SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): May 7, 1999
FLAG Financial Corporation
(Exact name of registrant as specified in its charter)
Georgia 0-24532 58-2094179
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification Number)
101 North Greenwood St., P.O. Box 3007
LaGrange, Georgia 30240
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (706) 845-5000
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Item 5. Other Events
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On May 7, 1999, the Registrant executed an Agreement and Plan of Merger
(the "Merger Agreement") with Thomaston Federal Savings Bank ("Thomaston
Federal"), located in Thomaston, Georgia. The Merger Agreement provides that
Thomaston Federal will merge with a wholly-owned subsidiary of the Registrant,
with Thomaston Federal being the survivor of the merger. Attached hereto is a
copy of the announcement of the combination and a copy of the Merger Agreement
by and between the Registrant and Thomaston.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits. The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Merger by and between the Registrant and
Thomaston Federal Savings Bank dated May 7, 1999.
99.1 Press release, dated May 7, 1999, issued by the Registrant.
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INDEX OF EXHIBITS
Exhibit
Number Description
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2.1 Agreement and Plan of Merger by and between the Registrant and
Thomaston Federal Savings Bank.
99.1 Press release, dated May 7, 1999.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: May 10, 1999
FLAG Financial Corporation
/s/ John S. Holle
-----------------
By John S. Holle
Chairman of the Board
3
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FLAG FINANCIAL CORPORATION
AND
THOMASTON FEDERAL SAVINGS BANK
Dated as of May 7, 1999
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TABLE OF CONTENTS
LIST OF EXHIBITS.............................................................iv
AGREEMENT AND PLAN OF MERGER.................................................1
ARTICLE 1. TRANSACTIONS AND TERMS OF THE MERGER.......................1
1.1 CREATION OF INTERIM.................................................1
1.2 MERGER..............................................................2
1.3 TIME AND PLACE OF CLOSING...........................................2
1.4 EFFECTIVE TIME......................................................2
ARTICLE 2. TERMS OF MERGER............................................2
2.1 CHARTER.............................................................2
2.2 BYLAWS..............................................................2
2.3 DIRECTORS AND OFFICERS..............................................3
ARTICLE 3. MANNER OF CONVERTING SHARES................................3
3.1 CONVERSION OF SHARES................................................3
3.2 ANTI-DILUTION PROVISIONS............................................4
3.3 SHARES HELD BY THOMASTON FEDERAL OR FLAG............................4
3.4 DISSENTING SHAREHOLDERS.............................................4
3.5 FRACTIONAL SHARES...................................................5
3.6 INTERIM STOCK.......................................................5
ARTICLE 4. EXCHANGE OF SHARES.........................................5
4.1 EXCHANGE PROCEDURES.................................................5
4.2 RIGHTS OF FORMER SHAREHOLDERS OF THOMASTON FEDERAL..................6
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THOMASTON FEDERAL........7
5.1 ORGANIZATION, STANDING, AND POWER...................................7
5.2 AUTHORITY OF THOMASTON FEDERAL; NO BREACH BY AGREEMENT..............7
5.3 CAPITAL STOCK.......................................................9
5.4 THOMASTON FEDERAL SUBSIDIARIES......................................9
5.5 FINANCIAL STATEMENTS...............................................10
5.6 ABSENCE OF UNDISCLOSED LIABILITIES ................................10
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS ..............................11
5.8 TAX MATTERS .......................................................11
5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES ................................12
5.10 ASSETS .........................................................13
5.11 INTELLECTUAL PROPERTY ..........................................13
5.12 ENVIRONMENTAL MATTERS ..........................................14
5.13 COMPLIANCE WITH LAWS ...........................................15
5.14 IMMIGRATION MATTERS ............................................15
5.15 LABOR RELATIONS ................................................16
5.16 EMPLOYEE BENEFIT PLANS .........................................16
5.17 MATERIAL CONTRACTS .............................................18
5.18 LEGAL PROCEEDINGS ..............................................19
5.19 REPORTS ........................................................20
5.20 STATEMENTS TRUE AND CORRECT ....................................20
5.21 ACCOUNTING, TAX AND REGULATORY MATTERS .........................20
5.22 CHARTER PROVISIONS .............................................21
5.23 BOARD RECOMMENDATION ...........................................21
5.24 Y-2K ...........................................................21
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ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF FLAG....................21
6.1 ORGANIZATION, STANDING, AND POWER .................................21
6.2 AUTHORITY OF FLAG; NO BREACH BY AGREEMENT .........................22
6.3 CAPITAL STOCK .....................................................23
6.4 FLAG SUBSIDIARIES .................................................23
6.5 SEC FILINGS, FINANCIAL STATEMENTS .................................24
6.6 ABSENCE OF UNDISCLOSED LIABILITIES ................................25
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS ..............................25
6.8 TAX MATTERS .......................................................25
6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES ................................26
6.10 ASSETS .........................................................27
6.11 INTELLECTUAL PROPERTY ..........................................27
6.12 ENVIRONMENTAL MATTERS ..........................................28
6.13 COMPLIANCE WITH LAWS ...........................................28
6.14 LABOR RELATIONS ................................................29
6.15 EMPLOYEE BENEFIT PLANS .........................................29
6.16 MATERIAL CONTRACTS .............................................31
6.17 LEGAL PROCEEDINGS ..............................................32
6.18 REPORTS ........................................................32
6.19 STATEMENTS TRUE AND CORRECT ....................................32
6.20 ACCOUNTING TAX AND REGULATORY MATTERS ..........................33
6.21 CHARTER PROVISIONS .............................................33
6.22 BOARD RECOMMENDATION ...........................................33
6.23 Y2K ............................................................33
6.24 MATTERS RELATING TO INTERIM ....................................34
ARTICLE 7. CONDUCT OF BUSINESS PENDING CONSUMMATION..................34
7.1 AFFIRMATIVE COVENANTS OF THOMASTON FEDERAL ........................34
7.2 NEGATIVE COVENANTS OF THOMASTON FEDERAL ...........................35
7.3 AFFIRMATIVE COVENANTS OF FLAG .....................................37
7.4 NEGATIVE COVENANTS OF FLAG ........................................37
7.5 ADVERSE CHANGES IN CONDITION ......................................37
7.6 REPORTS ...........................................................37
ARTICLE 8. ADDITIONAL AGREEMENTS.....................................38
8.1 REGISTRATION STATEMENT ............................................38
8.2 NASDAQ LISTING ....................................................39
8.3 SHAREHOLDER APPROVAL ..............................................39
8.4 APPLICATIONS ......................................................40
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE .............................40
8.6 INVESTIGATION AND CONFIDENTIALITY .................................41
8.7 PRESS RELEASES ....................................................41
8.8 CERTAIN ACTIONS ...................................................41
8.9 ACCOUNTING AND TAX TREATMENT ......................................42
8.10 CHARTER PROVISIONS .............................................42
8.11 AGREEMENTS OF AFFILIATES .......................................42
8.12 EMPLOYEE BENEFITS AND CONTRACTS ................................43
8.13 INDEMNIFICATION ................................................44
ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.........44
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY ...........................44
9.2 CONDITIONS TO OBLIGATIONS OF FLAG .................................46
9.3 CONDITIONS TO OBLIGATIONS OF THOMASTON FEDERAL ....................47
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ARTICLE 10. TERMINATION...............................................48
10.1 TERMINATION ....................................................48
10.2 EFFECT OF TERMINATION ..........................................49
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS ..................49
ARTICLE 11. MISCELLANEOUS.............................................49
11.1 DEFINITIONS ....................................................49
11.2 EXPENSES .......................................................57
11.3 BROKERS AND FINDERS ............................................57
11.4 ENTIRE AGREEMENT ...............................................58
11.5 AMENDMENTS .....................................................58
11.6 WAIVERS ........................................................58
11.7 ASSIGNMENT .....................................................59
11.8 NOTICES ........................................................59
11.9 GOVERNING LAW ..................................................60
11.10 COUNTERPARTS ...................................................60
11.11 CAPTIONS, ARTICLES AND SECTIONS ................................60
11.12 INTERPRETATIONS ................................................60
11.13 ENFORCEMENT OF AGREEMENT .......................................60
11.14 SEVERABILITY ...................................................60
SIGNATURES TO AGREEMENT AND PLAN OF MERGER
iii
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LIST OF EXHIBITS
Exhibit
Number Description
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1. Form of Agreement of Affiliates of Thomaston Federal Savings
Bank (ss.8.12,ss. 9.2(f)).
2. Matters as to which Long Aldridge & Norman LLP will opine.
(ss. 9.2(d)).
3. Form of Claims Letter (ss. 9.2(g)).
4. Matters as to which Powell, Goldstein, Frazer & Murphy LLP will
opine. (ss. 9.3(d)).
iv
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of May 7, 1999, by and between FLAG FINANCIAL CORPORATION ("FLAG"), a
Georgia corporation located in LaGrange, Georgia, and THOMASTON FEDERAL SAVINGS
BANK ("THOMASTON FEDERAL"), a federally-chartered savings association located in
Thomaston, Georgia.
Preamble
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The respective Boards of Directors of THOMASTON FEDERAL and FLAG are of
the opinion that the transactions described herein are in the best interests of
the Parties to this Agreement and their respective shareholders. This Agreement
provides for the acquisition of THOMASTON FEDERAL by FLAG, pursuant to the
merger of FFC FEDERAL SAVINGS BANK, a wholly-owned subsidiary of FLAG to be
organized under the laws of the United States, with and into THOMASTON FEDERAL.
At the effective time of such merger, the outstanding shares of the capital
stock of THOMASTON FEDERAL shall be converted into the right to receive shares
of the common stock of FLAG (except as provided herein). As a result,
shareholders of THOMASTON FEDERAL shall become shareholders of FLAG, and
THOMASTON FEDERAL shall become a wholly-owned subsidiary of FLAG. The
transactions described in this Agreement are subject to (a) approval of the
shareholders of THOMASTON FEDERAL, (b) approval of the Board of Governors of the
Federal Reserve System, (c) approval of the Office of Thrift Supervision (the
"OTS"), (d) approval of the Georgia Department of Banking and Finance, and (e)
satisfaction of certain other conditions described in this Agreement. It is the
intention of the Parties to this Agreement that the merger, for federal income
tax purposes, shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code, and, for accounting purposes, shall qualify
for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section 11.1
hereof.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1.
TRANSACTIONS AND TERMS OF THE MERGER
------------------------------------
1.1 Creation of INTERIM.
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As soon as practicable after the date of this Agreement, FLAG shall cause
to be chartered by the OTS an interim savings bank to be called FFC FEDERAL
SAVINGS BANK ("INTERIM"), and which will be a wholly-owned subsidiary of FLAG.
As soon as practicable following the organization of INTERIM, FLAG shall cause
INTERIM to approve, adopt and ratify this Agreement so that it becomes the
binding obligation of INTERIM.
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1.2 Merger.
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Subject to the terms and conditions of this Agreement, at the Effective
Time, INTERIM will merge with and into THOMASTON FEDERAL in accordance with the
applicable laws and regulations of the OTS (the "Merger"). THOMASTON FEDERAL
shall be the Surviving Bank resulting from the Merger, shall continue under the
name "Thomaston Federal Savings Bank," and shall continue to be a
federally-charted savings association governed by the Laws of the United States.
The Merger shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the respective Boards of Directors of THOMASTON
FEDERAL and FLAG, and which will be approved, adopted and ratified by INTERIM as
soon as practicable after its organization, as set forth herein.
1.3 Time and Place of Closing.
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The closing of the transactions contemplated hereby (the "Closing") will
take place at 9:00 A.M. on the date that the Effective Time occurs (or the
immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or
at such other time as the Parties, acting through their authorized officers, may
mutually agree. The Closing shall be held at such location as may be mutually
agreed upon by the Parties.
1.4 Effective Time.
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The Merger and other transactions contemplated by this Agreement shall
become effective on the date and at the time that the appropriate Articles of
Combination reflecting the Merger are approved by the OTS (the "Effective
Time"). Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by the authorized officers of each Party, the Parties
shall use their reasonable efforts to cause the Effective Time to occur on or
before the fifth business day following the last to occur of (i) the effective
date (including expiration of any applicable waiting period) of the last
required Consent of any Regulatory Authority having authority over and approving
or exempting the Merger, and (ii) the earliest date on which the shareholders of
THOMASTON FEDERAL have approved this Agreement (applicable Law does not require
that FLAG shareholders approve this Agreement and/or the transactions
contemplated hereby, including the Merger); provided, however, that the date of
the Effective Time shall not extend past the termination date set forth in ss.
10.1(e) hereof.
ARTICLE 2.
TERMS OF MERGER
---------------
2.1 Charter.
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The Charter of THOMASTON FEDERAL in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Bank until duly amended or
repealed.
2.2 Bylaws.
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The Bylaws of THOMASTON FEDERAL in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Bank until duly amended or
repealed.
2.3 Directors and Officers.
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(a) The directors of the Surviving Bank shall be (i) the directors of
THOMASTON FEDERAL immediately prior to the Effective Time and (ii) one of the
directors of FLAG immediately prior to the Effective Time, who shall be elected
as a director of the Surviving Bank, together with such additional persons as
may thereafter be elected. Such persons shall serve as the directors of the
Surviving Bank from and after the Effective Time in accordance with the Bylaws
of the Surviving Bank. In addition, as soon as practicable after the Merger, but
in no event later than the next quarterly meeting of the Board of Directors of
FLAG following the Effective Time, Robert G. Cochran, President and Chief
Executive Officer of THOMASTON FEDERAL, will be elected as a director of FLAG.
2
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(b) The executive officers of the Surviving Bank shall be (i) the executive
officers of the Surviving Bank immediately prior to the Effective Time and (ii)
such additional persons as may thereafter be elected. Such persons shall serve
as the executive officers of the Surviving Bank from and after the Effective
Time in accordance with the Bylaws of the Surviving Bank.
ARTICLE 3.
MANNER OF CONVERTING SHARES
---------------------------
3.1 Conversion of Shares.
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Subject to the provisions of this Article 3, at the Effective Time, by
virtue of the Merger and without any action on the part of THOMASTON FEDERAL, or
the shareholders of the foregoing, the shares of THOMASTON FEDERAL shall be
converted as follows:
(a) Each share of capital stock of FLAG issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and after
the Effective Time.
(b) Each share of THOMASTON FEDERAL Common Stock (excluding shares held by
any THOMASTON FEDERAL Entity or any FLAG Entity, in each case other than in a
fiduciary capacity or as a result of debts previously contracted, and excluding
shares held by shareholders who perfect their dissenters' rights as provided in
Section 3.4) issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive 1.7275 shares of FLAG Common Stock (the "Exchange Ratio").
(c) Each option or warrant to purchase THOMASTON FEDERAL Common Stock
outstanding immediately prior to the Effective Time (and which by its terms does
not lapse on or before the Effective Time), whether or not then exercisable,
will be converted into and become options or warrants, as the case may be, to
purchase FLAG Common Stock and FLAG will assume each option and warrant in
accordance with the terms of the option or warrant plans and agreements, except
that from and after the Effective Time (i) FLAG and its Compensation Committee
shall be substituted for THOMASTON FEDERAL as administrator of the option and
warrant plans, (ii) each option and warrant assumed by FLAG may be exercised
solely for shares of FLAG Common Stock, (iii) the number of shares of FLAG
Common Stock subject to each option and warrant shall be the number of whole
shares of FLAG (omitting any fractional share) determined by multiplying the
number of shares of THOMASTON FEDERAL Common Stock subject to such option or
warrant immediately prior to the Effective Time by the Exchange Ratio, and (iv)
the per share exercise price under each such option or warrant shall be adjusted
by dividing the per share exercise price under each such option or warrant by
the Exchange Ratio and rounding up to the nearest cent.
3
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3.2 Anti-Dilution Provisions.
- -------------------------------
In the event that FLAG changes the number of shares of FLAG Common Stock
issued and outstanding prior to the Effective Time as a result of a stock split,
stock dividend, or similar recapitalization with respect to such stock, and the
record date therefor (in the case of a stock dividend) or the effective date
thereof (in the case of a stock split or similar recapitalization for which a
record date is not established) is prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.3 Shares Held by THOMASTON FEDERAL or FLAG.
- ------------------------------------------------
Each of the shares of THOMASTON FEDERAL Common Stock held by any THOMASTON
FEDERAL Entity or by any FLAG Entity, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.4 Dissenting Shareholders.
- ------------------------------
Any holder of shares of THOMASTON FEDERAL Common Stock who perfects his
dissenters' rights in accordance with and as contemplated by Section 552.14 of
the OTS regulations, shall be entitled to receive the value of such shares in
cash as determined pursuant to such regulations; provided, that no such payment
shall be made to any dissenting shareholder unless and until such dissenting
shareholder has complied with the applicable provisions of the OTS regulations
and surrendered to FLAG the certificates or certificates representing the shares
for which payment is being made. In the event that after the Effective Time, a
dissenting shareholder of THOMASTON FEDERAL fails to perfect, or effectively
withdraws or loses, his right to appraisal of and payment for his shares, FLAG
shall issue and deliver the consideration to which such holder of shares of
THOMASTON FEDERAL Common Stock is entitled under this Article 3 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of THOMASTON FEDERAL Common Stock held by him. If and to the
extent required by applicable Law, THOMASTON FEDERAL will establish (or cause to
be established) an escrow account with an amount sufficient to satisfy the
maximum aggregate payment that may be required to be paid to dissenting
shareholders. Upon satisfaction of all claims of dissenting shareholders, the
remaining escrowed amount, reduced by payment of the fees and expenses of the
escrow agent, will be returned to FLAG.
3.5 Fractional Shares.
- ------------------------
Notwithstanding any other provision of this Agreement, each holder of
shares of THOMASTON FEDERAL Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of FLAG
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of FLAG Common Stock multiplied by the
market value of one share of FLAG Common Stock at the Effective Time. The market
value of one share of FLAG Common Stock at the Effective Time shall be the last
sale price of such common stock on the Nasdaq National Market (as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by FLAG) on the last trading day preceding the Effective Time
or, if no sales are reported on such date, on the next preceding date on which a
sale is reported. No such holder will be entitled to dividends, voting rights,
or any other rights as a shareholder in respect of any fractional shares.
4
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3.6 INTERIM Stock.
- --------------------
Each share of INTERIM common stock issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchanged for that number
of fully paid and nonassessable shares of common stock of the Surviving Bank,
which is equal to the number of shares of THOMASTON FEDERAL Common Stock issued
and outstanding immediately prior to the Effective Date. From and after the
Effective Date, the certificates theretofore representing all of the outstanding
shares of INTERIM common stock shall be deemed for all purposes to evidence
ownership of such number of shares of Surviving Bank stock. Promptly after the
Effective Date, the Surviving Bank shall issue to the shareholder of INTERIM a
stock certificate or certificates representing such number of shares of
Surviving Bank stock in exchange for the certificate or certificates which
formerly represented all of the outstanding shares of INTERIM common stock,
which shall be cancelled.
ARTICLE 4.
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures.
- -------------------------
(a) Promptly after the Effective Time, FLAG shall cause the exchange agent
selected by FLAG (the "Exchange Agent") to mail to each holder of record of a
certificate or certificates which represented shares of THOMASTON FEDERAL Common
Stock immediately prior to the Effective Time (the "Certificates") appropriate
transmittal materials and instructions (which shall specify that delivery shall
be effected, and risk of loss and title to such Certificates shall pass, only
upon proper delivery of such Certificates to the Exchange Agent). The
Certificate or Certificates of THOMASTON FEDERAL Common Stock so delivered shall
be duly endorsed as the Exchange Agent may reasonably require. In the event of a
transfer of ownership of shares of THOMASTON FEDERAL Common Stock represented by
Certificates that are not registered in the transfer records of THOMASTON
FEDERAL, the consideration provided in Section 3.1 may be issued to a transferee
if the Certificates representing such shares are delivered to the Exchange
Agent, accompanied by all documents required to evidence such transfer and by
evidence satisfactory to the Exchange Agent that any applicable stock transfer
taxes have been paid. If any Certificate shall have been lost, stolen, mislaid
or destroyed, upon receipt of (i) an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii) such
bond, security or indemnity as FLAG and the Exchange Agent may reasonably
require, and (iii) any other documents necessary to evidence and effect the bona
fide exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. The Exchange Agent may
establish such other reasonable and customary rules and procedures in connection
with its duties as it may deem appropriate. After the Effective Time, each
holder of shares of THOMASTON FEDERAL Common Stock (other than shares to be
canceled pursuant to Section 3.3 or as to which statutory dissenters' rights
have been perfected as provided in Section 3.4) issued and outstanding at the
Effective Time shall surrender the Certificate or Certificates representing such
5
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shares to the Exchange Agent and shall promptly upon surrender thereof receive
in exchange therefor the consideration provided in Section 3.1, together with
all undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2. FLAG shall not be obligated to
deliver the consideration to which any former holder of THOMASTON FEDERAL Common
Stock is entitled as a result of the Merger until such holder surrenders such
holder's Certificate or Certificates for exchange as provided in this Section
4.1. Any other provision of this Agreement notwithstanding, neither FLAG nor the
Exchange Agent shall be liable to a holder of THOMASTON FEDERAL Common Stock for
any amounts paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat or similar Law. Approval
of this Agreement by the shareholders of THOMASTON FEDERAL shall constitute
ratification of the appointment of the Exchange Agent.
(b) Promptly after the Effective Time, FLAG shall deliver to the holders of
each option or warrant to purchase Thomaston Federal Common Stock an appropriate
notice setting forth such holder's rights pursuant to such option or warrant
following the Merger. At or prior to the Effective Time, FLAG shall take all
corporate action necessary to reserve for issuance sufficient shares of FLAG
Common Stock for delivery upon the exercise of such options and warrants assumed
in accordance with Section 3.1(c).
4.2 Rights of Former Shareholders of THOMASTON FEDERAL.
- --------------------------------------------------------------
At the Effective Time, the stock transfer books of THOMASTON FEDERAL shall
be closed as to holders of THOMASTON FEDERAL Common Stock immediately prior to
the Effective Time and no transfer of THOMASTON FEDERAL Common Stock by any such
holder shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 4.1, each Certificate theretofore
representing shares of THOMASTON FEDERAL Common Stock (other than shares to be
canceled pursuant to Sections 3.3 and 3.4) shall from and after the Effective
Time represent for all purposes only the right to receive the consideration
provided in Section 3.1 in exchange therefor, subject, however, to FLAG's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by THOMASTON
FEDERAL in respect of such shares of THOMASTON FEDERAL Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. To the extent permitted by Law, former shareholders of record of
THOMASTON FEDERAL shall be entitled to vote after the Effective Time at any
meeting of FLAG shareholders the number of whole shares of FLAG Common Stock
into which their respective shares of THOMASTON FEDERAL Common Stock are
converted, regardless of whether such holders have exchanged their Certificates
for certificates representing FLAG Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by FLAG on the FLAG Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares of FLAG Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of FLAG Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any Certificate until such holder surrenders
such Certificate for exchange as provided in Section 4.1. However, upon
surrender of such Certificate, both the FLAG Common Stock certificate (together
with all such undelivered dividends or other distributions without interest) and
any undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
Certificate. No interest shall be payable with respect to any cash to be paid
under Section 3.1 of this Agreement except to the extent required in connection
with the exercise of dissenters' rights.
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ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THOMASTON FEDERAL
---------------------------------------------------
THOMASTON FEDERAL hereby represents and warrants to FLAG as follows:
5.1 Organization, Standing, and Power.
- -------------------------------------
THOMASTON FEDERAL is a federally-chartered savings association duly
organized, validly existing, and in good standing under the Laws of the United
States, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. THOMASTON
FEDERAL is duly qualified or licensed to transact business as a foreign
corporation in good standing in the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a THOMASTON FEDERAL Material Adverse
Effect. The minute book and other organizational documents for THOMASTON FEDERAL
have been made available to FLAG for its review and, except as disclosed in
Section 5.1 of the THOMASTON FEDERAL Disclosure Memorandum, are true and
complete in all material respects as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and shareholders thereof.
5.2 Authority of THOMASTON FEDERAL; No Breach By Agreement.
- ------------------------------------------------------------
(a) THOMASTON FEDERAL has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby subject to the terms and
conditions hereof. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of THOMASTON FEDERAL, subject to the approval of
this Agreement by the holders of a majority of the outstanding shares of voting
stock of THOMASTON FEDERAL, which is the only shareholder vote required for
approval of this Agreement, and consummation of the Merger by THOMASTON FEDERAL.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid, and binding obligation of THOMASTON FEDERAL, enforceable against
THOMASTON FEDERAL in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
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(b) Neither the execution and delivery of this Agreement by THOMASTON
FEDERAL, nor the consummation by THOMASTON FEDERAL of the transactions
contemplated hereby, nor compliance by THOMASTON FEDERAL with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of THOMASTON FEDERAL's Charter or Bylaws, or the Charter, Articles of
Incorporation, or Bylaws of any THOMASTON FEDERAL Subsidiary or any resolution
adopted by the board of directors or the shareholders of any THOMASTON FEDERAL
Entity, or (ii) except as disclosed in Section 5.2 of the THOMASTON FEDERAL
Disclosure Memorandum, constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
THOMASTON FEDERAL Entity under, any Contract or Permit of any THOMASTON FEDERAL
Entity, where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a THOMASTON FEDERAL
Material Adverse Effect, or (iii) create any right in any third party to
exercise any rights adverse to any THOMASTON FEDERAL entity or acquire any asset
of any THOMASTON FEDERAL entity, or (iv) subject to receipt of the requisite
Consents referred to in Section 9.1(b), constitute or result in a Default under
or require any Consent pursuant to, any Law or Order applicable to any THOMASTON
FEDERAL Entity or any of their respective material Assets (including any
THOMASTON FEDERAL Entity becoming subject to or liable for the payment of any
Tax on any of the Assets owned by any THOMASTON FEDERAL Entity being reassessed
or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of
applicable federal and state banking Laws (including Laws applicable to bank
and/or savings association holding companies), and other than Consents required
from Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, and other than
Consents, filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a THOMASTON FEDERAL
Material Adverse Effect, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by THOMASTON FEDERAL of the
Merger and the other transactions contemplated in this Agreement.
5.3 Capital Stock.
- ------------------
(a) As of the date of this Agreement, the authorized capital stock of
THOMASTON FEDERAL consists of 5,000,000 shares of THOMASTON FEDERAL Common Stock
and 5,000,000 shares of serial preferred stock with a par value of $1.00 per
share, of which 651,639 shares of Common Stock are issued and outstanding, and
of which 28,350 shares of Common Stock underlie outstanding options to purchase
THOMASTON FEDERAL Common Stock. All of the issued and outstanding shares of
capital stock of THOMASTON FEDERAL are duly and validly issued and outstanding
and are fully paid and nonassessable under the OTS regulations. None of the
outstanding shares of capital stock of THOMASTON FEDERAL has been issued in
violation of any preemptive rights of the current or past shareholders of
THOMASTON FEDERAL.
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(b) Except as set forth in Section 5.3(a), or as disclosed in Section
5.3(b) of the THOMASTON FEDERAL Disclosure Memorandum, there are no shares of
capital stock or other equity securities of THOMASTON FEDERAL outstanding and no
outstanding Equity Rights relating to the capital stock of THOMASTON FEDERAL.
5.4 THOMASTON FEDERAL Subsidiaries.
- ------------------------------------
THOMASTON FEDERAL has disclosed in Section 5.4 of the THOMASTON FEDERAL
Disclosure Memorandum all of the THOMASTON FEDERAL Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which the character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the number
of shares owned and percentage ownership interest represented by such share
ownership) and all of the THOMASTON FEDERAL Subsidiaries that are general or
limited partnerships, limited liability companies, or other non-corporate
entities (identifying the Law under which such entity is organized, each
jurisdiction in which the character of its Assets or the nature or conduct of
its business requires it to be qualified and/or licensed to transact business,
and the amount and nature of Thomaston Federal's ownership interest therein).
Except as disclosed in Section 5.4 of the THOMASTON FEDERAL Disclosure
Memorandum, THOMASTON FEDERAL or one of its wholly-owned Subsidiaries owns all
of the issued and outstanding shares of capital stock (or other equity
interests) of each THOMASTON FEDERAL Subsidiary. No capital stock (or other
equity interest) of any THOMASTON FEDERAL Subsidiary is or may become required
to be issued (other than to another THOMASTON FEDERAL Entity) by reason of any
Equity Rights, and there are no Contracts by which any THOMASTON FEDERAL
Subsidiary is bound to issue (other than to another THOMASTON FEDERAL Entity)
additional shares of its capital stock (or other equity interests) or Equity
Rights or by which any THOMASTON FEDERAL Entity is or may be bound to transfer
any shares of the capital stock (or other equity interests) of any THOMASTON
FEDERAL Subsidiary (other than to another THOMASTON FEDERAL Entity). There are
no Contracts relating to the rights of any THOMASTON FEDERAL Entity to vote or
to dispose of any shares of the capital stock (or other equity interests) of any
THOMASTON FEDERAL Subsidiary. All of the shares of capital stock (or other
equity interests) of each THOMASTON FEDERAL Subsidiary held by a THOMASTON
FEDERAL Entity are fully paid and (except pursuant to 12 U.S.C. Section 55 in
the case of national banks and comparable, applicable state Law, if any, in the
case of state depository institutions) nonassessable and are owned by the
THOMASTON FEDERAL Entity free and clear of any Lien. Except as disclosed in
Section 5.4 of the THOMASTON FEDERAL Disclosure Memorandum, each THOMASTON
FEDERAL Subsidiary is either a bank, savings association or a corporation, and
is duly organized, validly existing, and, as to corporations, in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Each THOMASTON
FEDERAL Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a THOMASTON FEDERAL
Material Adverse Effect. Each THOMASTON FEDERAL Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder. The minute book and other
organizational documents for each THOMASTON FEDERAL Subsidiary have been made
available to FLAG for its review, and, except as disclosed in Section 5.4 of the
THOMASTON FEDERAL Disclosure Memorandum, are true and complete in all material
respects as in effect as of the date of this Agreement and accurately reflect in
all material respects all amendments thereto and all proceedings of the Board of
Directors and shareholders thereof.
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5.5 Financial Statements.
- --------------------------
Each of the THOMASTON FEDERAL Financial Statements (including, in each
case, any related notes) was prepared in accordance with GAAP, or with
regulatory accounting principles applicable to audited or interim financial
statements of savings associations, applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements), and fairly presented in all material respects the consolidated
financial position of THOMASTON FEDERAL and its Subsidiaries as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount or effect.
5.6 Absence of Undisclosed Liabilities.
- ------------------------------------------
No THOMASTON FEDERAL Entity has any Liabilities that are reasonably likely
to have, individually or in the aggregate, a THOMASTON FEDERAL Material Adverse
Effect, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of THOMASTON FEDERAL as of December 31, 1998,
included in the THOMASTON FEDERAL Financial Statements or reflected in the notes
thereto. No THOMASTON FEDERAL Entity has incurred or paid any Liability since
December 31, 1998, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice and which are
not reasonably likely to have, individually or in the aggregate, a THOMASTON
FEDERAL Material Adverse Effect or (ii) in connection with the transactions
contemplated by this Agreement.
5.7 Absence of Certain Changes or Events.
- --------------------------------------------
Since December 31, 1998, except as disclosed in the THOMASTON FEDERAL
Financial Statements delivered prior to the date of this Agreement or as
disclosed in Section 5.7 of the THOMASTON FEDERAL Disclosure Memorandum, (i)
there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a THOMASTON FEDERAL
Material Adverse Effect, and (ii) each THOMASTON FEDERAL Entity has operated in
all material respect in the ordinary course of business and without a material
breach or violation of any of the covenants and agreements of THOMASTON FEDERAL
provided in Article 7.
5.8 Tax Matters.
- -----------------
(a) All Tax Returns required to be filed by or on behalf of any THOMASTON
FEDERAL Entities have been timely filed or requests for extensions have been
timely filed, granted, and, to the Knowledge of THOMASTON FEDERAL, have not
expired for the periods ended on or before December 31, 1998, and on or before
the date of the most recent fiscal year end immediately preceding the Effective
Time, except to the extent that all such failures to file, taken together, are
not reasonably likely to have a THOMASTON FEDERAL Material Adverse Effect, and
all Tax Returns filed are complete and accurate in all material respects. All
Taxes shown on filed Tax Returns have been paid. There is no audit examination,
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deficiency, or refund Litigation pending with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a THOMASTON FEDERAL Material Adverse Effect, except as
reserved against in the THOMASTON FEDERAL Financial Statements delivered prior
to the date of this Agreement or as disclosed in Section 5.8 of the THOMASTON
FEDERAL Disclosure Memorandum. All Taxes and other Liabilities due with respect
to completed and settled examinations or concluded tax related Litigation have
been paid. There are no Liens with respect to Taxes upon any of the Assets of
THOMASTON FEDERAL Entities, except for any such Liens which are not reasonably
likely to have a THOMASTON FEDERAL Material Adverse Effect or with respect to
which the Taxes are not yet due and payable.
(b) None of the THOMASTON FEDERAL Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
THOMASTON FEDERAL Entities for the period or periods through and including the
date of the respective THOMASTON FEDERAL Financial Statements that has been made
and is reflected on such THOMASTON FEDERAL Financial Statements is sufficient to
cover all such Taxes.
(d) Deferred Taxes of THOMASTON FEDERAL Entities have been provided for in
accordance with GAAP.
(e) Except as disclosed in Section 5.8 of the THOMASTON FEDERAL Disclosure
Memorandum, none of the THOMASTON FEDERAL Entities is a party to any Tax
allocation or sharing agreement and none of THOMASTON FEDERAL Entities has been
a member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was THOMASTON FEDERAL) or has any
Liability for Taxes of any Person (other than THOMASTON FEDERAL and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law) as a transferee or successor or by
Contract or otherwise.
(f) Each of the THOMASTON FEDERAL Entities is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a THOMASTON FEDERAL Material Adverse Effect.
(g) Except as disclosed in Section 5.8 of the THOMASTON FEDERAL Disclosure
Memorandum, none of the THOMASTON FEDERAL Entities has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Sections 280G or 162(m) of the Internal Revenue Code.
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(h) Exclusive of the Merger, there has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of THOMASTON FEDERAL Entities
that occurred during or after any Taxable Period in which THOMASTON FEDERAL
Entities incurred a net operating loss that carries over to any Taxable Period
ending after December 31, 1998.
(i) No THOMASTON FEDERAL Entity has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
(j) All material elections with respect to Taxes affecting THOMASTON
FEDERAL Entities have been or will be timely made.
5.9 Allowance for Possible Loan Losses.
- -------------------------------------------
The allowance for possible loan or credit losses (the "Allowance") shown on
the consolidated balance sheets of THOMASTON FEDERAL included in the most recent
THOMASTON FEDERAL Financial Statements dated prior to the date of this Agreement
was, and the Allowance shown on the consolidated balance sheets of THOMASTON
FEDERAL included in the THOMASTON FEDERAL Financial Statements as of dates
subsequent to the execution of this Agreement will be, as of the dates thereof,
adequate (within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for all known or reasonably anticipated losses, net of
recoveries related to loans or credits previously charged off, relating to or
inherent in the loan and lease portfolios (including accrued interest
receivables) of THOMASTON FEDERAL Entities and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
THOMASTON FEDERAL Entities as of the dates thereof, except where the failure of
such Allowance to be so adequate is not reasonably likely to have a THOMASTON
FEDERAL Material Adverse Effect.
5.10 Assets.
- -------------
(a) Except as disclosed in Section 5.10 of the THOMASTON FEDERAL Disclosure
Memorandum or as disclosed or reserved against in the THOMASTON FEDERAL
Financial Statements delivered prior to the date of this Agreement, THOMASTON
FEDERAL Entities have good and marketable title, free and clear of all Liens, to
all of their respective Assets, except for any such Liens or other defects of
title which are not reasonably likely to have a THOMASTON FEDERAL Material
Adverse Effect. All tangible properties used in the businesses of the THOMASTON
FEDERAL Entities are usable in the ordinary course of business consistent with
THOMASTON FEDERAL's past practices.
(b) All Assets which are material to THOMASTON FEDERAL's business on a
consolidated basis, held under leases or subleases by any of the THOMASTON
FEDERAL Entities, are held under valid Contracts enforceable against THOMASTON
FEDERAL in accordance with their respective terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
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other Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and, assuming the enforceability of such Contract
against the third party thereto, each such Contract is in full force and effect.
(c) THOMASTON FEDERAL Entities currently maintain the insurance policies
described in Section 5.10(c) of the THOMASTON FEDERAL Disclosure Memorandum.
None of the THOMASTON FEDERAL Entities has received written notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $25,000 pending
under such policies of insurance and no written notices of claims in excess of
such amounts have been given by any THOMASTON FEDERAL Entity under such
policies.
(d) The Assets of the THOMASTON FEDERAL Entities include all material
Assets required to operate the business of the THOMASTON FEDERAL Entities as
presently conducted.
5.11 Intellectual Property.
- ---------------------------
Each THOMASTON FEDERAL Entity owns or has a license to use all of the
Intellectual Property used by such THOMASTON FEDERAL Entity in the ordinary
course of its business. Except as disclosed in Section 5.11 of the THOMASTON
FEDERAL Disclosure Memorandum, each THOMASTON FEDERAL Entity is the owner of or
has a license to any Intellectual Property sold or licensed to a third party by
such THOMASTON FEDERAL Entity in connection with such THOMASTON FEDERAL Entity's
business operations, and such THOMASTON FEDERAL Entity has the right to convey
by sale or license any Intellectual Property so conveyed. No THOMASTON FEDERAL
Entity is in material Default under any of its Intellectual Property licenses.
No proceedings have been instituted, or are pending or, to the Knowledge of
THOMASTON FEDERAL, threatened, which challenge the rights of any THOMASTON
FEDERAL Entity with respect to Intellectual Property used, sold or licensed by
such THOMASTON FEDERAL Entity in the course of its business, nor has any person
claimed or alleged any rights to such Intellectual Property. To the Knowledge of
THOMASTON FEDERAL, the conduct of the business of the THOMASTON FEDERAL Entities
does not infringe any Intellectual Property of any other person. Except as
disclosed in Section 5.11 of the THOMASTON FEDERAL Disclosure Memorandum, no
THOMASTON FEDERAL Entity is obligated to pay any recurring royalties to any
Person with respect to any such Intellectual Property.
5.12 Environmental Matters.
- ---------------------------
(a) Except as disclosed in Section 5.12 of the THOMASTON FEDERAL Disclosure
Memorandum, to the Knowledge of THOMASTON FEDERAL, each THOMASTON FEDERAL
Entity, its Participation Facilities, and its Operating Properties are, and have
been, in compliance with all Environmental Laws, except for violations which are
not reasonably likely to have, individually or in the aggregate, a THOMASTON
FEDERAL Material Adverse Effect.
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(b) There is no Litigation pending or, to the Knowledge of THOMASTON
FEDERAL, threatened, before any court, governmental agency, or authority or
other forum in which any THOMASTON FEDERAL Entity or any of its Operating
Properties or Participation Facilities (or THOMASTON FEDERAL in respect of such
Operating Property or Participation Facility) has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the emission, migration, release, discharge, spillage, or disposal into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any THOMASTON FEDERAL Entity or any of its Operating Properties or
Participation Facilities or any neighboring property, except for such Litigation
pending or threatened against THOMASTON FEDERAL that is not reasonably likely to
have, individually or in the aggregate, a THOMASTON FEDERAL Material Adverse
Effect, nor, to the Knowledge of THOMASTON FEDERAL, is there any reasonable
basis for any Litigation of a type described in this sentence, except such as is
not reasonably likely to have, individually or in the aggregate, a THOMASTON
FEDERAL Material Adverse Effect.
(c) Except as disclosed in Section 5.12 of the THOMASTON FEDERAL Disclosure
Memorandum, during the period of (i) any THOMASTON FEDERAL Entity's ownership or
operation of any of their respective current Assets, or (ii) any THOMASTON
FEDERAL Entity's participation in the management of any Participation Facility
or any Operating Property, to the Knowledge of THOMASTON FEDERAL, there have
been no emissions, migrations, releases, discharges, spillages, or disposals of
Hazardous Material in, on, at, under, adjacent to, or affecting (or potentially
affecting) such properties or any neighboring properties, except such as are not
reasonably likely to have, individually or in the aggregate, a THOMASTON FEDERAL
Material Adverse Effect. Except as disclosed in Section 5.12 of the THOMASTON
FEDERAL Disclosure Memorandum, prior to the period of (i) any THOMASTON FEDERAL
Entity's ownership or operation of any of their respective current properties,
(ii) any THOMASTON FEDERAL Entity's participation in the management of any
Participation Facility or any Operating Property, to the Knowledge of THOMASTON
FEDERAL, there were no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, or affecting any such property, Participation
Facility or Operating Property, except such as are not reasonably likely to
have, individually or in the aggregate, a THOMASTON FEDERAL Material Adverse
Effect.
5.13 Compliance with Laws.
- ----------------------------
Each THOMASTON FEDERAL Entity has in effect all Permits necessary for it to
own, lease, or operate its material Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a THOMASTON FEDERAL Material
Adverse Effect, and, to the Knowledge of THOMASTON FEDERAL, there has occurred
no Default under any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a THOMASTON FEDERAL Material
Adverse Effect. Except as disclosed in Section 5.13 of the THOMASTON FEDERAL
Disclosure Memorandum, none of the THOMASTON FEDERAL Entities:
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(a) is in Default under any of the provisions of its Charter or Bylaws (or
other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for Defaults which are not
reasonably likely to have, individually or in the aggregate, a THOMASTON FEDERAL
Material Adverse Effect; or
(c) since January 1, 1995, has received any written notification or written
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any THOMASTON FEDERAL Entity is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
THOMASTON FEDERAL Material Adverse Effect, (ii) threatening to revoke any
Permits, the revocation of which is reasonably likely to have, individually or
in the aggregate, a THOMASTON FEDERAL Material Adverse Effect, or (iii)
requiring any THOMASTON FEDERAL Entity to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business or in any
material manner relates to its capital adequacy, its credit or reserve policies,
its management, or the payment of dividends. Copies of all material reports,
correspondence, notices and other documents relating to any inspection, audit,
monitoring or other form of review or enforcement action by a Regulatory
Authority have been made available to FLAG.
5.14 Immigration Matters.
- -------------------------
(a) Except as set forth in Section 5.14(a) of the THOMASTON FEDERAL
Disclosure Memorandum, each THOMASTON FEDERAL Entity has complied with the IRCA
with respect to the completion of Forms I-9 for all employees and the
reverification of the employment status of any and all employees whose
employment authorization documents indicated a limited period of employment
authorization.
(b) Except as set forth in Section 5.14(b) of the THOMASTON FEDERAL
Disclosure Memorandum, with respect to a former employee who has left a
THOMASTON FEDERAL Entity's employment within three (3) years prior to Closing,
the THOMASTON FEDERAL Entity has complied with the IRCA with respect to the
maintenance of Forms I-9 for at least three years from the date of hire or for
one year beyond the date of termination, whichever is later.
5.15 Labor Relations.
- ---------------------
No THOMASTON FEDERAL Entity is the subject of any pending Litigation
asserting that it or any other THOMASTON FEDERAL Entity has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other THOMASTON FEDERAL
Entity to bargain with any labor organization as to wages or conditions of
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employment, nor is any THOMASTON FEDERAL Entity party to any collective
bargaining agreement, nor is there any strike or other labor dispute involving
any THOMASTON FEDERAL Entity, pending or, to the Knowledge of Thomaston Federal,
threatened, or to the Knowledge of THOMASTON FEDERAL, is there any activity
involving any THOMASTON FEDERAL Entity's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.16 Employee Benefit Plans.
- --------------------------------
(a) THOMASTON FEDERAL has disclosed in Section 5.16 of the THOMASTON
FEDERAL Disclosure Memorandum, and has delivered or made available to FLAG prior
to the execution of this Agreement copies in each case of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit plans" as
that term is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any THOMASTON FEDERAL
Entity or ERISA Affiliate (as defined in subparagraph (c) below) thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, "THOMASTON FEDERAL Benefit Plans").
Each THOMASTON FEDERAL Benefit Plan which is an "employee pension benefit plan,"
as that term is defined in Section 3(2) of ERISA, is referred to herein as an
"THOMASTON FEDERAL ERISA Plan." Each THOMASTON FEDERAL ERISA Plan which is also
a "defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referred to herein as an "THOMASTON FEDERAL Pension Plan." No THOMASTON
FEDERAL Pension Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(b) All THOMASTON FEDERAL Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a THOMASTON FEDERAL Material Adverse Effect.
Each THOMASTON FEDERAL ERISA Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and THOMASTON FEDERAL
has no Knowledge of any circumstances likely to result in revocation of any such
favorable determination letter. To the Knowledge of THOMASTON FEDERAL, no
THOMASTON FEDERAL Entity has engaged in a transaction with respect to any
THOMASTON FEDERAL Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any THOMASTON FEDERAL
Entity to a Tax imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a THOMASTON FEDERAL Material Adverse Effect.
(c) No THOMASTON FEDERAL Pension Plan has any "unfunded current liability,"
as that term is defined in Section 302(d)(8)(A) of ERISA, based on actuarial
assumptions set forth for such plan's most recent actuarial valuation. Since the
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date of the most recent actuarial valuation, there has been (i) no material
change in the financial position of any THOMASTON FEDERAL Pension Plan, (ii) no
change in the actuarial assumptions with respect to any THOMASTON FEDERAL
Pension Plan, and (iii) no increase in benefits under any THOMASTON FEDERAL
Pension Plan as a result of plan amendments or changes in applicable Law which
is reasonably likely to have, individually or in the aggregate, a THOMASTON
FEDERAL Material Adverse Effect or materially adversely affect the funding
status of any such plan. Neither any THOMASTON FEDERAL Pension Plan nor any
"single employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any THOMASTON FEDERAL Entity, or the
single-employer plan of any entity which is considered one employer with
THOMASTON FEDERAL under Section 4001 of ERISA or Section 414 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA
Affiliate") has an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is
reasonably likely to have a THOMASTON FEDERAL Material Adverse Effect. No
THOMASTON FEDERAL Entity has provided, or is required to provide, security to a
THOMASTON FEDERAL Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any THOMASTON FEDERAL Entity with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a THOMASTON FEDERAL
Material Adverse Effect. No THOMASTON FEDERAL Entity has incurred any withdrawal
Liability with respect to a multiemployer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a THOMASTON FEDERAL Material
Adverse Effect. No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any THOMASTON FEDERAL Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.16 of the THOMASTON FEDERAL Disclosure
Memorandum, no THOMASTON FEDERAL Entity has any Liability for retiree health and
life benefits under any of the THOMASTON FEDERAL Benefit Plans and there are no
restrictions on the rights of such THOMASTON FEDERAL Entity to amend or
terminate any such retiree health or benefit Plan without incurring any
Liability thereunder, which Liability is reasonably likely to have a THOMASTON
FEDERAL Material Adverse Effect.
(f) Except as disclosed in Section 5.16 of the THOMASTON FEDERAL Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any THOMASTON FEDERAL
Entity from any THOMASTON FEDERAL Entity under any THOMASTON FEDERAL Benefit
Plan or otherwise, (ii) increase any benefits otherwise payable under any
THOMASTON FEDERAL Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit, where such payment, increase, or
acceleration is reasonably likely to have, individually or in the aggregate, a
THOMASTON FEDERAL Material Adverse Effect.
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(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any THOMASTON FEDERAL Entity and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the THOMASTON FEDERAL Financial Statements
to the extent required by and in accordance with GAAP.
5.17 Material Contracts.
- -------------------------
(a) Except as disclosed in Section 5.17(a) of the THOMASTON FEDERAL
Disclosure Memorandum or otherwise reflected in the THOMASTON FEDERAL Financial
Statements, none of the THOMASTON FEDERAL Entities, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $50,000, (ii) any Contract relating to the borrowing
of money by any THOMASTON FEDERAL Entity or the guarantee by any THOMASTON
FEDERAL Entity of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase agreements,
Federal Home Loan Bank advances and trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any THOMASTON FEDERAL Entity from engaging
in any business activities in any geographic area, line of business or otherwise
in competition with any other Person, (iv) any Contract between or among the
THOMASTON FEDERAL Entities, (v) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
THOMASTON FEDERAL Entity, (vi) any exchange traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial Contract, or any other
interest rate or foreign currency protection Contract not included on its
balance sheet which is a financial derivative Contract, and (vii) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a Form 10-K filed by THOMASTON FEDERAL with the SEC (assuming THOMASTON
FEDERAL were subject to the reporting requirements of the 1934 Act) as of the
date of this Agreement (together with all Contracts referred to in Sections 5.10
and 5.16(a), the "THOMASTON FEDERAL Contracts").
(b) With respect to each THOMASTON FEDERAL Contract and except as disclosed
in Section 5.17(b) of the THOMASTON FEDERAL Disclosure Memorandum: (i) assuming
the enforceability of such Contract against the third party thereto, each such
Contract is in full force and effect; (ii) no THOMASTON FEDERAL Entity is in
Default thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a THOMASTON FEDERAL Material Adverse Effect;
(iii) no THOMASTON FEDERAL Entity has repudiated or waived any material
provision of any such Contract; and (iv) no other party to any such Contract is,
to the Knowledge of THOMASTON FEDERAL, in Default in any respect, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a THOMASTON FEDERAL Material Adverse Effect, or has repudiated or
waived any material provision thereunder.
18
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(c) Except as disclosed in Section 5.17(c) of the THOMASTON FEDERAL
Disclosure Memorandum, no officer, director or employee of any THOMASTON FEDERAL
Entity is party to any Contract which restricts or prohibits such officer,
director or employee from engaging in activities competitive with any Person,
including any THOMASTON FEDERAL Entity. All of the indebtedness of any THOMASTON
FEDERAL Entity for money borrowed (excluding deposits obtained in the ordinary
course of business) is prepayable at any time by such THOMASTON FEDERAL Entity
without penalty or premium.
5.18 Legal Proceedings.
- ----------------------
There is no Litigation instituted or pending or, to the Knowledge of
THOMASTON FEDERAL, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any THOMASTON FEDERAL Entity, or against any
director, employee or employee benefit plan (acting in such capacity) of any
THOMASTON FEDERAL Entity, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a
THOMASTON FEDERAL Material Adverse Effect, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any THOMASTON FEDERAL Entity, that are reasonably likely to
have, individually or in the aggregate, a THOMASTON FEDERAL Material Adverse
Effect. Section 5.18 of the THOMASTON FEDERAL Disclosure Memorandum contains a
summary of all Litigation as of the date of this Agreement to which any
THOMASTON FEDERAL Entity is a party and which names a THOMASTON FEDERAL Entity
as a defendant or cross-defendant or for which, to the Knowledge of THOMASTON
FEDERAL, any THOMASTON FEDERAL Entity has any potential Liability.
5.19 Reports.
- -------------
Since January 1, 1995, or the date of organization if later, each THOMASTON
FEDERAL Entity has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities, except for such filings which the failure to
so file is not reasonably likely to have, individually or in the aggregate, a
THOMASTON FEDERAL Material Adverse Effect. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Except as disclosed in Section 5.19 of the THOMASTON FEDERAL Disclosure
Memorandum, since January 1, 1995, no THOMASTON FEDERAL Entity has filed any
Suspicious Activity Report or any claim under any fidelity blanket bond, general
liability, errors and omissions, directors and officers or other insurance
policies that pertain to the operations of its business or the ownership of its
assets.
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5.20 Statements True and Correct.
- ---------------------------------
No written statement, certificate, or other writing furnished or to be
furnished by any THOMASTON FEDERAL Entity to FLAG pursuant to this Agreement
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied in writing by any THOMASTON FEDERAL
Entity specifically for inclusion in the Registration Statement to be filed by
FLAG with the SEC in accordance with Section 8.1 will, when such Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. All documents that any THOMASTON FEDERAL Entity is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law. No documents to be filed by a THOMASTON
FEDERAL Entity with any Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.21 Accounting, Tax and Regulatory Matters.
- -----------------------------------------------
No THOMASTON FEDERAL Entity has taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying for pooling of interest accounting treatment
and as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, or (ii) materially impede or delay receipt of any Consents of
Regulatory Authorities referred to in Section 9.1(b) or result in the imposition
of a condition or restriction of the type referred to in the last sentence of
such Section.
5.22 Charter Provisions.
- ---------------------------
Each THOMASTON FEDERAL Entity has taken all action so that the entering
into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights (other than dissenter's rights) to any Person under the
Charter, Articles of Incorporation, Bylaws or other governing instruments of any
THOMASTON FEDERAL Entity or restrict or impair the ability of FLAG or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any THOMASTON FEDERAL Entity that may be directly or
indirectly acquired by them as a result of the Merger.
5.23 Board Recommendation.
- ----------------------------
The Board of Directors of THOMASTON FEDERAL, at a meeting duly called and
held, has by unanimous vote of those directors present (who constituted all of
the directors then in office) (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interests of the
shareholders of THOMASTON FEDERAL, and (ii) resolved to recommend that the
holders of the shares of THOMASTON FEDERAL Common Stock approve this Agreement.
5.24 Y2K.
- ----------
No THOMASTON FEDERAL Entity has received, nor to THOMASTON FEDERAL's
Knowledge are there facts that would form the basis for the issuance by the OTS
of, a rating of "Needs Improvement" or "Unsatisfactory" on any OTS Year 2000
Report of Examination. THOMASTON FEDERAL has disclosed to FLAG a complete and
accurate copy of its plan, including its good faith estimate of the anticipated
20
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associated costs, for addressing the issues set forth in the Year 2000 guidance
papers issued by the Federal Financial Institutions Examination Council (the
"FFIEC"), including the statement dated May 5, 1997, entitled "Year 2000 Project
Management Awareness," December 17, 1997, entitled "Safety and Soundness
Guidelines Concerning the Year 2000 Business Risk," October 15, 1998, entitled
"Interagency Guidelines Establishing Year 2000 Standards for Safety and
Soundness," and any subsequent guidance papers issued by the FFIEC, as such
issues are, to the knowledge of THOMASTON FEDERAL, reasonably expected to affect
any THOMASTON FEDERAL Entity. Between the date of this Agreement and the
Effective Time, THOMASTON FEDERAL shall use its reasonable best efforts to
implement such plan. THOMASTON FEDERAL has formed a committee to review policies
and directives issued by Regulatory Authorities with respect to preparedness for
year 2000 data processing and other operations, and intends to implement such
committee's recommendations for ensuring compliance with such policies and
directives.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF FLAG
--------------------------------------
FLAG hereby represents and warrants to THOMASTON FEDERAL as follows:
6.1 Organization, Standing, and Power.
- -----------------------------------------
FLAG is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Georgia, and has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its material Assets. FLAG is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect. The minute book and other organizational documents for FLAG have
been made available to THOMASTON FEDERAL for its review and, except as disclosed
in Section 6.1 of the FLAG Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings of
the Board of Directors and shareholders thereof.
6.2 Authority of FLAG; No Breach By Agreement.
- ----------------------------------------------
(a) FLAG has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of FLAG. This Agreement
represents a legal, valid, and binding obligation of FLAG, enforceable against
FLAG in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
21
<PAGE>
(b) Neither the execution and delivery of this Agreement by FLAG, nor the
consummation by FLAG of the transactions contemplated hereby, nor compliance by
FLAG with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of FLAG's Articles of Incorporation or Bylaws, or the
Charter, or Articles of Incorporation or Bylaws of any FLAG Entity, or any
resolution adopted by the Board of Directors or the shareholders of any FLAG
Entity, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any FLAG
Entity under, any Contract or Permit of any FLAG Entity, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a FLAG Material Adverse Effect, or (iii)
subject to receipt of the requisite Consents referred to in Section 9. 1 (b),
constitute or result in a Default under, or require any Consent pursuant to, any
Law or Order applicable to any FLAG Entity or any of their respective material
Assets (including any FLAG Entity becoming subject to or liable for the payment
of any Tax on any of the Assets owned by any FLAG Entity being reassessed or
revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a FLAG Material Adverse Effect or prevent or restrict the
consummation of the transaction contemplated by this Agreement, no notice to,
filing with, or Consent of, any public body or authority is necessary for the
consummation by FLAG of the Merger and the other transactions contemplated in
this Agreement.
6.3 Capital Stock.
- ------------------
(a) The authorized capital stock of FLAG consists of (i) 20,000,000 shares
of FLAG Common Stock, of which 6,561,879 shares are issued and outstanding as of
the date of this Agreement, and (ii) 10,000,000 shares of FLAG Preferred Stock,
of which no shares are issued and outstanding. All of the issued and outstanding
shares of FLAG Capital Stock are, and all of the shares of FLAG Common Stock to
be issued in exchange for shares of THOMASTON FEDERAL Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of FLAG Capital
Stock has been, and none of the shares of FLAG Common Stock to be issued in
exchange for shares of THOMASTON FEDERAL Common Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past shareholders of FLAG or in violation of any applicable Law.
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(b) Except as set forth in Section 6.3(a), or as disclosed in Section 6.3
of the FLAG Disclosure Memorandum, there are no shares of capital stock or other
equity securities of FLAG outstanding and no outstanding Equity Rights relating
to the capital stock of FLAG.
6.4 FLAG Subsidiaries.
- -----------------------
FLAG has disclosed in Section 6.4 of the FLAG Disclosure Memorandum all of
the FLAG Subsidiaries that are corporations (identifying its jurisdiction of
incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed to
transact business, and the number of shares owned and percentage ownership
interest represented by such share ownership) and all of the FLAG Subsidiaries
that are general or limited partnerships, limited liability companies, or other
non-corporate entities (identifying the Law under which such entity is
organized, each jurisdiction in which the character of its Assets or the nature
or conduct of its business requires it to be qualified and/or licensed to
transact business, and the amount and nature of the ownership interest therein).
Except as disclosed in Section 6.4 of the FLAG Disclosure Memorandum, FLAG or
one of its wholly-owned Subsidiaries owns all of the issued and outstanding
shares of capital stock (or other equity interests) of each FLAG Subsidiary. No
capital stock (or other equity interest) of any FLAG Subsidiary are or may
become required to be issued (other than to another FLAG Entity) by reason of
any Equity Rights, and there are no Contracts by which any FLAG Subsidiary is
bound to issue (other than to another FLAG Entity) additional shares of its
capital stock (or other equity interests) or Equity Rights or by which any FLAG
Entity is or may be bound to transfer any shares of the capital stock (or other
equity interests) of any FLAG Subsidiary (other than to another FLAG Entity).
There are no Contracts relating to the rights of any FLAG Entity to vote or to
dispose of any shares of the capital stock (or other equity interests) of any
FLAG Subsidiary. All of the shares of capital stock (or other equity interests)
of each FLAG Subsidiary held by a FLAG Entity are fully paid and nonassessable
under the applicable corporation or banking Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by the FLAG Entity
free and clear of any Lien. Each FLAG Subsidiary is either a bank, savings
association or a corporation, and is duly organized, validly existing, and (as
to corporations) in good standing under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease and operate its Assets and to carry on its
business as now conducted. Each FLAG Subsidiary is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
FLAG Material Adverse Effect. Each FLAG Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder. The minute book and other
organizational documents for each FLAG Subsidiary have been made available to
THOMASTON FEDERAL for its review, and, except as disclosed in Section 6.4 of the
FLAG Disclosure Memorandum, are true and complete in all material respects as in
effect as of the date of this Agreement and accurately reflect in all material
respects all amendments thereto and all proceedings of the Board of Directors
and shareholders thereof.
23
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6.5 SEC Filings, Financial Statements.
- --------------------------------------
(a) FLAG has timely filed and made available to THOMASTON FEDERAL all SEC
Documents required to be filed by FLAG since December 31, 1993 (the "FLAG SEC
Reports"). The FLAG SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such FLAG SEC Reports or necessary in
order to make the statements in such FLAG SEC Reports, in light of the
circumstances under which they were made, not misleading. No FLAG Subsidiary is
required to file any SEC Documents.
(b) Each of the FLAG Financial Statements (including, in each case, any
related notes) contained in the FLAG SEC Reports, including any FLAG SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of FLAG
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
6.6 Absence of Undisclosed Liabilities.
- --------------------------------------------
No FLAG Entity has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a FLAG Material Adverse Effect, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of FLAG as of December 31, 1998, included in the FLAG Financial
Statements or reflected in the notes thereto. No FLAG Entity has incurred or
paid any Liability since December 31, 1998, except for such Liabilities incurred
or paid (i) in the ordinary course of business consistent with past business
practice and which are not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect or (ii) in connection with the
transactions contemplated by this Agreement.
6.7 Absence of Certain Changes or Events.
- --------------------------------------------
Since December 31, 1998, except as disclosed in the FLAG Financial
Statements delivered prior to the date of this Agreement or as disclosed in
Section 6.7 of the FLAG Disclosure Memorandum, (i) there have been no events,
changes or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a FLAG Material Adverse Effect, and (ii) the
FLAG Entities have not taken any action, or failed to take any action, prior to
the date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a material breach or violation of
any of the covenants and agreements of FLAG provided in Article 7.
24
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6.8 Tax Matters.
- ----------------
(a) All Tax Returns required to be filed by or on behalf of any of the FLAG
Entities have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1998, and on or before the date of the most recent fiscal year end immediately
preceding the Effective Time, except to the extent that all such failures to
file, taken together, are not reasonably likely to have a FLAG Material Adverse
Effect, and all Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. There is no audit
examination, deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a FLAG Material Adverse Effect, except as reserved against in
the FLAG Financial Statements delivered prior to the date of this Agreement or
as disclosed in Section 6.8 of the FLAG Disclosure Memorandum. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no Liens with respect to Taxes
upon any of the Assets of the FLAG Entities, except for any such Liens which are
not reasonably likely to have a FLAG Material Adverse Effect or with respect to
which the Taxes are not yet due and payable.
(b) None of the FLAG Entities has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) The provision for any Taxes due or to become due for any of the FLAG
Entities for the period or periods through and including the date of the
respective FLAG Financial Statements that has been made and is reflected on such
FLAG Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the FLAG Entities have been provided for in
accordance with GAAP.
(e) None of the FLAG Entities is a party to any Tax allocation or sharing
agreement and none of the FLAG Entities has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was FLAG) or has any Liability for Taxes of any Person (other
than FLAG and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign, Law) as a transferee or
successor or by Contract or otherwise.
(f) Each of the FLAG Entities is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a FLAG Material Adverse Effect.
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(g) Except as disclosed in Section 6.8 of the FLAG Disclosure Memorandum,
none of the FLAG Entities has made any payments, is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Sections 280G or 162(m)
of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the FLAG Entities that occurred during or after any
Taxable Period in which the FLAG Entities incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1998.
(i) No FLAG Entity has or has had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
(j) All material elections with respect to Taxes affecting the FLAG
Entities have been or will be timely made.
6.9 Allowance for Possible Loan Losses.
- ---------------------------------------
The Allowance shown on the consolidated balance sheets of FLAG included in
the most recent FLAG Financial Statements dated prior to the date of this
Agreement was, and the Allowance shown on the consolidated balance sheets of
FLAG included in the FLAG Financial Statements as of dates subsequent to the
execution of this Agreement will be, as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or guidelines) to
provide for all known or reasonably anticipated losses relating to or inherent
in the loan and lease portfolios (including accrued interest receivables) of the
FLAG Entities and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the FLAG Entities as of the dates
thereof, except where the failure of such Allowance to be so adequate is not
reasonably likely to have a FLAG Material Adverse Effect.
6.10 Assets.
- -------------
(a) Except as disclosed in Section 6.10 of the FLAG Disclosure Memorandum
or as disclosed or reserved against in the FLAG Financial Statements delivered
prior to the date of this Agreement, the FLAG Entities have good and marketable
title, free and clear of all Liens, to all of their respective Assets, except
for any such Liens or other defects of title which are not reasonably likely to
have a FLAG Material Adverse Effect. All tangible properties used in the
businesses of the FLAG Entities are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
FLAG's past practices.
(b) All Assets which are material to FLAG's business on a consolidated
basis, held under leases or subleases by any of the FLAG Entities, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
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(c) The FLAG Entities currently maintain insurance similar in amounts,
scope and coverage to that maintained by other peer banking organizations. None
of the FLAG Entities has received notice from any insurance carrier that (i) any
policy of insurance will be cancelled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be substantially increased. There are presently no claims for
amounts exceeding in any individual case $25,000 pending under such policies of
insurance and no notices of claims in excess of such amounts have been given by
any FLAG Entity under such policies.
(d) The Assets of the FLAG Entities include all Assets required to operate
the business of the FLAG Entities as presently conducted.
6.11 Intellectual Property.
- ----------------------------
Each FLAG Entity owns or has a license to use all of the Intellectual
Property used by such FLAG Entity in the course of its business. Each FLAG
Entity is the owner of or has a license to any Intellectual Property sold or
licensed to a third party by such FLAG Entity in connection with such FLAG
Entity's business operations, and such FLAG Entity has the right to convey by
sale or license any Intellectual Property so conveyed. No FLAG Entity is in
Default under any of its Intellectual Property licenses. No proceedings have
been instituted, or are pending or to the Knowledge of FLAG threatened, which
challenge the rights of any FLAG Entity with respect to Intellectual Property
used, sold or licensed by such FLAG Entity in the course of its business, nor
has any person claimed or alleged any rights to such Intellectual Property. The
conduct of the business of the FLAG Entities does not infringe any Intellectual
Property of any other person. Except as disclosed in Section 6.11 of the FLAG
Disclosure Memorandum, no FLAG Entity is obligated to pay any recurring
royalties to any Person with respect to any such Intellectual Property.
6.12 Environmental Matters.
- ---------------------------
(a) To the Knowledge of FLAG, each FLAG Entity, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a FLAG Material Adverse Effect.
(b) There is no Litigation pending or threatened before any court,
governmental agency, or authority or other forum in which any FLAG Entity or any
of its Operating Properties or Participation Facilities (or FLAG in respect of
such Operating Property or Participation Facility) has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the emission, migration, release, discharge, spillage, or disposal into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any FLAG Entity or any of its Operating Properties or Participation
Facilities or any neighboring property, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect, nor is there any reasonable basis for
any Litigation of a type described in this sentence, except such as is not
reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect.
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(c) During the period of (i) any FLAG Entity's ownership or operation of
any of their respective current properties, (ii) any FLAG Entity's participation
in the management of any Participation Facility or any Operating Property, there
have been no emissions, migrations, releases, discharges, spillages, or
disposals of Hazardous Material in, on, at, under, adjacent to, or affecting (or
potentially affecting) such properties or any neighboring properties, except
such as are not reasonably likely to have, individually or in the aggregate, a
FLAG Material Adverse Effect. Prior to the period of (i) any FLAG Entity's
ownership or operation of any of their respective current properties, (ii) any
FLAG Entity's participation in the management of any Participation Facility or
any Operating Property, to the Knowledge of FLAG, there were no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect.
6.13 Compliance with Laws.
- -----------------------------
FLAG is duly registered as a bank holding company under federal and state
bank holding company Laws. Each FLAG Entity has in effect all Permits necessary
for it to own, lease or operate its material Assets and to carry on its business
as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect, and there has occurred no Default under any such Permit, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect. Except as disclosed in Section 6.13
of the FLAG Disclosure Memorandum, none of the FLAG Entities:
(a) is in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which are not
reasonably likely to, have, individually or in the aggregate, a FLAG Material
Adverse Effect; or
(c) since January 1, 1995, has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any FLAG Entity is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of which
is reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect, or (iii) requiring any FLAG Entity to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment or memorandum of understanding, or to adopt any Board resolution or
similar undertaking, which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit or reserve policies,
its management, or the payment of dividends. Copies of all material reports,
correspondence, notices and other documents relating to any inspection, audit,
monitoring or other form of review or enforcement action by a Regulatory
Authority have been made available to THOMASTON FEDERAL.
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6.14 Labor Relations.
- ----------------------
No FLAG Entity is the subject of any Litigation asserting that it or any
other FLAG Entity has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or comparable state law) or seeking to compel
it or any other FLAG Entity to bargain with any labor organization as to wages
or conditions of employment, nor is any FLAG Entity party to any collective
bargaining agreement, nor is there any strike or other labor dispute involving
any FLAG Entity, pending or threatened, or to the Knowledge of FLAG, is there
any activity involving any FLAG Entity's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
6.15 Employee Benefit Plans.
- ----------------------------
(a) FLAG has disclosed in Section 6.15 of the FLAG Disclosure Memorandum
and has delivered or made available to THOMASTON FEDERAL prior to the execution
of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any FLAG Entity or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "FLAG Benefit
Plans"). Each FLAG Benefit Plan which is an "employee pension benefit plan," as
that term is defined in Section 3(2) of ERISA, is referred to herein as a "FLAG
ERISA Plan." Each FLAG ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code) is referred to herein as
a "FLAG Pension Plan." No FLAG Pension Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA.
(b) All FLAG Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect. Each FLAG ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
FLAG has no Knowledge of any circumstances likely to result in revocation of any
such favorable determination letter. To the Knowledge of Flag, no FLAG Entity
has engaged in a transaction with respect to any FLAG Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any FLAG Entity to a Tax imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA in amounts which are reasonably
likely to have, individually or in the aggregate, a FLAG Material Adverse
Effect.
(c) No FLAG Pension Plan has any "unfunded current liability," as that term
is defined in Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set
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forth for such plan's most recent actuarial valuation. Since the date of the
most recent actuarial valuation, there has been (i) no material change in the
financial position of any FLAG Pension Plan, (ii) no change in the actuarial
assumptions with respect to any FLAG Pension Plan, and (iii) no increase in
benefits under any FLAG Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect or materially adversely affect the
funding status of any such plan. Neither any FLAG Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any FLAG Entity, or the single-employer plan
of any ERISA Affiliate of FLAG has an "accumulated funding deficiency" within
the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
which is reasonably likely to have a FLAG Material Adverse Effect. No FLAG
Entity has provided, or is required to provide, security to a FLAG Pension Plan
or to any single-employer plan of an ERISA Affiliate pursuant to Section 401
(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any FLAG Entity with respect to any ongoing, frozen or terminated
single-employer plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a FLAG Material Adverse Effect. No FLAG
Entity has incurred any withdrawal Liability with respect to a multiemployer
plan under Subtitle B of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate), which Liability is reasonably likely to
have a FLAG Material Adverse Effect. No notice of a "reportable event," within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any FLAG Pension Plan or
by any ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.15 of the FLAG Disclosure Memorandum,
no FLAG Entity has any Liability for retiree health and life benefits under any
of the FLAG Benefit Plans and there are no restrictions on the rights of such
FLAG Entity to amend or terminate any such retiree health or benefit Plan
without incurring any Liability thereunder, which Liability is reasonably likely
to have a FLAG Material Adverse Effect.
(f) Except as disclosed in Section 6.15 of the FLAG Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any FLAG Entity from any FLAG Entity
under any FLAG Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any FLAG Benefit Plan, or (iii) result in any acceleration of the
time of payment or vesting of any such benefit, where such payment, increase, or
acceleration is reasonably likely to have, individually or in the aggregate, a
FLAG Material Adverse Effect.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any FLAG Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the FLAG Financial Statements to the extent
required by and in accordance with GAAP.
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6.16 Material Contracts.
- --------------------------
Except as disclosed in Section 6.16 of the FLAG Disclosure Memorandum or
otherwise reflected in the FLAG Financial Statements, none of the FLAG Entities,
nor any of their respective Assets, businesses, or operations, is a party to, or
is bound or affected by, or receives benefits under, (i) any employment,
severance, termination, consulting or retirement Contract providing for
aggregate payments to any Person in any calendar year in excess of $50,000, (ii)
any Contract relating to the borrowing of money by any FLAG Entity or the
guarantee by any FLAG Entity of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, and Federal Home Loan Bank advances of depository
institution Subsidiaries, trade payables and Contracts relating to borrowings or
guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts any FLAG Entity from engaging in any business activities
in any geographic area, line of business or otherwise in competition with any
other Person, (iv) any Contract between or among FLAG Entities, (v) any Contract
relating to the provision of data processing, network communication, or other
technical services to or by any FLAG Entity, (vi) any exchange-traded or
over-the-counter swap, forward, future, option, cap, floor, or collar financial
Contract, or any other interest rate or foreign currency protection Contract not
included on its balance sheet which is a financial derivative Contract, or (vii)
any other Contract or amendment thereto that would be required to be filed as an
exhibit to a Form 10-K filed by FLAG with the SEC as of the date of this
Agreement that has not been filed as an exhibit to FLAG's Form 10-K filed for
the fiscal year ended December 31, 1998, or in an SEC Document and identified to
THOMASTON FEDERAL (together with all Contracts referred to in Sections 6.10 and
6.15(a), the "FLAG Contracts"). With respect to each FLAG Contract and except as
disclosed in Section 6.16 of the FLAG Disclosure Memorandum: (i) the Contract is
in full force and effect; (ii) no FLAG Entity is in Default thereunder, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect; (iii) no FLAG Entity has repudiated
or waived any material provision of any such Contract; and (iv) no other party
to any such Contract is, to the Knowledge of FLAG, in Default in any respect,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a FLAG Material Adverse Effect, or has repudiated or waived any
material provision thereunder. All of the indebtedness of any FLAG Entity for
money borrowed is prepayable at any time by such FLAG Entity without penalty or
premium. Except as disclosed in Section 6.16 of the FLAG Disclosure Memorandum,
no officer, director or employee of any FLAG Entity is party to any Contract
which restricts or prohibits such officer, director or employee from engaging in
activities competitive with any Person, including any FLAG Entity.
6.17 Legal Proceedings.
- -----------------------
There is no Litigation instituted or pending or, to the Knowledge of FLAG,
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable outcome)
against any FLAG Entity, or against any director, employee or employee benefit
plan of any FLAG Entity, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a
FLAG Material Adverse Effect, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any FLAG Entity, that are reasonably likely to have, individually or in the
aggregate, a FLAG Material Adverse Effect. Section 6.17 of the FLAG Disclosure
Memorandum contains a summary of all Litigation as of the date of this Agreement
to which any FLAG Entity is a party and which names a FLAG Entity as a defendant
or cross-defendant or for which any FLAG Entity has any potential Liability.
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6.18 Reports.
- --------------
Since January 1, 1993, each FLAG Entity has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a FLAG Material
Adverse Effect). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
6.19 Statements True and Correct
- --------------------------------
No statement, certificate, instrument or other writing furnished or to be
furnished by any FLAG Entity to THOMASTON FEDERAL pursuant to this Agreement or
any other document, agreement or instrument referred to herein contains or will
contain any untrue statement of material fact or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the information supplied or
to be supplied by any FLAG Entity for inclusion in the Registration Statement to
be filed by FLAG with the SEC, will, when such Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the documents to be filed by any FLAG Entity with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. All documents that any FLAG Entity thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
6.20 Accounting, Tax and Regulatory Matters.
- --------------------------------------------
No FLAG Entity has taken or agreed to take any action or has any Knowledge
of any fact or circumstance that is reasonably likely to (i) prevent the Merger
from qualifying for pooling of interests accounting treatment and as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.l(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.21 Charter Provisions.
- ---------------------------
Each FLAG Entity has taken all action so that the entering into of this
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement do not and will not result in the grant of any
rights to any Person under the Charter, Articles of Incorporation, Bylaws or
other governing instruments of any FLAG Entity or restrict or impair the ability
of FLAG or any of its Subsidiaries to vote, or otherwise to exercise the rights
of a shareholder with respect to, shares of any FLAG Entity that may be directly
or indirectly acquired or controlled by them.
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6.22 Board Approval.
- ---------------------
The Board of Directors of FLAG, at a meeting duly called and held, has by
unanimous vote of those directors present (who constituted all of the directors
then in office) determined that this Agreement and the transactions contemplated
hereby, including the Merger, taken together, are fair to and in the best
interests of the FLAG shareholders. Applicable Law does not require that FLAG
shareholders approve this Agreement and/or the transactions contemplated hereby,
including the Merger.
6.23 Y2K. No FLAG Entity has received, nor to FLAG's Knowledge are there facts
that would form the basis for the issuance of, a "Year 2000 Deficiency
Notification Letter" (as such term is employed in the Federal Reserve's
Supervision and Regulatory Letter No. SR 98-3 (SUP), dated March 4, 1998). FLAG
has disclosed to THOMASTON FEDERAL a complete and accurate copy of its plan,
including its good faith estimate of the anticipated associated costs, for
addressing the issues set forth in the Year 2000 guidance papers issued by the
Federal Financial Institutions Examination Council (the "FFIEC"), including the
statement dated May 5, 1997, entitled "Year 2000 Project Management Awareness,"
December 17, 1997, entitled "Safety and Soundness Guidelines Concerning the Year
2000 Business Risk," October 15, 1998, entitled "Interagency Guidelines
Establishing Year 2000 Standards for Safety and Soundness," and any subsequent
guidance papers issued by the FFIEC, as such issues affect any FLAG Entity.
Between the date of this Agreement and the Effective Time, FLAG shall use its
reasonable best efforts to implement such plan. FLAG has formed a committee to
review policies and directives issued by Regulatory Authorities with respect to
preparedness for year 2000 data processing and other operations, and intends to
implement such committee's recommendations for ensuring compliance with such
policies and directives.
6.24 Matters Relating to INTERIM.
- -----------------------------------
At the Effective Time, INTERIM will be an interim federal savings
association chartered by the OTS, and will have the corporate power and
authority to carry on its business as contemplated by this Agreement and to own,
lease and operate its material Assets. INTERIM will have the corporate power
necessary to approve, adopt and ratify this Agreement and to consummate the
transactions contemplated hereby. The approval, adoption and ratification of
this Agreement, the performance of the Agreement, and the consummation of the
transactions contemplated therein, including the Merger, will be duly and
validly authorized by all necessary corporate action in respect thereof on the
part of INTERIM, subject to the approval of the Agreement by FLAG, as the sole
shareholder of INTERIM, which is the only shareholder vote required for approval
of the Agreement, and the consummation of the Merger by INTERIM. When INTERIM
approves, adopts and ratifies this Agreement, this Agreement will represent a
legal, valid and binding obligation of INTERIM, enforceable against INTERIM in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
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ARTICLE 7.
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of THOMASTON FEDERAL.
- ------------------------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of FLAG
shall have been obtained, and except as otherwise expressly contemplated herein,
THOMASTON FEDERAL shall, and shall cause each of its Subsidiaries to (a) operate
its business only in the usual, regular, and ordinary course, (b) preserve
intact its business organization and Assets and maintain its rights and
franchises, and (c) take no action which would (i) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentences of Section 9.1(b) or 9.1(c), or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
7.2 Negative Covenants of THOMASTON FEDERAL.
- -----------------------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of FLAG
shall have been obtained, and except as otherwise expressly contemplated herein,
THOMASTON FEDERAL covenants and agrees that it will not do or agree or commit to
do, or permit any of its Subsidiaries to do or agree or commit to do, any of the
following:
(a) amend the Charter, Articles of Incorporation, Bylaws or other governing
instruments of any THOMASTON FEDERAL entity, except to amend the Bylaws of
THOMASTON FEDERAL to allow THOMASTON FEDERAL to hold its annual meeting of
shareholders to be held in 1999 within 210 days after the end of the 1998 fiscal
year; or
(b) incur any additional debt obligation or other obligation for borrowed
money (other than indebtedness of a THOMASTON FEDERAL Entity to another
THOMASTON FEDERAL Entity) in excess of an aggregate of $100,000 (for THOMASTON
FEDERAL Entities on a consolidated basis) except in the ordinary course of the
business of the THOMASTON FEDERAL Subsidiaries consistent with past practices
(which shall include, for the THOMASTON FEDERAL Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank or Federal Home Loan Bank, and entry into
repurchase agreements fully secured by U.S. government or agency securities), or
impose, or suffer the imposition, on any Asset of any THOMASTON FEDERAL Entity
of any Lien or permit any such Lien to exist (other than in connection with
deposits, repurchase agreements, bankers acceptances, "treasury tax and loan"
accounts established in the ordinary course of business, the satisfaction of
legal requirements in the exercise of trust powers, and Liens in effect as of
the date hereof that are disclosed in Section 7.2(b) of the THOMASTON FEDERAL
Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any THOMASTON FEDERAL Entity, or declare or pay any dividend or
make any other distribution in respect of THOMASTON FEDERAL's capital stock,
except in accordance with past practice specifically disclosed in Section 7.2(c)
of the THOMASTON FEDERAL Disclosure Memorandum; or
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(d) except for this Agreement, or pursuant to the exercise of stock options
outstanding as of the date hereof and pursuant to the terms thereof in existence
on the date hereof, or as disclosed in Section 7.2(d) of the THOMASTON FEDERAL
Disclosure Memorandum, issue, sell, pledge, encumber, authorize the issuance of,
enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional shares of
THOMASTON FEDERAL Common Stock or any other capital stock of any THOMASTON
FEDERAL Entity, or any stock appreciation rights, or any option, warrant, or
other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any THOMASTON
FEDERAL Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of THOMASTON FEDERAL Common Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any Asset
having a book value in excess of $100,000 other than in the ordinary course of
business for reasonable and adequate consideration or any shares of capital
stock of any THOMASTON FEDERAL Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another THOMASTON FEDERAL Entity); or
(f) except for loans made in the ordinary course of its business, make any
material investment, either by purchase of stock or securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person other than a
wholly owned THOMASTON FEDERAL Subsidiary, or otherwise acquire direct or
indirect control over any Person, other than in connection with (i) foreclosures
in the ordinary course of business, (ii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity, or (iii) the creation of new
wholly owned Subsidiaries organized to conduct or continue activities otherwise
permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any THOMASTON FEDERAL Entity, other than in the ordinary course of
business, provided that THOMASTON FEDERAL will not increase any officer's or
employee's compensation by more than ten percent (10%); pay any severance or
termination pay or any bonus other than pursuant to written policies or written
Contracts in effect on the date of this Agreement and disclosed in Section
7.2(g) of the THOMASTON FEDERAL Disclosure Memorandum; and enter into or amend
any severance agreements with officers of any THOMASTON FEDERAL Entity; grant
any material increase in fees or other increases in compensation or other
benefits to directors of any THOMASTON FEDERAL Entity except in accordance with
past practice disclosed in Section 7.2(g) of the THOMASTON FEDERAL Disclosure
Memorandum; or voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits or other Equity Rights; or
(h) enter into or amend any employment Contract between any THOMASTON
FEDERAL Entity and any Person having a salary thereunder in excess of $50,000
per year (unless such amendment is required by Law) that the THOMASTON FEDERAL
Entity does not have the unconditional right to terminate without Liability
(other than Liability for services already rendered), at any time on or after
the Effective Time; or
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(i) adopt any new employee benefit plan of any THOMASTON FEDERAL Entity or
terminate or withdraw from, or make any material change in or to, any existing
employee benefit plans of any THOMASTON FEDERAL Entity other than any such
change that is required by Law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax qualified status of any such plan, or make any
distributions from such employee benefit plans, except as required by Law, the
terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice or
except as set forth in Section 7.2(k) of the THOMASTON FEDERAL Disclosure
Memorandum, settle any Litigation involving any Liability of any THOMASTON
FEDERAL Entity for material money damages or restrictions upon the operations of
any THOMASTON FEDERAL Entity; or
(l) except in the ordinary course of business, enter into, modify, amend or
terminate any material Contract (including any loan Contract with an unpaid
balance exceeding $50,000) or waive, release, compromise or assign any material
rights or claims.
7.3 Affirmative Covenants of FLAG.
- ------------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of THOMASTON
FEDERAL shall have been obtained, and except as otherwise expressly contemplated
herein, FLAG shall and shall cause each of its Subsidiaries to (a) operate its
business only in the usual, regular, and ordinary course, (b) preserve intact
its business organization and Assets and maintain its rights and franchises, and
(c) take no action which would (i) materially adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely
affect the ability of any Party to perform its covenants and agreements under
this Agreement.
7.4 Negative Covenants of FLAG.
- ----------------------------------
From the date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, unless the prior written consent of THOMASTON
FEDERAL shall have been obtained, and except as otherwise expressly contemplated
herein, FLAG covenants and agrees that it will not amend the Articles of
Incorporation or Bylaws of FLAG in any manner adverse to the holders of
THOMASTON FEDERAL Common Stock, or take any action which will materially
adversely impact the ability of FLAG Entities to consummate the transactions
contemplated by this Agreement.
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7.5 Adverse Changes in Condition.
- ---------------------------------
Each of FLAG and THOMASTON FEDERAL agrees to give written notice promptly
to the other upon becoming aware of the occurrence or impending occurrence of
any event or circumstance relating to it or any of its Subsidiaries which (i) is
reasonably likely to have, individually or in the aggregate, a THOMASTON FEDERAL
Material Adverse Effect or a FLAG Material Adverse Effect, as applicable, or
(ii) would cause or constitute a material breach of any of its representations,
warranties, or covenants contained herein, and to use its reasonable efforts to
prevent or promptly to remedy the same.
7.6 Reports.
- ------------
Each of FLAG and THOMASTON FEDERAL and their Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other copies
of all such periodic reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8.
ADDITIONAL AGREEMENTS
---------------------
8.1 Registration Statement.
- ---------------------------
(a) As soon as practicable after execution of this Agreement, FLAG shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable best efforts to cause the Registration Statement to become effective
under the 1933 Act and take any action required to be taken under the applicable
state Blue Sky or Securities Laws in connection with the issuance of the shares
of FLAG Common Stock to the shareholders of THOMASTON FEDERAL upon consummation
of the Merger. No filing of, or amendment or supplement to, the Registration
Statement will be made by FLAG without providing THOMASTON FEDERAL the
opportunity to review and comment thereon. FLAG will advise THOMASTON FEDERAL
promptly after it receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualification of FLAG
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment to the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. THOMASTON FEDERAL shall cooperate in the preparation and
filing of the Registration Statement and shall furnish all information
concerning it and the holders of its capital stock as FLAG may reasonably
request in connection with such action. FLAG and THOMASTON FEDERAL shall make
all necessary filings with respect to the Merger under the Securities Laws.
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(b) FLAG will indemnify and hold harmless THOMASTON FEDERAL its directors,
officers and other persons, if any, who control THOMASTON FEDERAL within the
meaning of the Securities Act from and against (including, without limitation,
advance, prior to final disposition of the matter, the expenses of defending)
any losses, claims, damages, liabilities or judgments, joint or several, to
which they or any of them may become subject, insofar as such losses, claims,
damages, liabilities, or judgments (or actions in respect thereof) arise out of
or are based upon an untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or in any amendment or supplement
thereto, or in any state application for qualification, permit, exemption or
registration as a broker/dealer, or in any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will advance expenses to or reimburse
each such person for any legal or other expenses reasonably incurred by such
person in connection with investigating or defending any such action or claim to
the maximum extent permitted by the GBCC; provided, however, that FLAG shall not
be liable, in any such case, to the extent that any such loss, claim, damage,
liability, or judgment (or action in respect thereof) arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, or any such amendment or supplement
thereto, or in any such state application, or in any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to FLAG by or on behalf of either THOMASTON FEDERAL or any officer, director or
affiliate of THOMASTON FEDERAL specifically for use therein.
(c) Promptly after receipt by an indemnified party under subparagraph (b)
above of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against FLAG under such
subparagraph, notify FLAG in writing of the commencement thereof. In case any
such action shall be brought against any indemnified party and it shall notify
FLAG of the commencement thereof, FLAG shall be entitled to participate therein
and, to the extent that it shall wish, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party, and, after notice
from FLAG to such indemnified party of its election so to assume the defense
thereof, FLAG shall not be liable to such indemnified party under such
subparagraph for any legal expenses of other counsel or any other expenses
subsequently incurred by such indemnified party; provided, however, if FLAG
elects not to assume such defense or if counsel for the indemnified party
advises FLAG in writing that there are material substantive issues which raise
conflicts of interest between FLAG or THOMASTON FEDERAL and the indemnified
party, such indemnified party may retain counsel satisfactory to it and FLAG
shall pay all reasonable fees and expenses of such counsel for the indemnified
party promptly as statements therefor are received. Notwithstanding the
foregoing, FLAG shall not be obligated to pay the fees and expenses of more than
one counsel for all parties indemnified by FLAG in respect of such claim unless,
in the reasonable judgment of any such indemnified party, a conflict of interest
exists between such indemnified party and any other of such indemnified parties
in respect to such claims.
8.2 Nasdaq Listing.
- -------------------
FLAG shall use its reasonable efforts to list, prior to the Effective Time,
on the Nasdaq National Market the shares of FLAG Common Stock to be issued to
the holders of THOMASTON FEDERAL Common Stock pursuant to the Merger, and FLAG
shall give all notices and make all filings with the NASD required in connection
with the transactions contemplated herein.
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8.3 Shareholder Approval.
- -------------------------
(a) THOMASTON FEDERAL shall call a Shareholders' Meeting, to be held as
soon as reasonably practicable after the Registration Statement is declared
effective by the SEC, for the purpose of voting upon approval of this Agreement
and such other related matters as it deems appropriate. In connection with the
Shareholders' Meeting, the Board of Directors of THOMASTON FEDERAL shall
recommend to its shareholders, subject to the conditions in such authorization
and recommendation by the Board of Directors, the approval of the matters
submitted for approval (subject to the Board of Directors of THOMASTON FEDERAL,
after having consulted with and considered the advice of outside counsel,
reasonably determining in good faith that the making of such recommendation, or
the failure to withdraw or modify its recommendation, would constitute a breach
of fiduciary duties of the members of such Board of Directors to THOMASTON
FEDERAL's shareholders, under applicable law), and the Board of Directors and
officers of THOMASTON FEDERAL shall use their reasonable efforts to obtain such
shareholders' approval (subject to the Board of Directors of THOMASTON FEDERAL,
after having consulted with and considered the advice of outside counsel,
reasonably determining in good faith that the taking of such actions would
constitute a breach of fiduciary duties of the members of such Board of
Directors to the THOMASTON FEDERAL shareholders, under applicable law).
(b) INTERIM shall call an INTERIM Shareholders' Meeting, to be held as soon
as reasonably practicable after its organization, for the purpose of voting upon
approval of this Agreement and such other related matters as it deems
appropriate. In connection with the INTERIM Shareholders' Meeting, the Board of
Directors of INTERIM shall recommend to its shareholder, subject to the
conditions in such authorization and recommendation by the Board of Directors,
the approval of the matters submitted for approval, and the Board of Directors
and officers of INTERIM shall use their reasonable efforts to obtain its
shareholder's approval. FLAG, as sole shareholder of INTERIM, shall vote its
shares of INTERIM in favor of this Agreement.
8.4 Applications.
- ------------------
FLAG shall promptly prepare and file, and THOMASTON FEDERAL shall cooperate
in the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this Agreement, including, without limitation, the Board of Governors of the
Federal Reserve System, the OTS, and the Georgia Department of Banking and
Finance, seeking the requisite Consents necessary to consummate the transactions
contemplated by this Agreement. The Parties shall deliver to each other copies
of all filings, correspondence and orders to and from all Regulatory Authorities
in connection with the transactions contemplated hereby.
8.5 Agreement as to Efforts to Consummate.
- ------------------------------------------
Subject to the terms and conditions of this Agreement, each Party agrees to
use, and to cause its Subsidiaries to use, its reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper, or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable after the date of this Agreement,
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the transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied the
conditions referred to in Article 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
- --------------------------------------
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to the
consummation of the Merger, and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the Party
reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby, and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of any other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Each Party shall use its reasonable efforts to exercise its rights
under confidentiality agreements entered into with Persons which were
considering an Acquisition Proposal with respect to such Party to preserve the
confidentiality of the information relating to such Party and its Subsidiaries
provided to such Persons and their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant or agreement of the other Party or which
has had or is reasonably likely to have a THOMASTON FEDERAL Material Adverse
Effect or a FLAG Material Adverse Effect, as applicable.
8.7 Press Releases.
- --------------------
Prior to the Effective Time, THOMASTON FEDERAL and FLAG shall use their
reasonable best efforts to consult with each other as to the form and substance
of any press release or other public disclosure related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel shall reasonably deem necessary or advisable in order to satisfy such
Party's disclosure obligations imposed by Law.
40
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8.8 Certain Actions.
- --------------------
Except with respect to this Agreement and the transactions contemplated
hereby, no THOMASTON FEDERAL Entity nor any Representatives thereof retained by
any THOMASTON FEDERAL Entity shall directly or indirectly solicit any
Acquisition Proposal by any Person. Except to the extent the Board of Directors
of THOMASTON FEDERAL, after having consulted with and considered the advice of
outside counsel, reasonably determines in good faith that the failure to take
such actions would constitute a breach of fiduciary duties of the members of
such Board of Directors to THOMASTON FEDERAL's shareholders, under applicable
Law, no THOMASTON FEDERAL Entity or Representative thereof shall furnish any
non-public information that it is not legally obligated to furnish, negotiate
with respect to, or enter into any Contract with respect to, any Acquisition
Proposal, but THOMASTON FEDERAL may communicate information about such an
Acquisition Proposal to its shareholders if and to the extent, upon the advice
of counsel, THOMASTON FEDERAL reasonably determines that it is required to do so
in order to comply with its legal obligations. Notwithstanding the foregoing,
if, at any time prior to the Effective Time, the Board of Directors of THOMASTON
FEDERAL determines in good faith, based on the advice of outside counsel and its
financial advisors, that the terms of an Acquisition Proposal are more desirable
to THOMASTON FEDERAL than the terms of this Agreement or the proposed Merger and
that the Board of Directors has a fiduciary duty to consider and respond to the
Acquisition Proposal under applicable law, THOMASTON FEDERAL in response to a
written Acquisition Proposal may furnish nonpublic information with respect to
THOMASTON FEDERAL to the person who made such Acquisition Proposal. THOMASTON
FEDERAL shall promptly advise FLAG following the receipt of any Acquisition
Proposal and the details thereof, and advise FLAG of any developments with
respect to such Acquisition Proposal promptly upon, but in any event not more
than five business days after, the occurrence thereof. THOMASTON FEDERAL shall
(i) immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable efforts to cause
its Representatives not to engage in any of the foregoing.
8.9 Accounting and Tax Treatment.
- ---------------------------------
Each of the Parties undertakes and agrees to use its reasonable efforts to
cause the Merger to, and to take no action which would cause the Merger not to,
qualify for pooling of interests accounting treatment and as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes.
8.10 Charter Provisions.
- ------------------------
Each Party shall take, and shall cause its Subsidiaries to take, all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby do not
and will not result in the grant of any rights to any Person under the charter,
articles of incorporation, bylaws or other governing instruments of such Party
or any of its Subsidiaries or restrict or impair the ability of FLAG or any of
its Subsidiaries to vote, or otherwise to exercise the rights of a shareholder
with respect to, shares of any THOMASTON FEDERAL Entity that may be directly or
indirectly acquired by them.
8.11 Agreements of Affiliates.
- ------------------------------
THOMASTON FEDERAL has disclosed in Section 8.11 of the THOMASTON FEDERAL
Disclosure Memorandum each Person whom it reasonably believes is an "affiliate"
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of THOMASTON FEDERAL for purposes of Rule 145 under the 1933 Act. THOMASTON
FEDERAL shall use its reasonable efforts to cause each such Person to deliver to
FLAG not later than 30 days after the date of this Agreement a written
agreement, substantially in the form of Exhibit 1, providing that such Person
will not sell, pledge, transfer, or otherwise dispose of the shares of the
THOMASTON FEDERAL Common Stock held by such Person except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of FLAG Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder and until
such time as financial results covering at least 30 days of combined operations
of FLAG and THOMASTON FEDERAL have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies, except that
transfers may be made in compliance with Staff Accounting Bulletin No. 76 issued
by the SEC. Except for transfers made in compliance with Staff Accounting
Bulletin No. 76, shares of FLAG Common Stock issued to such affiliates of
THOMASTON FEDERAL shall not be transferable until such time as financial results
covering at least 30 days of combined operations of FLAG and THOMASTON FEDERAL
have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
affiliate has provided the written agreement referred to in this Section 8.12.
FLAG shall be entitled to place restrictive legends upon certificates for shares
of FLAG Common Stock issued to affiliates of THOMASTON FEDERAL pursuant to this
Agreement to enforce the provisions of this Section 8.12. FLAG shall not be
required to maintain the effectiveness of the Registration Statement under the
1933 Act for the purposes of resale of FLAG Common Stock by such affiliates.
8.12 Employee Benefits and Contracts.
- --------------------------------------
Following the Effective Time, FLAG shall either (i) continue to provide to
officers and employees of the THOMASTON FEDERAL Entities employee benefits under
THOMASTON FEDERAL's existing employee benefit and welfare plans or, (ii) if FLAG
shall determine to provide to officers and employees of the THOMASTON FEDERAL
Entities employee benefits under other employee benefit plans and welfare plans,
provide generally to officers and employees of the THOMASTON FEDERAL Entities
employee benefits under employee benefit and welfare plans, on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the FLAG Entities to their similarly situated officers and
employees. For purposes of participation and vesting (but not accrual of
benefits) under FLAG's employee benefit plans, (i) service under any qualified
defined contribution plans of THOMASTON FEDERAL shall be treated as service
under FLAG's qualified defined contribution plans, and (ii) service under any
other THOMASTON FEDERAL Benefit Plans shall be treated as service under any
similar employee benefit plans maintained by FLAG. With respect to officers and
employees of the THOMASTON FEDERAL Entities who, at or after the Effective Time,
become employees of a FLAG Entity and who, immediately prior to the Effective
Time, are participants in one or more employee welfare benefit plans maintained
by the THOMASTON FEDERAL Entities, FLAG shall cause each comparable employee
welfare benefit plan which is substituted for a THOMASTON FEDERAL welfare
benefit plan to waive any evidence of insurability or similar provision, to
provide credit for such participation prior to such substitution with regard to
the application of any pre-existing condition limitation, and to provide credit
towards satisfaction of any deductible or out-of-pocket provisions for expenses
incurred by such participants during the period prior to such substitution, if
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any, that overlaps with the then current plan year for each such substituted
employee welfare benefit plans. FLAG also shall cause the Surviving Bank and its
Subsidiaries to honor in accordance with their terms all employment, severance,
consulting and other compensation Contracts disclosed in Section 5.16 of the
THOMASTON FEDERAL Disclosure Memorandum to FLAG between any THOMASTON FEDERAL
Entity and any current or former director, officer, or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the THOMASTON FEDERAL Benefit Plans.
8.13 Indemnification.
- ----------------------
FLAG shall indemnify, defend and hold harmless each person entitled to
indemnification from a THOMASTON FEDERAL Entity (each, an "Indemnified Party")
against all Liabilities arising out of actions or omissions occurring at or
prior to the Effective Time (including the transactions contemplated by this
Agreement) to the fullest extent permitted under OTS regulations and by
THOMASTON FEDERAL's Charter and Bylaws as in effect on the date hereof,
including provisions relating to advances of expenses incurred in the defense of
any Litigation. Without limiting the foregoing, in any case in which approval by
FLAG is required to effectuate any indemnification, FLAG shall direct, at the
election of the Indemnified Party, that the determination of any such approval
shall be made by independent counsel mutually agreed upon between FLAG and the
Indemnified Party.
ARTICLE 9.
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 Conditions to Obligations of Each Party.
- --------------------------------------------
The respective obligations of each Party to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6:
(a) Shareholder Approval. The shareholders of THOMASTON FEDERAL shall have
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or by the
provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of any Party would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
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(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 9.1 (b)) or for the preventing of any Default under any Contract or
Permit of such Party which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a THOMASTON FEDERAL Material Adverse
Effect or a FLAG Material Adverse Effect, as applicable. No Consent so obtained
which is necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
Board of Directors of any Party would so materially adversely impact the
economic or business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(d) Legal Proceedings. No court or governmental or regulatory authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law or Order (whether temporary, preliminary or permanent) or taken
any other action which prohibits, restricts, makes illegal or, in good faith,
inadvisable, the consummation of the transactions contemplated by this
Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, and no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of FLAG Common Stock issuable pursuant to the Merger shall have been
received.
(f) Nasdaq Listing. The shares of FLAG Common Stock issuable pursuant to
the Merger shall have been approved for listing on the Nasdaq National Market.
(g) Tax Matters. Each Party shall have received a written opinion of
counsel from Powell, Goldstein, Frazer & Murphy LLP, in form reasonably
satisfactory to such Parties (the "Tax Opinion"), to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, (ii) the exchange in the Merger of THOMASTON FEDERAL
Common Stock for FLAG Common Stock will not give rise to gain or loss to the
shareholders of THOMASTON FEDERAL with respect to such exchange (except to the
extent of any cash received), and (iii) neither THOMASTON FEDERAL nor FLAG will
recognize gain or loss as a consequence of the Merger (except for amounts
resulting from any required change in accounting methods and any income and
deferred gain recognized pursuant to Treasury regulations issued under Section
1502 of the Internal Revenue Code). In rendering such Tax Opinion, such counsel
shall be entitled to rely as to matters of fact upon representations of officers
of THOMASTON FEDERAL and FLAG reasonably satisfactory in form and substance to
such counsel.
(h) Employment Matters. Robert G. Cochran, President and Chief Executive
Officer of THOMASTON FEDERAL, and Joel Dudley, Manager of THOMASTON FEDERAL's
loan production offices, shall each have negotiated a mutually satisfactory
employment/separation agreement with FLAG which shall have an initial term of
three years.
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(i) Dissenting Stockholders. The number of shares of THOMASTON FEDERAL
Common Stock for which THOMASTON FEDERAL stockholders seek appraisal rights as
dissenting stockholders under Section 552.14 of the OTS regulations shall not
exceed nine percent (9%) of the THOMASTON FEDERAL COMMON STOCK outstanding as of
the Effective Time.
9.2 Conditions to Obligations of FLAG.
- --------------------------------------
The obligations of FLAG to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by FLAG pursuant to Section 11.6(a):
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of THOMASTON FEDERAL set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Section 5.3 shall be true and correct (except for changes resulting from the
exercise of outstanding stock options, and except for inaccuracies which are de
minimus in amount). The representations and warranties set forth in Sections
5.21 and 5.22 shall be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of THOMASTON
FEDERAL set forth in this Agreement (including the representations and
warranties set forth in Sections 5.3, 5.21 and 5.22) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a THOMASTON
FEDERAL Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of THOMASTON FEDERAL to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. THOMASTON FEDERAL shall have delivered to FLAG (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its secretary, to the effect that to their Knowledge
the conditions set forth in Section 9.1 as relates to THOMASTON FEDERAL and in
Section 9.2(a) and 9.2(b) have been satisfied; provided, -------- however, that
the representations, warranties and covenants to which such certificate relates
shall not been deemed to ------- have survived the Closing, and (ii) certified
copies of resolutions duly adopted by THOMASTON FEDERAL's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as FLAG and its counsel shall reasonably request.
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(d) Opinion of Counsel. FLAG shall have received an opinion of Long
Aldridge & Norman LLP, counsel to THOMASTON FEDERAL, dated as of the Closing
Date, in form reasonably satisfactory to FLAG, as to the matters set forth in
Exhibit 2.
(e) Pooling Letters. FLAG shall have received an opinion of Porter Keadle
Moore, LLP, dated as of the Closing Date, addressed to FLAG and in form and
substance reasonably acceptable to FLAG, to the effect that the Merger, for
accounting purposes, shall qualify for treatment as a pooling of interests.
(f) Affiliates Agreements. FLAG shall have received from each affiliate of
THOMASTON FEDERAL the affiliate agreement referred to in Section 8.11 and
Exhibit 1.
(g) Claims Letters. Each of the directors and officers of THOMASTON FEDERAL
shall have executed and delivered to FLAG letters in substantially the form of
Exhibit 3.
9.3 Conditions to Obligations of THOMASTON FEDERAL.
- ---------------------------------------------------
The obligations of THOMASTON FEDERAL to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by THOMASTON
FEDERAL pursuant to Section 11.6(b):
(a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of FLAG set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Section 6.3 shall be true and correct (except for inaccuracies which are de
minimus in amount). The representations and warranties of FLAG set forth in
Section 6.20 and 6.21 shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of FLAG set
forth in this Agreement (including the representations and warranties set forth
in Sections 6.3, 6.20 and 6.21) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a FLAG Material Adverse
Effect; provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of FLAG to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material respects.
(c) Certificates. FLAG shall have delivered to THOMASTON FEDERAL (i) a
certificate, dated as of the Closing Date and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that to the
best of their knowledge the conditions set forth in Section 9.1 as relates to
FLAG and in Section 9.3(a) and 9.3(b) have been satisfied; provided, however,
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that the representations, warranties and covenants to which such certificate
relates shall not been deemed to have survived the Closing, and (ii) certified
copies of resolutions duly adopted by FLAG's Board of Directors evidencing the
taking of all corporate action necessary to authorize the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as THOMASTON FEDERAL and its
counsel shall request.
(d) Opinion of Counsel. THOMASTON FEDERAL shall have received an opinion of
Powell, Goldstein, Frazer & Murphy LLP, counsel to FLAG, dated as of the Closing
Date, in form reasonably acceptable to THOMASTON FEDERAL, as to the matters set
forth in Exhibit 4.
(e) Fairness Opinions. THOMASTON FEDERAL shall have received from The
Robinson-Humphrey Company opinions that the terms of the Merger are fair to the
stockholders of THOMASTON FEDERAL from a financial point of view. Such opinions
shall be dated the date of approval of this Agreement by THOMASTON FEDERAL'S
Board of Directors, and as of the date of the proxy materials relating to the
Merger mailed to THOMASTON FEDERAL stockholders.
ARTICLE 10.
TERMINATION
-----------
10.1 Termination.
- ------------------
Notwithstanding any other provision of this Agreement, and notwithstanding
the approval of this Agreement by the shareholders of THOMASTON FEDERAL, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) By mutual consent of FLAG and THOMASTON FEDERAL; or
(b) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any representation or warranty contained in this Agreement which cannot
be or has not been cured within 30 days after the giving of written notice to
the breaching Party of such breach and which breach is reasonably likely, in the
opinion of the non-breaching Party, to have, individually or in the aggregate, a
THOMASTON FEDERAL Material Adverse Effect or a FLAG Material Adverse Effect, as
applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
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(d) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event (i) any Consent of any Regulatory
Authority required for consummation of the Merger and the other transactions
contemplated hereby shall have been denied by final non-appealable action of
such authority or if any action taken by such authority is not appealed within
the time limit for appeal, or (ii) the shareholders of THOMASTON FEDERAL fail to
vote their approval of the matters relating to this Agreement and the
transactions contemplated hereby at the Shareholders' Meeting where such matters
were presented to such shareholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall not have been
consummated by October 31, 1999, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of this
Agreement by the Party electing to terminate pursuant to this Section 10.1(e);
or
(f) By THOMASTON FEDERAL in the event that prior to the Effective Time,
THOMASTON FEDERAL enters into a definitive agreement with respect to the sale of
THOMASTON FEDERAL to any person or entity who or which has made an Acquisition
Proposal and THOMASTON FEDERAL has paid FLAG $100,000 as reimbursement for the
expenses of FLAG incurred in connection with the Merger.
10.2 Effect of Termination.
- ---------------------------
In the event of the termination and abandonment of this Agreement pursuant
to Section 10.1, this Agreement shall become void and have no effect, except
that (i) the provisions of this Section 10.2 and Article 11 and Section 8.6(b)
shall survive any such termination and abandonment, and (ii) a termination
pursuant to Sections 10.1(b), 10.1(c) or 10.1(e) shall not relieve the breaching
Party from Liability for an uncured willful breach of a representation,
warranty, covenant, or agreement giving rise to such termination.
10.3 Non-Survival of Representations and Covenants.
- ---------------------------------------------------
The respective representations, warranties, obligations, covenants, and
agreements of the Parties shall not survive the Effective Time except this
Section 10.3 and Articles 1, 2, 3, 4 and 11 and Sections 8.12 and 8.13.
ARTICLE 11.
MISCELLANEOUS
-------------
11.1 Definitions.
- ------------------
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Acquisition Proposal" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the stock
or assets of, or other business combination involving the acquisition of such
Party or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any of its
Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits, the FLAG Disclosure Memorandum and the THOMASTON FEDERAL Disclosure
Memorandum delivered pursuant hereto and incorporated herein by reference.
"Articles of Combination" shall mean the Articles filed with the OTS to
effect the merger of INTERIM with and into THOMASTON FEDERAL.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records
of such Person, or any Affiliate of such Person and wherever located.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement (provided such oral
agreement is, in any one year period, in excess of $5,000 individually, or
$25,000 in the aggregate), arrangement, authorization, commitment, contract,
indenture, instrument, lease, obligation, plan, practice, restriction,
understanding, or undertaking of any kind or character, to which any Person is a
party or that is binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, after
failing to cure any such breach, violation, default, contravention or conflict
within any applicable grace or cure period, (ii) any occurrence of any event
that with the passage of time or the giving of notice or both would constitute a
breach or violation of, default under, contravention of, or conflict with, any
Contract, Law, Order, or Permit, or (iii) any occurrence of any event that with
or without the passage of time or the giving of notice would give rise to a
right of any Person to exercise any remedy or obtain any relief under, terminate
or revoke, suspend, cancel, or modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to increase or
impose any Liability under, any Contract, Law, Order, or Permit.
49
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"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and other federal, state and local agencies with jurisdiction
over, and including common law in respect of, pollution or protection of the
environment, including the Comprehensive Environmental Response Compensation and
Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and
other Laws relating to emissions, migrations, discharges, releases, or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution use, treatment, storage, disposal,
generation, recycling, transport, or handling of any Hazardous Material.
"Equity Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exhibits 1 through 4," inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FLAG Capital Stock" shall mean, collectively, the FLAG Common Stock, the
FLAG Preferred Stock and any other class or series of capital stock of FLAG.
"FLAG Common Stock" shall mean the $1.00 par value common stock of FLAG.
"FLAG Disclosure Memorandum" shall mean the written information entitled
"FLAG Financial Corporation Disclosure Memorandum" delivered prior to execution
of this Agreement to THOMASTON FEDERAL describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto, unless it is clear from the
disclosure of such information that it applies to other Sections.
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"FLAG Entities" shall mean, collectively, FLAG and all FLAG Subsidiaries.
"FLAG Financial Statements" shall mean the consolidated balance sheets
(including related notes and schedules, if any) of FLAG as of December 31, 1998
and as of December 31, 1997 and 1996, and the related statements of income,
changes in shareholders' equity, and cash flows (including related notes and
schedules, if any) for each of the three fiscal years ended December 31, 1997,
1996 and 1995, as filed by FLAG in SEC Documents, and (ii) the consolidated
balance sheets of FLAG (including related notes and schedules, if any) and
related statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents filed
with respect to periods ended subsequent to December 31, 1998.
"FLAG Material Adverse Effect" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on (i) the financial position, business, or results of
operations of FLAG and its Subsidiaries, taken as a whole, or (ii) the ability
of FLAG Entities to perform their obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this Agreement,
provided that "Material Adverse Effect" shall not be deemed to include the
impact of (a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting principles
generally applicable to savings associations, banks, and their holding
companies, and (c) actions and omissions of FLAG (or any of its Subsidiaries)
taken with the prior informed written Consent of THOMASTON FEDERAL in
contemplation of the transactions contemplated hereby.
"FLAG Preferred Stock" shall mean the shares of preferred stock of FLAG.
"FLAG Subsidiaries" shall mean the Subsidiaries of FLAG, which shall
include the FLAG Subsidiaries described in Section 6.4 and any corporation,
bank, savings association, or other organization acquired as a Subsidiary of
FLAG in the future and held as a Subsidiary by FLAG at the Effective Time.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
constituent, hazardous waste, solid waste, special waste, regulated substance,
or toxic substance (as those terms are listed, defined or regulated by any
applicable Environmental Laws) and (ii) any chemicals, pollutants, contaminants,
petroleum, petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal, or encapsulation pursuant to the requirements of
governmental authorities and any polychlorinated biphenyls).
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"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks, service
marks, service names, trade names, applications therefor, and licenses, computer
software (including any source or object codes therefor or documentation
relating thereto), trade secrets, franchises, inventions, and other intellectual
property rights.
"INTERIM Shareholders' Meeting" shall meant the meeting of the shareholders
of INTERIM to be held pursuant to Section 8.3, including any adjournment or
adjournments thereof.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a FLAG Entity (including references to
being aware of a particular matter) shall mean those facts that are known or
should reasonably have been known after due inquiry by the chairman, president,
chief financial officer, chief accounting officer, chief operating officer,
chief credit officer, general counsel, any assistant or deputy general counsel,
or any senior, executive or other vice president of such FLAG Entity.
"Knowledge" as used with respect to a THOMASTON FEDERAL Entity (including
references to being aware of a particular matter) shall mean those facts that
are actually known (with no obligation of inquiry) by the president and chief
executive officer of such THOMASTON FEDERAL Entity.
"Law" shall mean any code, law (including common law), ordinance,
regulation, decision, judicial interpretation, reporting or licensing
requirement, rule, or statute applicable to a Person or its Assets, Liabilities,
or business, including those promulgated, interpreted or enforced by any
Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the ordinary course of the banking
business, and (iii) Liens which do not materially impair the use of or title to
the Assets subject to such Lien.
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"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, Known investigation, hearing, Known criminal prosecution, Known
governmental or other examinations, or other administrative or other proceeding,
or any investigation Known to the Party by, relating to or affecting a Party,
its business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq National Market" shall mean the National Market System of the
National Association of Securities Dealers Automated Quotations System.
"Operating Property" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries and, where required by the
context, includes the owner or operator of such property, but only with respect
to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"OTS" shall mean the Office of Thrift Supervision.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management and,
where required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or property.
"Party" shall mean either THOMASTON FEDERAL or FLAG and "Parties" shall
mean THOMASTON FEDERAL and FLAG.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets, or
business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by FLAG under the 1933 Act
with respect to the shares of FLAG Common Stock to be issued to the shareholders
of THOMASTON FEDERAL in connection with the transactions contemplated by this
Agreement.
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"Regulatory Authorities" shall mean, collectively, the SEC, the NASD, the
Federal Trade Commission, the United States Department of Justice, the Board of
the Governors of the Federal Reserve System, the OTS (including its predecessor,
the Federal Home Loan Bank Board), the Federal Deposit Insurance Corporation,
the Georgia Department of Banking and Finance, and all other federal, state,
county, local or other governmental or regulatory agencies, authorities
(including self-regulatory authorities), instrumentalities, commissions, boards
or bodies having jurisdiction over the Parties and their respective
Subsidiaries.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Shareholders Meeting" shall mean the meeting of the shareholders of
THOMASTON FEDERAL to be held pursuant to Section 8.3(a), including any
adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or controls
50% or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the outstanding
equity securities is owned directly or indirectly by its parent (provided, there
shall not be included any such entity the equity securities of which are owned
or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves
as a general partner, (iii) in the case of a limited liability company, serves
as a managing member, or (iv) otherwise has the ability to elect a majority of
the directors, trustees or managing members thereof.
"Surviving Bank" shall mean THOMASTON FEDERAL as the surviving bank
resulting from the Merger.
"Tax Return" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection with
Taxes, including any return of an affiliated or combined or unitary group that
includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local, or foreign
taxes, charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
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"THOMASTON FEDERAL Common Stock" shall mean the $1.00 par value common
stock of THOMASTON FEDERAL.
"THOMASTON FEDERAL Disclosure Memorandum" shall mean the written
information entitled "THOMASTON FEDERAL Disclosure Memorandum" delivered prior
to execution of this Agreement to FLAG describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto, unless it is clear from the
disclosure of such information that it applies to other Sections.
"THOMASTON FEDERAL Entities" shall mean, collectively, THOMASTON FEDERAL
and all THOMASTON FEDERAL Subsidiaries.
"THOMASTON FEDERAL Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of THOMASTON
FEDERAL as of December 31, 1998, and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules, if
any) for the period ended December 31, 1998, and (ii) the consolidated balance
sheets of THOMASTON FEDERAL (including related notes and schedules, if any) and
related statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) with respect to periods ended
subsequent to December 31, 1998.
"THOMASTON FEDERAL Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial condition,
business, or results of operations of THOMASTON FEDERAL and its Subsidiaries,
taken as a whole, or (ii) the ability of THOMASTON FEDERAL to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that a "THOMASTON FEDERAL
Material Adverse Effect" shall not be deemed to include the impact of (a)
changes in banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in generally accepted
accounting principles or regulatory accounting principles generally applicable
to banks and their holding companies, and (c) actions and omissions of THOMASTON
FEDERAL (or any of its Subsidiaries) taken with the prior informed written
Consent of FLAG in contemplation of the transactions contemplated hereby.
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"THOMASTON FEDERAL Subsidiaries" shall mean the Subsidiaries of THOMASTON
FEDERAL, which shall include the THOMASTON FEDERAL Subsidiaries described in
Section 5.4 and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of THOMASTON FEDERAL in the future and
held as a Subsidiary by THOMASTON FEDERAL at the Effective Time.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
Allowance Section 5.9
Certificates Section 4.1
Closing Section 1.3
Effective Time Section 1.4
ERISA Affiliate Section 5.16(c)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(b)
FLAG Benefit Plans Section 6.15(a)
FLAG Contracts Section 6.16
FLAG ERISA Plan Section 6.15(a)
FLAG Pension Plan Section 6.15(a)
FLAG SEC Reports Section 6.5(a)
Indemnified Party Section 8.13
Merger Section 1.2
Tax Opinion Section 9.1(g)
THOMASTON FEDERAL Benefit Plans Section 5.16(a)
THOMASTON FEDERAL Contracts Section 5.17
THOMASTON FEDERAL ERISA Plan Section 5.16(a)
THOMASTON FEDERAL Pension Plan Section 5.16(a)
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
- --------------
Except as otherwise provided in Section 10.1(f), each Party shall bear and
pay all direct costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel.
11.3 Brokers and Finders.
- -------------------------
Except as disclosed in Section 11.3 of the FLAG Disclosure Memorandum, and
except as disclosed in Section 11.3 of the THOMASTON FEDERAL Disclosure
Memorandum, each of the Parties represents and warrants that neither it nor any
of its officers, directors, employees, or Affiliates has employed any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by THOMASTON FEDERAL or by FLAG,
each of THOMASTON FEDERAL and FLAG, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
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11.4 Entire Agreement.
- ----------------------
Except for the Non-Disclosure Agreement dated March 22, 1999 between FLAG
and THOMASTON FEDERAL, and except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement,
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
11.5 Amendments.
- ----------------
To the extent permitted by Law, this Agreement may be amended by a
subsequent writing signed by each of the Parties upon the approval of each of
the Parties, whether before or after shareholder approval of this Agreement has
been obtained; provided, that after any such approval by the holders of
THOMASTON FEDERAL Common Stock, there shall be made no amendment that, pursuant
to OTS regulations, requires further approval by such shareholders without the
further approval of such shareholders.
11.6 Waivers.
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(a) Prior to or at the Effective Time, FLAG, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
THOMASTON FEDERAL, to waive or extend the time for the compliance or fulfillment
by THOMASTON FEDERAL of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of FLAG under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of FLAG.
(b) Prior to or at the Effective Time, THOMASTON FEDERAL, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by FLAG or INTERIM, to waive or extend the time for the compliance or
fulfillment by FLAG, of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of THOMASTON
FEDERAL under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of THOMASTON FEDERAL.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
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11.7 Assignment.
- ----------------
Except as expressly contemplated hereby, neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any Party
hereto (whether by operation of Law or otherwise) without the prior written
consent of the other Party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the Parties
and their respective successors and assigns. The Parties intend that the
directors of THOMASTON FEDERAL be third party beneficiaries of the
Indemnification provisions of Section 8.13 of this Agreement.
11.8 Notices.
- -------------
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, or by courier
or overnight carrier, to the persons at the addresses set forth below (or at
such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so delivered:
THOMASTON FEDERAL:
THOMASTON FEDERAL SAVINGS BANK
206 North Church Street
P. O. Drawer 1186
Thomaston, GA 30286-1186
Telecopy Number: (706) 647-6019
Attention: Robert G. Cochran
Copy to Counsel: Long Aldridge & Norman
303 Peachtree Street, N.E.
Suite 5300
Atlanta, GA 30308
Telecopy Number: (404) 527-4198
Attention: David M. Calhoun, Esq.
FLAG: Citizens Bank
100 Union Street
P. O. Box 156
Vienna, GA 31092
Telecopy Number: (912) 268-1370
Attention: J. Daniel Speight, Jr.
Copy to Counsel: Powell Goldstein Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, GA 30303
Telecopy Number: (404) 572-5954
Attention: Walter G. Moeling IV, Esq.
58
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11.9 Governing Law.
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This Agreement shall be governed by and construed in accordance with the
Laws of the State of Georgia, without regard to any applicable conflicts of
Laws.
11.10 Counterparts.
- -------------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
11.11 Captions, Articles and Sections.
- --------------------------------------
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement. Unless otherwise indicated, all references
to particular Articles or Sections shall mean and refer to the referenced
Articles and Sections of this Agreement.
11.12 Interpretations.
- ----------------------
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against any party, whether under any rule of construction
or otherwise. No party to this Agreement shall be considered the draftsman. The
parties acknowledge and agree that this Agreement has been reviewed, negotiated,
and accepted by all parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all parties hereto.
11.13 Enforcement of Agreement.
- --------------------------------
The Parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the Parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
11.14 Severability.
- --------------------
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
[SIGNATURES APPEAR ON NEXT PAGE]
59
<PAGE>
SIGNATURES TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
FLAG FINANCIAL CORPORATION
By: /s/ J. Daniel Speight, Jr.
------------------------------
J. Daniel Speight, Jr.
President and Chief Executive Officer
THOMASTON FEDERAL SAVINGS BANK
By: /s/Robert G. Cochran
--------------------------
Robert G. Cochran
President and Chief Executive Officer
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: John S. Holle - FLAG Financial Corporation (706/845-5005)
J. Daniel Speight, Jr.- FLAG Financial Corporation (912/268-2200)
Robert G. Cochran - Thomaston Federal Savings Bank (706/647-6601)
FLAG FINANCIAL CORPORATION ANNOUNCES SIGNING OF DEFINITIVE AGREEMENT
--------------------------------------------------------------------
WITH THOMASTON FEDERAL SAVINGS BANK
-----------------------------------
LAGRANGE, GA (MAY 7, 1999) -- FLAG FINANCIAL CORPORATION (NASDAQ: FLAG)
Chairman, John S. Holle, and President and CEO, J. Daniel Speight, Jr.,
announced today that FLAG Financial Corporation has executed a definitive
agreement with Thomaston Federal Savings Bank ("TFSB") to combine its operations
into FLAG by means of a tax-free merger. Thomaston Federal Savings Bank is
located in Thomaston, Upson County, Georgia and has loan production offices in
Columbus and Macon, Georgia and Phenix City and Opelika, Alabama.
The proposed combination is subject to regulatory approval and approval by the
shareholders of TFSB. The combination, which is anticipated to be accounted for
as a pooling of interests, is projected to be consummated during the third
quarter of 1999. Under the terms of the proposed agreement, shareholders of
Thomaston Federal Savings Bank will receive 1.7275 shares of FLAG common stock
for each share owned of TFSB stock. The transaction is expected to be accretive
to future earnings of FLAG.
John S. Holle, Chairman of the Board of FLAG, and J. Daniel Speight, Jr.,
President and CEO of FLAG, commented, "The signing of the definitive agreement
represents the next step in completing this transaction which was announced two
months ago. By retaining the Thomaston Federal Savings Bank thrift charter,
Thomaston will now be the third subsidiary of FLAG Financial, positioning the
Company to operate going forward with maximum regulatory flexibility."
Robert G. Cochran, President and Chief Executive Officer of Thomaston Federal
Savings Bank, added, "We are pleased to announce the completion of this phase of
the combination of Thomaston Federal and FLAG Financial Corporation and look
forward to finalization of the remaining regulatory, legal and stockholder
requirements. The employee teams of both Thomaston Federal and FLAG have worked
together well over the past 60 days to complete the definitive agreement, which
further confirms the combination to be a strategic move, beneficial to our
employees, customers and community."
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FLAG Financial Corporation is the multi-bank holding company whose wholly-owned
subsidiaries are First Flag Bank, based in LaGrange, Georgia, and Citizens Bank,
based in Vienna, Georgia. Partner banks, which include Bank of Milan, based in
Milan, Georgia, The Brown Bank, based in Metter, Georgia, and Empire Banking
Company, based in Homerville, Georgia, were successfully merged into Citizens
Bank at year-end 1998. FLAG previously announced its completed acquisition,
effective April 30, 1999, of the Blackshear branch office of First Georgia Bank,
which will operate as a branch of Empire Banking Company and announced the
opening of its first de novo branch, First Flag Bank - Statesboro, located in
Statesboro, Georgia. The closing of these transactions increased FLAG's
franchise to include 25 offices serving twelve communities in the regions of
west central, middle and southeast Georgia. FLAG reported assets of $532
million, loans of $395 million, deposits of $422 million and stockholders'
equity of $49 million as of March 31, 1999.
FLAG also announced the execution of a Letter of Intent to merge with First
Hogansville Bankshares, Inc., parent company of The Citizens Bank, located in
Hogansville, Georgia, and the execution of a Definitive Agreement with Abbeville
Capital Corporation, parent company of The Bank of Abbeville, located in
Abbeville, South Carolina. Including shares issued as part of the Thomaston
Federal transaction as well as the pending merger transactions, FLAG's shares
outstanding will increase to approximately 8.3 million. FLAG currently has
approximately 6.6 million shares outstanding which are traded and quoted on The
Nasdaq National Market under the symbol "FLAG."
2
