related Entity"), (ii) the sale or
exchange by First Clayton of all or a substantial part of its
assets to or with such Related Entity, (iii) the issuance or
delivery by First Clayton of any stock or other securities issued
by it in exchange or payment for any properties or assets of such
Related Entity or securities issued by such Related Entity, or
any merger of any affiliate of First Clayton with or into such
Related Entity or any of its affiliates, or (iv) the dissolution
of First Clayton. The above voting requirement shall not apply
to any transaction which was approved by the affirmative vote of
not less than sixty-six and two-thirds percent (66 2/3%) of the
directors.
AMENDMENTS TO ARTICLES OF INCORPORATION AND BYLAWS
UNITED. In general, the Georgia Business Corporation
Code provides that the bylaws or articles of a Georgia
corporation may be amended by a majority of the votes entitled to
be cast within each voting group entitled to vote.
FIRST CLAYTON. The First Clayton Articles provide that
the affirmative vote of not less than sixty-six and two-thirds
percent (66 2/3%) of the shareholders shall be required to amend
the portions of such articles relating to classification and
staggered terms of the board, removal of directors, shareholder
notice of nomination of directors, or any requirement for a
supermajority vote on such amendment, unless such proposed
amendment is approved by eighty percent (80%) of the directors.
ACCOUNTING TREATMENT
United will account for the Merger as a "pooling of
interests" transaction in accordance with generally accepted
accounting principles. Under this accounting method, holders of
First Clayton Stock will be deemed to have combined their
existing voting common stock interests with the holders of United
Stock by exchanging their shares for shares of United Stock, and
as a result, the assets and liabilities of First Clayton will be
added to those of United at their recorded book value and the
-30-
<PAGE>
stockholders' equity accounts of First Clayton and United would
be combined on United's consolidated balance sheet. The
unaudited pro forma financial information contained in this proxy
statement prospectus has been prepared using the pooling of
interests accounting method to account for the Merger. See "Pro
Forma Consolidated Financial Information".
RESALES OF UNITED STOCK
Although the United Stock to be issued upon
consummation of the Merger has been registered under the
Securities Act, the directors, officers and shareholders of First
Clayton who are deemed to be affiliates of First Clayton may not
resell the United Stock received by them unless such sales are
made pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144 promulgated under the
Securities Act or another exemption from registration under such
Act. Rule 144 limits the amount of United Stock or other equity
securities of United that such persons may sell during any three
month period and requires that there be available certain current
public information with respect to United and that the United
Stock be sold in a broker's transaction or directly to a market
maker in the United Stock. Because the United Stock is not
publicly traded and is not listed on a stock exchange or quoted
in the over-the-counter market, affiliates will not be able to
sell the United Stock pursuant to Rule 144.
REGULATORY APPROVALS
The Merger is subject to the approval of the Federal
Reserve and the DBF. The Federal Reserve and the DBF consider
the effect on the financial and managerial resources and future
prospects of the companies and banks concerned and the
convenience and needs of the communities served.
RIGHTS OF DISSENTING SHAREHOLDERS
Any shareholder of record of First Clayton Stock who
objects to the Merger and who fully complies with Section 14-2-
1301 et seq. of the Georgia Business Corporation Code will be
entitled to demand and receive payment in cash of an amount equal
to the fair value of all, but not less than all, of his or her
shares of First Clayton Stock if the Merger is consummated. A
shareholder of record may assert dissenters' rights as to fewer
than the shares registered in such shareholder's name only if he
or she dissents with respect to all shares beneficially owned by
any one beneficial owner and notifies First Clayton in writing of
the name and address of each person on whose behalf he asserts
dissenters' rights. For the purpose of determining the amount to
be received in connection with the exercise of statutory
dissenters' rights under the Georgia Business Corporation Code,
the fair value of a dissenting shareholder's First Clayton Stock
equals the value of the shares immediately before the Effective
Date of the Merger, excluding any appreciation or depreciation in
anticipation of the Merger.
Any First Clayton shareholder desiring to receive
payment of the fair value of his or her First Clayton Stock in
accordance with the requirements of the Georgia Business
-31-
<PAGE>
Corporation Code: (a) must deliver to First Clayton prior to the
time the shareholder vote on the Merger Agreement is taken, a
written notice of his or her intent to demand payment for his
shares if such Merger is consummated; (b) must not vote his or
her shares in favor of the Merger Agreement; and (c) must demand
payment and deposit stock certificates representing First Clayton
Stock in accordance with the terms of a notice which will be sent
to the shareholder by First Clayton no later than 10 days after
such Merger Agreement is consummated. A filing of the written
notice of intent to dissent with respect to either Merger
Agreement should be sent to: Ronald E. Vandiver, Secretary,
First Clayton Bancshares, Inc., P. O. Box 1250, Clayton, Georgia
30525-9723. A VOTE AGAINST THE MERGER AGREEMENT ALONE WILL NOT
SATISFY THE REQUIREMENTS FOR THE SEPARATE WRITTEN NOTICE OF
INTENT TO DISSENT TO THE MERGER, THE SEPARATE WRITTEN DEMAND FOR
PAYMENT OF THE FAIR VALUE OF SHARES OF FIRST CLAYTON STOCK AND
THE DEPOSIT OF THE STOCK CERTIFICATES, WHICH ARE REFERRED TO IN
CONDITIONS (A) AND (C) ABOVE. RATHER, A DISSENTING SHAREHOLDER
MUST SEPARATELY COMPLY WITH ALL OF THOSE CONDITIONS.
Within 10 days of the later of the Effective Date or
receipt of a payment demand by a shareholder who deposits his or
her stock certificates in accordance with the First Clayton's
dissenters' notice sent to those shareholders who notified First
Clayton of their intent to dissent, described in (c) above, First
Clayton must offer to pay to each dissenting shareholder the
amount First Clayton estimates to be the fair value of the
dissenting shareholder's shares, plus accrued interest. Such
notice and offer must be accompanied by: (a) First Clayton's
balance sheet as of the end of a fiscal year ending not more than
16 months before the date of making an offer, an income statement
for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements,
if any; (b) an explanation of how the interest was calculated;
(c) a statement of the dissenting shareholder's right to demand
payment of a different amount under Section 14-2-1327 of the
Georgia Business Corporation Code; and (d) a copy of the
dissenters' rights provisions of the Georgia Business Corporation
Code.
If the dissenting shareholder accepts First Clayton's
offer, by written notice to such entity, within 30 days after
First Clayton's offer or is deemed to have accepted the offer by
reason of failing to respond to such offer, First Clayton must
make payment for his or her shares within 60 days after the
making of the offer or the Effective Date, whichever is later.
Upon payment of the agreed value, the dissenting shareholder will
cease to have any interest in his shares of First Clayton Stock.
If within 30 days after First Clayton offers payment
for the shares of a dissenting shareholder, the dissenting
shareholder does not accept the estimate of fair value of his or
her shares and interest due thereon and demands payment of his or
her own estimate of the fair value of the shares and interest due
thereon, then First Clayton, within 60 days after receiving the
payment demand of a different amount from a dissenting
shareholder, must file an action in a court of competent
jurisdiction in Rabun County, Georgia, requesting that the fair
value of such shares be found and determined. First Clayton must
-32-
<PAGE>
make all dissenting shareholders whose demands remain unsettled
parties to the proceeding. If First Clayton does not commence
the proceeding within such 60-day period, it shall be required to
pay each dissenting shareholder whose demand remains unsettled
the amount demanded by the dissenting shareholder.
The foregoing does not purport to be a complete
statement of the provisions of the Georgia Business Corporation
Code relating to statutory dissenters' rights and is qualified in
its entirety by reference to the Dissenters' Rights provisions of
the Georgia Business Corporation Code, which are reproduced in
full in Appendix B to this Proxy Statement and which are
incorporated herein by reference.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND OPINION
OF TAX COUNSEL
First Clayton has received an opinion from Kilpatrick
Stockton LLP, Atlanta, Georgia (the "Tax Opinion") to the effect
that, assuming the Merger is consummated in accordance with the
terms of the Acquisition Agreement and the Merger Agreement:
(a) The merger of First Clayton into United and
the issuance of shares of United Stock in connection
therewith, as described herein and in the Merger
Agreement, will constitute a tax-free reorganization
under Section 368(c)(1)(A) of the Internal Revenue Code
of 1986 (the "Code"), as amended.
(b) No gain or loss will be recognized by holders
of First Clayton Stock upon the exchange of such stock
for United Stock as a result of the Merger.
(c) Gain or loss will be recognized pursuant to
Section 302 of the Code by holders of First Clayton
Stock upon their receipt of cash in lieu of fractional
shares of United Stock and upon their exercise of
dissenter's rights.
(d) No gain or loss will be recognized by First
Clayton as a result of the Merger.
(e) The aggregate tax basis of the United Stock
received by shareholders of First Clayton pursuant to
the Merger will be the same as the tax basis of the
shares of First Clayton Stock exchanged therefor
decreased by any portion of each tax basis allocated to
fractional shares of United Stock that are treated as
redeemed by United.
(f) The holding period of the shares of United
Stock received by the shareholders of First Clayton
will include the holding period of the shares of First
Clayton Stock exchanged therefor, provided that the
First Clayton Stock is held as a capital asset on the
date of the consummation of the Merger.
No ruling will be requested from the Internal Revenue
Service with respect to any Federal income tax consequences of
the Merger.
-33-<PAGE>
The Tax Opinion and the preceding discussion relate to
the material federal income tax consequences of the Merger to
First Clayton Shareholders. The First Clayton shareholders are
advised to consult their own tax advisors as to any state, local
or other tax consequences of the Merger.
INFORMATION ABOUT FIRST CLAYTON BANCSHARES, INC.
DESCRIPTION OF BUSINESS
First Clayton is a one-bank holding company which
engages through its subsidiary, First Clayton Bank, in providing
banking services to customers of First Clayton Bank from its main
office in Clayton, Georgia. The Company's executive office is
located at U.S. 441, Village Center, Clayton, Georgia 30525, and
its telephone number is (706) 782-7100.
First Clayton was incorporated on February 3, 1989 as a
Georgia business corporation. On February 2, 1990, First Clayton
purchased all of the shares of common stock of First Clayton Bank
which was organized as a Georgia banking corporation in 1990.
First Clayton's primary business is to manage the business and
affairs of its bank subsidiary. First Clayton's subsidiary bank
provides a full range of banking services to its customers,
except for trust services. Additional information about First
Clayton is included in the Form 10-KSB for the year ended
December 31, 1996 and the Form 10-QSB for the quarter ended March
31, 1997, that are contained in the separately bound document
which accompanies this Proxy Statement/Prospectus.
-34-<PAGE>
INFORMATION ABOUT UNITED COMMUNITY BANKS, INC.
DESCRIPTION OF BUSINESS
GENERAL. United was incorporated under the laws of
Georgia in 1987 and commenced operations in 1988 by acquiring
100% of the outstanding shares of UCB. United is a registered
bank holding company. All of United's activities are currently
conducted by its wholly-owned subsidiaries, UCB, which was
organized as a Georgia banking corporation in 1950, Carolina,
which United acquired in 1990, Peoples, which United acquired in
1992, Towns, which United also acquired in 1992 and White, which
United acquired in 1995. Additional information with respect to
United is included in its 1997 Proxy Statement (which includes
its 1996 Annual Report to Shareholders) and Form 10-Q quarterly
report for the period ended March 31, 1997, which are contained
in the separately bound document which accompanies these proxy
materials.
RECENT DEVELOPMENTS
PUBLIC STOCK OFFERINGS. In May 1997, United completed
an offering to the public of 300,000 shares of United Common
Stock registered under the Securities Act pursuant to which
$6,476,000 in additional capital was raised. The additional
capital was invested in UCB and Carolina. In August 1995 United
completed an offering to the public of 215,515 shares of United
Stock registered under the Securities Act pursuant to which
$2,434,000 in additional capital was raised. United used the
proceeds of the offering primarily to invest additional capital
in Carolina and Towns. The additional capital for Towns was used
to support the asset growth experienced by Towns. The additional
capital for Carolina was necessitated by Carolina's asset growth
and the acquisition of the Franklin and Waynesville branch
banking offices.
PRIVATE PLACEMENT OF $3,500,000 CONVERTIBLE
SUBORDINATED PAYABLE-IN-KIND DEBENTURES DUE DECEMBER 31, 2006.
On December 31, 1996, United completed a private placement of
convertible subordinated payable-in-kind debentures due December
31, 2006 (the "2006 Debentures"). The 2006 Debentures bear
interest at the rate of one quarter of one percentage point over
the prime rate per annum as quoted in The Wall Street Journal,
payable on April 1, July 1, October 1, and January 1 of each year
commencing on April 1, 1997, to holders of record at the close of
business on the 15th day of the month immediately preceding the
interest payment date. For additional information on the 2006
Debentures, see "Description of Securities of United."
BRANCHING TO NEW MARKETS. Effective July 1, 1996, the
Georgia bank branching laws were amended to permit subsidiary
banks of Georgia bank holding companies to branch in an aggregate
of three additional counties prior to July 1, 1998, after which
time statewide branching would be permitted. On July 1, 1996,
UCB changed its name from Union County Bank to United Community
Bank and established a branch office in Dahlonega, Lumpkin
County, Georgia. UCB simultaneously filed a tradename filing to
permit it to conduct its operations in Union County, Georgia
under the tradename Union County Bank. On September 28, 1996,
-35-
<PAGE>
UCB assumed deposits of $23.7 million and purchased assets of
$33.2 million in Cornelia, Habersham County, Georgia, from a
banking institution which sold all of its operations in the
county. In Habersham County, UCB operates under the trade name
of First Bank of Habersham, and in Lumpkin County, UCB does
business as United Community Bank. In July 1996, Carolina opened
a loan production office in Sylva, North Carolina, and in June
1997 Carolina opened a branch in Bryson City, North Carolina.
DESCRIPTION OF SECURITIES OF UNITED
The following is a summary of certain provisions of the
United Stock, Preferred Stock and the 2006 Debentures.
GENERAL. The authorized capital stock of United
consists of 10,000,000 shares of common stock, $1.00 par value
per share, and 10,000,000 shares of preferred stock, $1.00 par
value per share. As of June 30, 1997, 6,956,748 shares,
including 140,000 shares deemed outstanding pursuant to the 2006
Debentures and presently exercisable options to acquire 77,900
shares of United's common stock, were issued and outstanding and
no shares of preferred stock were issued and outstanding. At the
same date, 2006 Debentures in the principal amount of $3,500,000
were outstanding.
PREFERRED STOCK. United is authorized to issue
10,000,000 shares of preferred stock, issuable in such series and
bearing such voting, dividend, conversion, liquidation
and other rights and preferences as the Board of Directors of
United may determine. The preferred stock could be issued for
any lawful corporate purpose without further action by the
shareholders. The issuance of any preferred stock having
conversion rights might have the effect of diluting the interests
of the other shareholders. Shares of preferred stock could be
issued with such rights, privileges and preferences as would
deter a further tender or exchange offer or to discourage the
acquisition of control of the Company. The Board of Directors
presently has no plans to issue any preferred stock.
COMMON STOCK. All voting rights are vested in the
holders of the common stock. Each holder of common stock is
entitled to one vote per share on any issue requiring a vote at
any meeting. The shares do not have cumulative voting rights in
the election of directors. All shares of United Stock are
entitled to share equally in such dividends as the Board of
Directors of United may declare on United's common stock from
sources legally available therefor. The determination and
declaration of dividends is within the discretion of the Board of
Directors of United. United's common stock will be entitled to
receive on a pro rata basis, after payment or provision for
payment of all debts and liabilities of United, all assets of
United available for distribution, in cash or in kind.
The outstanding shares of United Stock are, and the
shares of United Stock to be issued by United in connection with
the Merger will be, duly authorized, validly issued, fully paid
and nonassessable.
-36-
<PAGE>
DEBENTURES. Debentures in the principal amount of
$3,500,000 which are due on December 31, 2006 are outstanding as
of the date hereof (the "2006 Debentures"). The 2006 Debentures
bear interest at the rate of one quarter of one percentage point
over the prime rate per annum as quoted in The Wall Street
Journal, payable on April 1, July 1, October 1, and January 1 of
each year commencing on April 1, 1997, to holders of record at
the close of business on the 15th day of the month immediately
preceding the interest payment date. Interest is computed on the
basis of the actual number of days elapsed in a year of 365 or
366 days, as applicable. Interest on the 2006 Debentures is
payable, at the option of the Board of Directors of United, in
cash or in an additional debenture with the same terms as the
2006 Debentures.
The 2006 Debentures may be redeemed, in whole or in
part from time to time on or after January 1, 1998, at the option
of United upon at least 20 days and not more than 60 days notice,
at a redemption price equal to 100% of the principal amount of
the Debentures to be redeemed plus interest accrued and unpaid as
of the date of redemption.
The holder of any 2006 Debentures not called for
redemption will have the right, exercisable at any time up to
December 31, 2006, to convert such Debenture at the principal
amount thereof into shares of United Stock of United at the
conversion price of $25 per share, subject to adjustment for
stock splits and stock dividends.
The 2006 Debentures are unsecured obligations of United
and are subordinate in right of payment to all obligations of
United to its other creditors, except obligations ranking on a
parity with or junior to such debentures. The 2006 Debentures
were not issued pursuant to an indenture nor is there a trustee
to act on behalf of debentureholders.
TRANSFER AGENT AND REGISTRAR. The Transfer Agent and
Registrar for United's common stock and the 2006 Debentures is
SunTrust Bank, Atlanta, 58 Edgewood Avenue, Room 2000, Atlanta,
Georgia 30303.
-37-
<PAGE>
LEGAL OPINIONS
The legality of the common stock to be issued in
connection with the Merger will be passed on by Kilpatrick
Stockton LLP, Suite 2800, 1100 Peachtree Street, Atlanta, Georgia
30309-4530, counsel to United. Certain income tax consequences
of the Merger will be passed upon by Kilpatrick Stockton LLP As
of the date of this Proxy Statement/Prospectus, certain members
of Kilpatrick Stockton LLP own an aggregate of 2,000 shares of
United Stock.
EXPERTS
The audited consolidated financial statements of United
and its subsidiaries included or incorporated by reference in
this Proxy Statement/Prospectus and elsewhere in the registration
statement have been audited by Porter Keadle Moore LLP,
independent certified public accountants, as indicated in their
reports with respect thereto, and are included herein upon the
authority of said firm as experts in giving said reports.
The audited consolidated financial statements of First
Clayton included or incorporated by reference in this Proxy
Statement/Prospectus and elsewhere in the registration statement
have been audited by Mauldin & Jenkins, LLC independent certified
public accountants, as indicated in their reports with respect
thereto, and are included herein upon the authority of said firm
as experts in giving said reports.
OTHER MATTERS
Management of First Clayton knows of no other matters
which may be brought before the Special Meeting. If any matter
other than the proposed Merger or matters incident thereto should
properly come before such Special Meeting, however, the persons
named in the enclosed proxies will vote such proxy in accordance
with their judgment on such matters.
Clayton, Georgia By Order of the Board of Directors,
August 6, 1997 Ronald E. Vandiver
Secretary
-38-<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is
made and entered into as of this 12th day of June, 1997, by and
between UNITED COMMUNITY BANKS, INC. ("United") and FIRST CLAYTON
BANCSHARES, INC. ("Clayton"), both Georgia corporations (said
corporations are hereinafter collectively referred to as the
"Constituent Corporations").
R E C I T A L S:
WHEREAS, the authorized capital stock of United
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share (the "United Stock"), of which 6,738,848 shares are
issued and outstanding; and
WHEREAS, the authorized capital stock of Clayton
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share, of which 400,691 shares are issued and outstanding and
5,000,000 shares of special stock $1.00 par value per share, none
of which is issued and outstanding ("Clayton Stock"); and
WHEREAS, the respective Boards of Directors of the
Constituent Corporations deem it advisable and in the best
interests of each such corporation and its shareholders that
Clayton merge with United, with United being the surviving
corporation; and
WHEREAS, the respective Boards of Directors of the
Constituent Corporations, by resolutions duly adopted, have
unanimously approved and adopted this Agreement, and the Board of
Directors of Clayton, by resolution duly adopted, has directed
that this Agreement be submitted to the shareholders of Clayton
for their approval; and
WHEREAS, United has agreed to issue shares of United
Stock which shareholders of Clayton will be entitled to receive,
according to the terms and conditions contained herein, on or
after the Effective Date (as defined herein) of the merger
provided for herein.
NOW, THEREFORE, for and in consideration of the
premises and the mutual agreements herein contained, and other
good and valuable consideration, the receipt and adequacy of
which as legally sufficient consideration are hereby
acknowledged, the parties hereto have agreed and do hereby agree,
as follows:
1. MERGER.
Pursuant to and with the effects provided in the
applicable provisions of Article 11 of the Georgia Business
Corporation Code, as amended (Chapter 2 of Title 14 of the
Official Code of Georgia), Clayton (hereinafter sometimes
referred to as the "Merged Corporation") shall be merged with and
into United (the "Merger"). United shall be the surviving
A-1
<PAGE>
corporation (the "Surviving Corporation") and shall continue
under the name "United Community Banks, Inc.". On the Effective
Date (as defined herein) of the Merger, the individual existence
of the Merged Corporation shall cease and terminate.
2. ACTIONS TO BE TAKEN.
The acts and things required to be done by the Georgia
Business Corporation Code in order to make this Agreement
effective, including the submission of this Agreement to the
shareholders of the Merged Corporation and the filing of the
Certificate of Merger relating hereto in the manner provided in
said Code, shall be attended to and done by the proper officers
of the Constituent Corporations with the assistance of counsel as
soon as practicable.
3. EFFECTIVE DATE.
The Merger shall be effective upon the approval of this
Agreement by the shareholders of the Merged Corporation and the
filing of the Certificate of Merger relating hereto in the manner
provided in the Georgia Business Corporation Code (the "Effective
Date").
4. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION.
(a) The Articles of Incorporation of United, as
heretofore amended, shall on the Effective Date be the Articles
of Incorporation of the Surviving Corporation.
(b) Until altered, amended or repealed, as therein
provided, the Bylaws of United as in effect on the Effective Date
shall be the Bylaws of the Surviving Corporation.
5. MANNER AND BASIS OF CONVERTING SHARES OF CAPITAL STOCK;
CAPITAL STRUCTURE OF THE SURVIVING CORPORATION.
The manner and basis of converting the shares of
capital stock of each of the Constituent Corporations into shares
of the Surviving Corporation shall be as follows:
(a) Upon the Effective Date each of the shares of
Clayton Stock outstanding on the Effective Date shall be
converted into fully paid and nonassessable shares of United
Stock at the rate of 1.6136 shares of United Stock for each
outstanding share of Clayton Stock. If either party should
change the number of its outstanding shares as a result of a
stock split, stock dividend, or similar recapitalization with
respect to such shares prior to the Effective Date then the
shares to be issued hereunder to holders of Clayton Stock shall
be proportionately adjusted.
(b) No scrip or fractional share certificates of
United Stock shall be issued in connection with the Merger and an
outstanding fractional share interest will not entitle the owner
thereof to vote, to receive dividends or to have any of the
rights of a shareholder with respect to such fractional interest.
In lieu of any fractional interest, there shall be paid in cash
A-2
<PAGE>
an amount (computed to the nearest cent) equal to such fraction
multiplied by $22.00.
(c) As soon as practicable after the Effective Date,
each holder as of the Effective Date of any of the shares of
Clayton Stock, upon presentation and surrender of the
certificates representing such shares to United, shall be
entitled to receive in exchange therefor a certificate
representing the number of shares of United Stock to which such
shareholder shall be entitled according to the terms of this
Agreement. Until such surrender, each such outstanding
certificate which prior to the Effective Date represented Clayton
Stock shall be deemed for all corporate purposes to evidence
ownership of the number of shares of United Stock into which the
same shall have been converted and the right to receive payment
for fractional shares.
(d) Upon the Effective Date, each share of United
Stock issued and outstanding immediately prior to the Effective
Date shall continue unchanged and shall continue to evidence a
share of common stock of the Surviving Corporation.
6. TERMINATION OF SEPARATE EXISTENCE.
Upon the Effective Date, the separate existence of the
Merged Corporation shall cease and the Surviving Corporation
shall possess all of the rights, privileges, immunities, powers
and franchises, as well of a public nature as of a private
nature, of each of the Constituent Corporations; and all
property, real, personal and mixed, and all debts due on whatever
account, and all other choses in action, and all and every other
interest of or belonging to or due to each of the Constituent
Corporations shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed,
and the title to any real estate or any interest therein, vested
in either of the Constituent Corporations shall not revert or be
in any way impaired by reason of the Merger. The Surviving
Corporation shall thenceforth be responsible and liable for all
the liabilities, obligations and penalties of each of the
Constituent Corporations; and any claim existing or action or
proceeding, civil or criminal, pending by or against either of
said Constituent Corporations may be prosecuted as if the Merger
had not taken place, or the Surviving Corporation may be
substituted in its place, and any judgment rendered against
either of the Constituent Corporations may thenceforth be
enforced against the Surviving Corporation; and neither the
rights of creditors nor any liens upon the property of either of
the Constituent Corporations shall be impaired by the Merger.
7. FURTHER ASSIGNMENTS.
If at any time the Surviving Corporation shall consider
or be advised that any further assignments or assurances in law
or any other things are necessary or desirable to vest in said
corporation, according to the terms hereof, the title to any
property or rights of the Merged Corporation, the proper officers
and directors of the Merged Corporation shall and will execute
and make all such proper assignments and assurances and do all
things necessary and proper to vest title in such property or
A-3
<PAGE>
rights in the Surviving Corporation, and otherwise to carry out
the purposes of this Agreement.
8. CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER.
This Agreement is subject to, and consummation of the
Merger is conditioned upon, the fulfillment as of the Effective
Date of each of the following conditions:
(a) Approval of this Agreement by the affirmative vote
of the holders of a majority of the outstanding voting shares of
Clayton Stock; and
(b) All the terms, covenants, agreements, obligations
and conditions of the Agreement and Plan of Reorganization (the
"Acquisition Agreement") of even date herewith by and between
Clayton and United to be complied with, satisfied and performed
on or prior to the Closing Date (as defined therein), shall have
been complied with, satisfied and performed in all material
respects unless accomplishment of such covenants, agreements,
obligations and conditions has been waived by the party benefited
thereby.
9. TERMINATION.
This Agreement may be terminated and the Merger
abandoned in accordance with the terms of the Acquisition
Agreement, at any time before or after adoption of this Agreement
by the directors of either of the Constituent Corporations, not-
withstanding favorable action on the Merger by the shareholders
of the Merged Corporation, but not later than the issuance of the
certificate of merger by the Secretary of State of Georgia with
respect to the Merger in accordance with the provisions of the
Georgia Business Corporation Code.
10. COUNTERPARTS; TITLE; HEADINGS.
This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same
instrument. The title of this Agreement and the headings herein
set out are for the convenience of reference only and shall not
be deemed a part of this Agreement.
11. AMENDMENTS; ADDITIONAL AGREEMENTS.
At any time before or after approval and adoption by
the shareholders of Clayton, this Agreement may be modified,
amended or supplemented by additional agreements, articles or
certificates as may be determined in the judgment of the
respective Boards of Directors of the Constituent Corporations to
be necessary, desirable or expedient to further the purposes of
this Agreement, to clarify the intention of the parties, to add
to or modify the covenants, terms or conditions contained herein
or to effectuate or facilitate any governmental approval of the
Merger or this Agreement, or otherwise to effectuate or
facilitate the consummation of the transactions contemplated
hereby; provided, however, that no such modification, amendment
or supplement shall reduce to any extent the consideration into
A-4
<PAGE>
which shares of Clayton Stock shall be converted in the Merger
pursuant to Section 5 hereof.
IN WITNESS WHEREOF, the Constituent Corporations have
each caused this Agreement to be executed on their respective
behalfs and their respective corporate seals to be affixed hereto
as of the day and year first above written.
UNITED COMMUNITY BANKS, INC.
(CORPORATE SEAL)
By: /s/ Jimmy Tallent
ATTEST: Jimmy Tallent
President
/s/ Billy M. Decker
Billy M. Decker
Secretary
FIRST CLAYTON BANCSHARES, INC.
(CORPORATE SEAL)
By: /s/ J. Mark Smith
J. Mark Smith
ATTEST: President
/s/ Ronald E. Vandiver
Ronald E. Vandiver
Secretary
A-5
<PAGE>
APPENDIX B
Georgia Dissenters' Rights Statutes
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee
as the record shareholder.
(2) "Corporate action" means the transaction or other
action by the corporation that creates dissenters' rights under
Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under Code Section 14-2-1302 and
who exercises that right when and in the manner required by Code
Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation
of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate
action.
(6) "Interest" means interest from the effective date of
the corporate action until the date of payment, at a rate that is
fair and equitable under all the circumstances.
(7) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted by
a nominee certificate on file with a corporation.
(8) "Shareholder" means the record shareholder or the
beneficial shareholder. (Code 1981, Section 14-2-1301, enacted by Ga.
L. 1988, p. 1070, Section 1; Ga. L. 1993, p. 1231, Section 16.)
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to
dissent from, and obtain payment of the fair value of his shares
in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the
corporation is a party:
(A) If approval of the shareholders of the
corporation is required for the merger by Code Section
14-2-1103 or the articles of incorporation and the
shareholder is entitled to vote on the merger; or
B-1
<PAGE>
(B) If the corporation is a subsidiary that is
merged with its parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which
the corporation is a party as the corporation whose shares
will be acquired, if the shareholder is entitled to vote on
the plan;
(3) Consummation of a sale or exchange of all or
substantially all of the property of the corporation if a
shareholder vote is required on the sale or exchange
pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds
of the sale will be distributed to the shareholders within
one year after the date of sale;
(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a
dissenter's shares because it:
(A) Alters or abolishes a preferential right of
the shares;
(B) Creates, alters, or abolishes a right in
respect of redemption, including a provision respecting
a sinking fund for the redemption or repurchase, of the
shares;
(C) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other
securities;
(D) Excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or
other securities with similar voting rights;
(E) Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under Code
Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part
of the shares of the class; or
(5) Any corporate action taken pursuant to a
shareholder vote to the extent that Article 9 of this
chapter, the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) A shareholder entitled to dissent and obtain payment
for his shares under this article may not challenge the corporate
action creating his entitlement unless the corporate action fails
to comply with procedural requirements of this chapter or the
articles of incorporation or bylaws of the corporation or the
vote required to obtain approval of the corporate action was
B-2
<PAGE>
obtained by fraudulent and deceptive means, regardless of whether
the shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article,
there shall be no right of dissent in favor of the holder of
shares of any class or series which, at the record date fixed to
determine the shareholders entitled to receive notice of and to
vote at a meeting at which a plan of merger or share exchange or
a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national
securities exchange or held of record by more than 2,000
shareholders, unless:
(1) In the case of a plan of merger or share exchange,
the holders of shares of the class or series are required
under the plan of merger or share exchange to accept for
their shares anything except shares of the surviving
corporation or another publicly held corporation which at
the effective date of the merger or share exchange are
either listed on a national securities exchange or held of
record by more than 2,000 shareholders, except for scrip or
cash payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution of
the board of directors approving the transaction provides
otherwise. (Code 1981, Sec. 14-2-1302, enacted by Ga. L. 1988,
p. 1070, Section 1; Ga. L. 1989, p. 946, Section 58.)
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as
to fewer than all the shares registered in his name only if he
dissents with respect to all shares beneficially owned by any one
beneficial shareholder and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he
dissents and his other shares were registered in the names of
different shareholders. (Code 1981, Section 14-2-1303, enacted by Ga.
L. 1988, p. 1070, Section 1.)
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights
under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under
Code Section 14-2-1302 is taken without a vote of shareholders,
the corporation shall notify in writing all shareholders entitled
to assert dissenters' rights that the action was taken and send
them the dissenters' notice described in Code Section 14-2-1322
no later than ten days after the corporate action was taken.
(Code 1981, Section 14-2-1320, enacted by Ga. L. 1988, p. 1070,
Section 1; Ga. L. 1993, p. 1231, Section 17.)
B-3
<PAGE>
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, a record shareholder who wishes to assert
dissenters' rights:
(1) Must deliver to the corporation before the vote is
taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed
action.
(b) A record shareholder who does not satisfy the
requirements of subsection (a) of this Code section is not
entitled to payment for his shares under this article. (Code
1981, Section 14-2-1321, enacted by Ga. L. 1988, p. 1070, Section 1.)
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is authorized at a
shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten
days after the corporate action was taken and must:
(1) State where the payment demand must be sent and
where and when certificates for certificated shares must be
deposited;
(2) Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the
payment demand is received;
(3) Set a date by which the corporation must receive
the payment demand, which date may not be fewer than 30 nor
more than 60 days after the date the notice required in
subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article. (Code
1981, Section 14-2-1322, enacted by Ga. L. 1988, p. 1070, Section 1.)
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice
described in Code Section 14-2-1322 must demand payment and
deposit his certificates in accordance with the terms of the
notice.
(b) A record shareholder who demands payment and deposits
his shares under subsection (a) of this Code section retains all
other rights of a shareholder until these rights are canceled or
B-4
<PAGE>
modified by the taking of the proposed corporate action.
(c) A record shareholder who does not demand payment or
deposit his share certificates where required, each by the date
set in the dissenters' notice, is not entitled to payment for his
shares under this article. (Code 1981, Section 14-2-1323, enacted by
Ga. L. 1988, p. 1070, Section 1.)
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is taken or the
restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as
to uncertificated shares retains all other rights of a
shareholder until these rights are canceled or modified by the
taking of the proposed corporate action. (Code 1981, Section 14-2-
1324, enacted by Ga. L. 1988, p. 1070, Section 1.)
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within
ten days of the later of the date the proposed corporate action
is taken or receipt of a payment demand, the corporation shall by
notice to each dissenter who complied with Code Section 14-2-1323
offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued
interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date
of payment, an income statement for that year, a statement
of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the
fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand
payment under Code Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by
written notice to the corporation within 30 days after the
corporation's offer or is deemed to have accepted such offer by
failure to respond within said 30 days, payment for his or her
shares shall be made within 60 days after the making of the offer
or the taking of the proposed corporate action, whichever is
later. (Code 1981, Section 14-2-1325, enacted by Ga. L. 1988, p. 1070,
Section 1; Ga. L. 1989, p. 946, Section 59; Ga. L. 1993, p. 1231, Section 18.)
B-5
<PAGE>
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action
within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(b) If, after returning deposited certificates and
releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under Code
Section 14-2-1322 and repeat the payment demand procedure. (Code
1981, Section 14-2-1326, enacted by Ga. L. 1988, p. 1070, Section 1; Ga. L.
1990, p. 257, Section 20.)
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.
(a) A dissenter may notify the corporation in writing of
his own estimate of the fair value of his shares and amount of
interest due, and demand payment of his estimate of the fair
value of his shares and interest due, if:
(1) The dissenter believes that the amount offered
under Code Section 14-2-1325 is less than the fair value of
his shares or that the interest due is incorrectly
calculated; or
(2) The corporation, having failed to take the
proposed action, does not return the deposited certificates
or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment
under this Code section and is deemed to have accepted the
corporation's offer unless he or she notifies the corporation of
his or her demand in writing under subsection (a) of this Code
section within 30 days after the corporation offered payment for
his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the
time set forth in subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information
required under subsection (b) of Code Section 14-2-1325, and
the corporation shall provide the information to the
shareholder within ten days after receipt of a written
demand for the information; and
(2) The shareholder may at any time, subject to the
limitations period of Code Section 14-2-1332, notify the
corporation of his own estimate of the fair value of his
shares and the amount of interest due and demand payment of
his estimate of the fair value of his shares and interest
due. (Code 1981, Section 14-2-1327, enacted by Ga. L. 1988, p.
1070, Section 1; Ga. L. 1989, p. 946, Section 60; Ga. L. 1990, p. 257,
Section 21; Ga. L. 1993, p. 1231, Section 19.)
B-6
<PAGE>
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327
remains unsettled, the corporation shall commence a proceeding
within 60 days after receiving the payment demand and petition
the court to determine the fair value of the shares and accrued
interest. If the corporation does not commence the proceeding
within the 60 day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which
shall be a nonjury equitable valuation proceeding, in the
superior court of the county where a corporation's registered
office is located. If the surviving corporation is a foreign
corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled
parties to the proceeding, which shall have the effect of an
action quasi in rem against their shares. The corporation shall
serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the
manner provided by law for the service of a summons and
complaint, and upon each nonresident dissenting shareholder
either by registered or certified mail or by publication, or in
any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding
is commenced under subsection (b) of this Code section is plenary
and exclusive. The court may appoint one or more persons as
appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except
as otherwise provided in this chapter, Chapter 11 of Title 9,
known as the "Georgia Civil Practice Act," applies to any
proceeding with respect to dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is
entitled to judgment for the amount which the court finds to be
the fair value of his shares, plus interest to the date of
judgment. (Code 1981, Section 14-2-1330, enacted by Ga. L. 1988, p.
1070, Section 1; Ga. L. 1989, p. 946, Section 61; Ga. L. 1993, p. 1231,
Section 20.)
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under
Code Section 14-2-1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court, but not including fees and
expenses of attorneys and experts for the respective parties.
B-7
<PAGE>
The court shall assess the costs against the corporation, except
that the court may assess the costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or
not in good faith in demanding payment under Code Section 14-2-
1327.
(b) The court may also assess the fees and expenses of
attorneys and experts for the respective parties, in amounts the
court finds equitable;
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of Code Sections
14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this article.
(c) If the court finds that the services of attorneys for
any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited. (Code 1981, Section 14-2-
1331, enacted by Ga. L. 1988, p. 1070, Section 1.)
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters'
rights shall be brought more than three years after the corporate
action was taken, regardless of whether notice of the corporate
action and of the right to dissent was given by the corporation
in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322. (Code 1981, Section 14-2-1332, enacted by Ga.
L. 1988, p. 1070, Section 1.)
B-8
<PAGE>
PROXY
FIRST CLAYTON BANCSHARES, INC.
Clayton, Georgia
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, AND NOT
REVOKED, THE SHARES OF COMMON STOCK IT REPRESENTS WILL BE VOTED
AT THE MEETING IN ACCORDANCE WITH THE CHOICE SPECIFIED BELOW, AND
IF NO CHOICE IS SPECIFIED, IT WILL BE VOTED FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER BETWEEN UNITED COMMUNITY BANKS, INC.
("UNITED") AND FIRST CLAYTON BANCSHARES, INC. ("FIRST CLAYTON")
DATED JUNE 12, 1997 (THE "MERGER AGREEMENT").
The undersigned shareholder of First Clayton hereby appoints
Robert H. Blaylock or J. Mark Smith or either of them, with full
power of substitution to each, the proxies of the undersigned to
vote, as designated below, the shares of the undersigned at the
Special Meeting of Shareholders of First Clayton to be held on
September 10, 1997 and at any adjournments thereof;
(a) PROPOSAL TO APPROVE THE MERGER AGREEMENT, providing for
the merger of First Clayton with and into United, pursuant to
which each outstanding share of Common Stock of First Clayton
will be converted, subject to certain terms, conditions, and
adjustments as described in the Merger Agreement, into 1.6136
shares of Common Stock of United and in lieu of the issuance of
fractional shares of United, cash will be paid in an amount equal
to the fraction multiplied by $22.00.
FOR / / AGAINST / / ABSTAIN / /
(b) IN ACCORDANCE WITH THEIR BEST JUDGMENT with respect to
any other matters which may properly come before the meeting and
any adjournment thereof.
Please date and sign this Proxy exactly as your name appears
below:
Dated:________________, 1997
[LABEL]
NOTE: When signing as attorney, trustee, administrator, executor
or guardian, please give your full title as such. If a
corporation, please sign in full corporate name by President or
other authorized officer. In the case of joint tenants, each
joint owner must sign.
