| | On December 5, 2008, as part of the United States Department of the Treasury’s (the “UST”) Capital Purchase Program (the “CPP”), United Community Banks, Inc. (the “Registrant”) entered into an Agreement (the “Purchase Agreement”) with the UST, pursuant to which the Registrant agreed to issue and sell (i) 180,000 shares of the Registrant’s Fixed Rate Cumulative Preferred Stock, Series B (the “Series B Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 2,132,701 shares of the Registrant’s common stock, par value $1.00 per share (the “Common Stock”), for an aggregate purchase price of $180,000,000 in cash. The Purchase Agreement is attached as Exhibit 10.1 hereto and is incorporated herein by reference and a form of the certificate for the Series B Preferred Stock is attached as Exhibit 4.1. The Series B Preferred Stock will qualify as Tier 1 capital and will pay cumulative dividends at a rate of 5% per annum for the first five years and 9% per annum thereafter. The Series B Preferred Stock may be redeemed by the Registrant after three years for the per share liquidation amount of $1,000 plus any accrued and unpaid dividends. Prior to the end of three years, the Series B Preferred Stock may be redeemed by the Registrant only with proceeds from the sale of qualifying equity securities of the Registrant (a “Qualified Equity Offering”). The restrictions on redemption are set forth in the Amendment to the Registrant’s Restated Articles of Incorporation, as amended (the “Amendment”) described in Item 5.03 below. The Series B Preferred Stock will be non-voting except for class voting rights on matters that would adversely affect the rights of the holders of the Series B Preferred Stock. As part of its purchase of the Series B Preferred Stock, the UST received the Warrant. The Warrant has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to $12.66 per share of the Common Stock. If the Registrant receives aggregate gross cash proceeds of not less than $180,000,000 from Qualified Equity Offerings on or prior to December 31, 2009, the number of shares of Common Stock issuable pursuant to the UST’s exercise of the Warrant will be reduced by one half of the original number of shares, taking into account all adjustments, underlying the Warrant. Pursuant to the Purchase Agreement, the UST has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant. The Warrant is attached as Exhibit 4.2 hereto and is incorporated herein by reference. The Series B Preferred Stock and the Warrant were issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. Upon the request of the UST at any time, the Registrant has agreed to promptly enter into a deposit arrangement pursuant to which the Series B Preferred Stock may be deposited and depositary shares (“Depositary Shares”), representing fractional shares of Series B Preferred Stock, may be issued. The Registrant has agreed to register the Series B Preferred Stock, the Warrant, the shares of Common Stock underlying the Warrant (the “Warrant Shares”) and the Depositary Shares, if any, as soon as practicable after the date of the issuance of the Series B Preferred Stock and the Warrant. Neither the Series B Preferred Stock nor the Warrant will be subject to any contractual restrictions on transfer, except that the UST may only transfer or exercise an aggregate of one-half of the Warrant Shares prior to the earlier of the redemption of 100% of the shares of Series B Preferred Stock and December 31, 2009. |
