<PAGE> 1
As filed with the Securities and Exchange Commission on _____, 1997
Registration Statement Nos. 333- and 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
REPUBLIC BANCSHARES, INC.
RBI CAPITAL TRUST I
(Exact name of registrant and co-registrant as specified in its charter)
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<S> <C>
FLORIDA 59-3347653
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
111 SECOND AVENUE N.E.
ST. PETERSBURG, FLORIDA 33701
(813) 823-7300
(Address, including zip code, and telephone number, including
area code, of registrant's and co-registrant's principal executive offices)
CHRISTOPHER M. HUNTER, ESQ.
CORPORATE COUNSEL AND CORPORATE SECRETARY
REPUBLIC BANCSHARES, INC.
111 SECOND AVENUE N.E.
ST. PETERSBURG, FLORIDA 33701
(813) 823-7300
(Name, address, including zip code, and telephone number,
including area code, of registrant's and co-registrant's agent for service)
Copies of communications to:
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JOHN A. BUCHMAN, ESQ. CHESTER E. BACHELLER, ESQ. ALISON W. MILLER, ESQ.
HOLLAND & KNIGHT LLP HOLLAND & KNIGHT LLP MICHAEL I. KEYES, ESQ.
2100 PENNSYLVANIA AVENUE, N.W. 200 CENTRAL AVENUE STEARNS, WEAVER, MILLER
WASHINGTON, D.C. 20037-3202 ONE PROGRESS PLAZA WEISSLER, ALHADEFF & SITTERSON, P.A.
(202) 955-3000 ST. PETERSBURG, FLORIDA 33701 MUSEUM TOWER
(813) 227-8500 150 WEST FLAGLER STREET
MIAMI, FLORIDA 33130
(305) 789-3500
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___________________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statements for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<CAPTION>
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
=============================================================================================================
<S> <C> <C> <C> <C>
Preferred Securities of RBI Capital
Trust I . . . . . . . . . . . . . . . . 2,875,000(1) $10.00 $28,750,000 $8,713.00
- -------------------------------------------------------------------------------------------------------------
Junior Subordinated Debentures
of Republic Bancshares, Inc.(2) . . . N/A
- -------------------------------------------------------------------------------------------------------------
Guarantee of Republic Bancshares, Inc
(3). . . . . . . . . . . . . . . . . . N/A
=============================================================================================================
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(1) Includes up to 375,000 additional Preferred Securities of RBI Capital
Trust I which may be acquired by the Underwriters to cover
over-allotments, if any.
(2) The Junior Subordinated Debentures will be purchased by RBI Capital Trust
I with the proceeds of the sale of the Preferred Securities. Such
securities may later be distributed for no additional consideration to the
holders of the Preferred Securities of RBI Capital Trust I upon its
dissolution and the distribution of its assets.
(3) This Registration Statement is deemed to cover the Guarantee. No separate
consideration will be received for the Guarantee, and pursuant to Rule
457(n) under the Securities Act, no separate registration fee is payable
for the Guarantee.
___________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[LOGO]
SUBJECT TO COMPLETION, DATED JUNE __, 1997
2,500,000 PREFERRED SECURITIES
RBI CAPITAL TRUST I
____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
REPUBLIC BANCSHARES, INC.
The ____% Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of RBI Capital Trust I, a statutory business trust created under
the laws of the State of Delaware ("RBI Capital"). Republic Bancshares, Inc., a
Florida corporation (the "Company"), will own all the common securities
representing undivided beneficial interests in the assets of RBI Capital (the
"Common Securities" and, together with the Preferred Securities will be
referred to herein as the "Trust Securities").
Application has been made to list the Preferred Securities for quotation
on The Nasdaq Stock Market's National Market under the symbol "REPBP." See
"Risk Factors--Absence of Market.
_____________
SEE "RISK FACTORS" BEGINNING ON PAGE 16 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
_____________
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
A BANK AND ARE NOT INSURED BY THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.
_____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________
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<CAPTION>
=============================================================================================================
Price to Underwriting Proceeds to
Public Commission(1) RBI Capital(2)(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security . . . . $10.00 (3) $10.00
- -------------------------------------------------------------------------------------------------------------
Total(4) . . . . . . . . . . . $25,000,000 (3) $25,000,000
=============================================================================================================
</TABLE>
(1) RBI Capital and the Company have each agreed to indemnify the Underwriters
against certain liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deduction of expenses payable by the Company estimated at
$_________.
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of
the Company, the Company has agreed to pay to the Underwriters, as
compensation for arranging the investment therein of such proceeds,
$______ per Preferred Security (or $___________ in the aggregate). See
"Underwriting."
(4) RBI Capital and the Company have granted the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase
up to an additional 375,000 aggregate liquidation amount of the Preferred
Securities on the same terms as set forth above, solely to cover
over-allotments, if any. If such over-allotment option is exercised in
full, the total Price to Public and Proceeds to RBI Capital will be
$28,750,000 and $28,750,000, respectively. See "Underwriting."
The Preferred Securities are offered by the Underwriters subject to
receipt and acceptance by them, prior sale and the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the
offer without notice. It is expected that delivery of the Preferred Securities
will be made in book-entry form through the book-entry facilities of The
Depository Trust Company on or about __________, 1997 against payment therefor
in immediately available funds.
WILLIAM R. HOUGH & CO. RYAN, BECK & CO.
The date of this Prospectus is __________, 1997
<PAGE> 3
(cover page continued)
Wilmington Trust Company is the Property Trustee (as defined herein) of
RBI Capital. RBI Capital exists for the sole purpose of issuing the Trust
Securities and investing the gross proceeds thereof in an equivalent amount of
____% Junior Subordinated Debentures (the "Junior Subordinated Debentures") of
the Company. The Junior Subordinated Debentures will mature on ____________,
2027 (the "Stated Maturity"), which date may be shortened to a date not earlier
than _____________, 2002, if certain conditions are met (including the Company
having received prior approval by the Board of Governors of the Federal Reserve
System or any successor agency (the "Federal Reserve") if then required under
applicable Federal Reserve capital guidelines or policies). The Common
Securities will represent an aggregate liquidation amount equal to at least 3%
of the total capital of RBI Capital. The Preferred Securities will have a
preference under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the Common
Securities. See "Description of the Preferred Securities--Subordination of
Common Securities."
The Preferred Securities will be represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as depository ("DTC"). Beneficial interests in the global securities will be
shown on, and transfer thereof will be effected only through, records
maintained by DTC and its participants. Except as described under "Description
of Preferred Securities," Preferred Securities in definitive form will not be
issued and owners of beneficial interests in the global securities will not be
considered holders of the Preferred Securities. Settlement for the Preferred
Securities will be made in immediately available funds. The Preferred
Securities will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity for the Preferred Securities will therefore settle in
immediately available funds.
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of ____% of the liquidation
amount of $10 per Preferred Security (the "Liquidation Amount"), accruing from
the date of original issuance and payable quarterly in arrears on the last day
of March, June, September and December of each year, commencing ____________,
1997 (the "Distributions"). Such distributions are considered under current law
to be interest paid by the Company to the holders of Preferred Securities for
United States federal income tax purposes. Interest on the Junior Subordinated
Debentures will accrue at the same rate as distributions accrue on the
Preferred Securities. The Company has the right, so long as no Debenture Event
of Default (as defined herein) has occurred and is continuing, to defer payment
of interest on the Junior Subordinated Debentures at any time or from time to
time for a period not to exceed 20 consecutive quarters with respect to each
deferral period (each, an "Extended Interest Payment Period"); provided that no
Extended Interest Payment Period may extend beyond the Stated Maturity. Upon
the termination of any such Extended Interest Payment Period and the payment of
all amounts then due, the Company may elect to begin a new Extended Interest
Payment Period subject to the requirements set forth herein. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions
on the Preferred Securities will also be deferred, and the Company will not be
permitted to declare or pay any cash distributions with respect to debt
securities that rank pari passu with or junior to the Junior Subordinated
Debentures or with respect to its capital stock. During an Extended Interest
Payment Period, interest on the Junior Subordinated Debentures will continue to
accrue (and the amount of distributions to which holders of the Preferred
Securities are entitled will accumulate) at the rate of ____% per annum,
compounded quarterly, and under such circumstances holders of the Preferred
Securities will be required to include interest income (in the form of original
issue discount) in their gross income for United States Federal income tax
purposes in advance of receipt of the cash distributions with respect to such
deferred interest payments. See "Description of the Junior Subordinated
Debentures--Option to Extend Interest Payment Period," "Certain Federal Income
Tax Consequences--Interest Income and Original Issue Discount" and "--Sales of
Preferred Securities." The Company has no current intention of exercising its
right to defer payments of interest by extending the interest payment period on
the Junior Subordinated Debentures. The Company believes that the mere
existence of its right to defer interest payments should not cause the
Preferred Securities to be issued with original issue discount for federal
income tax purposes. However, it is possible that the Internal Revenue Service
could take the position that the likelihood of
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deferral was not a remote contingency within the meaning of applicable Treasury
Regulations. See "Description of the Junior Subordinated Debentures--Option to
Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The Company and RBI Capital believe that, taken together, the obligations
of the Company under the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein) provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of all of the obligations of
RBI Capital under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the
Guarantee--Full and Unconditional Guarantee." The Guarantee of the Company
guarantees the payment of Distributions and payments on liquidation or
redemption of the Preferred Securities but only in each case to the extent of
funds held by RBI Capital, as described herein. See "Description of the
Guarantee--General." If the Company does not make interest payments on the
Junior Subordinated Debentures held by RBI Capital, RBI Capital will have
insufficient funds to pay Distributions on the Preferred Securities. The
Guarantee does not cover payments of Distributions when RBI Capital does not
have sufficient funds to pay such Distributions. In such event, a holder of
Preferred Securities may in certain circumstances institute a legal proceeding
directly against the Company pursuant to the terms of the Indenture to enforce
payments of amounts equal to such Distributions to such holder. See
"Description of the Junior Subordinated Debentures--Enforcement of Certain
Rights by Holders of the Preferred Securities." The obligations of the Company
under the Guarantee with respect to the Preferred Securities are subordinate
and junior in right of payment to all Senior Debt and Subordinated Debt (each
as defined herein) of the Company. The Junior Subordinated Debentures are
unsecured obligations of the Company and are also subordinated to all Senior
Debt and Subordinated Debt of the Company, currently comprised of $6.0 million
of the Company's 6.0% convertible subordinated debentures, due 2011 (the "6.0%
Debentures"). The Company does not currently have any Senior Debt. See
"Description of the Junior Subordinated Debentures--Subordination."
The Preferred Securities have no stated maturity. They are subject to
mandatory redemption, in whole or in part, upon repayment of the Junior
Subordinated Debentures at maturity or their earlier redemption. Subject to
prior approval of the Federal Reserve, if then required under applicable
Federal Reserve capital guidelines or policies, the Junior Subordinated
Debentures are redeemable prior to maturity at the option of the Company (i) on
or after _____________, 2002, in whole at any time or in part from time to
time, or (ii) at any time, in whole (but not in part), within 180 days
following the occurrence of a Tax Event, an Investment Company Event, or a
Capital Treatment Event (each as defined herein), in each case at a redemption
price equal to the accrued and unpaid interest on the Junior Subordinated
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof. See "Description of the Preferred
Securities--Redemption or Exchange."
The Company intends to take the position that the Junior Subordinated
Debentures will be classified under current law as indebtedness of the Company
for United States federal income tax purposes and, accordingly, the Company
intends to treat the interest payable by the Company on the Junior Subordinated
Debentures as deductible for United States federal income tax purposes. There
is no assurance that such position of the Company will not be challenged by the
Internal Revenue Service or, if challenged, that such a challenge will not be
successful. See "Risk Factors--Proposed Tax Legislation" and "Certain Federal
Income Tax Consequences--Classification of the Junior Subordinated Debentures."
The Company, as the holder of the Common Securities, has the right at any
time to dissolve, wind-up or terminate RBI Capital subject to the Company
having received the prior approval of the Federal Reserve if then required
under applicable Federal Reserve capital guidelines or policies. In the event
of the voluntary or involuntary dissolution, winding up or termination of RBI
Capital, after satisfaction of liabilities to creditors of RBI Capital as
required by applicable law, the holders of Preferred Securities will be
entitled to receive a Liquidation Amount of $10 per Preferred Security, plus
accumulated and unpaid Distributions thereon to the date of payment, which may
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be in the form of a Junior Subordinated Debenture, subject to certain
exceptions. See "Description of the Preferred Securities--Redemption or
Exchange" and "--Liquidation Distribution Upon Termination."
The Company will provide to the holders of the Preferred Securities
quarterly reports containing unaudited financial statements and annual reports
containing financial statements audited by the Company's independent auditors.
The Company will also furnish annual reports on Form 10-K and quarterly reports
on Form 10-Q free of charge to holders of the Preferred Securities who so
request in writing addressed to the Secretary of the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
PREFERRED SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
STOCK MARKET'S NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
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[OUTLINE OF THE STATE OF FLORIDA, WITH THE COUNTIES IN WHICH THE BANK'S BRANCHES
ARE LOCATED ENLARGED AND KEYED TO SHOW THE NUMBER OF BRANCHES WITHIN EACH SUCH
COUNTY.]
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised.
THE COMPANY AND THE BANK
Republic Bancshares, Inc. (the "Company") is a registered bank holding
company formed in February 1996 for the primary purpose of becoming the holding
company parent of Republic Bank (the "Bank"), a Florida-chartered commercial
bank organized on December 13, 1973. The Bank is the largest
independently-owned commercial bank headquartered on the west coast of Florida.
The Bank provides a broad range of traditional banking services with a
particular emphasis on residential and commercial real estate lending.
Currently, the Bank's branch network consists of 35 branches in Pasco,
Pinellas, Orange, Manatee, Hernando and Sarasota Counties. At March 31, 1997,
the Company's consolidated assets totaled $912.1 million, loans totaled $748.5
million, deposits totaled $829.1 million and stockholders' equity was $55.6
million. The Company is regulated by the Federal Reserve, and the Bank is
regulated by the Florida Department of Banking and Finance ("Department") and
the Federal Deposit Insurance Corporation ("FDIC"). The Bank's deposits are
insured by the FDIC, and the Bank is a member of the Federal Home Loan Bank of
Atlanta ("FHLB").
On May 28, 1993, William R. Hough and John W. Sapanski (together, the
"Controlling Stockholders") acquired from the prior controlling stockholder
over 99% of the outstanding common stock of the Bank (the "Change in Control").
Currently, Mr. Hough and Mr. Sapanski (and their respective affiliates and
immediate family members) own shares of the Company's capital stock
representing approximately 50.6% and 9.0%, respectively, of the total voting
rights of the Company. Mr. Hough is a member of the Company's Board of
Directors, and Mr. Sapanski serves as the Company's Chairman of the Board,
President and Chief Executive Officer.
After the Change in Control, the Bank began to implement a program of
expanding its branches and lines of business. On December 17, 1993, the Bank
acquired 12 branches from CrossLand Savings FSB ("CrossLand"), a federal stock
savings bank, assumed deposits of $327.7 million at the acquired branches and
purchased from CrossLand loans secured by real estate and other real estate
("ORE") amounting to $201.6 million (the "Crossland Purchase and Assumption") .
These transactions more than doubled the Bank's size, increasing total assets
to $531.3 million and total deposits to $494.3 million at December 31, 1993.
Additionally, the new branches expanded the Bank's market area to include
Manatee and Sarasota counties and more than doubled the branch network to a
total of 19 branches.
During the latter part of 1994 and throughout 1995, the Bank continued to
pursue a strategy of increasing its retail banking presence on the west coast
of Florida. The Bank opened thirteen de novo branches, increasing market
presence in existing counties and providing entry into Pasco County.
During 1996, the Company focused on increasing its residential lending
capabilities. Through internal growth and the addition of the Bank's new
mortgage banking division, the Company added six new loan production offices in
Florida and one loan production office in Boston, Massachusetts. These offices
expanded the Company's product line to include government-insured first
mortgage loans, "Title I" home improvement loans and high loan-to-value debt
consolidation loans. A wholesale lending operation which purchases loans
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from third-party originators for resale was also added in the fourth quarter of
1996. The Company sells substantially all the loan production from its
mortgage banking division as whole loans or securities.
In 1997, the Company again pursued external expansion. In January, the
Company expanded into Hernando County by opening a de novo branch. In April,
the Company acquired Firstate Financial, F.A. ("Firstate"), a thrift
institution headquartered in Orlando, Florida, for a cash purchase price of
$5.5 million (the "Firstate Acquisition"). At March 31, 1997, Firstate had
total assets of $72.0 million, total deposits of $68.1 million and operated two
branches in Orange County. This step increased the Company's presence in
central Florida's rapidly growing Orange County, where the Company previously
operated a loan production facility but had no branches. See "Pro Forma
Financial Data."
Also in April 1997, the Company and F.F.O. Financial Group, Inc. ("FFO"),
St. Cloud, Florida, the holding company parent of First Federal Savings and
Loan Association of Osceola County, entered into an Agreement and Plan of
Merger (the "FFO Agreement") pursuant to which FFO will be merged into the
Company in a stock transaction (the "FFO Merger"). FFO has 11 branches in
Osceola, Orange and Brevard counties and, at March 31, 1997, had total assets
of $320.0 million, total loans of $226.1 million and total deposits of $285.7
million. If consummated, this acquisition would increase the total assets of
the Company to approximately $1.3 billion, expand its network of branches from
35 to 46, and increase the number of counties served by the Company's branches
from six to eight. See "Pro Forma Financial Data." William R. Hough, one of
the Company's Controlling Stockholders, also owns a majority interest in FFO.
Consummation of the transaction is subject to regulatory and shareholder
approval. Either party has the right to terminate the FFO Agreement if the
merger does not occur by November 1, 1997.
The principal executive offices of the Company are located at 111 Second
Avenue N.E., Suite 300, St. Petersburg, Florida, 33701, and its telephone
number is (813) 823-7300.
BUSINESS STRATEGY
The Company's business strategy entails (i) originating and purchasing
real estate secured loans for portfolio and sale and originating business and
consumer loans for portfolio; (ii) improving market share and expanding its
market area through acquisitions of financial institutions and de novo
branching; (iii) increasing non-interest income through expanded mortgage
banking activities and emphasizing commercial and retail checking
relationships; and (iv) increasing its range of products and services. While
pursuing this strategy, management remains committed to improving asset
quality, managing interest rate risk and enhancing profitability.
The Company's business strategy has resulted in:
. Increased Earnings - In 1994 and 1995 earnings before taxes and
amortization of negative goodwill were $4.7 million and $6.1 million,
respectively. In 1996, earnings before taxes and the one-time SAIF
special assessment were $8.6 million. In the three months ended
March 31, 1997, earnings before taxes totaled $2.6 million.
. Expanded Branch Network - Since the Change of Control in May 1993,
the Company has expanded its retail banking presence from seven
branches in northern Pinellas County at mid-year 1993, to its current
35 branches in Hernando, Pasco, Pinellas, Manatee, Sarasota and
Orange Counties.
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Further market expansion will occur upon the acquisition of FFO later
this year which will add eleven branches in the central Florida
market, including five in Osceola County, five in Brevard County, and
one in Orange County, bringing the total number of branches to 46.
. Increased Levels and Sources of Noninterest Income - The Company has
expanded its sources and amounts of fee income by emphasizing
mortgage banking activities and new products, including a program
that generates fee income for the Company when the Company's checking
account customers utilize the travel and other services of certain
third-party providers.
. Improved Asset Quality Ratios - The assets acquired in the Change of
Control and from CrossLand included significant levels of
nonperforming assets. As a result, the Company's nonperforming
assets-to-total assets ratio was 4.95% at year-end 1993. This ratio
had been reduced to 2.58% at March 31, 1997. This reduction was
achieved primarily through the implementation of consistent loan
underwriting policies and procedures, centralization of all credit
decision functions and growth in the loan portfolio. Virtually none
of the Company's nonperforming assets were originated following the
Change in Control in 1993.
. Management of Interest Rate Risk - One of the Company's primary
objectives is to reduce fluctuations in net interest income caused by
changes in market interest rates. To manage interest rate risk, the
Company generally limits holding loans in its portfolio to those that
have variable interest rates tied to interest-sensitive indices and
management of the maturities within the investment portfolio. The
Company believes, based on its experience, that, as of March 31,
1997, the anticipated dollar amounts of assets and liabilities which
reprice or mature within a one-year time horizon are closely matched.
RBI CAPITAL TRUST I
RBI Capital is a statutory business trust formed under Delaware law
pursuant to (i) an initial trust agreement, dated as of May 29, 1997, executed
by the Company, as depositor, Wilmington Trust Company, as Property Trustee (the
"Property Trustee") and as Delaware Trustee (the "Delaware Trustee"), and the
administrative trustees (the "Administrative Trustees") named therein
(collectively, the "Trustees"), and (ii) a certificate of trust filed with the
Secretary of State of the State of Delaware on May 29, 1997. The initial trust
agreement will be amended and restated in its entirety (as so amended and
restated, the "Trust Agreement") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the purchasers thereof will own all of the Preferred Securities and
the Company will acquire all of the Common Securities, which will represent an
aggregate liquidation amount equal to at least 3.0% of the total capital of RBI
Capital. The Common Securities will rank pari passu, and payments will be made
thereon pro rata, with the Preferred Securities, except that upon the occurrence
and during the continuance of an Event of Default (as defined herein) under the
Trust Agreement resulting from a Debenture Event of Default, the rights of the
Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of the Preferred Securities--Subordination of Common Securities."
RBI Capital exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests
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in the assets of RBI Capital, (ii) investing the gross proceeds of the Trust
Securities in an equivalent amount of the Junior Subordinated Debentures issued
by the Company, and (iii) engaging in only those other activities necessary,
advisable, or incidental thereto. The Junior Subordinated Debentures and
payments thereunder will be the only assets of RBI Capital, and payments under
the Junior Subordinated Debentures will be the only revenue of RBI Capital. RBI
Capital has a term of 31 years, but may terminate earlier as provided in the
Trust Agreement.
The principal executive office of RBI Capital is located at 111 Second
Avenue N.E., St. Petersburg, Florida 33701, and its telephone number is (813)
823-7300.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered . . . . . . . . . . . . . . . 2,500,000 Preferred Securities having no stated
maturity and a Liquidation Amount of $10 per
Preferred Security. The Preferred Securities
represent preferred undivided beneficial interests
in the assets of RBI Capital, which will consist
solely of the Junior Subordinated Debentures and
payments thereunder. RBI Capital has granted the
Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up
to an additional 375,000 Preferred Securities on
the same terms and conditions as the initial
offering, solely to cover over-allotments, if any.
Offering Price . . . . . . . . . . . . . . . . . $10 per Preferred Security (Liquidation Amount
$10).
Distributions . . . . . . . . . . . . . . . . . . The Distributions payable on each Preferred
Security will be fixed at a rate per annum of
____% of the Liquidation Amount of $10 per
Preferred Security, will be cumulative, will
accrue from the date of issuance of the Preferred
Securities, and will be payable quarterly in
arrears, on March 31, June 30, September 30 and
December 31 of each year, commencing ____________,
1997. See "Description of the Preferred
Securities--Distributions--Payment of
Distributions."
Junior Subordinated Debentures . . . . . . . . . RBI Capital will invest the gross proceeds from
the issuance of the Preferred Securities and
Common Securities in an equivalent amount of ____%
Junior Subordinated Debentures of the Company. The
Junior Subordinated Debentures will mature on
____________, 2027 (the "Stated Maturity"). The
</TABLE>
9
<PAGE> 11
<TABLE>
<S> <C>
Junior Subordinated Debentures will rank subordinate and
junior in right of payment to all existing and future
Senior Debt and Subordinated Debt of the Company. In
addition, the Company's obligations under the Junior
Subordinated Debentures will be structurally subordinated
to all existing and future liabilities and obligations of
its subsidiaries.
Option to Extend Interest Payment Period . . . . . .The Company has the right, at any time, so long as no
Debenture Event of Default has occurred and is continuing,
to defer payments of interest on the Junior Subordinated
Debentures for a period not exceeding 20 consecutive
quarters; provided, that no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. During an Extended Interest
Payment Period, quarterly Distributions on the Preferred
Securities will be deferred, though such Distributions
would continue to accrue with interest thereon compounded
quarterly just as interest will continue to accrue and
compound on the Junior Subordinated Debentures.
During an Extended Interest Payment Period, the
Company and any subsidiary will be prohibited,
subject to certain exceptions described herein,
from declaring or paying any cash distributions
with respect to its debt securities that rank pari
passu with or junior to the Junior Subordinated
Debentures or with respect to its capital stock.
Upon the termination of any Extended Interest
Payment Period and the payment of all amounts then
due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing
restrictions. See "Description of the Preferred
Securities--Distributions--Extended Interest
Payment Period" and "Description of the Junior
Subordinated Debentures--Option to Extend Interest
Payment Period." Should an Extended Interest
Payment Period occur, holders of Preferred
Securities will be required to include deferred
interest income in their gross income for United
States federal income tax purposes in advance of
receipt of the cash distributions with respect to
such deferred interest payments. See "Certain
Federal Income Tax Consequences--Interest Income
and Original Issue Discount." The Company has no
</TABLE>
10
<PAGE> 12
<TABLE>
<S> <C>
current intention of exercising its right to defer
payments of interest by extending the interest payment
period on the Junior Subordinated Debentures.
Redemption . . . . . . . . . . . . . . . . . . . The Preferred Securities are subject to mandatory redemption,
in whole or in part, upon repayment of the Junior
Subordinated Debentures at the Stated Maturity or their
earlier redemption. Subject to Federal Reserve approval, if
then required under applicable Federal Reserve capital
guidelines or policies, the Junior Subordinated Debentures
are redeemable prior to the Stated Maturity at the option
of the Company (i) on or after _____________, 2002, in
whole at any time or in part from time to time, or (ii) at
any time, in whole (but not in part), within 180 days
following the occurrence of a Tax Event, an Investment
Company Event or a Capital Treatment Event, in each case at
a redemption price equal to 100% of the principal amount of
the Junior Subordinated Debentures so redeemed, together
with any accrued but unpaid interest to the date fixed for
redemption. See "Description of the Junior Subordinated
Debentures--Redemption or Exchange."
Distribution of Junior Subordinated Debentures . Subject to receipt of any required Federal Reserve
approvals, the Company, as the holder of the
Common Securities, also has the right at any time
to terminate RBI Capital and cause the Junior
Subordinated Debentures to be distributed to
holders of Preferred Securities in liquidation of
RBI Capital. See "Description of the Preferred
Securities--Redemption or Exchange" and
"Description of the Preferred
Securities--Liquidation Distribution Upon
Termination."
Guarantee . . . . . . . . . . . . . . . . . . . . The Company has guaranteed the payment of
Distributions and payments on liquidation or
redemption of the Preferred Securities, but only
in each case to the extent of funds held by RBI
Capital, as described herein. The Company and RBI
Capital believe that, taken together, the
obligations of the Company under the Guarantee,
the Trust Agreement, the Junior Subordinated
Debentures, the Indenture and the Expense
Agreement provide, in the aggregate, a full,
irrevocable and unconditional
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C>
guarantee, on a subordinated basis, of all of the
obligations of RBI Capital relating to the Preferred
Securities. If the Company does not make principal or
interest payments on the Junior Subordinated Debentures,
however, RBI Capital will not have sufficient funds to make
distributions on the Preferred Securities; in which event,
the Guarantee will not apply to such Distributions unless
and until RBI Capital has sufficient funds available
therefor. The obligations of the Company under the
Guarantee and the Preferred Securities are subordinate and
junior in right of payment to all Senior Debt and
Subordinated Debt of the Company. See "Description of the
Guarantee."
Voting Rights . . . . . . . . . . . . . . . . . . Except in limited circumstances, the holders of
the Preferred Securities will have no voting
rights in RBI Capital. See "Description of the
Preferred Securities--Voting Rights; Amendment of
Trust Agreement."
Use of Proceeds . . . . . . . . . . . . . . . . . The gross proceeds received from the sale of the
Preferred Securities offered hereby will be used
by RBI Capital to purchase the Junior Subordinated
Debentures from the Company. The net proceeds from
the sale of the Junior Subordinated Debentures
will be contributed by the Company to the capital
of the Bank where they will be utilized by the
Bank for general corporate purposes, including
working capital, financing possible future
acquisitions and market expansion and for
supporting growth. See "Use of Proceeds."
Nasdaq National Market Symbol . . . . . . . . . . Application has been made to have the Preferred
Securities listed for quotation on The Nasdaq
Stock Market's National Market under the symbol
REPBP.
</TABLE>
RISK FACTORS
Before making an investment decision, prospective investors should
consider all of the information contained in this Prospectus. In particular,
prospective investors should evaluate the factors discussed under "Risk
Factors."
12
<PAGE> 14
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The Summary Consolidated Financial Data presented below has been derived
from the audited Consolidated Financial Statements of the Company and, prior to
1996, the Bank and are qualified in their entirety by reference to the more
detailed Consolidated Financial Statements and notes thereto, included
elsewhere within.
<TABLE>
<CAPTION>
Three Months Ended Seven Months Ended
March 31, Years Ended December 31, December 31,
------------------- --------------------------- ------------------
1997 1996 1996 1995 1994 1994 1993
--------- --------- -------- -------- --------- --------- --------
(unaudited) (unaudited)
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income . . . . . . . . . . . . $ 18,070 $ 15,862 $ 66,947 $ 57,863 $ 37,115 $ 23,684 $ 7,331
Interest expense . . . . . . . . . . . 8,969 7,927 32,926 30,001 16,871 10,711 3,110
--------- --------- --------- --------- --------- --------- ---------
Net interest income . . . . . . . . . . 9,101 7,935 34,021 27,862 20,244 12,973 4,221
Loan loss provision . . . . . . . . . . 1,138 450 1,800 1,685 1,575 1,263 709
--------- --------- --------- --------- --------- --------- ---------
Net interest income after loan loss
provision . . . . . . . . . . . . . . 7,963 7,485 32,221 26,177 18,669 11,710 3,512
Other noninterest income . . . . . . . 3,124 678 4,409 2,751 2,612 1,758 1,122
Gain on sale of ORE held for investment -- -- 1,207 -- -- -- --
General and administrative ("G&A")
expenses . . . . . . . . . . . . . . . 8,240 5,956 27,352 22,119 14,916 9,308 3,700
SAIF special assessment(1) . . . . . . -- -- 2,539 -- -- -- --
Provision for losses on ORE . . . . . . 170 180 1,611 -- 10 10 20
Other noninterest expense . . . . . . . 110 124 319 739 1,691 1,417 311
--------- --------- --------- --------- --------- --------- ---------
Net income before income taxes &
goodwill accretion . . . . . . . . . . 2,567 1,903 6,016 6,070 4,664 2,733 603
Accretion of negative goodwill . . . . -- -- -- 1,578 2,705 1,578 1,579
--------- --------- --------- --------- --------- --------- ---------
Net income before income taxes . . . . 2,567 1,903 6,016 7,648 7,369 4,311 2,182
Income tax provision . . . . . . . . . 964 699 2,232 1,875 468 268 --
--------- --------- --------- --------- --------- --------- ---------
Net income . . . . . . . . . . . . . . $ 1,603 $ 1,204 $ 3,784 $ 5,773 $ 6,901 $ 4,043 $ 2,182
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Earnings per share-total . . . . . . . $ .32 $ .24 $ .76 $ 1.26 $ 1.67 $ 0.98 $ 1.12
========= ========= ========= ========= ========= ========= =========
Earnings per share-excluding negative
goodwill . . . . . . . . . . . . . . . $ .32 $ .24 $ .76 $ .92 $ 1.02 $ .60 $ .32
========= ========= ========= ========= ========= ========= =========
Weighted average shares outstanding . . 4,980,167 4,953,119 4,952,937 4,562,642 4,136,790 4,141,322 1,951,231
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . $ 912,093 $ 802,363 $ 907,868 $ 801,995 $ 626,445 $ 626,445 $ 531,312
Investment & mortgage backed securities 62,370 51,481 94,989 64,801 40,271 40,271 37,382
Loans, net of unearned income . . . . . 748,493 676,658 742,994 669,416 516,335 516,335 316,483
Allowance for loan losses . . . . . . 13,508 14,746 13,134 14,910 7,065 7,065 6,539
Deposits . . . . . . . . . . . . . . . 829,060 742,082 827,980 743,105 583,885 583,885 494,316
Negative goodwill . . . . . . . . . . . -- -- -- -- 1,578 1,578 4,283
Stockholders' equity . . . . . . . . . 55,579 52,047 54,319 50,903 36,165 36,165 29,454
SELECTED FINANCIAL RATIOS(2):
Return on average assets . . . . . . . .72% .60% .45% .77% 1.25% 1.20% 1.99%
Return on average equity . . . . . . . 12.10 9.57 7.31 13.47 21.34 20.68 39.17
Net interest spread . . . . . . . . . . 3.83 3.83 3.96 3.67 3.78 4.06 3.45
Net interest margin . . . . . . . . . . 4.12 4.14 4.28 3.95 3.96 4.25 4.22
G&A expense to average assets . . . . . 3.63 2.96 3.28 2.96 2.74 2.79 3.94
G&A efficiency ratio . . . . . . . . . 67.40 69.15 68.98 72.25 65.26 62.02 65.70
Non-accrual loans to loans . . . . . . 2.27 2.22 2.15 2.04 2.51 2.51 5.05
Nonperforming assets to total assets . 2.58 3.02 2.51 2.93 3.59 3.59 4.95
Loan loss allowance to loans(3) . . . . 1.91 2.18 1.86 2.24 1.37 1.37 2.07
Loan loss allowance to nonperforming
loans(3) . . . . . . . . . . . . . . 82.81 96.47 84.93 90.47 53.36 53.36 39.12
RATIO OF EARNINGS TO FIXED CHARGES(4):
Including interest on deposits . . . .
Excluding interest on deposits . . . .
OTHER DATA (AT PERIOD-END):
Number of branches . . . . . . . . . . 33 32 32 32 21 21 19
Number of full-time equivalent
employees . . . . . . . . . . . . . . 644 432 637 421 300 300 179
</TABLE>
(1) The SAIF special assessment is a one-time charge. See
"Business--Supervision and Regulation--Deposit Insurance."
(2) Annualized.
(3) See "Business--Asset Quality" for a discussion of the allocation and
availability of loan loss reserves among portfolios of loans within the
Bank.
(4) Represents earnings before fixed charges, income taxes and extraordinary
items and non-cumulative preferred dividends and redemption. Fixed
charges include interest expense (inclusive or exclusive of interest on
deposits as indicated).
13
<PAGE> 15
<TABLE>
<CAPTION>
Five Months Ended Year Ended
May 31, December 31,
----------------------------- ---------------
1994 1993 1992
--------------- ------------- ---------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
OPERATING DATA:
Interest income . . . . . . . . . . . . . . . . . . $ 13,431 $ 4,848 $ 11,845
Interest expense . . . . . . . . . . . . . . . . . 6,160 1,970 6,054
-------------- ------------ --------------
Net interest income . . . . . . . . . . . . . . . . 7,271 2,878 5,791
Loan loss provision . . . . . . . . . . . . . . . 312 379 520
-------------- ------------ --------------
Net interest income after loan loss provision . . . 6,959 2,499 5,271
Other noninterest income . . . . . . . . . . . . . 854 743 1,679
G&A expenses . . . . . . . . . . . . . . . . . . . 5,608 2,699 5,748
Provision for losses on ORE . . . . . . . . . . . . -- 1,214 230
Other noninterest expense . . . . . . . . . . . . . 274 443 715
-------------- ------------ --------------
Net income (loss) before income taxes and goodwill
accretion . . . . . . . . . . . . . . . . . . . . 1,931 (1,114) 257
Accretion of negative goodwill . . . . . . . . . . 1,127 -- --
-------------- ----------- --------------
Net income (loss) before income taxes . . . . . . . 3,058 (1,114) 257
Income tax provision (benefit) . . . . . . . . . . 200 0 0
-------------- ------------ --------------
Net income (loss) . . . . . . . . . . . . . . . . . $ 2,858 $ (1,114) $ 257
============== ============ ==============
PER SHARE DATA:
Earnings (loss) per share - total . . . . . . . . . $ 1.67 $ (1.00) $ 0.23
============== ============ ==============
Earnings (loss) per share - excluding negative
goodwill . . . . . . . . . . . . . . . . . . . . $ 1.01 $ (1.00) $ (0.23)
============== =========== ==============
Weighted average shares outstanding . . . . . . . . 4,134,420 1,117,192 1,106,459
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . $ 508,642 $ 168,741 $ 168,810
Investment securities . . . . . . . . . . . . . . . 52,571 27,433 24,276
Loans net of unearned income . . . . . . . . . . . 396,144 111,292 110,715
Allowance for loan losses . . . . . . . . . . . . . 6,828 1,866 1,958
Negative goodwill . . . . . . . . . . . . . . . . . 3,156 5,861 --
Deposits . . . . . . . . . . . . . . . . . . . . . 469,461 153,660 154,984
Stockholder's Equity . . . . . . . . . . . . . . . 32,234 8,058 12,215
SELECTED FINANCIAL RATIOS(1):
Return on average assets . . . . . . . . . . . . . 1.33% (1.61)% 0.15%
Return on average equity . . . . . . . . . . . . . 22.34 (21.75) 2.12
Net interest spread . . . . . . . . . . . . . . . . 3.48 4.21 3.51
Net interest margin . . . . . . . . . . . . . . . . 3.67 4.66 3.95
G&A expense to average assets . . . . . . . . . . . 2.40 6.28 4.01
G&A efficiency ratio . . . . . . . . . . . . . . . 67.32 74.54 76.95
Non-accrual loans to loans . . . . . . . . . . . . 4.36 2.27 3.20
Nonperforming assets to total assets . . . . . . . 5.64 5.89 7.55
Loan loss allowance to loans(2) . . . . . . . . . . 1.72 1.68 1.77
Loan loss allowance to nonperforming loans(2) . . . 23.58 73.03 54.98
RATIO OF EARNINGS TO FIXED CHARGES(3):
Including interest on deposits . . . . . . . . . .
Excluding interest on deposits . . . . . . . . . .
OTHER DATA (AT PERIOD-END):
Number of branches . . . . . . . . . . . . . . . . 19 7 7
Number of full-time equivalent employees . . . . . 223 96 90
</TABLE>
(1) Annualized.
(2) See "Business--Asset Quality" for a discussion of the allocation and
availability of loan loss reserves among portfolios of loans within the
Bank.
(3) Represents earnings before fixed charges, income taxes and extraordinary
items and non-cumulative preferred dividends and redemption. Fixed
charges include interest expense (inclusive or exclusive of interest on
deposits as indicated).
14
<PAGE> 16
RISK FACTORS
An investment in the Preferred Securities involves a high degree of risk.
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following factors in evaluating the Company, its business and RBI Capital
before purchasing the Preferred Securities offered hereby. Prospective
investors should note, in particular, that this Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve
substantial risks and uncertainties. When used in this Prospectus, or in the
documents incorporated by reference herein, the words "anticipate", "believe",
"estimate", "may", "intend" and "expect" and similar expressions identify
certain of such forward-looking statements. Actual results, performance or
achievements could differ materially from those contemplated, expressed or
implied by the forward-looking statements contained herein. The considerations
listed below represent certain important factors the Company believes could
cause such results to differ. These considerations are not intended to
represent a complete list of the general or specific risks that may affect the
Company and RBI Capital. It should be recognized that other risks, including
general economic factors and business strategies, may be significant, presently
or in the future, and the risks set forth below may affect the Company and RBI
Capital to a greater extent than indicated.
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
The ability of RBI Capital to pay amounts due on the Preferred Securities
is entirely dependent upon the Company making payments on the Junior
Subordinated Debentures as and when required. As a holding company without
significant assets other than the capital stock of the Bank, the ability of the
Company to pay interest on the principal of the Junior Subordinated Debentures
to RBI Capital (and consequently, RBI Capital's ability to pay Distributions on
the Preferred Securities and the Company's ability to pay its obligations under
the Guarantee) will be significantly dependent on the ability of the Bank to
pay dividends to the Company in amounts sufficient to service the Company's
obligations. The Company is currently obligated to pay $360,000 in annual
interest on its 6.0% Debentures, and to make any other payments with respect to
securities issued by the Company in the future which are pari passu or have a
preference over the Junior Subordinated Debentures issued to RBI Capital with
respect to the payment of principal, interest or dividends. There is no
restriction on the ability of the Company to issue, or limitations on the
amount of, securities which are pari passu or have a preference over the Junior
Subordinated Debentures issued to RBI Capital, nor is there any restriction on
the ability of the Bank to issue additional capital stock or incur additional
indebtedness.
The Bank's ability to pay dividends or make other capital distributions to
the Company is governed by both federal and Florida law and regulations
promulgated by the FDIC and the Department, and is based on the Bank's
regulatory capital levels and net income. Under the FDIC's capital regulations,
the Bank is prohibited from making a capital distribution that would cause it
to become "undercapitalized" or if it is already undercapitalized (i.e., has a
risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio
of less than 4.0%, or a leverage ratio of less than 3.0%). Under the Florida
Financial Institutions Code, the prior approval of the Department is required
if the total of all dividends declared by a bank in any calendar year will
exceed the sum of the bank's net profits for that year and its retained net
profits for the preceding two years. Any additional capital distributions
would require prior Federal Reserve approval. As of March 31, 1997, the Bank
was a well-capitalized institution for purposes of the FDIC's capital
regulations and had $6.5 million available for distribution as dividends to the
Company. There is no assurance that the Bank will remain a well-capitalized
institution or that it will be in a position to make dividend payments to the
Company in an amount sufficient for the Company to service the Junior
Subordinated Debentures or for RBI Capital to pay amounts due on the Preferred
Securities.
15
<PAGE> 17
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued for the benefit
of the holders of Preferred Securities and under the Junior Subordinated
Debentures issued to RBI Capital are unsecured and rank subordinate and junior
in right of payment to all existing and future Senior Debt and Subordinated
Debt of the Company. At March 31, 1997, the aggregate outstanding Subordinated
Debt of the Company was approximately $6.0 million and there was no Senior Debt
outstanding. Only the capital stock of the Company is currently junior in right
of payment to the Junior Subordinated Debentures issued to RBI Capital. Because
the Company is a holding company, the right of the Company to participate in
any distribution of assets of a subsidiary, including the Bank, upon a
liquidation or reorganization or otherwise of such subsidiary (and thus the
ability of holders of the Preferred Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of the subsidiary
(including depositors in the Bank), except to the extent that the Company may
itself be recognized as a creditor of the subsidiary. If the Company is a
creditor of a subsidiary, the claims of the Company would be subject to any
prior security interest in the assets of the subsidiary and any indebtedness of
the subsidiary senior to that of the Company. The Junior Subordinated
Debentures, therefore, will be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, including the Bank. At March
31, 1997, the Bank had liabilities of $850.4 million (including $829.1 million
in deposits). Holders of Junior Subordinated Debentures and the Preferred
Securities should look only to the assets of the Company for payments on the
Junior Subordinated Debentures. Neither the Indenture, the Guarantee nor the
Trust Agreement places any limitation on the amount of secured or unsecured
debt, including Senior Debt and Subordinated Debt, that may be incurred by the
Company or any of its subsidiaries. See "Description of the Guarantee--Status
of the Guarantee" and "Description of the Junior Subordinated
Debentures--Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
The Company has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters with respect to each
Extended Interest Payment Period; provided that no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. In the event of any such deferral, quarterly Distributions on the
Preferred Securities by RBI Capital will be deferred (and the amount of
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate of ____% per annum,
compounded quarterly from the relevant payment date for such Distributions)
during such Extended Interest Payment Period. During any such Extended Interest
Payment Period, the Company may not and may not permit any subsidiary to (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock (other than (a) the reclassification of any class of the Company's
capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's capital stock, (c) any
declaration of a dividend in connection with the implementation of a
shareholder rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto and
(d) purchases of the Company's capital stock related to the rights under any of
the Company's benefit plans for its or its subsidiaries' directors, officers or
employees), (ii) make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Junior Subordinated Debentures or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Junior Subordinated Debentures (other
than payments under the Guarantee), or (iii) redeem, purchase or acquire less
than all of the Junior Subordinated Debentures or any of the Preferred
Securities. Prior to the termination of any such Extended Interest Payment
Period, the Company may further defer the payment of interest; provided that no
Extended Interest Payment Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any Extended Interest Payment Period and the payment of all
interest then accrued and unpaid (together with interest thereon at the annual
rate of ____% compounded quarterly, to the extent permitted by applicable law),
the Company may elect to begin a new
16
<PAGE> 18
Extended Interest Payment Period, subject to the above restrictions. Subject
only to compliance with the foregoing, there is no limit on the number of times
that the Company may elect to begin an Extended Interest Payment Period so long
as no Debenture Event of Default has occurred and is continuing. See
"Description of the Preferred Securities--Distributions--Extended Interest
Payment Period" and "Description of the Junior Subordinated Debentures--Option
to Extend Interest Payment Period."
Should an Extended Interest Payment Period occur, each holder of Preferred
Securities will be required to accrue and recognize as income (in the form of
original issue discount) in respect of its pro rata share of the interest
accruing on the Junior Subordinated Debentures held by RBI Capital for United
States federal income tax purposes. A holder of Preferred Securities would, as
a result, be required to include such income in gross income for United States
federal income tax purposes in advance of the receipt of cash, and will not
receive the cash related to such income from RBI Capital if the holder disposes
of the Preferred Securities prior to the record date for the payment of the
related Distributions. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount." See also "--Absence of Prior Public Market
for the Preferred Securities; Trading Price and Tax Considerations."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Preferred Securities is likely to
be adversely affected. As a result of the existence of the Company's right to
defer interest payments, the market price of the Preferred Securities may be
more volatile than the market prices of other securities on which original
issue discount accrues that do not provide for such optional deferrals.
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton released his budget proposals for
fiscal year 1998. One of the revenue provisions of those proposals would
generally deny interest deductions for interest on an instrument such as the
Junior Subordinated Debentures which is issued by a corporation that has a
maximum term of more than 15 years and that is not shown as indebtedness on the
separate balance sheet of the issuer or, where the instrument is issued to a
related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness on
the issuer's consolidated balance sheet. If enacted as proposed by the
President, this provision would be effective for instruments issued on or after
the date of first action by a Congressional committee with respect to the
proposal. It is not clear from the President's proposals as to what constitutes
Congressional "committee action" with respect to this proposal. If the
provision were enacted and were to apply to the Junior Subordinated Debentures,
the Company would no longer be able to deduct interest on the Junior
Subordinated Debentures as it would be permitted to do so under current law.
There is no assurance that future legislative proposals or final legislation
will not affect the ability of the Company to deduct interest on the Junior
Subordinated Debentures or will not give rise to a Tax Event. A Tax Event would
permit the Company, upon receipt of Federal Reserve approval if then required
under applicable Federal Reserve capital guidelines or policies, to cause a
redemption of the Preferred Securities before, as well as after, _____________,
2002. See "Description of the Junior Subordinated Debentures--Redemption or
Exchange--Tax Event Redemption, Investment Company Event Redemption or Capital
Treatment Event Redemption" and "Certain Federal Income Tax
Consequences--Effect of Proposed Changes in Tax Laws."
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT, OR CAPITAL TREATMENT
EVENT
The Company has the right to redeem the Junior Subordinated Debentures in
whole (but not in part) within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event (whether
occurring before or after _____________, 2002), and, therefore, cause a
mandatory redemption of the Preferred Securities. The exercise of such right is
subject to the Company having received prior Federal Reserve approval to do so
if then required under applicable Federal Reserve capital guidelines or
policies.
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"Tax Event" means the receipt by the Company or RBI Capital of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change), in the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the Preferred Securities, there is more than an insubstantial risk that (i)
RBI Capital is, or will be within 90 days of the date of such opinion, subject
to United States federal income tax with respect to income received or accrued
on the Junior Subordinated Debentures, (ii) interest payable by the Company on
the Junior Subordinated Debentures is not, or, within 90 days of such opinion,
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) RBI Capital is, or will be within 90 days
of the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges. The Company must request and
receive an opinion with regard to such matters within a reasonable period of
time after it becomes aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by the Company or RBI Capital
of an opinion of counsel to the Company experienced in such matters to the
effect that, as a result of the occurrence of a change in law or regulation or
a written change (including any announced prospective change) in interpretation
or application of law or regulation by any legislative body, court,
governmental agency or regulatory authority, there is more than an
insubstantial risk that RBI Capital is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), which change or prospective
change becomes effective or would become effective, as the case may be, on or
after the date of original issuance of the Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
Federal Reserve or other official or administrative pronouncement or action or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such proposed change, pronouncement, action
or decision is announced on or after the date of original issuance of the
Preferred Securities, there is more than an insubstantial risk that the Company
will not be entitled to treat an amount equal to the Liquidation Amount of the
Preferred Securities as "Tier 1 Capital" except as otherwise restricted under
the 25% Capital Limitation (as defined herein), for purposes of the risk-based
capital adequacy guidelines of the Federal Reserve as then in effect and
applicable to the Company.
See "--Proposed Tax Legislation" for a discussion of certain legislative
proposals that, if adopted, could give rise to a Tax Event, which may permit
the Company to cause a redemption of the Preferred Securities prior to
_____________, 2002. For a discussion of possible tax consequences of a
redemption, see "--Exchange of Preferred Securities for Junior Subordinated
Debentures; Redemption and Tax Consequences."
POSSIBLE SHORTENING OF MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the Stated Maturity of
the Junior Subordinated Debentures to a date not earlier than _____________,
2002. The exercise of such right is subject to the Company having received
prior Federal Reserve approval if then required under applicable capital
guidelines or regulatory policies. See "Description of the Junior Subordinated
Debentures--General."
LIMITED RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to
the extent not paid by RBI Capital, (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that RBI Capital
has funds available therefor at such time, (ii) the Redemption Price (as
defined herein) with respect to any Preferred
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<PAGE> 20
Securities called for redemption, to the extent that RBI Capital has funds
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of RBI Capital (other than in connection
with the distribution of Junior Subordinated Debentures to the holders of
Preferred Securities or a redemption of all of the Preferred Securities), the
lesser of (a) the amount of the Liquidation Distribution (as defined herein),
to the extent RBI Capital has funds available therefor at such time, and (b)
the amount of assets of RBI Capital remaining available for distribution to
holders of the Preferred Securities upon liquidation of RBI Capital. The
holders of not less than a majority in Liquidation Amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in respect of
the Guarantee or to direct the exercise of any trust power conferred upon the
Guarantee Trustee under the Guarantee. Any holder of the Preferred Securities
may institute a legal proceeding directly against the Company to enforce its
rights under the Guarantee without first instituting a legal proceeding against
RBI Capital, the Guarantee Trustee or any other Person (as defined in the
Guarantee). If the Company were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, RBI Capital would lack funds
for the payment of Distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of Preferred
Securities would not be able to rely upon the Guarantee for such amounts. In
the event, however, that a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest on or principal of the Junior Subordinated Debentures on the payment
date on which such payment is due and payable, then a holder of Preferred
Securities may institute a legal proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on such
Junior Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). The exercise by the Company of its right, as described herein, to
defer the payment of interest on the Junior Subordinated Debentures does not
constitute a Debenture Event of Default. In connection with such Direct Action,
the Company will have a right of set-off under the Indenture to the extent of
any payment made by the Company to such holder of Preferred Securities in the
Direct Action. Except as described herein, holders of Preferred Securities
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of the Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders of Preferred
Securities," "Description of the Junior Subordinated Debentures--Debenture
Events of Default" and "Description of the Guarantee." The Trust Agreement
provides that each holder of Preferred Securities by acceptance thereof agrees
to the provisions of the Guarantee and the Indenture.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES; REDEMPTION
AND TAX CONSEQUENCES
The Company, as the holder of the Common Securities, has the right at any
time to dissolve, wind-up or terminate RBI Capital and cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities in exchange therefor upon liquidation of RBI Capital. The exercise
of such right is subject to the Company having received prior Federal Reserve
approval if then required under applicable capital guidelines or regulatory
policies. The Company will have the right, in certain circumstances, to redeem
the Junior Subordinated Debentures in whole or in part, in lieu of a
distribution of the Junior Subordinated Debentures by RBI Capital, in which
event RBI Capital will redeem the Trust Securities on a pro rata basis to the
same extent as the Junior Subordinated Debentures are redeemed by the Company.
Any such distribution or redemption prior to the Stated Maturity will be
subject to prior Federal Reserve approval if then required under applicable
capital guidelines or regulatory policies. See "Description of the Preferred
Securities--Redemption or Exchange--Tax Event Redemption, Investment Company
Event Redemption or Capital Treatment Event Redemption."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of RBI Capital should not
be a taxable event to holders of the Preferred Securities. If, however, RBI
Capital is characterized as an association taxable as a corporation at the time
of the dissolution of RBI Capital, the distribution of the Junior Subordinated
Debentures would constitute a taxable event to holders of Preferred Securities.
Moreover, any redemption of the Preferred Securities for cash would be a
taxable event to such holders. See "Certain Federal Income Tax
Consequences--Receipt of Junior Subordinated Debentures or Cash Upon
Liquidation of RBI Capital."
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<PAGE> 21
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
Exchange for Preferred Securities upon a dissolution or liquidation of RBI
Capital. The Preferred Securities or the Junior Subordinated Debentures may
trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby. Because holders of Preferred Securities
may receive Junior Subordinated Debentures, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the Junior
Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein.
While there is no assurance that listing will be achieved, if the Junior
Subordinated Debentures are distributed to the holders of Preferred Securities
upon the liquidation of RBI Capital, the Company will use all reasonable
efforts to list the Junior Subordinated Debentures on The Nasdaq Stock Market's
National Market or Small-Cap Market or such stock exchanges, if any, on which
the Preferred Securities are then listed.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have no voting rights in RBI Capital
except in limited circumstances relating only to the modification of the
Preferred Securities and the exercise of the rights of RBI Capital as holder of
the Junior Subordinated Debentures and the Guarantee. Holders of Preferred
Securities will not be entitled to vote to appoint, remove or replace the
Property Trustee or the Delaware Trustee, as such voting rights are vested
exclusively in the holder of the Common Securities (except upon the occurrence
of certain events described herein). The Property Trustee, the Delaware
Trustee, the Administrative Trustees and the Company may amend the Trust
Agreement without the consent of holders of Preferred Securities to ensure that
RBI Capital will be classified for United States federal income tax purposes as
a grantor trust even if such action adversely affects the interests of such
holders. See "Description of the Preferred Securities--Voting Rights;
Amendment of Trust Agreement" and "Description of the Preferred
Securities--Removal of RBI Capital Trustees."
LIMITED COVENANTS
The covenants in the Indenture are limited and there are no covenants in
the Trust Agreement. As a result, neither the Indenture nor the Trust Agreement
protects holders of Junior Subordinated Debentures or Preferred Securities,
respectively, in the event of a material adverse change in the Company's
financial condition or results of operations or limits the ability of the
Company or any subsidiary to incur or assume additional indebtedness or other
obligations. Additionally, neither the Indenture nor the Trust Agreement
contain any financial ratios or specified levels of liquidity to which the
Company must adhere. Therefore, the provisions of these governing instruments
should not be considered a significant factor in evaluating whether the Company
will be able to comply with its obligations under the Junior Subordinated
Debentures or the Guarantee.
ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND
TAX CONSIDERATIONS
The Preferred Securities are a new issue. Application has been made to
the National Association of Securities Dealers, Inc. ("NASD") to have the
Preferred Securities listed for quotation on The Nasdaq Stock Market's National
Market. However, one of the requirements for listing and continued listing is
the presence of two market makers for the Preferred Securities. The Company has
been advised that the Underwriters intend to make a market in the Preferred
Securities. However, the Underwriters are not obligated to do so, and such
market making may be discontinued at any time. Therefore, there is no assurance
that the Preferred Securities will be listed or will continue to be listed on
The Nasdaq Stock Market's National Market, that an active trading market will
develop for the Preferred Securities or, if such market develops, that it will
be maintained or that the market price will equal or exceed the public offering
price set forth on the cover page of this Prospectus. Accordingly, holders of
Preferred Securities may experience difficulty reselling them or may be unable
to sell them at all. The offering price and terms of the Preferred Securities
has been determined through negotiations between the Company and Ryan, Beck &
Co., acting as qualified independent underwriter. Future prices for the
Preferred Securities will be determined in the marketplace and may be
influenced by many factors, including prevailing interest rates, the liquidity
of the market
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for the Preferred Securities, investor perceptions of the Company and general
industry and economic conditions. See "Underwriting."
Further, should the Company exercise its option to defer any payment of
interest on the Junior Subordinated Debentures, the Preferred Securities may
trade at prices that do not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. In the
event of such a deferral, a holder of Preferred Securities who disposes of
Preferred Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from RBI Capital for the period
prior to such disposition) will nevertheless be required to include accrued but
unpaid interest on the Junior Subordinated Debentures through the date of
disposition in income as ordinary income and to add such amount to the adjusted
tax basis in the holder's pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. Such holder will recognize a capital loss to the
extent the selling price (which may not fully reflect the value of accrued but
unpaid interest) is less than its adjusted tax basis (which will include all
accrued but unpaid interest). Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes. See "Certain Federal Income Tax Consequences--Sales of
Preferred Securities."
SECURITIES ARE NOT INSURED
Neither the Preferred Securities nor the Junior Subordinated Debentures
are insured by the Bank Insurance Fund, the Savings Association Insurance Fund,
or the Federal Deposit Insurance Corporation or by any other insurer or
government agency.
ABILITY TO MANAGE GROWTH AND INTEGRATE OPERATIONS
Since the Change of Control, the Company has experienced rapid growth
through acquisitions, the opening of loan production offices and de novo
branches, the creation of the Bank's mortgage banking division and asset
purchases. There is no assurance that the Company will not encounter unforeseen
expenses, as well as difficulties and complications in integrating expanded
operations and new employees without disruption to overall operations. In
addition, such rapid growth may adversely affect the Company's operating
results because of many factors, including start-up costs, diversion of
management resources, asset quality and required operating adjustments. There
can be no assurance that the Company will successfully integrate or achieve the
anticipated benefits of its growth or expanded operations.
In addition, achieving the anticipated benefits of the FFO Merger will
depend in part upon whether the operations and organizations of the Company and
FFO can be integrated in an efficient, effective, and timely manner. There can
be no assurance that this integration will occur and that cost savings in
operations will be achieved. After the FFO Merger, the Company may also
encounter unanticipated operational or organizational difficulties. The
successful combination of the two companies will require, among other things,
consolidation of certain operations, elimination of duplicative corporate and
administrative expense and elimination of certain positions. The integration
of certain operations following the FFO Merger will require the dedication of
management resources which may temporarily distract attention from the
day-to-day business of the Company. There can be no assurance that integration
will be accomplished smoothly or successfully. Failure to accomplish
effectively the integration of operations could have a material adverse effect
on the Company's results of operations and financial condition following the
FFO Merger.
NONPERFORMING ASSETS
At the time of the Change in Control, the Bank had a relatively high ratio
of nonperforming assets to total assets. In addition, subsequent purchases of
loans, acquired at a discount, included loans that subsequently were placed in
nonperforming status. Although the Company has reduced its nonperforming
assets ratio from 5.95% at year-end 1993 to 2.58% at March 31, 1997, its
current level of nonperforming assets is still above the average level
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<PAGE> 23
of other similarly-sized financial institutions. Moreover, there is no
assurance that this ratio will continue to decline, particularly if general
economic conditions or Florida real estate values deteriorate.
ADEQUACY OF LOAN RESERVES
Industry experience indicates that a portion of the Company's loans will
become delinquent and a portion of the loans will require partial or entire
charge-off. Regardless of the underwriting criteria utilized by the Company,
losses may be experienced as a result of various factors beyond the Company's
control, including, among other things, changes in market conditions affecting
the value of properties and problems affecting the credit of the borrower. The
Company's determination of the adequacy of its allowance for loan losses is
based on various considerations, including an analysis of the risk
characteristics of various classifications of loans, previous loan loss
experience, specific loans which would have loan loss potential, delinquency
trends, estimated fair value of the underlying collateral, current economic
conditions, the view of the Company's regulators, and geographic and industry
loan concentration. However, if delinquency levels were to increase as a
result of adverse general economic conditions, especially in Florida where the
Company's exposure is greatest, the loan loss reserve so determined by the
Company may not be adequate. A substantial portion of the Company's loan loss
reserves are allocated to specific portfolios of loans purchased by the
Company. Such allocated reserves are not available to cover losses in other
portfolios. To the extent that losses in certain pools or portfolios exceed
the loan loss reserves and unamortized loan discount allocated to such pool or
portfolio, or available as a general reserve, the Company's results of
operations would be adversely affected. There can be no assurance that the
Company's allowance for loan losses will be adequate to cover its loan losses
or that the Company will not experience significant losses in its loan
portfolios which may require significant increases to the allowance for loan
losses in the future.
IMPACT OF CHANGES IN REAL ESTATE VALUES
A significant portion of the Company's loan portfolio consists of
residential mortgage loans and commercial real estate loans. At March 31,
1997, 55.1% of the Company's loans were secured by one-to-four family
residential real estate, 34.7% were secured by commercial real estate and
multifamily residential, 4.1% were construction loans and the Company had ORE
acquired through foreclosure with a book value of $7.2 million. Further, the
properties securing these loans are concentrated in Florida. Real estate
values and real estate markets generally are affected by, among other things,
changes in national, regional or local economic conditions, fluctuations in
interest rates and the availability of loans to potential purchasers, changes
in the tax laws and other governmental statutes, regulations and policies and
acts of nature. Any decline in real estate prices, particularly in Florida,
could significantly reduce the value of the real estate collateral securing the
Company's loans, increase the level of the Company's nonperforming loans,
require write-downs in the book value of its ORE, and have a material negative
impact on the Company's financial performance.
Additionally, the Company has increased its level of commercial real
estate loans which are generally considered to involve a higher degree of
credit risk than that for one-to-four family residential lending.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Company's profitability is dependent to a large extent on its net
interest income, which is the difference between its interest income on
interest-earning assets and its interest expense on interest-bearing
liabilities. The Company, like most financial institutions, is affected by
changes in general interest rate levels, which are currently at relatively low
levels, and by other economic factors beyond its control. Interest rate risk
arises from mismatches (i.e., the interest sensitivity gap) between the dollar
amount of repricing or maturing assets and liabilities, and is measured in
terms of the ratio of the interest rate sensitivity gap to total assets. More
assets repricing or maturing than liabilities over a given time frame is
considered asset-sensitive and is reflected as a positive gap, and more
liabilities repricing or maturing than assets over a given time frame is
considered liability-sensitive and is reflected as a negative gap. An
asset-sensitive position (i.e., a positive gap) will generally enhance earnings
in a rising interest rate environment and will negatively impact earnings in a
falling interest rate environment, while a liability-sensitive
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<PAGE> 24
position (i.e., a negative gap) will generally enhance earnings in a falling
interest rate environment and negatively impact earnings in a rising interest
rate environment. Fluctuations in interest rates are not predictable or
controllable. The Company has attempted to structure its asset and liability
management strategies to mitigate the impact on net interest income of changes
in market interest rates. At March 31, 1997, the Company had a one year
cumulative positive gap of .97%. This positive one year gap position may, as
noted above, have a negative impact on earnings in a falling interest rate
environment. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition."
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and examination
by the Department as its chartering authority and primary regulator, and by the
FDIC as its federal regulator and administrator of the insurance fund that
insures the Bank's deposits up to applicable limits. The Bank is a member of
the FHLB of Atlanta and is subject to certain limited regulation by the Federal
Reserve. As the holding company of the Bank, the Company is also subject to
regulation and oversight by the Federal Reserve. See "Supervision and
Regulation." Such regulation and supervision governs the activities in which an
institution may engage and is intended primarily for the protection of the FDIC
insurance funds and depositors. Regulatory authorities have been granted
extensive discretion in connection with their supervisory and enforcement
activities and regulations have been implemented which have increased capital
requirements, increased insurance premiums and have resulted in increased
administrative, professional and compensation expenses. Any change in the
regulatory structure or the applicable statutes or regulations could have a
material impact on the Company and the Bank and their operations. See
"Supervision and Regulation." Additional legislation and regulations may be
enacted or adopted in the future which could significantly affect the powers,
authority and operations of the Bank and the Bank's competitors which in turn
could have a material adverse affect on the Bank and its operations. See
"Supervision and Regulation."
CONTROL BY THE CONTROLLING STOCKHOLDERS
The Company's Controlling Stockholders, William R. Hough and John W.
Sapanski (and their respective affiliates and immediate family members) each
currently owns shares of the Company's capital stock representing approximately
50.6% and 9.0%, respectively, of the total voting rights of the Company.
Following consummation of the FFO Merger, it is anticipated that these voting
percentages will be approximately ___% and ___%, respectively. On the basis of
such ownership, Messrs. Hough and Sapanski will be able to elect the Company's
Board of Directors and, through their control of the Company's Board, will be
able to continue to direct the affairs of the Company and the Bank.
CAPITAL LIMITATIONS ON FUTURE GROWTH
Since the Change of Control, one of the Company's primary business
objectives has been to increase its total asset size, expand into new market
areas, and increase market share in its existing markets. The Company has
sought to accomplish this goal through a combination of internal growth, loan
and other asset purchases, deposit assumptions, the opening of new branches and
acquisitions of other financial institutions. Most recently, in April 1997,
the Company acquired Firstate, an Orlando-based federal savings association
having total assets of $71.1 million. In addition, the Company has pending an
acquisition of FFO, a thrift holding company headquartered in St. Cloud,
Florida, with total assets of $320.0 million as of March 31, 1997. The Company
intends to pursue its current growth strategy for the foreseeable future as a
means of increasing overall profitability. While the proceeds of the Preferred
Securities offering will enhance the Company's Tier 1 capital position and will
thereby facilitate the Company's growth and expansion, there can be no
assurance that the Company will in the future have sufficient capital to
continue to pursue its growth strategy.
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COMPETITION
The Company competes with various types of financial institutions,
including other commercial banks, savings institutions, finance companies,
mortgage banking companies, money market funds and credit unions, many of which
have substantially greater financial resources than the Company and, in some
cases, operate under fewer regulatory constraints. The Company not only
competes with financial institutions headquartered in the State of Florida but
also competes with a number of financial institutions headquartered outside of
Florida who are active in the state. See "Business--Competition" and
"Business--Supervision and Regulation."
USE OF PROCEEDS
RBI Capital will use the gross proceeds received from the sale of the
Preferred Securities to purchase the Junior Subordinated Debentures from the
Company. The net proceeds to the Company from the sale of the Junior
Subordinated Debentures are estimated to be approximately $____ million ($____
million if the Underwriters' over-allotment option is exercised in full) after
deduction of the underwriting discount and estimated expenses. The net proceeds
from the sale of the Junior Subordinated Debentures will be contributed by the
Company to the capital of the Bank where it will be utilized for general
corporate purposes, including working capital, financing possible future
acquisitions and market expansion and for supporting growth.
MARKET FOR THE PREFERRED SECURITIES
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market under the symbol REPBP.
One of the requirements for listing and continued listing is the presence of
two market makers. Although the Underwriters have informed the Company that
they both presently intend to make a market in the Preferred Securities, the
Underwriters are not obligated to do so and any such market making may be
discontinued at any time. Accordingly, there is no assurance that the Preferred
Securities will be listed on The Nasdaq Stock Market's National Market, that an
active and liquid trading market will develop or, if developed, that such a
market will be sustained. The offering price and distribution rate are
determined by negotiations among representatives of the Company and Ryan, Beck
& Co., acting as qualified independent underwriter, and the offering price of
the Preferred Securities may not be indicative of the market price following
the offering. See "Underwriting."
ACCOUNTING TREATMENT
For financial reporting purposes, RBI Capital will be treated as a
subsidiary of the Company and, accordingly, the accounts of RBI Capital will be
included in the consolidated financial statements of the Company. The Preferred
Securities will be presented as a separate line item in the consolidated
balance sheet of the Company under the caption "Guaranteed Preferred Beneficial
Interests in Company's Junior Subordinated Debentures," and appropriate
disclosures about the Preferred Securities, the Guarantee and the Junior
Subordinated Debentures will be included in the notes to consolidated financial
statements. For financial reporting purposes, the Company will record
Distributions payable on the Preferred Securities as minority interest in the
consolidated statements of operations.
As long as any Preferred Securities remain outstanding, all future reports
of the Company filed under the Exchange Act will (a) present the Trust
Securities issued by RBI Capital on the balance sheet as a separate line-item
entitled "Guaranteed Preferred Beneficial Interests in Company's Junior
Subordinated Debentures," (b) include in a footnote to the financial statements
disclosure that the sole assets of RBI Capital are the Junior Subordinated
Debentures (including the outstanding principal amount, interest rate and
maturity date of such Junior Subordinated Debentures), and (c) include in an
audited footnote to the financial statements disclosure that the Company owns
all of the Common Securities of RBI Capital, the sole assets of RBI Capital are
the Junior Subordinated Debentures, and the back-up obligations, in the
aggregate, constitute a full and unconditional guarantee by the Company of the
obligations of RBI Capital under the Preferred Securities.
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CAPITALIZATION
The following table sets forth the actual and pro forma, as adjusted,
consolidated capitalization of the Company at March 31, 1997. Pro forma
capitalization gives effect to (i) the Firstate Acquisition, (ii) the FFO
Merger, and (iii) the proceeds raised hereby. The information set forth below
should be read in conjunction with the Consolidated Financial Statements of the
Company included elsewhere in this Prospectus. See "Pro Forma Financial Data."
<TABLE>
<CAPTION>
March 31, 1997
--------------------------------
Pro Forma
Company As
Actual Adjusted
------------ --------------
(dollars in thousands)
<S> <C> <C>
Subordinated debentures . . . . . . . . . . . . . . . . $ 6,000 $ 6,000
Guaranteed preferred beneficial interests in Company's
junior subordinated debentures(1) . . . . . . . . . 0 25,000
Stockholders' Equity:
Perpetual Preferred Convertible Stock, 100,000 shares
authorized, 75,000 shares issued and outstanding . 1,500 1,500
Common Stock, 20,000,000 shares authorized,
4,183,507 shares issued and outstanding . . . . . . 8,367 13,266
Capital surplus . . . . . . . . . . . . . . . . . . . 26,699 45,801
Retained earnings . . . . . . . . . . . . . . . . . . 19,386 21,066
Net unrealized losses on debt securities available for
sale-net of deferred income taxes . . . . . . . . . (373) (522)
----------- -------------
Total stockholders' equity . . . . . . . . . . . . . $ 55,579 $ 81,111
=========== =============
Company Capital Ratios(2):
Equity to total assets . . . . . . . . . . . . . . . 6.09% 6.21%
Tier 1 risk-based capital ratio(3) . . . . . . . . . 8.87 10.83
Total risk-based capital ratio . . . . . . . . . . . 11.12 13.14
Leverage ratio(3)(4) . . . . . . . . . . . . . . . . 5.83 7.19
</TABLE>
(1) Preferred Securities representing beneficial interests in an aggregate
amount of $25 million of the ____% Junior Subordinated Debentures of the
Company. The Junior Subordinated Debentures will mature on ____________,
2027.
(2) The pro forma capital ratios, as adjusted, are computed including the
total estimated net proceeds from the sale of the Preferred Securities, in
a manner consistent with Federal Reserve guidelines.
(3) In October 1996, the Federal Reserve announced that securities having
terms similar to those offered herein would be treated as the equivalent of
cumulative preferred stock for purposes of calculating a bank holding
company's Tier 1 capital. Under the Federal Reserve's guidelines, the
amount of cumulative preferred stock that can be included in Tier 1 capital
is limited to 25% of total Tier 1 capital. In view of this limitation
on a pro forma basis, only $____ million of the net proceeds raised hereby
will initially be included in the Company's Tier 1 capital.
(4) The leverage ratio is Tier 1 capital divided by the average total assets
less intangibles.
25
<PAGE> 27
PRO FORMA FINANCIAL DATA
The pro forma balance sheet as of March 31, 1997 and statement of
operations and other data for the year ended December 31, 1996 and for the
three months ended March 31, 1997 give effect to, among other things, the
Firstate Acquisition and the FFO Merger, as if they had occurred at the
beginning of the respective periods. See "Business--Recent and Pending
Acquisitions" for a description of the Firstate Acquisition and FFO Merger.
The pro forma adjustments are based upon available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The pro forma and projected financial data should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto appearing elsewhere in this Prospectus. The pro forma and projected
financial data are not necessarily indicative of the results that would have
occurred had the Firstate Acquisition and the FFO Merger actually occurred on
the dates indicated, nor are they indicative of the Company's future results of
operations.
The pro forma adjustments do not include the effect of operating cost,
savings or revenue enhancements, which may be realized after the Firstate
Acquisition and FFO Merger or completed.
26
<PAGE> 28
REPUBLIC BANCSHARES, INC. & SUBSIDIARY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
Combined
Combined Company
Company with
Firstate with FFO Firstate
Company Firstate Adjustments(a) Firstate FFO Adjustments(b) and FFO
--------- -------- -------------- ----------- --------- -------------- ------------
(In thousands, except par values)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and due from banks $ 23,803 $ 513 $ 5,173 $ 29,489 $ 6,491 $ -- $ 35,980
Interest bearing
deposits. . . . . . . -- 950 -- 950 7,688 -- 8,638
Investment securities . 42,709 0 -- 42,709 13,169 -- 55,878
Mortgage backed
securities. . . . . . 19,661 27,493 (247) 46,907 58,415 19 105,341
FHLB stock . . . . . . 5,081 -- -- 5,081 2,378 -- 7,459
Federal funds sold . . 41,000 380 -- 41,380 764 -- 42,144
Loans held for sale . . 40,201 -- -- 40,201 4,573 -- 44,774
Loans receivable . . . 708,292 38,050 (6,689) 739,653 221,505 (530) 960,628
Allowance for loan
losses . . . . . . . 13,508 119 -- 13,627 5,579 -- 19,206
-------- ------- ------------- ---------- -------- ------------- -----------
Loans receivable, net . 694,784 37,931 (6,689) 726,026 215,926 (530) 941,422
Premises and equipment 20,015 655 -- 20,670 5,268 251 26,189
Real estate owned . . . 7,250 2,526 (2,453) 7,323 1,425 -- 8,748
Other assets . . . . . 17,589 1,531 1,794 20,914 3,934 5,179 30,027
-------- ------- ------------- ---------- -------- ------------- -----------
Total assets . . $912,093 $71,979 $ (2,422) $ 981,650 $320,031 $ 4,919 $ 1,306,600
======== ======= ============= ========== ======== ============= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Liabilities:
Deposits-
Noninterest-bearing
checking . . . . $ 49,066 $ 1,416 $ -- $ 50,482 $ 16,589 $ -- $ 67,071
Interest-bearing
checking . . . . 89,895 1,453 -- 91,348 22,676 -- 114,024
Savings and money
market . . . . . 283,362 3,848 -- 287,210 35,392 -- 322,602
Time deposits . . . 406,737 61,349 490 486,576 211,015 149 679,740
-------- ------- ------------- ---------- -------- ------------- -----------
Total deposits . 829,060 68,066 490 897,616 285,672 149 1,183,437
Securities sold under
agreement to
repurchase . . . . . 49,066 -- -- 16,160 -- -- 67,071
Other borrowings . . . 6,000 -- -- 6,000 9,000 -- 15,000
Other liabilities . . . 5,294 1,027 (26) 6,295 4,599 (2) 10,892
-------- ------- ------------- ---------- -------- ------------- -----------
Total liabilities 856,514 69,093 464 926,071 299,271 147 1,225,489
-------- ------- ------------- ---------- -------- ------------- -----------
Stockholders' equity
Perpetual preferred
convertible stock 1,500 -- -- 1,500 -- -- 1,500
Common Stock . . . 8,367 1,500 (1,500) 8,367 845 4,054 13,266
Capital surplus . . 26,699 13,002 (13,002) 26,699 17,633 1,469 45,801
Retained earnings . 19,386 (11,616) 11,616 19,368 2,431 (751) 21,066
Net unrealizable
loss on AFS
securities. . . . (373) -- -- (373) (149) -- (522)
-------- ------- ------------- ---------- -------- ------------- -----------
Total
stockholders'
equity . . . . 55,579 2,886 (2,886) 55,579 20,760 4,772 81,111
-------- ------- ------------- ---------- -------- ------------- -----------
Total liabilities and
stockholders' equity $912,093 $71,979 $ (2,422) $ 981,650 $320,031 $ 4,919 $ 1,306,600
======== ======= ============= ========== ======== ============= ===========
</TABLE>
27
<PAGE> 29
REPUBLIC BANCSHARES, INC. & SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Combined
Combined Company
Company with
Firstate with FFO Firstate
Company Firstate Adjustments(c) Firstate FFO Adjustments(d) and FFO
-------- --------- ------------ --------- --------- ------------- -----------
THREE MONTHS ENDED 3/31/97 (In thousands, except par values)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income . . . . . . $18,070 $ 1,141 $ -- $ 19,211 $ 5,807 $ -- $ 25,018
Interest expense . . . . . 8,969 879 -- 9,848 3,173 -- 13,021
------- -------- ----------- -------- -------- ------------ ----------
Net interest income . . . . 9,101 262 -- 9,363 2,634 -- 11,997
Loan loss provision . . . . 1,138 -- -- 1,138 -- -- 1,138
------- -------- ----------- -------- -------- ------------ ----------
Net interest income after
loan loss provisions . . 7,963 262 -- 8,225 2,634 -- 10,859
Noninterest income . . . . 3,124 101 -- 3,225 601 -- 3,826
General & administrative
expenses . . . . . . . . 8,240 270 -- 8,510 2,263 -- 10,773
Other noninterest expenses 280 16 3 299 34 130 463
------- -------- ----------- -------- -------- ------------ ----------
Net income before taxes . . 2,567 77 (3) 2,641 938 (130) 3,449
Income tax expense . . . . 964 26 -- 990 351 -- 1,341
------- -------- ----------- -------- -------- ------------ ----------
Net income . . . . . $ 1,603 $ 51 $ (3) $ 1,651 $ 587 $ (130) $ 2,108
======= ======== =========== ======== ======== ============ ==========
Earnings per share . . . . $ 0.22 $ 0.22 $ 0.28
======= ======== ==========
Weighted average shares
outstanding . . . . . .4,980,167 4,980,167 7,429,584
</TABLE>
REPUBLIC BANCSHARES, INC. & SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Combined
Combined Company
Company with
Firstate with FFO Firstate
Company Firstate Adjustments Firstate FFO Adjustments and FFO
-------- --------- ------------ --------- --------- ------------- -----------
TWELVE MONTHS ENDED 12/31/96 (In thousands, except par values)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income . . . . . . $ 66,947 $ 5,409 $ -- $ 72,356 $ 21,997 $ -- $ 94,353
Interest expense . . . . . 32,926 4,015 -- 36,941 12,023 -- 48,964
--------- -------- --------- -------- -------- ---------- ----------
Net interest income . . . . 34,021 1,394 -- 35,415 9,974 -- 45,389
Loan loss provision . . . . 1,800 -- -- 1,800 782 -- 2,582
--------- -------- --------- -------- -------- ---------- ----------
Net interest income after
loan loss provisions . . 32,221 1,394 -- 33,615 9,192 -- 42,807
Noninterest income . . . . 5,616 390 -- 6,006 2,387 -- 8,393
General & administrative
expenses . . . . . . . . 27,352 1,173 -- 28,525 9,528 -- 38,053
Other noninterest expenses 4,469 914 13 5,396 (352) 518 5,562
--------- -------- --------- -------- -------- ---------- ----------
Net income before taxes . . 6,016 (303) (13) 5,700 2,403 (518) 7,585
Income tax expense . . . . 2,232 (126) -- 2,106 803 -- 2,909
--------- -------- --------- -------- -------- ---------- ----------
Net income . . . . . . . . $ 3,784 $ (177) $ (13) $ 3,574 $ 1,600 $ (518) $ 4,676
========= ======== ========= ======== ======== ========== ==========
Earnings per share . . . . $ 0.76 $ 0.73 $ 0.63
========= ======== ==========
Weighted Average shares
outstanding . . . . . . . 7,397,637 4,952,937 7,402,354
</TABLE>
28
<PAGE> 30
NOTES TO PRO FORMA DATA
(a) To reflect the purchase by Firstate's former controlling stockholder of
certain loans and ORE to reflect the excess purchase price over the
estimated fair value of the net assets acquired from Firstate and to
eliminate Firstate's historical equity accounts.
(b) The FFO Merger will be accounted for as a corporate reorganization in
which the majority stockholder's interest will be combined at historical
cost in a manner similar to a pooling of interests while the minority
interest will be combined using purchase accounting rules. The pro forma
valuation of the minority interest, book value and estimated amount of
goodwill and market value adjustments is as follows:
<TABLE>
<S> <C>
Exchange ratio . . . . . . . . . . . . . . . . . . . 0.29 shares
of FFO for
each share
of the
Company
Number of shares to be issued - total . . . . . . . . 2,449,417
Minority interest . . . . . . . . . . . . . . . . . . 30.9%
Number of shares to be issued to minority interest . 756,870
Fair value per share of Company Common Stock . . . . $ 14.78 (1)
Fair value of minority interest . . . . . . . . . . . $ 11,187 (2)
Book value of minority interest . . . . . . . . . . . 6,415 (3)
----------
Goodwill and market value adjustments . . . . . . . . $ 4,772
==========
Amount allocated to goodwill . . . . . . . . . . . 5,179
Amount allocated to market value adjustments . . . (407)
</TABLE>
(1) The fair value of the Company's Common Stock is based on the average
of the closing bid price on The Nasdaq National Market two days
before and after the December 26, 1996 date that the Company and FFO
announced they were engaged in merger discussions.
(2) The fair value per share of Company Common Stock times the number of
shares to be issued to the minority interest.
(3) FFO's book value times the 30.3% minority interest.
(c) Amortization of goodwill on the Firstate Acquisition is as follows:
<TABLE>
<S> <C>
Goodwill recorded . . . . . . . . . . . . . . . . . . 130
Annual amortization based on 10-year period . . . . . 13
Amortization for 3 months . . . . . . . . . . . . . . 3
</TABLE>
(d) Amortization of goodwill on the FFO Merger is as follows:
<TABLE>
<S> <C>
Goodwill recorded . . . . . . . . . . . . . . . . . . $5,179
Annual amortization based on 10-year period . . . . . 518
Amortization for 3 months . . . . . . . . . . . . . . 130
</TABLE>
29
<PAGE> 31
SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data presented below has been derived
from the audited Consolidated Financial Statements of the Company and, prior to
1996, the Bank and are qualified in their entirety by reference to the more
detailed Consolidated Financial Statements and notes thereto, included
elsewhere herein. Financial data for interim periods include all adjustments,
consisting of normal accruals, that management considers necessary for a fair
presentation of the financial conditions and results of operations for such
interim periods. In light of the significant mark-to market adjustments and
other adjusting entries to its financial statements that were made following
the Change in Control on May 28, 1993, management believes that the usefulness
of comparisons between (i) the financial statements and the financial data
derived therefrom as of the dates and for the period prior to June 1, 1993, and
(ii) the financial statements and the financial data derived therefrom as of
the dates and for the periods since June 1, 1993, may be limited. In addition,
subsequent to consummation of the initial public offering in December 1993 and
the CrossLand Purchase and Assumption in that month, the Company has operated
in a significantly different manner from that which it had previously operated.
Accordingly, the financial results for periods prior to the CrossLand Purchase
and Assumption differ significantly from periods since then.
<TABLE>
<CAPTION>
Three Months Ended Seven Months Ended
March 31, Years Ended December 31, December 31,
------------------- ------------------------------- --------------------
1997 1996 1996 1995 1994 1994 1993
--------- --------- -------- -------- --------- -------- ---------
(unaudited) (unaudited)
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income . . . . . . . . . . . . $ 18,070 $ 15,862 $ 66,947 $ 57,863 $ 37,115 $ 23,684 $ 7,331
Interest expense . . . . . . . . . . . 8,969 7,927 32,926 30,001 16,871 10,711 3,110
--------- --------- --------- -------- --------- --------- ---------
Net interest income . . . . . . . . . . 9,101 7,935 34,021 27,862 20,244 12,973 4,221
Loan loss provision . . . . . . . . . . 1,138 450 1,800 1,685 1,575 1,263 709
--------- --------- --------- -------- --------- --------- ---------
Net interest income after loan loss
provision . . . . . . . . . . . . . . 7,963 7,485 32,221 26,177 18,669 11,710 3,512
Other noninterest income . . . . . . . 3,124 678 4,409 2,751 2,612 1,758 1,122
Gain on sale of ORE held for investment -- -- 1,207 -- -- -- --
General and administrative ("G&A")
expenses . . . . . . . . . . . . . . . 8,240 5,956 27,352 22,119 14,916 9,308 3,700
SAIF special assessment(1) . . . . . . -- -- 2,539 -- -- -- --
Provision for losses on ORE . . . . . . 170 180 1,611 -- 10 10 20
Other noninterest expense . . . . . . . 110 124 319 739 1,691 1,417 311
--------- --------- --------- -------- --------- --------- ---------
Net income before income taxes &
goodwill accretion . . . . . . . . . . 2,567 1,903 6,016 6,070 4,664 2,733 603
Accretion of negative goodwill . . . . -- -- -- 1,578 2,705 1,578 1,579
--------- --------- --------- -------- --------- --------- ---------
Net income before income taxes . . . . 2,567 1,903 6,016 7,648 7,369 4,311 2,182
Income tax provision . . . . . . . . . 964 699 2,232 1,875 468 268 --
--------- --------- --------- -------- --------- --------- ---------
Net income . . . . . . . . . . . . . . $ 1,603 $ 1,204 $ 3,784 $ 5,773 $ 6,901 $ 4,043 $ 2,182
========= ========= ========= ========= ======== ========= =========
PER SHARE DATA:
Earnings per share - total . . . . . . $ .32 $ .24 $ .76 $ 1.26 $ 1.67 $ 0.98 $ 1.12
========= ========= ========= ========= ======== ========= =========
Earnings per share - excluding negative
goodwill . . . . . . . . . . . . . . . $ .32 $ .24 $ .76 $ .92 $ 1.02 $ .60 $ .32
========= ========= ========= ========= ======== ========= =========
Weighted average shares outstanding . . 4,980,167 4,953,119 4,952,937 4,562,642 4,136,790 4,141,322 1,951,231
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . $ 912,093 $802,363 $ 907,868 $ 801,995 $ 626,445 $ 626,445 $ 531,312
Investment & mortgage backed securities 62,370 51,481 94,989 64,801 40,271 40,271 37,382
Loans, net of unearned income . . . . . 748,493 676,658 742,994 669,416 516,335 516,335 316,483
Allowance for loan losses . . . . . . 13,508 14,746 13,134 14,910 7,065 7,065 6,539
Deposits . . . . . . . . . . . . . . . 829,060 742,082 827,980 743,105 583,885 583,885 494,316
Negative goodwill . . . . . . . . . . . -- -- -- -- 1,578 1,578 4,283
Stockholders' equity . . . . . . . . . 55,579 52,047 54,319 50,903 36,165 36,165 29,454
SELECTED FINANCIAL RATIOS(2):
Return on average assets . . . . . . . .72% .60% .45% .77% 1.25% 1.20% 1.99%
Return on average equity . . . . . . . 12.10 9.57 7.31 13.47 21.34 20.68 39.17
Net interest spread . . . . . . . . . . 3.83 3.83 3.96 3.67 3.78 4.06 3.45
Net interest margin . . . . . . . . . . 4.12 4.14 4.28 3.95 3.96 4.25 4.22
G&A expense to average assets . . . . . 3.63 2.96 3.28 2.96 2.74 2.79 3.94
G&A efficiency ratio . . . . . . . . . 67.40 69.15 68.98 72.25 65.26 62.02 65.70
Non-accrual loans to loans . . . . . . 2.27 2.22 2.15 2.04 2.51 2.51 5.05
Nonperforming assets to total assets . 2.58 3.02 2.51 2.93 3.59 3.59 4.95
Loan loss allowance to loans(3) . . . . 1.91 2.18 1.86 2.24 1.37 1.37 2.07
Loan loss allowance to nonperforming
loans(3) . . . . . . . . . . . . . . . 82.81 96.47 84.93 90.47 53.36 53.36 39.12
RATIO OF EARNINGS TO FIXED CHARGES(4):
Including interest on deposits . . . .
Excluding interest on deposits . . . .
</TABLE>
30
<PAGE> 32
<TABLE>
Caption>
Three Months Ended Seven Months Ended
March 31, Years Ended December 31, December 31,
------------------- ------------------------------- -------------------
1997 1996 1996 1995 1994 1994 1993
--------- --------- -------- -------- --------- -------- ---------
(unaudited) (unaudited)
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA (AT PERIOD-END):
Number of branches . . . . . . . . . . 33 32 32 32 21 21 19
Number of full-time equivalent employees 644 432 637 421 300 300 179
</TABLE>
(1) The SAIF special assessment is a one-time charge. See
"Business--Supervision and Regulation--Deposit Insurance."
(2) Annualized.
(3) See "Business--Asset Quality" for a discussion of the allocation and
availability of loan loss reserves among portfolios of loans within the
Bank.
(4) Represents earnings before fixed charges, income taxes and extraordinary
items and non-cumulative preferred dividends and redemption. Fixed
charges include interest expense (inclusive or exclusive of interest on
deposits as indicated).
31
<PAGE> 33
<TABLE>
<CAPTION>
Five Months Ended Year Ended
May 31, December 31,
------------------------------ --------------
1994 1993 1992
--------------- -------------- --------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
OPERATING DATA:
Interest income . . . . . . . . . . . . . . . . . . . . . $ 13,431 $ 4,848 $ 11,845
Interest expense . . . . . . . . . . . . . . . . . . . . 6,160 1,970 6,054
-------------- ------------- -------------
Net interest income . . . . . . . . . . . . . . . . . . . 7,271 2,878 5,791
Loan loss provision . . . . . . . . . . . . . . . . . . 312 379 520
-------------- ------------- -------------
Net interest income after loan loss provision . . . . . . 6,959 2,499 5,271
Other noninterest income . . . . . . . . . . . . . . . . 854 743 1,679
G&A expenses . . . . . . . . . . . . . . . . . . . . . . 5,608 2,699 5,748
Provision for losses on ORE . . . . . . . . . . . . . . . -- 1,214 230
Other noninterest expense . . . . . . . . . . . . . . . . 274 443 715
-------------- ------------- -------------
Net income (loss) before income taxes and goodwill
accretion . . . . . . . . . . . . . . . . . . . . . . . 1,931 (1,114) 257
Accretion of negative goodwill . . . . . . . . . . . . . 1,127 -- --
-------------- ------------- -------------
Net income (loss) before income taxes . . . . . . . . . . 3,058 (1,114) 257
Income tax provision (benefit) . . . . . . . . . . . . . 200 0 0
-------------- ------------- -------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 2,858 $ (1,114) $ 257
============== ============= =============
PER SHARE DATA:
Earnings (loss) per share - total . . . . . . . . . . . . $ 1.67 $ (1.00) $ 0.23
============== ============= =============
Earnings (loss) per share - excluding negative goodwill . $ 1.01 $ (1.00) $ (0.23)
============== ============= =============
Weighted average shares outstanding . . . . . . . . . . . 4,134,420 1,117,192 1,106,459
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 508,642 $ 168,741 $ 168,810
Investment securities . . . . . . . . . . . . . . . . . . 52,571 27,433 24,276
Loans net of unearned income . . . . . . . . . . . . . . 396,144 111,292 110,715
Allowance for loan losses . . . . . . . . . . . . . . . . 6,828 1,866 1,958
Negative goodwill . . . . . . . . . . . . . . . . . . . . 3,156 5,861 --
Deposits . . . . . . . . . . . . . . . . . . . . . . . . 469,461 153,660 154,984
Stockholder's Equity . . . . . . . . . . . . . . . . . . 32,234 8,058 12,215
SELECTED FINANCIAL RATIOS(1):
Return on average assets . . . . . . . . . . . . . . . . 1.33% (1.61)% 0.15%
Return on average equity . . . . . . . . . . . . . . . . 22.34 (21.75) 2.12
Net interest spread . . . . . . . . . . . . . . . . . . . 3.48 4.21 3.51
Net interest margin . . . . . . . . . . . . . . . . . . . 3.67 4.66 3.95
G&A expense to average assets . . . . . . . . . . . . . . 2.40 6.28 4.01
G&A efficiency ratio . . . . . . . . . . . . . . . . . . 67.32 74.54 76.95
Non-accrual loans to loans . . . . . . . . . . . . . . . 4.36 2.27 3.20
Nonperforming assets to total assets . . . . . . . . . . 5.64 5.89 7.55
Loan loss allowance to loans (2) . . . . . . . . . . . . 1.72 1.68 1.77
Loan loss allowance to nonperforming loans (2) . . . . . 23.58 73.03 54.98
RATIO OF EARNINGS TO FIXED CHARGES(3):
Including interest on deposits . . . . . . . . . . . . .
Excluding interest on deposits . . . . . . . . . . . . .
OTHER DATA (AT PERIOD-END):
Number of branches . . . . . . . . . . . . . . . . . . . 19 7 7
Number of full-time equivalent employees . . . . . . . . 223 96 90
</TABLE>
(1) Annualized.
(2) See "Business--Asset Quality" for a discussion of the allocation and
availability of loan loss reserves among portfolios of loans within the
Bank.
(3) Represents earnings before fixed charges, income taxes and extraordinary
items and non-cumulative preferred dividends and redemption. Fixed
charges include interest expense (inclusive or exclusive of interest on
deposits as indicated).
32
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of the Company's balance sheets and
statements of operations should be read in conjunction with "Selected
Consolidated Financial Data" and the Consolidated Financial Statements and the
related notes included therein.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Comparison of Balance Sheets for the Three Months Ended March 31, 1997 and 1996
Overview
Total assets of the Company were $912.1 million at March 31, 1997 and
$907.9 million at December 31, 1996, an increase of $4.2 million. Total loans
increased by $5.5 million from $743.0 million at the end of the prior year to
$748.5 million at the end of the first quarter. Total deposits increased by
$1.1 million from $827.9 million at year-end 1996 to $829.1 million.
Investment and Mortgage-Backed Securities
Investment and mortgage-backed securities, consisting primarily of U.S.
Treasury and federal agency securities, were $63.2 million at March 31, 1997
compared to $94.9 million at December 31, 1996, a decrease of $31.7 million.
During the first three months of 1997 management permitted the amount in this
category to decline by allowing maturities and sales to exceed purchases.
Concurrently, federal funds sold, all on an overnight basis, increased by $33.0
million from $8.0 million at the prior year-end to $41.0 million at March 31,
1997. At March 31, 1997, the Company had recorded all its investment and
mortgage-backed securities as "available for sale," carrying them at their
market value.
Loans and Loans Held for Sale
Total loans increased $5.5 million from $742.9 million at year-end to
$748.5 million at March 31, 1997. This increase was the result of $108.4
million of new loan production during the first quarter, which exceeded loan
repayments of $16.9 million and $85.9 million in residential loan sales.
Residential loans, including $40.2 million in mortgage loans held for sale,
declined $7.7 million to $398.1 million, while other real estate-secured loans
increased $5.2 million. Consumer loans also increased $1.7 million while
commercial (business) loans declined $1.3 million.
Allowance for Loan Losses
The allowance for loan losses amounted to $13.5 million at March 31, 1997,
compared to $13.1 million at December 31, 1996. The loan portfolio includes
purchased loans amounting to $271.2 million (36.2% of total loans) and the
Company has allocated a portion of the discount on those purchases to the
allowance for loan losses in amounts consistent with the Company's loan loss
allowance policy guidelines. At March 31, 1997, the allowance for loan losses
included $3.7 million allocated to the Company's largest purchase made in March
1995 (the "March 1995 Purchase"), $1.0 million allocated to loans purchased
from CrossLand, $1.6 million allocated to other loan purchases, and $7.1
million allocated to loans originated by the Bank. Activity to the allowance
for loan losses during the first quarter of 1997 included a $1.1 million
provision for loan losses and loan charge-offs (net of recoveries) of $121,000.
During the first quarter, the Company sold $6.0 million of loans from the March
1995 Purchase and subsequently reallocated $642,000 from the allowance
allocated for the March 1995 Purchase to the allowance allocated for originated
loans. This transfer was accomplished by recording a gain on sale of loans and
an increase in the loan loss provision of equivalent amounts. Discounts on
loan purchases not allocated to the allowance for loan losses, recorded as
unearned discount, amounted to $4.1 million at March 31, 1997. Such
33
<PAGE> 35
discounts are available to absorb losses on pools of purchased loans should
amounts allocated to the allowance prove insufficient.
Nonperforming Assets
Nonperforming assets amounted to $23.6 million or 2.58% of total assets at
March 31, 1997, as compared to $22.6 million or 2.51% of total assets at
December 31, 1996. Nonperforming assets at March 31, 1997, included a $1.1
million loan which had matured prior to March 31, 1997, which the borrower
subsequently agreed to repay prior to June 30, 1997. Nonperforming loans
totaled $16.3 million at the end of the first quarter, an increase of $1.0
million from the year-end total of $15.3 million. This was the result of
increases of $904,000 in nonperforming residential loans, and $718,000 in
nonperforming commercial (business) loans, partially offset by decreases of
$468,000 in nonperforming commercial real estate loans and $123,000 in
nonperforming consumer loans. Other real estate acquired through foreclosure
declined from $7.4 million at the end of 1996 to $7.2 million at the end of the
first quarter.
Deposits
Total deposits were $829.0 million at March 31, 1997, compared to $828.0
million at December 31, an increase of $1.0 million. Passbook savings accounts
offered to higher balance customers at a premium rate increased by $4.2 million
and other savings accounts increased by $1.2 million. Interest bearing and
non-interest bearing checking account balances remained relatively unchanged
from the prior year-end increasing by only $168,000, while certificates of
deposit declined by $4.2 million.
Stockholders' Equity
Stockholders' equity was $55.6 million at March 31, 1997, or 6.1% of total
assets compared to $54.3 million or 6.0% of total assets at December 31, 1996.
At March 31, 1997, the Company's Tier 1 ("Leverage") Capital ratio was 5.83%,
its Tier 1 Risk-Based Capital ratio was 8.87%, and the Total Risk-Based Capital
ratio was 11.12%, all in excess of minimum regulatory guidelines for an
institution to be considered "well-capitalized". At March 31, 1997, the Bank's
regulatory capital levels were 6.47% for its Tier 1 ("Leverage") ratio, 9.85%
for its Tier 1 Risk-Based Capital ratio, and 11.09% for its Total Risk-Based
Capital ratio.
Comparison of Results of Operations for the Three Months Ended March 31,
1997 and 1996
Overview
Net income for the first quarter of 1997 was $1.6 million or $.32 per
share, compared to $1.2 million or $.24 per share for the same period of 1996,
an improvement of $399,000 for the three month period. The Company's return on
average assets and return on average equity also improved to 0.72% and 12.10%,
respectively, for the first quarter of 1997 compared to 0.60% and 9.57%,
respectively, for the first quarter of 1996.
Analysis of Net Interest Income
Net interest income for the first quarter of 1997 was $9.1 million
compared to $7.9 million for 1996. This $1.2 million or 14.7% increase was
primarily the result of additional income from balance sheet growth as total
interest-earning assets increased by approximately $101.9 million. Interest
income was $18.1 million for the three months ended March 31, 1997, an increase
of $2.2 million over 1996 while interest expense increased by $1.0 million.
The average asset yield and the average cost of interest-bearing liabilities
remained level at 8.36% and 4.53%, respectively. As a result, net interest
spread for the first quarter of 1997 and 1996 was unchanged at 3.83% and net
interest margin, which includes the benefit of noninterest bearing funds,
decreased from 4.14% for 1996 to 4.12% for 1997.
34
<PAGE> 36
The following table summarizes the average yields earned on
interest-earning assets and the average rates paid on interest-bearing
liabilities for the three months ended March 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------------------
1997 1996
------------------------------- --------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- ---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans, net . . . . . . . . . . . . . . . $ 745,893 $ 16,506 8.77% $ 677,439 $ 14,778 8.68%
Investment securities . . . . . . . . . . 33,749 486 5.83 32,275 428 5.34
Mortgage backed securities . . . . . . . 19,962 306 6.12 20,403 291 5.71
Interest bearing deposits in banks . . . 118 -- 5.49 43 -- 3.67
FHLB stock . . . . . . . . . . . . . . . 4,869 87 7.25 3,695 68 7.28
Federal funds sold . . . . . . . . . . . 52,950 685 5.17 21,743 297 5.40
---------- ---------- ----------- ----------
Total interest-earning assets . . . . . . 857,541 18,070 8.36 755,598 15,862 8.36
Non interest-earning assets . . . . . . . 49,507 46,291
---------- -----------
Total assets . . . . . . . . . . . . . . $ 907,048 $ 801,889
========== ===========
Interest-bearing liabilities: . . . . . .
Interest checking . . . . . . . . . . . . $ 88,679 240 1.10 $ 77,552 254 1.32
Savings . . . . . . . . . . . . . . . . . 27,082 137 2.05 29,322 159 2.17
Passbook gold . . . . . . . . . . . . . . 221,023 2,649 4.86 70,735 766 4.36
Money market . . . . . . . . . . . . . . 33,007 165 2.03 39,709 219 2.22
Time deposits . . . . . . . . . . . . . . 410,499 5,471 5.40 482,125 6,481 5.41
Subordinated debt . . . . . . . . . . . . 6,000 108 7.17 -- -- --
Other borrowings . . . . . . . . . . . . 16,137 199 5.01 4,357 48 4.40
---------- ---------- ----------- ----------
Total interest-bearing liabilities . . . 802,427 8,969 4.53 703,800 7,927 4.53
Non interest-bearing liabilities . . . . 50,910 47,658
Stockholders' equity . . . . . . . . . . 53,711 50,431
---------- -----------
Total liabilities and equity . . . . . . $ 907,048 $ 801,889
========== ===========
Net interest income & net interest spread
$ 9,101 3.83% $ 7,935 3.83%
========== ==== ========== ====
Net interest margin . . . . . . . . . . . 4.12% 4.14%
==== ====
<CAPTION>
Increase (Decrease) due to (1)
------------------------------
Changes in Net Interest Income(1) Volume Rate Total
--------------------------------- ------ ---- -----
<S> <C> <C> <C>
Interest earning assets:
Loans, net . . . . . . . . . . . . . . . . . . $ 1,428 $ 300 $ 1,728
Investment securities . . . . . . . . . . . . . 28 30 58
Mortgage backed securities . . . . . . . . . . (6) 21 15
Interest bearing deposits in banks . . . . . . -- -- --
FHLB stock . . . . . . . . . . . . . . . . . . 21 (2) 19
Federal funds sold . . . . . . . . . . . . . . 401 (13) 388
------ ------- ------
Total change in interest income . . . . . . 1,872 336 2,208
Interest-bearing liabilities: . . . . . . . . .
Interest checking . . . . . . . . . . . . . 31 (45) (14)
Savings . . . . . . . . . . . . . . . . . . (14) (8) (22)
Passbook gold . . . . . . . . . . . . . . . 1,786 97 1,883
Money market . . . . . . . . . . . . . . . . (37) (17) (54)
Time deposits . . . . . . . . . . . . . . . (845) (165) (1,010)
Subordinated debt . . . . . . . . . . . . . 108 -- 108
Other borrowings . . . . . . . . . . . . . . 138 13 151
----- ----- -----
Total change in interest expense . . . . . . 1,167 (125) 1,042
------ ------ ------
Increase (decrease) in net interest income . . $ 705 $ 461 $ 1,166
====== ====== =======
</TABLE>
(1) Changes in net interest income due to changes in volume and rate are based
on absolute value.
35
<PAGE> 37
Noninterest Income
Noninterest income for the first quarter of 1997 was $3.1 million compared
to $678,000 for the same period in 1996, an increase of $2.4 million. Of the
increase, $898,000 was the result of increased income from mortgage banking
operations, principally gains on sale of loans, net of certain capitalized
costs of production. In addition, the Company elected to sell certain
portfolio loans and recorded gains on sale of loans amounting to $1.2 million
for the first quarter of 1997. Other improvements included $93,000 from a
third-party fee-based checking account program under the name "Generations
Gold" and an increase of $62,000 in other sources of fee income on deposit
accounts.
The following table reflects the components of noninterest income for the
three months ended March 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------------
Increase
1997 1996 (Decrease)
------------- ------------- --------------
<S> <C> <C> <C>
Service charges on deposit accounts . . . . . . . . . . . . . . . $ 438 $ 376 $ 62
Loan fee income . . . . . . . . . . . . . . . . . . . . . . . . . 125 125 --
Income from mortgage banking activities . . . . . . . . . . . . . 898 -- 898
Gains on sales of portfolio loans . . . . . . . . . . . . . . . . 1,188 (11) 1,199
Gain on sale of investments . . . . . . . . . . . . . . . . . . . 42 4 39
Generations Gold fee income . . . . . . . . . . . . . . . . . . . 100 7 93
Merchant charge card processing fees . . . . . . . . . . . . . . 48 23 25
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . 283 154 130
------------ ------------ -------------
Total noninterest income . . . . . . . . . . . . . . . . . . . . $ 3,124 $ 678 $ 2,446
============ ============ =============
</TABLE>
Noninterest Expense
General and administrative ("G&A") expenses for the first quarter of 1997
were $8.2 million compared to $6.0 million, an increase of $2.3 million. The
major factor responsible for the expense increase was the expansion of the
Company's mortgage banking activities which accounted for substantially all of
the increase in employees from 432 at March 31, 1996 to 644 at March 31, 1997.
Total noninterest expenses, which include G&A expense, provisions for losses on
ORE properties, ORE income and expense, and amortization of premiums paid on
deposits, were $8.5 million for the first quarter of 1997 compared to $6.2
million for the same period last year.
36
<PAGE> 38
The following table reflects the components of noninterest expense for the
three months ended March 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------------------------------------------
Increase
1997 1996 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Salaries and benefits . . . . . . . . . $ 4,366 $ 3,253 $ 1,113
Net occupancy expense . . . . . . . . . 1,284 1,025 259
Advertising . . . . . . . . . . . . . . 209 80 129
Data processing fees . . . . . . . . . 391 317 74
FDIC and state assessments . . . . . . 127 270 (143)
Telephone expense . . . . . . . . . . . 251 125 126
Legal and professional . . . . . . . . 248 106 142
Postage and supplies . . . . . . . . . 336 229 107
Other operating expense . . . . . . . . 1,028 551 477
------- ------ ------
G & A expenses . . . . . . . . . . . . 8,240 5,956 2,284
Provision for losses on ORE . . . . . . 170 180 (10)
ORE expense, net of ORE income . . . . (13) 1 (14)
Amortization of premium on deposits . . 123 123 --
------ ------ -------
Total noninterest expense . . . . . . . $ 8,520 $ 6,260 $ 2,260
======= ======= =======
</TABLE>
YEARS ENDED DECEMBER 31, 1996 AND 1995
Comparison of Balance Sheets at December 31, 1996 and 1995
Overview
Total assets of the Company were $907.9 million at December 31, 1996 and
$802.0 million at December 31, 1995, an increase of $105.9 million. This
growth was primarily the result of the expansion of the Company's residential
loan production capability. Total loans increased by $73.6 million from $669.4
million at the end of the prior year to $743.0 million at the end of 1996.
Total deposits increased by $84.9 million from $743.1 million at year-end 1995
to $828.0 million.
Investment and Mortgage-Backed Securities
The Company's investment securities consisted of U.S. Treasury Bills and
Notes and a $1.5 million revenue bond with the Northern Palm Beach County
Improvement District (the "Revenue Bond"). The Revenue Bond is not an
obligation of Palm Beach County, the State of Florida, or any political
subdivision, municipality or agency, thereof. The principal and interest are
payable solely from and are secured equally and ratably by a lien upon and
pledge of the proceeds of special assessments levied by the district. This
investment is taxable for federal income tax purposes.
Loans and Loans Held for Sale
Total loans at December 31, 1996 included $706.4 million of loans held for
portfolio and $36.6 million held for sale, a total of $743.0 million. At
December 31, 1995, these amounts were $664.7 million and $4.7 million,
respectively. The $73.6 million increase in total loans was primarily
comprised of a $25.5 million increase in residential loans to $405.9 million
(54.6% of total loans), and a $41.3 million increase in other real
estate-secured
37
<PAGE> 39
loans. At December 31, 1996, loans secured by first liens on real estate
constituted 92.0% of the total loan portfolio. Commercial (business) loans not
secured by real estate increased $4.7 million while consumer loans increased
$3.1 million. Residential loan sales for 1996 amounted to $106.1 million and
totalled $41.5 million for 1995.
Allowance for Loan Losses
The allowance for loan losses amounted to $13.1 million at December 31,
1996, compared to $14.9 million at December 31, 1995. The total amount of
loans for determining the adequacy of the allowance includes $467.5 million of
loans originated by the Company, purchased loans amounting to $275.5 million.
The Company made various loan purchases totaling $157.4 million during
1994, $102.3 million during 1995 and $8.2 million in 1996. The Company
allocated a portion of the discount on its purchased loans to the allowance in
amounts consistent with loan loss allowance policy guidelines and recorded the
remainder as an unearned discount to be accreted to income as a yield
adjustment. In 1995 such allocation included $7.2 million related solely to
the March 1995 Purchase. Subsequently, the principal balance of the March 1995
Purchase had declined to $39.9 million and losses on certain nonperforming
loans in this pool had reduced the allowance allocated to this purchase to $5.9
million. The Company's history of administering this loan purchase indicates
that the expected loss rate on the remaining loans in this portfolio would be
less than the amount remaining in the allowance. Consequently, the Company
reallocated $1.5 million from the allowance to unearned discount in the fourth
quarter of 1996, reducing the December 31, 1996 allowance allocated to the
March 1995 Purchase to $4.4 million. The overall allowance at year-end 1996 of
$13.1 million also included $1.0 million allocated to loans purchased from
CrossLand, $1.8 million allocated to other loan purchases, and $6.0 million
allocated to originated loans.
Activity to the allowance during 1996 included a $1.8 million provision
for loan losses, loan charge-offs (net of recoveries) of $1.8 million, and $1.7
million allocated from the allowance to unearned discount. The net charge-off
amount for 1996 included $1.0 million assessed against the allowance for loans
acquired in the March 1995 Purchase as properties securing certain
nonperforming loans which were purchased at a substantial discount were
acquired through foreclosure and recorded at their fair value. At December 31,
1996 the amount of unearned discount on purchased loans not allocated to
allowance totaled $4.7 million.
Nonperforming Assets
Nonperforming assets amounted to $22.6 million or 2.51% of total assets at
December 31, 1996, as compared to $23.5 million or 2.93% of total assets at
December 31, 1995. Nonperforming loans totaled $15.5 million at the end of
1996, an increase of $34,000 from the prior year-end total of $15.4 million.
The ratio of nonperforming loans to total loans declined from 2.32% at the end
of 1995 to 2.19% at year-end 1996. ORE acquired through foreclosure decreased
by $701,000 from $8.1 million at the end of the prior year to $7.4 million at
year-end 1996. The ratio of nonperforming assets to total assets at the end of
1996 was 2.51% compared to 2.93% at the end of 1995.
Deposits
Total deposits were $828.0 million at December 31, 1996, compared to
$743.1 million at the prior year-end, an increase of $84.9 million. Passbook
savings accounts offered to higher-balance customers at a premium rate of 5.00%
increased by $156.5 million and retail checking and noninterest-bearing account
balances increased $20.5 million or 19.18%. The Company reduced its reliance
on time deposits through a less aggressive pricing strategy which resulted in
an $83.7 million decline in certificates of deposits and a decline in other
interest-bearing balances of $9.9 million. At December 31, 1996, jumbo
($100,000 and over) deposits totaled $49.3 million or 5.96% of total deposits.
There were no brokered deposits.
38
<PAGE> 40
Convertible Subordinated Debt
In December 1996 the Company completed a private offering of $6.0 million
in 6.0% Debentures. The proceeds were used to increase the capital of the
Bank. The Debentures are convertible by the holder at any time prior to
maturity into shares of Company Common Stock at a conversion price of $17.85714
per share (equivalent to a conversion rate of 56 shares per $1,000 principal
amount of Debentures). The Debentures were sold at par and the Company
incurred $213,000 in expenses associated with the offering. The Company has
the right to redeem the Debentures beginning in 2001 at 106% of face value,
with the premium declining 1% per year thereafter and without any premium if
the price of the Company Common Stock equals or exceed 130% of the conversion
price for not less than 20 consecutive trading days.
Stockholders' Equity
Stockholders' equity of the Company was $54.3 million at December 31,
1996, or 6.0% of total assets compared to $50.9 million or 6.3% of total assets
at December 31, 1995. At December 31, 1996, the Company's and the Bank's
capital ratios were all in excess of minimum regulatory guidelines for an
institution to be considered "well-capitalized."
Comparison of Results of Operations for the Year Ended December 31, 1996
and 1995
Overview
Consolidated net income for 1996 was $3.8 million or $.76 per share
compared to $5.8 million or $1.26 per share for 1995. Consolidated net income
excluding the SAIF special assessment would have been $_____ million or $______
per share for 1996 as compared to $_____ million or $_____ per share for 1995,
excluding negative goodwill accretion.
Analysis of Net Interest Income
Net interest income for 1996 was $34.0 million compared to $27.9 million
for 1995. This $6.2 million or 22.1% increase was primarily the result of $3.9
million in additional income from balance sheet growth and a more favorable mix
of earning assets. An increase in net interest spread also improved net
interest income by $2.2 million. Interest income was $66.9 million for 1996,
an increase of $9.1 million over 1995. During the same period interest expense
increased by $2.9 million from $30.0 million for 1995 to $32.9 million for
1996. Asset yield increased 25 basis points from 8.21% for 1995 to 8.46% for
1996 and average earning assets increased $83.6 million. The average cost of
interest-bearing liabilities decreased 5 basis points from 4.55% to 4.50%.
Net interest spread increased 30 basis points from 3.66% for 1995 to 3.96% for
1996 and net interest margin, which includes the benefit of noninterest bearing
funds, increased from 3.94% for 1995 to 4.28% for 1996.
39
<PAGE> 41
The following table summarizes the average yields earned on
interest-earning assets and the average rates paid on interest-bearing
liabilities for the years ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1996 1995
-----------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------------------- ---------------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans, net . . . . . . . . . . . $ 704,919 $ 62,244 8.78% $ 604,535 $ 52,389 8.65%
Investment securities . . . . . . 25,905 1,413 5.46 31,042 1,431 4.60
Mortgage backed securities . . . 20,494 1,325 6.46 13,515 827 6.12
Interest bearing deposits in banks 79 2 2.91 290 17 5.82
FHLB stock . . . . . . . . . . . 4,548 330 7.26 3,126 231 7.40
Federal funds sold . . . . . . . 30,188 1,633 5.32 49,978 2,968 5.86
----------- --------- ----------- ---------
Total interest-earning assets . . 786,133 66,947 8.46 702,486 57,863 8.21
Non interest-earning assets . . . 46,343 45,556
----------- -----------
Total assets . . . . . . . . . . $ 832,476 $ 748,042
=========== ===========
Interest-bearing liabilities:
Interest checking . . . . . . . . 80,442 944 1.17 $ 67,005 1,081 1.61
Savings . . . . . . . . . . . . . 170,100 7,281 4.28 90,904 3,281 5.57
Money market . . . . . . . . . . 37,778 809 2.14 58,862 1,735 2.94
Time deposits . . . . . . . . . . 433,860 23,392 5.39 439,824 23,777 5.41
FHLB advances . . . . . . . . . . 956 52 5.21 -- -- --
Other borrowings . . . . . . . . 8,884 448 4.95 3,304 127 3.85
----------- --------- ----------- ---------
Total interest-bearing liabilities 732,020 32,926 4.50 659,899 30,001 4.55
Non interest-bearing liabilities 48,821 45,285
Stockholders' equity . . . . . . 51,635 42,858
----------- -----------
Total liabilities and equity . . $ 832,476 $ 748,042
=========== ===========
Net interest income/net interest
spread . . . . . . . . . . . . $ 34,021 3.96% $ 27,862 3.66%
========= ==== ========= ====
Net interest margin . . . . . . . 4.28% 3.94%
==== ====
<CAPTION>
Increase(Decrease) Due to (1)
-----------------------------
Changes in Net Interest Income Volume Rate Total
- ------------------------------ ---------------------- ----------
<S> <C> <C> <C>
Interest earning assets:
Loans, net . . . . . . . . . . . $ 8,108 $ 1,747 $ 9,855
Investment securities . . . . . . (91) 73 (18)
Mortgage backed securities . . . 449 49 498
Interest bearing deposits in banks (9) (6) (15)
FHLB stock . . . . . . . . . . . 103 (4) 99
Federal funds sold . . . . . . . (1,091) (244) (1,335)
----------- --------- ---------
Total change in interest income . 7,469 1,615 9,084
Interest-bearing liabilities:
Interest checking . . . . . . . . 191 (328) (137)
Savings . . . . . . . . . . . . . 3,738 262 4,000
Money market . . . . . . . . . . (530) (396) (926)
Time deposits . . . . . . . . . . (173) (212) (385)
FHLB advances . . . . . . . . . . 52 -- 52
Other borrowings . . . . . . . . 248 73 321
----------- --------- ---------
Total change in interest expense 3,526 (601) 2,925
----------- --------- ---------
Increase (decrease) in net
interest income . . . . . . . $ 3,943 $ 2,216 $ 6,159
=========== ========= =========
</TABLE>
(1) Changes in net interest income due to changes in volume and rate are
based on absolute values.
40
<PAGE> 42
Noninterest Income
Noninterest income for 1996 was $5.6 million compared to $2.8 million for the
same period of 1995, an increase of $2.9 million. The gain on sale of the
former headquarters building accounted for $1.2 million of the increase.
Income from the Company's expanded mortgage banking activities increased
$878,000, service fees on deposit accounts increased $211,000, loan service and
other ancillary fees increased $327,000, and net gains on sale of investments
increased $343,000. Other sources of income increased $148,000 and merchant
charge card processing fees, a program which has been discontinued, declined
$249,000.
The following table reflects the components of noninterest income for the
years ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------
Increase
1996 1995 (Decrease)
------------------------------------------------
<S> <C> <C> <C>
Service charges on deposit accounts $ 1,606 $ 1,395 $ 211
Loan fee income 604 277 327
Mortgage banking activities 1,002 124 878
Gain on sale of ORE held for investment 1,207 -- 1,207
Net gains on sale of investments 370 27 343
Merchant charge card processing fees 1 250 (249)
Other income 826 678 148
-------------- -------------- -----------------
Total noninterest income $ 5,616 $ 2,751 $ 2,865
============== ============== =================
</TABLE>
Noninterest Expense
Total noninterest expenses for 1996 were $31.8 million compared to $22.9
million for the same period in 1995, an increase of $9.0 million. Noninterest
expenses for 1996 include a $2.5 million charge for the one-time SAIF Special
Assessment (See "Business--Supervision and Regulation--Deposit Insurance") and
a $1.6 million provision for losses on ORE, primarily related to two ORE
properties. See "Other Real Estate Acquired Through Foreclosure." G&A
expenses for 1996, included in the noninterest expense total, were $27.4
million compared to $22.1 million, an increase of $5.2 million. The increase
was primarily the result of expanding the Company's mortgage banking activities
and related administrative support units.
The following table reflects the components of noninterest expense for the
years ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
Increase
1996 1995 (Decrease)
-------------------------------------
<S> <C> <C> <C>
Salaries and benefits . . . . . . . . . . . . . . . . . $ 14,309 $ 11,251 $ 3,058
Net occupancy expense . . . . . . . . . . . . . . . . . 4,507 3,211 1,296
Advertising . . . . . . . . . . . . . . . . . . . . . . 519 439 80
Data processing fees and services . . . . . . . . . . . 1,451 1,152 299
FDIC and state assessments . . . . . . . . . . . . . . 949 1,566 (617)
Other operating expense . . . . . . . . . . . . . . . . 5,617 4,500 1,117
----------- ------------ -----------
G & A expenses . . . . . . . . . . . . . . . . . . . . 27,352 22,119 5,233
SAIF Special Assessment . . . . . . . . . . . . . . . . 2,539 -- 2,539
Provision for losses on ORE . . . . . . . . . . . . . . 1,611 -- 1,611
</TABLE>
41
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
Other ORE expense (income) . . . . . . . . . . . . . . (172) 289 (461)
Amortization of premium on deposits . . . . . . . . . . 491 450 41
----------- ------------ -----------
Total noninterest expense . . . . . . . . . . . . . . . $ 31,821 $ 22,858 $ 8,963
=========== ============ ===========
</TABLE>
YEARS ENDED DECEMBER 31, 1995 AND 1994
Comparison of Balance Sheets at December 31, 1995 and 1994
Overview
Total assets were $802.0 million at December 31, 1995 compared to $626.4
million at year-end 1994, an increase of $175.6 million or 28.0%. The source
of funds for this growth included $126.6 million in deposits from the thirteen
branches opened in the latter part of 1994 and throughout 1995. These
additional funds were primarily invested in residential and commercial real
estate-secured loans. Total stockholders' equity increased by $14.7 million to
$50.9 million at year-end 1995 as a result of the 1995 stock offerings and
earnings retention.
Investment and Mortgage-Backed Securities
Investment securities, consisting of U.S. Treasury and federal agency
securities, were $64.8 million at December 31, 1995 compared to $40.2 million
at December 31, 1994, an increase of $24.5 million. This increase included
$19.7 million from securitizing a portion of the Company's residential loan
originations into mortgage backed securities to improve liquidity and risk
based capital ratios.
Loans and Loans Held for Sale
Total loans were $669.4 million at December 31, 1995, an increase of $153.1
million or 29.6% over the $516.3 million total at year-end 1994. One-to-four
family residential mortgages amounted to $388.2 million at year-end 1995
compared to $293.1 million at the prior year-end, an increase of $95.1 million.
Fundings of residential loans through direct lending activities and a
correspondent/broker network amounted to $119.7 million and there were $100.3
million in residential loan purchases. The next largest loan category,
commercial real estate, amounted to $153.2 million at December 31, 1995
compared to $112.1 million at year-end 1994, an increase of $41.1 million.
Multi-family residential loans amounted to $75.1 million at year-end 1995
compared to $60.8 million at December 31, 1994. Substantially all fundings of
commercial real estate and multi-family residential loans were through direct
lending activities.
Commercial (business) loans amounted to $29.7 million at December 31, 1995
compared to $24.6 million at year-end 1994, an increase of $5.1 million.
Consumer loans, consisting primarily of loans secured by second liens on
residential real estate, amounted to $6.8 million at year-end 1995 compared to
$6.4 million at end of the prior year, an increase of $421,000.
Allowance for Loan Losses
The allowance for loan losses amounted to $14.9 million at December 31, 1995,
an increase of $7.8 million from the $7.1 million allowance at December 31,
1994. This increase primarily resulted from the transfer of $7.7 million of
discounts from purchases of various loan pools into an allowance established
for those loans. During March 1995 the Company made the March 1995 Purchase
for a cash payment of $39.9 million with a resulting discount of $8.2 million.
The March 1995 Purchase included 941 loans amounting to $46.3 million, which
were current as to their scheduled principal and interest payments, and 34
loans amounting to $1.8 million which were delinquent 90 days or more. Of this
discount, $7.2 million was allocated to the allowance for those loans, based
primarily on management's evaluation of collateral values, with the $982,000
remainder recorded as unearned income. At December 31, 1995, the amount
included in the allowance allocated to the March 1995 Purchase was $6.9 million
42
<PAGE> 44
and such portion allocated to the allowance is available only to absorb losses
in such portfolio. For a discussion of the use of allocated loan loss
reserves, see "Business -- Asset Quality". Management continually monitors the
status of its purchased loans and may, at a later date, adjust the amounts
allocated between loan discount and the loan loss reserve. Other activity to
the allowance included provisions for loan losses of $1.7 million (based
generally on the growth in the loan portfolio), loan charge-offs (net of
recoveries) of $1.5 million, and $503,000 in discounts allocated to allowance
from other loan purchases.
Nonperforming Assets
Nonperforming assets amounted to $23.5 million or 2.93% of total assets at
December 31, 1995, as compared to $22.5 million or 3.59% of total assets at
December 31, 1994. Nonperforming assets consisted of $15.4 million of
nonperforming loans and $8.1 million of ORE. The $1.0 million increase in
nonperforming assets during the year consisted primarily of the addition of
nonperforming commercial (business) and commercial real estate loans totaling
$4.0 million, partially offset by the removal from nonperforming status,
through repayment and/or return to performing status, of commercial (business)
loans and commercial real estate loans totaling $2.3 million. Other reductions
to nonperforming assets were in commercial (business) loans ($115,000),
consumer loans ($300,000) and ORE ($1.2 million).
Deposits
Total deposits were $743.1 million at December 31, 1995, compared to $583.9
million at the prior year-end, an increase of $159.2 million or 27.3%. Time
deposits increased $186.0 million which was partially offset by reductions of
$21.2 million in savings accounts and $8.1 million in money market accounts.
Of the total increase in deposits, $126.6 million is attributable to deposit
growth at 13 new branch locations opened in 1994 and 1995.
Stockholders' Equity
Stockholders' equity was $50.9 million at December 31, 1995, or 6.4% of total
assets compared to $36.2 million or 5.8% of total assets at December 31, 1994.
At December 31, 1995, the Tier 1 Capital ("Leverage") ratio was 6.00%, the Tier
1 Risk-Based Capital ratio was 9.17%, and the Total Risk-Based Capital ratio
was 10.30%, all in excess of minimum regulatory guidelines for an institution
to be considered "well-capitalized". On June 27, 1995, an offering was
completed to the public and the stockholders of 800,000 shares of common stock.
The common stock was offered through a combined subscription rights offering
and an underwritten public offering resulting in net proceeds of $9.1 million.
Comparison of Results of Operations for Years Ended December 31, 1995 and 1994
Overview
Net income for the year ended December 31, 1995 was $5.8 million compared to
$6.9 million for the same period of the previous year which included the
non-recurring benefit from certain income tax items and a full year's accretion
of negative goodwill. Income tax expense was $1.9 million for 1995 compared to
$468,000 in 1994, an increase of $1.4 million. This was primarily due to a
$1.3 million decrease in the deferred income tax valuation allowance in 1994
which reduced income tax expense by that amount. Earnings per share were $1.26
for 1995 compared to $1.67 for 1994. Return on average assets for 1995 was
.77% compared to 1.25% and .76% in 1994, while return on average equity was
13.47% compared to 21.34% and 12.97% in 1994.
Analysis of Net Interest Income
Net interest income for 1995 was $27.9 million compared to $20.2 million for
1994. This $7.6 million or 37.6% increase, was primarily the result of
additional income from balance sheet growth throughout 1994 and 1995 and a more
favorable asset mix as liquid assets were redeployed into higher-yielding
loans. Interest income was $57.9
43
<PAGE> 45
million for 1995, an increase of $20.7 million over 1994. Interest expense
increased by $13.1 million from $16.9 million for 1994 to $30.0 million for
1995. Average asset yield increased 95 basis points and average earning assets
increased $192.7 million, while the average cost of interest-bearing
liabilities increased 106 basis points as a result of a more competitive market
for customer deposits during 1995. Net interest spread decreased 11 basis
points from 3.77% for 1994 to 3.66% for 1995 while net interest margin, which
includes the benefit of noninterest bearing funds, was generally unchanged at
3.94% for 1995 compared to 3.96% for 1994.
44
<PAGE> 46
The following table summarizes the average yields earned on interest-earning
assets and the average rates paid on interest-bearing liabilities for the years
ended December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------------------------- --------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans, net . . . . . . . . . . . . . $ 604,535 $ 52,389 8.65% $ 396,238 $ 32,699 8.24%
Investment securities . . . . . . . . 31,042 1,431 4.60 47,631 1,939 4.06
Mortgage backed securities . . . . . 13,515 827 6.12 -- -- --
Interest bearing deposits in banks . 290 17 5.82 549 16 2.98
FHLB stock . . . . . . . . . . . . . 3,126 231 7.40 255 13 5.00
Federal funds sold . . . . . . . . . 49,978 2,968 5.86 65,080 2,448 3.71
----------- ------------ ----------- --------
Total interest-earning assets . . . . 702,486 57,863 8.21 509,753 37,115 7.26
Non interest-earning assets . . . . . 45,556 40,499
----------- -----------
Total assets . . . . . . . . . . . . $ 748,042 $ 550,252
=========== ===========
Interest--bearing liabilities:
Interest checking . . . . . . . . . . $ 67,005 1,081 1.61 $ 63,390 1,086 1.71
Savings . . . . . . . . . . . . . . . 90,904 3,281 5.57 66,049 2,136 3.24
Money market . . . . . . . . . . . . 58,862 1,735 2.94 72,211 1,587 2.20
Time deposits . . . . . . . . . . . . 439,824 23,777 5.41 279,058 11,958 3.49
FHLB advances . . . . . . . . . . . . -- -- -- 658 36 5.52
Other borrowings . . . . . . . . . . 3,304 127 3.85 2,259 68 2.97
----------- ------------ ----------- --------
Total interest-bearing liabilities . 659,899 30,001 4.55 483,625 16,871 3.49
Non interest-bearing liabilities . . 45,285 34,411
Stockholders' equity . . . . . . . . 42,858 32,216
----------- -----------
Total liabilities and equity . . . . $ 748,042 $ 550,252
=========== ===========
Net interest income/net interest
spread . . . . . . . . . . . . . . $ 27,862 3.66% $ 20,244 3.77%
============ ==== ======== ====
Net interest margin . . . . . . . . . 3.94% 3.96%
==== ====
<CAPTION>
Increase(Decrease) Due to (1)
------------------------------
Changes in Net Interest Income Volume Rate Total
- ------------------------------ ------------------------- ------------
<S> <C> <C> <C>
Interest earning assets:
Loans, net . . . . . . . . . . . . . $ 18,651 $ 1,038 $ 19,689
Investment securities . . . . . . . . (741) 233 (508)
Mortgage backed securities . . . . . 827 -- 827
Interest bearing deposits in banks . (10) 11 1
FHLB stock . . . . . . . . . . . . . 210 9 219
Federal funds sold . . . . . . . . . (662) 1,182 520
----------- ------------ -----------
Total change in interest income . . . 18,275 2,473 20,748
Interest-bearing liabilities:
Interest checking . . . . . . . . . . 60 (65) (5)
Savings . . . . . . . . . . . . . . . 1,451 (306) 1,145
Money market . . . . . . . . . . . . (329) 477 148
Time deposits . . . . . . . . . . . . 9,533 2,286 11,819
FHLB advances . . . . . . . . . . . . (18) (18) (36)
Other borrowings . . . . . . . . . . 64 (5) 59
----------- ------------ -----------
Total change in interest expense . . 10,761 2,369 13,130
----------- ------------ -----------
Increase (decrease) in net interest
income . . . . . . . . . . . . . . $ 7,514 $ 104 $ 7,618
=========== ============ ===========
</TABLE>
(1) Changes in net interest income due to changes in volume and rate are
based on absolute values.
45
<PAGE> 47
Noninterest Income
Noninterest income for 1995 was $2.8 million compared to $2.6 million for
1994, an increase of $139,000. The prior year had included $315,000 from
settlement of a claim against a borrower released from bankruptcy. Included in
1995 was a $57,000 lease termination settlement from a lessee who had sublet
space in a building leased by the Company. Other improvements were due to a
$148,000 increase in service charge and fee income from higher deposit levels
and gains on sale of loans of $124,000. Income from processing charge card
deposits for merchants was $250,000 in 1995 compared to $204,000 in 1994. This
program was discontinued in August 1995.
The following table reflects the components of noninterest income for the
years ended December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
For the Years
Ended December 31,
--------------------------------------
Increase
1995 1994 (Decrease)
--------------------------------------
<S> <C> <C> <C>
Service charges on deposit accounts $ 1,395 $ 1,247 $ 148
Loan fee income 277 368 (91)
Merchant charge card processing fees 250 204 46
Gains on sales of loans 124 -- 124
Other income 705 793 (88)
----------- ----------- -------------
Total noninterest income $ 2,751 $ 2,612 $ 139
=========== =========== =============
</TABLE>
Noninterest Expense
Total noninterest expenses for 1995 were $22.9 million compared to $16.6
million for 1994, an increase of $6.3 million. G & A expenses for 1995 were
$22.1 million compared to $14.9 million, an increase of $7.2 million. The
primary reasons for these increases were the additional personnel and other
operating costs related to the thirteen new branches which accounted for $2.9
million of the increase in G & A expense, an overall expansion of the lending
and administrative functions, and a $252,000 expense to record a loss on
reimbursing credit cardholders for chargebacks.
46
<PAGE> 48
The following table reflects the components of noninterest expense for the
years ended December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
For the Years
Ended December 31,
--------------------------------------
Increase
1995 1994 (Decrease)
--------------------------------------
<S> <C> <C> <C>
Salaries and benefits $ 11,251 $ 7,339 $ 3,912
Net occupancy expense 3,211 1,308 1,903
Advertising 439 349 90
Data processing fees 1,152 1,472 (320)
FDIC and state assessments 1,566 1,188 378
Loan collection and repossession expense 128 206 (78)
Other operating expense 4,372 3,054 1,318
----------- ----------- -------------
G & A expenses 22,119 14,916 7,203
ORE expense (net) 289 432 (143)
Amortization of premium on deposits 450 1,269 (819)
----------- ----------- -------------
Total noninterest expense $ 22,858 $ 16,617 $ 6,241
=========== =========== =============
</TABLE>
Income Taxes
Income tax expense for 1995 was $1.9 million, which was net of a $177,000
reduction in the estimated amount of the valuation allowance for the deferred
tax asset and a $122,000 tax credit related to the prior year's income tax
return. The income tax provision for the same period in 1994 was $468,000
which was net of a $1.3 million decrease in the valuation allowance.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
Liquidity
The Asset/Liability Management Committee ("ALCO") reviews the Company's
liquidity, which is its ability to generate sufficient cash to meet the funding
needs of current loan demand, deposit withdrawals, and other cash demands. The
primary sources of funds consist of deposits, amortization and prepayments of
loans, and sales of investments. The Bank is a member of the FHLB and has the
ability to borrow to supplement its liquidity needs.
At March 31, 1997, the liquidity ratio, consisting of net cash and
investments of $109.5 million divided by net deposits and short-term
liabilities of $82.8 million, was 13.22% as compared to 13.42% at December 31,
1996. Net liquid assets were $33.6 million in excess of the amount required by
Florida banking regulations.
Asset/Liability Management
One of the primary objectives of the Company is to reduce fluctuations in net
interest income caused by changes in interest rates. To manage interest rate
risk, the Board of Directors has established interest-rate risk policies and
procedures which delegate to ALCO the responsibility to monitor and report on
interest-rate risk, devise strategies to manage interest-rate risk, monitor
loan originations and deposit activity, and approve all pricing strategies.
The management of interest rate risk is one of the most significant factors
affecting the ability to achieve future earnings. The measure of the mismatch
of assets maturing or repricing within certain periods, and liabilities
maturing or repricing within the same period, is commonly referred to as the
"gap" for such period. Controlling
47
<PAGE> 49
the maturity or repricing of an institution's assets and liabilities in order
to minimize interest rate risk is commonly referred to as gap management.
"Negative gap" occurs when, during a specific time period, an institution's
liabilities are scheduled to reprice more rapidly than its assets, so that,
barring other factors affecting interest income and expense, in periods of
rising interest rates the institution's interest expense would increase more
rapidly than its interest income, and in periods of falling interest rates the
institution's interest expense would decrease more rapidly than its interest
income. "Positive gap" occurs when an institution's assets are scheduled to
reprice more rapidly than its liabilities, so that, barring other factors
affecting interest income and expense, in periods of falling interest rates the
institution's interest income would decrease more rapidly than its interest
expense, and in periods of rising interest rates the institution's interest
income would increase more rapidly than its interest expense. It is common to
focus on the one-year gap, which is the difference between the dollar amount of
assets and the dollar amount of liabilities maturing or repricing within the
next twelve months.
ALCO uses an industry standard computer modeling system to analyze the impact
of financial strategies prior to their implementation. The system attempts to
simulate the asset and liability base and project future operating results
under a variety of interest rate and spread assumptions. Through this
management tool, management can also, among other things, project the effects
of changing its asset and liability mix and modifying its balance sheet, and
identify appropriate investment opportunities. The results of these
simulations are evaluated within the context of the interest-rate risk policy,
which sets out target levels for the appropriate level of interest-rate risk.
The policy is to maintain a cumulative one-year gap of no more than 15% of
total assets. Management attempts to conform to this policy primarily by
managing the maturity distribution of the investment portfolio and emphasizing
loan originations and loan purchases carrying variable interest rates tied to
interest-sensitive indices. Additionally, the Bank has joined the FHLB to
enhance its liquidity position and to provide it with the ability to utilize
long-term fixed-rate advances to improve the match between interest-earning
assets and interest-bearing liabilities in certain periods. Currently,
off-balance-sheet hedging instruments are not used to manage overall interest
rate risk but such instruments are used to limit the exposure to changes in the
value of residential loans held for resale and estimated loan commitments to
originate and close fixed rate residential and mortgage loans. However, there
continues to be a risk that such loan commitments do not close or are
renegotiated in a declining interest rate environment. Management may expand
its use of off-balance sheet hedging instruments to manage exposure to overall
interest rate risk in the future, subject to Board approval.
The cumulative one year gap at March 31, 1997 was $8.9 million or a positive
.97% (expressed as a percentage of total assets). Management will attempt to
moderate any lengthening of the repricing structure of earning assets by
emphasizing variable-rate assets and, where appropriate, match-funding
longer-term fixed rate loans with FHLB advances. See "Business -- Sources of
Funds".
The following table presents the maturities or repricing of interest-earning
assets and interest-bearing liabilities at March 31, 1997. The balances shown
have been derived based on the financial characteristics of the various assets
and liabilities. Adjustable and floating-rate assets are included in the
period in which interest rates are next scheduled to adjust rather than their
scheduled maturity dates. Fixed rate loans are shown in the periods in which
they are scheduled to be repaid according to contractual amortization and,
where appropriate, prepayment assumptions based on the coupon rates in the
portfolio have been used to adjust the repayment amounts. Repricing of time
deposits is based on their scheduled maturities. Based on management's
experience in the markets in which the Company operates, statement savings
deposits are assumed to reprice at 8.3% of the total balance in the first three
months, 8.3% in the four-to-six month category, 16.7% in the six-to-12 month
category, and the remaining 66.7% from one to five years. Passbook savings
deposits are assumed to reprice equally over a 24 month period. Repricing of
interest checking and money market accounts is assumed to occur at 10% of the
total balance for every three month interval.
48
<PAGE> 50
INTEREST SENSITIVITY ANALYSIS
MARCH 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
0-3 Months 4-12 Months 1-5 Years Over 5 Years
-------------------- ------------------ ------------------- -------------------
Yield/ Yield/ Yield/ Yield/
Amount Rate Amount Rate Amount Rate Amount Rate
----------- -------- ---------- ------- ----------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
U.S. Treasury securities
and government agencies . . $ 7,715 5.24% $ 1,978 5.34% $ 31,471 5.91% $ -- --%
Revenue bonds . . . . . . . . -- -- -- -- 1,545 8.60 -- --
Mortgage backed securities . -- -- 19,661 5.53 -- -- -- --
Federal funds sold . . . . . 41,000 5.37 -- -- -- -- -- --
Interest bearing deposits in
banks . . . . . . . . . . . -- -- -- -- -- -- -- --
FHLB stock . . . . . . . . . -- -- -- -- -- -- 5,081 7.25
Loans . . . . . . . . . . . . 163,252 9.13 218,238 8.32 245,912 8.68 121,091 8.18
---------- ---------- ----------- ----------
Total interest-earning
assets . . . . . . . . . . $ 211,967 8.26 $ 239,877 8.07 $ 278,928 8.37 $ 126,172 8.14
Interest-bearing
liabilities:
Deposits
Interest checking . . . . . $ 8.991 1.09 $ 26,973 1.09 $ 53,931 1.09 $ -- --
Money market . . . . . . . 2,667 2.08 8,001 2.08 21,349 2.08 -- --
Savings . . . . . . . . . . 2,298 1.98 6,894 1.98 18,377 1.98 -- --
Passbook Gold . . . . . . . 27,972 4.88 83,916 4.88 111,888 4.88 -- --
Time deposits . . . . . . . 106,146 5.14 152,762 5.20 147,797 5.86 32 5.92
Subordinated debt . . . . . -- -- -- -- -- -- 6,000 6.00
Obligations under capital
leases . . . . . . . . . 45 7.49 135 7.49 263 7.49 -- --
Repurchase agreements . . . 16,160 4.99 -- -- -- -- -- --
---------- --------- ---------- ---------
Total interest-bearing
liabilities . . . . . . . . $ 164,279 4.76 $ 278,681 4.54 $ 353,605 4.39 $ 6,032 6.00
---------- --------- ---------- ---------
Excess (deficiency) of
interest-earning assets
over interest-bearing
liabilities . . . . . . . . $ 47,688 3.50% $ (38,804) 3.53% $ (74,677) 3.98% $ 120,140 2.14%
========== ==== ========= ==== ========== ==== ========= ====
Cumulative excess
(deficiency) of interest-
earning assets over
interest-bearing
liabilities . . . . . . . . $ 47,688 3.50% $ 8,884 3.54% $ (65,793) 3.72% $ 54,347 3.69%
========== ==== ========= ==== ========== ==== ========= ====
Cumulative excess
(deficiency) of interest-
earning assets over
interest-bearing
liabilities as a percent of
total assets . . . . . . . 5.23% .97% (7.21)% 5.96%
==== === ===== ====
</TABLE>
EFFECTS OF INFLATION
As a financial institution, the majority of the Company's assets are
monetary in nature and, therefore, differ greatly from those of most industrial
or commercial companies that have significant investments in fixed assets. The
effects of inflation on the financial condition and results of operations,
therefore, are less significant than the effects of changes in interest rates.
The most significant effect of inflation is on noninterest expense, which tends
to rise during periods of general inflation.
49
<PAGE> 51
BUSINESS
The Company is a bank holding company organized in March 1996 under the
laws of the State of Florida and is the parent of the Bank, a
Florida-chartered, federally-insured commercial bank. At March 31, 1997, the
Company's total assets were $912.1 million, total loans were $748.5 million,
total deposits were $829.1 million and total stockholders' equity was $55.6
million. The Company is regulated by the Federal Reserve and the Bank is
regulated by the Department and the FDIC. The Bank's deposits are insured by
the FDIC up to applicable limits. The Bank is a member of the FHLB. See
"--Supervision and Regulation."
BACKGROUND AND PRIOR OPERATING HISTORY
In May 1993, William R. Hough and John W. Sapanski acquired from the prior
controlling stockholder over 99% of the Bank's outstanding common stock for
$4.5 million and made an additional capital infusion of $3.5 million to meet
regulatory capital requirements. The transaction was accounted for using
purchase or push-down accounting treatment, which established a new accounting
basis. The assets and liabilities were restated from historical cost to their
fair market values as of May 28, 1993, premises and equipment totaling $1.4
million were written off, and the historical equity capital balances were not
carried forward. The excess of fair market value of assets acquired and
liabilities assumed exceeded the cost of acquisition by $5.9 million which
resulted in the creation of "negative goodwill" in that amount. That negative
goodwill was accreted to income over a 26 month period from May 28, 1993
through July 31, 1995, the weighted average life of the earning assets at the
change of control.
Pursuant to the CrossLand Purchase and Assumption, the Bank purchased 12
branches in Pinellas, Manatee and Sarasota counties from CrossLand, a federal
stock savings bank, and assumed deposit liabilities of $327.7 million. The
Bank paid CrossLand $11.5 million for the branches and related furniture,
fixtures, equipment and other assets, plus a $1.9 million (sixty basis points)
premium on the dollar amount of the deposits assumed. Concurrently, the Bank
purchased performing and non-performing loans secured by real estate and ORE
amounting to $201.6 million from CrossLand. The CrossLand Purchase and
Assumption increased total assets to $531.3 million and total deposits to
$494.3 million at December 31, 1993.
In December 1993, the Bank sold 1.4 million shares of common stock in an
initial public offering at a price of $8.00 per share. The net proceeds of
such offering totaled $10.3 million. In addition, the Bank sold 75,000 shares
of Series A non-cumulative convertible perpetual preferred stock for a purchase
price of $6.6 million (or $88.00 per share). In June 1995, the Bank sold
800,000 shares of its common stock in a combined subscription rights and public
offering at $12.50 per share, with net proceeds totaling $9.1 million.
In February 1996, the Bank's shareholders approved a reorganization under
which the Bank became a wholly-owned subsidiary of the Company. All holders of
shares of the Bank's common and preferred stock received one share of the
Company's Common Stock for each share of the Bank's common stock held of
record and one share of the Company's $20.00 par value noncumulative
convertible perpetual preferred stock for each share of the Bank's preferred
stock held of record. Holders of outstanding options to purchase or acquire
the Bank's common stock received options to purchase an equal number of shares
of Company Common Stock.
In December 1996, the Company completed a private offering of $6.0 million
of its 6.0% Debentures.
BUSINESS STRATEGY
The Company's business strategy entails (i) originating and purchasing
real estate secured loans for portfolio and sale and originating business and
consumer loans for portfolio; (ii) improving market share and expanding its
market area through acquisitions of financial institutions and de novo
branching; (iii) increasing non-interest income through expanded mortgage
banking activities and emphasizing commercial and retail checking
relationships; and
50
<PAGE> 52
(iv) increasing its range of products and services. While pursuing this
strategy, management remains committed to improving asset quality, managing
interest rate risk and enhancing profitability.
The Company's business strategy has resulted in:
. Increased Earnings - In 1994 and 1995 earnings before taxes and
amortization of negative goodwill were $4.7 million and $6.1 million,
respectively. In 1996, earnings before taxes and the one-time SAIF
special assessment were $8.6 million. In the three months ended
March 31, 1997, earnings before taxes totaled $2.6 million.
. Expanded Branch Network - Since the Change of Control in May 1993,
the Company has expanded its retail banking presence from seven
branches in northern Pinellas County at mid-year 1993, to its current
35 branches in Hernando, Pasco, Pinellas, Manatee, Sarasota and
Orange Counties. Further market expansion will occur upon the
acquisition of FFO later this year which will add eleven branches in
the central Florida market, including five in Osceola County, five in
Brevard County, and one in Orange County, bringing the total number
of branches to 46.
. Increased Levels and Sources of Noninterest Income - The Company has
expanded its sources and amounts of fee income by emphasizing
mortgage banking activities and new products, including a program
that generates fee income for the Company when the Company's checking
account customers utilize the travel and other services of certain
third-party providers.
. Improved Asset Quality Ratios - The assets acquired in the Change of
Control and from CrossLand included significant levels of
nonperforming assets. As a result, the Company's nonperforming
assets-to-total assets ratio was 4.95% at year-end 1993. This ratio
had been reduced to 2.58% at March 31, 1997. This reduction was
achieved primarily through the implementation of consistent loan
underwriting policies and procedures, centralization of all credit
decision functions and growth in the loan portfolio. Virtually none
of the Company's nonperforming assets were originated following the
Change in Control in 1993.
. Management of Interest Rate Risk - One of the Company's primary
objectives is to reduce fluctuations in net interest income caused by
changes in market interest rates. To manage interest rate risk, the
Company generally limits holding loans in its portfolio to those that
have variable interest rates tied to interest-sensitive indices and
management of the maturities within the investment portfolio. The
Company believes, based on its experience, that, as of March 31,
1997, the anticipated dollar amounts of assets and liabilities which
reprice or mature within a one-year time horizon are closely matched.
RECENT AND PENDING ACQUISITIONS
Management believes that acquisitions of financial institutions provide
the Company with an opportunity to enhance its market presence and size in a
manner which is generally quicker and more cost effective than de novo
branching. Management believes that its banking products and customer services
will enable it to preserve its relationships with the customers of acquired
financial institutions.
On April 18, 1997, the Company acquired Firstate, a thrift institution
headquartered in Orlando, Florida, with branches in downtown Orlando and Winter
Park, for a cash purchase price of $5.5 million. Firstate was not publicly
traded. At April 18, 1997, Firstate had total assets of $69.6 million and
total deposits of $68.6 million. The acquisition was accounted for as a
purchase, and the amount of goodwill recorded was $130,000. Because it
qualified as a "weak institution" under the SAIF recapitalization legislation
enacted in September 1996, Firstate was not required to pay a $519,063 special
assessment to the SAIF that otherwise would have been due and payable.
Accordingly, the Company will be required either (i) to pay a pro rata portion
of the special assessment ($346,734 from July 1 to December 31, 1997) or (ii)
to continue to pay quarterly assessments on the deposits assumed from
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<PAGE> 53
Firstate at the higher SAIF assessment rate that was in effect on June 30, 1995
(23 basis points), which exceeds the rate the Company is paying on all other
deposits. See "Pro Forma Financial Data" and "Business--Supervision and
Regulation--Deposit Insurance."
On April 14, 1997, the Company and FFO entered into the FFO Agreement
providing for the acquisition of FFO by the Company pursuant to the FFO Merger.
FFO has 11 branches in Osceola, Orange and Brevard counties. At March 31,
1997, FFO had total assets of $320.0 million and total deposits of $285.7
million. Mr. Hough, one of the Company's Controlling Stockholders, also owns a
majority interest in FFO. Under the terms of the FFO Agreement, the Company
will exchange 0.29 of a share of the Company's Common Stock for each of the 8.4
million outstanding shares of FFO Common Stock. If the product of (i) the
exchange ratio and (ii) the average market price of the Company's Common Stock
for a period ending shortly prior to closing is below $4.10, the exchange ratio
will be adjusted for decreases in the price of Company Common Stock; however,
in no event will the exchange ratio exceed 0.30. Outstanding options for FFO
Common Stock will be converted into options for Company Common Stock on the
same basis. FFO has the right not to consummate the FFO Agreement if the
average market price of Company Common Stock is less than $13.50. Either party
has the right to terminate the agreement if the FFO Merger does not occur by
November 1, 1997. The transaction will be accounted for as a corporate
reorganization under which Mr. Hough's interest in FFO will be carried forward
at its historical cost in a manner similar to that of a pooling of interest
accounting while the minority interest in FFO will be recorded using purchase
accounting rules. The transaction is subject to approval by a majority vote of
the stockholders of the Company and FFO, approval by various regulatory
authorities and receipt of opinion that the transaction qualifies as a tax-free
reorganization. The transaction is not dependent on the successful completion
of this offering of Preferred Securities.
Management of the Company believes that the comparison of FFO's assets and
liabilities is substantially similar to that of the Company. At December 31,
1996, the Company's loan portfolio included 56.4% in residential mortgages,
37.4% in commercial real estate mortgages, and 1.4% in consumer loans. The
corresponding percentages for FFO were 60.8%, 28.0% and 9.1%, respectively. In
addition, both residential mortgage portfolios consist primarily of
adjustable-rate loans. Also at December 31, 1996, the Company's deposit base
included 6.1% in demand deposits, 27.2% in savings and interest-bearing
transactions accounts, and 66.1% in time deposits. The corresponding
percentages for FFO were 5.0%, 20.2%, and 74.8%, respectively.
BRANCH NETWORK
Currently, the Company has 35 branches, including 3 offices in Pasco
County, 20 offices in Pinellas County, 7 offices in Manatee County, 2 offices
in Sarasota County, 2 in Orange County and one branch in Hernando County. As a
multi-office institution, the Company's market area encompasses all of the
counties in which it operates. The Company also operates 10 loan production
offices in Pinellas, Lee, Orange, Palm Beach and Polk Counties in Florida and
an office in Boston, Massachusetts.
Most of the Company's branches are in Metropolitan Statistical Areas
("MSA") and MSA is defined by the U.S. Census Bureau as geographic areas with a
significant population nucleus, along with any adjacent communities that have a
high degree of economic and social integration with that nucleus. Of the
Company's branches, 33 are in the MSAs which anchor the west coast of Florida;
Tampa-St. Petersburg-Clearwater, which includes Hillsborough, Hernando, Pasco
and Pinellas counties, and Sarasota-Bradenton, comprised of Manatee and
Sarasota counties. As of January 1, 1996, the latest estimates available, the
Tampa-St. Petersburg MSA had a population of 2.2 million, ranking it 23rd in
the nation. Sarasota-Bradenton had a population of 539,000, ranking it 95th.
Together the two MSAs had a combined population of 2.75 million residents which
would rank approximately 12th in the United States. The other two branches are
in the Orlando MSA. The economic base of the three MSAs in which the Company
has branches are supported by a large and growing segment of retirees, tourism,
which contributes to the economic base throughout the year, and light industry.
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<PAGE> 54
The west coast of Florida is highly competitive with 279 branches of banks
and savings and loan institutions operating in Pinellas County, 90 in Pasco
County, 81 in Manatee County, and 132 in Sarasota County, as of September 30,
1996, the most recent date that comparative data was available. The largest
commercial banking institutions in Florida operate in each of the three
counties. As in most market areas, competition for deposits also exists from
money market funds and credit unions. Competition for mortgage loans is
extremely strong from specialized lenders, other mortgage bankers and
independent brokers capable of selling qualified mortgage loans to the highest
bidder. Similarly, consumers can choose from a wide range of suppliers of
personal credit, including credit card companies, consumer finance companies
and credit unions.
The Company ranked 13th among banks and 24th among all depository
institutions in the state of Florida in terms of deposits held as of September
30, 1996, the latest date for which data is available. Ranked by deposits, the
Company was the 15th largest in Pasco County, the 7th largest in Pinellas
County, the 5th largest in Manatee County and the 14th largest in Sarasota
County. As the table below indicates, market share ranges from six percent in
Manatee County to one percent in Pasco.
Branch Deposits by County
September 30, 1996
<TABLE>
<CAPTION>
Company Total Market
Deposits Deposits Share
-------------- ----------- ---------------
(In millions)
<S> <C> <C> <C>
Pasco . . . . . . . . . . . . . . . . . . . . . . $ 42 $ 3,899 1.1%
Pinellas . . . . . . . . . . . . . . . . . . . . 502 12,787 3.9
Manatee . . . . . . . . . . . . . . . . . . . . . 167 2,770 6.0
Sarasota . . . . . . . . . . . . . . . . . . . . 72 5,860 1.2
------------- ---------- ----
Total . . . . . . . . . . . . . . . . . . . $ 783 $ 25,316 3.1%
============= ========== ====
</TABLE>
SOURCES OF FUNDS
Deposit accounts are the primary source of funds for lending, investment,
and other general business purposes. In addition to deposits, funds are
derived from loan repayments and loan sales. Scheduled loan payments on the
residential loan portfolio are a relatively stable source of funds, while
residential loan prepayments, deposit in-flows and out-flows are significantly
influenced by general interest rate and money market conditions. Funding needs
may be supplemented through borrowings from the FHLB, which are secured by a
blanket lien on the portfolio of residential loans. Management believes that
current funding requirements can be met through retail deposits, without
reliance on brokered deposits. To the extent there are requirements for
short-term financing beyond liquid assets, the Company intends to rely on
repurchase agreements, FHLB advances, and other traditional money market
sources of funding. For additional discussion of asset/liability management
policies and strategies, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Asset/Liability Management".
A full range of deposit services is offered, including checking and other
transaction accounts, savings accounts, and time deposits. At March 31, 1997,
the Company had no brokered deposits, and time deposits in amounts of $100,000
or more constituted 6.0% of total deposits
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<PAGE> 55
The following table sets forth the principal types of deposit accounts
offered and the aggregate amounts of such accounts at March 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
Weighted
Average Percent of
Interest Rate Amount Total Deposits
----------------- ----------------- -----------------
<S> <C> <C> <C>
Noninterest bearing . . . . . . . . . . . . . . . . 0.00% $ 49,066 5.9%
Interest checking . . . . . . . . . . . . . . . . . 1.09 89,895 10.8
Passbook savings . . . . . . . . . . . . . . . . . 4.88 223,776 27.0
Statement savings . . . . . . . . . . . . . . . . . 1.98 27,569 3.3
Money market . . . . . . . . . . . . . . . . . . . 2.08 32,017 3.9
Time deposits with original maturities of:
One year or less . . . . . . . . . . . . . . . . 5.07 112,509 13.6
Over 1 year through 5 years . . . . . . . . . . . 5.22 197,481 23.8
Over 5 years . . . . . . . . . . . . . . . . . . 6.20 96,747 11.7
-------- -----
Total time deposits (1) . . . . . . . . . . . . . 5.41 406,737 49.1
-------- -----
Total deposits . . . . . . . . . . . . . . . . . . 4.24% $829,060 100.0%
======== =====
</TABLE>
(1) Includes time deposits in amounts of $100,000 or more of $50.0 million.
At March 31, 1997, scheduled maturities of total time deposits were as
follows:
<TABLE>
<CAPTION>
Year ended Percent of
December 31, Amount Time Deposits
-------------------- ----------- --------------------
(In thousands)
<S> <C> <C>
1997 $ 258,908 63.7%
1998 51,622 12.7
1999 46,898 11.5
2000 18,256 4.5
2001 31,021 7.6
Thereafter 32 0.0
---------- -----
TOTAL $ 406,737 100.0%
========== =====
</TABLE>
LENDING AND LOAN PORTFOLIO PURCHASE ACTIVITIES
The Company originates a full range of lending products for its portfolio
and real estate-secured loans for sale in the secondary market. Portfolio
lending efforts are focused on customers located along the west coast and in
central Florida. During 1995, the Company opened commercial loan production
offices in central and southwest Florida. The portfolio objective is to
maintain a one-to-four family, primarily adjustable rate, residential loan
portfolio of at least 50% of its total loans and to achieve, over time, a level
of approximately 10% of its total loan portfolio in consumer loans, consisting
of home equity loans as well as extensions of credit for other household
purposes such as automobile loans and secured personal loans. The approximate
40% remainder of the loan portfolio will consist of commercial real estate
loans, multifamily residential loans and commercial (business) loans.
In April 1996, the Company started a mortgage banking division which
currently has eight loan production offices in Florida and one office in
Boston, Massachusetts, as well as a wholesale lending operation. The wholesale
lending operation is engaged in acquiring whole loans from third-party
originators. Substantially all of the loans generated by the mortgage banking
division are intended for sale into the secondary market on either a whole loan
54
<PAGE> 56
basis or by delivery into marketable securities, depending upon individual loan
characteristics. The Company's mortgage banking division has also begun to
originate home improvement and debt consolidation loans secured by junior liens
on real estate and has begun selling these loans to investors in 1997.
For 1996, originations of residential mortgage loans totaled $203.3
million, including $141.0 million in fixed rate loans and $62.3 million of
adjustable rate loans. Contributing to this increase in residential mortgage
loan originations was the employment of a commissioned sales force experienced
in loan originations and a support staff whose compensation is also
significantly incentive-based. Sales of residential loans totaled $106.1
million for 1996. For the first quarter of 1997, originations of residential
mortgage loans totaled $67.4 million, including $50.2 million of fixed rate
loans and $19.2 million of adjustable loans. Sales of residential loans
totaled $86.0 million for the first quarter of 1997.
Originations of commercial real estate and commercial (business) loans
totaled $207.4 million for 1996 and $37.8 million for the first quarter of
1997. To-date, such loan originations have been for portfolio purposes but the
Company intends to originate and sell into the secondary market a portion of
its commercial real estate loans originated during 1997, collecting fee income
on the sale and retaining the servicing of these loans.
The Company purchased loans totaling approximately $193.5 million in
connection with the CrossLand Purchase and Assumption. Loan purchases were
$157.5 million in 1994, $102.3 million in 1995 and $8.2 million in 1996. No
loan purchases were made in the first quarter of 1997. Additional real estate
loan purchases may be considered if loan pools with acceptable yield,
satisfactory creditworthiness, and other characteristics become available for
bid. However, during 1996 and the first quarter of 1997, loan originations
were the predominate source of growth in the loan portfolio and this is
expected to continue for the foreseeable future.
The following tables set forth information concerning the loan portfolio,
based on total dollars and percent of portfolio, by collateral type as of the
dates indicated:
<TABLE>
<CAPTION>
At March 31, At December 31,
------------- -------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans:
One-to-four family residential $ 412,700 $ 419,605 $ 388,221 $ 293,146 $ 153,587 $ 7,797
Multifamily residential 67,531 68,337 75,127 60,795 36,735 4,461
Commercial real estate 192,509 182,298 153,193 112,050 86,457 65,072
Construction/land development 29,812 27,050 13,974 16,095 9,561 5,256
------------- ---------- ---------- ---------- ---------- -----------
Total real estate mortgage loans 702,552 697,290 630,515 482,086 286,340 82,586
Commercial (business) loans 33,125 34,427 29,687 24,579 18,581 17,546
Consumer loans 11,747 9,983 6,847 6,426 7,509 8,374
Other loans 1,069 1,294 2,367 3,244 4,053 2,209
------------- ---------- ---------- ---------- ---------- -----------
Total loans(1) 748,493 742,994 669,416 516,335 316,483 108,757
Less:
Allowance for loan losses 13,508 13,134 14,910 7,065 6,539 1,958
------------- ---------- ---------- ---------- ---------- -----------
Loans, net of allowance $ 734,985 $ 729,860 $ 654,506 $ 509,270 $ 309,944 $ 108,757
- --------------- ============= ========== ========== ========== ========== ===========
</TABLE>
(1) Includes discounts, premiums, and unearned fees.
At March 31, 1997 and December 31, 1996, the balance of loans purchased
included in the portfolio amounted to $271.2 million and $286.5 million,
respectively. The balance of loans held for sale included in the portfolio at
March 31, 1997, December 31, 1996 and 1995 were $40.2 million, $36.6 million,
and $4.7 million, respectively.
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<PAGE> 57
<TABLE>
<CAPTION>
At March 31, At December 31,
------------------------ -------------------------------------------
Based on percent of portfolio: 1997 1996 1995 1994 1993 1992
----------------------------- ------------ ----------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans:
One-to-four family residential 55.1% 56.5% 58.0% 56.8% 48.5% 7.0%
Multifamily residential 9.0 9.2 11.2 11.8 11.6 4.0
Commercial real estate 25.7 24.6 22.9 21.7 27.3 58.8
Construction/land development 4.0 3.6 2.1 3.1 3.0 4.7
----- ----- ----- ----- ----- -----
Total real estate mortgage loans 93.8 93.9 94.2 93.4 90.4 74.5
Commercial (business) loans 4.4 4.6 4.4 4.8 5.9 15.8
Consumer loans 1.6 1.3 1.0 1.2 2.4 7.6
Other loans .2 .2 .4 .6 1.3 2.1
----- ----- ----- ----- ----- -----
Total loans 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
The following table sets forth the contractual amortization of real estate
and commercial loans at March 31, 1997 and December 31, 1996. Loans having no
stated schedule of repayments and no stated maturity are reported as due in
one- year or less. The table also sets forth the dollar amount of loans
scheduled to mature after one year, according to their interest rate
characteristics:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------------------- ------------------------
Real Estate Commercial Real Estate Commercial
------------ ------------- ----------- ------------
Type of loan: (In thousands)
<S> <C> <C> <C> <C>
Amounts due:
One year or less $ 46,120 $ 16,144 $ 60,246 $ 15,740
After one through five years 161,661 15,579 151,492 16,580
More than five years 494,771 1,402 485,552 2,107
----------- ------------ ----------- ------------
Total $ 702,552 $ 33,125 $ 697,290 $ 34,427
=========== ============ =========== ============
Interest rate terms on
amounts due after one year:
Adjustable $ 443,489 $ 11,182 $ 446,710 $ 12,053
Fixed 212,453 5,799 190,334 6,634
----------- ------------ ----------- ------------
Total $ 655,942 $ 16,981 $ 637,044 $ 18,687
=========== ============ =========== ============
</TABLE>
CREDIT ADMINISTRATION
The loan approval process provides for various levels of lending authority
to loan officers, the Officers' Loan Committee, and the Chairman and Chief
Executive Officer. In addition, loans in excess of $1.5 million require the
approval of the Board of Directors' Loan Committee or a majority of the full
Board prior to funding. Loan purchases are generally made subject to the same
underwriting standards as loan originations. All loan purchases must be
approved in advance of funding by the Chief Executive Officer, and are reported
to the full Board following purchase. In an attempt to achieve consistency in
underwriting policies and procedures, the supervision of all credit decision
functions is centralized.
Real estate lending is defined as extensions of credit secured by liens on
interests in real estate or made for the purpose of financing the construction
of a building or other improvements to real estate, regardless of whether
56
<PAGE> 58
a lien has been taken on the property. Applicable regulations require that
comprehensive written real estate lending policies be adopted and maintained
that are consistent with safe and sound banking practices. These lending
policies must reflect consideration of the Interagency Guidelines for Real
Estate Lending Policies adopted by the federal banking agencies in December
1992 (the "Guidelines"). Pursuant to the mandates of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), the Guidelines set
forth regulations prescribing standards for real estate lending, which the
Company has incorporated into its lending policy.
The policy addresses certain lending considerations set forth in the
Guidelines, including loan-to-value ("LTV") limits, loan administration
procedures, underwriting standards, portfolio diversification standards and
documentation, approval, and reporting requirements. The LTV ratio framework,
with an LTV ratio being the total amount of credit to be extended divided by
the appraised value or purchase price of the property at the time the credit is
originated, has been established for each category of real estate loans. The
Company's policy, subject to certain approval exceptions, establishes, among
other things, the following LTV limits: raw land (65%); land development (75%);
construction (commercial, multifamily and non-residential) (80%); and improved
property (85%). For portfolio purposes, loans on one-to-four family
residential (owner occupied) mortgages where the LTV exceeds 95% are not made,
and any LTV ratio in excess of 80% generally requires appropriate insurance or
additional security from readily marketable collateral. Loans with an LTV
higher than 95% may be made if saleable to investors at an acceptable premium.
The policy is reviewed and approved by the Board of Directors at least
annually.
The Company's commercial (business) lending is based on a strategy of
extending credit to the local business community, and the Company's policy has
been to make corporate and commercial loans to borrowers with satisfactory cash
flows.
The loan portfolio is managed on an ongoing basis pursuant to written
portfolio management strategies, guidelines for underwriting standards and risk
assessment, and procedures for ongoing identification and management of credit
deterioration. Regular portfolio reviews are undertaken to estimate loss
exposure and ascertain compliance with policies (see -- "Asset Quality").
ASSET QUALITY
Allowance/Provision for Loan Losses
The allowance for loan losses represents management's estimate of an
amount adequate to provide for potential losses inherent in the loan portfolio.
However, it is likely that there are additional risks of future losses which
cannot be quantified precisely or attributed to particular loans or classes of
loans. Because those risks include general economic trends as well as
conditions affecting individual borrowers, management's judgment of the reserve
is necessarily approximate and imprecise. The allowance is also subject to
regulatory examinations and determinations as to adequacy, which may take into
account such factors as the methodology used to calculate the allowance and the
size of the allowance in comparison to peers identified by the regulatory
agencies.
The Company believes that its loan loss allowance policy that is both
consistent with policies established by the FDIC and commensurate with
historical loss experience. Provisions for loan losses charged to expense
during each period will be the result of management's assessment of the
adequacy of the allowance when compared to the inherent risk of the portfolio.
As part of the risk assessment for loans purchased in the CrossLand Purchase
and Assumption and for loans purchased during 1994, 1995 and 1996, management
allocated a portion of the discount on such loan purchases to the allowance in
amounts which are consistent with loan loss allowance policy guidelines.
Amounts resulting from discount allocation to the allowance are available to
absorb potential losses only on those purchased loans and are not available for
losses from other loans. To the extent that losses in certain pools or
portfolios of loans exceed the loan loss allowance and any remaining unearned
loan discount, or available as a general allowance, the Company's results of
operations would be adversely effected.
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<PAGE> 59
Management conducts an ongoing evaluation and grading of its loan
portfolio according to an eight point rating system. The loan ratings serve as
a guideline in assessing the risk level of a particular loan and provide a
basis for the establishment of the overall allowance. The Loan Review
Department independently rates loans and, on a quarterly basis, meets with
senior management and the loan officers to discuss all loans which have been
identified for potential credit quality problems. The Loan Review Department
also reports its findings to the Directors' Audit Committee to ensure
independence of the loan grading function.
Various loan purchases were made totaling $157.4 million during 1994,
$102.3 million during 1995 and $8.2 million in 1996. No loan purchases were
made in the first quarter of 1997. A portion of the discount on those
purchased loans was allocated to the allowance in amounts consistent with the
Company's loan loss allowance policy guidelines. The remainder of the discount
arising from the purchase price is recorded as unearned discount and
subsequently accreted to income as a yield adjustment over the life of the
loans. In 1995 such allocation included $7.2 million related solely to one
particular portfolio purchase, in the aggregate principal amount of $48.1
million. Subsequently, the principal balance of the March 1995 Purchase had
declined to $39.9 million and the allowance allocated to this purchase was
reduced to $5.9 million. This was principally the result of charges to the
reserve for loans which were nonperforming when acquired and subsequently taken
into foreclosure and recorded at their fair value. The Company's history of
administering this loan purchase indicates that the expected loss rate on the
remaining loans in this portfolio will be less than the amount remaining in the
allowance. Consequently, the Company reallocated $1.5 million from the
allowance to unearned discount in the fourth quarter of 1996, reducing the
December 31, 1996 allowance allocated to the March 1995 Purchase to $4.4
million. In the first quarter of 1997, $6.0 million of loans from the March
1995 purchase were sold and $642,000 previously allocated to the allowance for
those loans was recognized as income and concurrently transferred to the
allowance for originated loans. At March 31, 1997, the allowance allocated to
the March 1995 purchase was $3.7 million. $1.0 million was allocated to loans
purchased from CrossLand, $1.7 million was allocated to other loan purchases,
and $7.1 million was allocated to originated loans. At March 31, 1997, the
amount of unearned discount on purchased loans which had not been allocated to
the allowance totaled $4.1 million.
Activity to the allowance during the first quarter of 1997 included a $1.1
million provision for loan losses, loan charge-offs (net of recoveries) of
$122,000 and the $642,000 transferred to unearned discount as previously
discussed. Activity to the allowance during 1996 included a $1.8 million
provision for loan losses, loan charge-offs (net of recoveries) of $1.8
million, and $1.7 million transferred to unearned discount. The net charge-off
amount for 1996 included $1.0 million assessed against the allowance for loans
acquired in the March 1995 Purchase as properties securing certain
nonperforming loans which were purchased at a substantial discount were
acquired through foreclosure and recorded at their fair value.
58
<PAGE> 60
The following table sets forth information concerning the activity in the
allowance for loan losses during the periods indicated (in thousands):
<TABLE>
<CAPTION>
Three Five
Months Seven Months Months Year Ended
Ended Years Ended December 31, Ended Ended December
March 31, -------------------------- December 31, May 31, 31,
1997 1996 1995 1994 1993 1993 1992
--------- ------- --------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance at beginning of period $13,134 $14,910 $ 7,065 $ 6,539 $ 1,866 $ 1,958 $2,180
Loan discount (net) allocated
to/(from) the allowance for loans
acquired in the:
CrossLand Purchase and Assumption -- (757) 4,046 N/A N/A
Loans purchased in 1994 -- (202) -- 1,400 -- -- --
Loans purchased in 1995 (642) (1,541) 7,658 -- -- -- --
Loans purchased in 1996 -- 11 - -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total loan discount allocated
to/(from) the allowance (642) (1,732) 7,658 643 4,046 -- --
Charge-offs:
------------
Residential loans (1-4 family) 91 1,700 275 94 -- -- 96
Commercial real estate/multi-family -- 51 907 1,472 115 43 356
Commercial (business) 38 249 558 304 28 439 375
Consumer and other loans 59 110 207 -- 65 50 64
------- ------- ------- ------- ------- ------- -------
Total charge-offs 188 2,119 1,947 1,870 208 532 891
Recoveries:
-----------
Residential loans (1-4 family) 2 1 7 -- 1 1 2
Commercial real estate/multi-family 3 35 379 113 19 1 1
Commercial loans (business) 60 168 53 64 91 44 95
Consumer and other loans 1 62 10 1 15 15 51
------- ------- ------- ------- ------- ------- -------
Total recoveries 66 266 449 178 126 61 149
Net charge-offs 122 1,844 1,498 1,692 82 471 742
Provisions for loan losses 1,138 1,800 1,685 1,575 709 379 520
------- ------- ------- ------- ------- ------- -------
Allowance at end of period $13,508 $13,134 $ 14,910 $ 7,065 $ 6,539 $ 1,866 $ 1,958
======= ======= ======== ======= ======= ======= =======
Charges to the allowance
representing shares allocated from
loan discount .02% .21% .13% .32% .00% .00% .00%
Other net charge-offs .00 .06 .12 .11 .12 .43 .69
------- ------- ------- ------- ------- ------- -------
Total net charge-offs to average
loans .02% .27% .25% .43% .12% .43% .69%
======= ======= ======== ======= ======= ======= =======
</TABLE>
59
<PAGE> 61
The following table sets forth the allocation of the allowance based on
management's subjective estimates. The amount allocated to a particular
segment should not be construed as the only amount available for future
charge-offs that might occur within that segment. In addition, the amounts
allocated by segment may not be indicative of future charge-offs. The
allocation of the allowance may change from year to year should management
determine that the risk characteristics of the loan portfolio and off-balance
sheet commitments have changed.
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------------------- ------------------------
Percent Percent
Amount of Portfolio Amount of Portfolio
------------- ------------ ----------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Allowance Allocation
--------------------
Performing/not classified:
Residential loans:
March 1995 Purchase $ 3,599 5.1% $ 4,171 5.3%
All other residential 603 48.1 1,788 48.3
Commercial (business) 319 4.3 340 4.6
Commercial real estate 2,423 36.0 2,622 35.5
Consumer & other 501 3.4 488 3.2
------------ ----- ---------- -----
Subtotal $ 7,445 96.9 $ 9,409 96.9
Non-performing/classified:
Special mention 152 1.0 124 .8
Substandard & nonperforming 2,130 1.9 2,476 2.2
Doubtful 578 .2 601 0.1
Loss -- -- -- --
------------ ------ ---------- -----
Subtotal 2,860 3.1 3,201 3.1
Off balance sheet risk 439 -- 434 --
Unallocated 2,764 -- 90 --
------------ ------ ---------- -----
Total $ 13,069 100.0% $ 13,134 100.0%
============ ===== ========== =====
</TABLE>
Nonperforming Assets
Nonperforming assets include (i) non-accrual loans (loans 90 days or more
delinquent and restructured loans that have not yet demonstrated a sufficient
payment history to warrant being returned to performing status), (ii) accruing
loans 90 days or more delinquent that are deemed by management to be adequately
secured and in the process of collection, and (iii) ORE (i.e., real estate
acquired through foreclosure or deed in lieu of foreclosure). All delinquent
loans are reviewed on a regular basis and are placed on non-accrual status
when, in the opinion of management, the possibility of collecting additional
interest is deemed insufficient to warrant further accrual. As a matter of
policy, interest is not accrued on loans past due 90 days or more unless the
loan is both well secured and in process of collection. When a loan is placed
in non-accrual status, interest accruals cease and uncollected accrued interest
is reversed and charged against current income. Additional interest income on
such loans is recognized only when received.
Loans classified as non-accrual totaled $15.4 million at December 31, 1996
compared to $16.2 million at March 31, 1997, an increase of $841,000. At March
31, 1997 and December 31, 1996, the Company had nonperforming assets (including
loans classified as non-accrual) of $23.6 million or 2.58% of total assets and
$22.8 million or 2.51% of total assets, respectively. The ratio of
non-performing assets to total assets was 2.93% at year-end 1995 and 3.59% at
year-end 1994. Accruing loans which were 90 days past due amounted to $121,000
at March 31, 1997 and $113,000 at December 31, 1996, and primarily consisted of
loans in process of renewal.
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<PAGE> 62
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of Balance Sheets at March 31, 1997 and December 31,
1996."
The following table sets forth information regarding the components of
nonperforming assets at the dates indicated:
<TABLE>
<CAPTION>
At March 31, At December 31,
------------ -------------------------------------------------------------
Non-Performing Assets: 1997 1996 1995 1994 1993 1992
------------ ----------- ----------- ------------ ----------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans:
1-4 family residential(1) $ 8,098 $ 7,366 $ 9,540 $ 9,062 $ 3,707 $ 35
Multi-family residential -- 55 129 1,160 10,200 0
Commercial real estate 5,740 6,162 3,082 1,515 1,464 2,965
Commercial (business) 2,256 1,604 308 591 620 529
Home equity and consumer 98 164 495 620 0 10
----------- ---------- ----------- ----------- ---------- -----------
Total non-accrual loans 16,192 15,351 13,554 12,948 15,991 3,539
ORE acquired through
foreclosure 7,250 7,363 8,064 9,278 9,569 9,190
Accruing loans 90 days past
due 121 113 1,876 293 725 22
----------- ---------- ----------- ----------- ---------- -----------
Nonperforming assets $ 23,563 $ 22,827 $ 23,494 $ 22,519 $ 26,285 $ 12,751
=========== ========== =========== =========== ========== ===========
Nonperforming loans to total
loans 2.18% 2.19% 2.32% 2.56% 5.28% 3.22%
===== ===== ===== ===== ===== =====
Nonperforming assets to total
assets 2.58% 2.51% 2.93% 3.59% 4.95% 7.55%
===== ===== ===== ===== ===== =====
</TABLE>
(1) Net of $114,000, $184,000 and $950,000 of loan loss allowances at March
31, 1997 and at December 31, 1996 and 1995, respectively, allocated to
nonaccrual loans acquired in the March 1995 Purchase.
Other Real Estate Acquired Through Foreclosure
All ORE assets are recorded at the lower of cost or estimated fair value
based on appraisal information which is updated when a property is taken into
ORE and thereafter when determined appropriate by management. As of March 31,
1997, in no case did the book value of any ORE property exceed 90% of the most
recent appraisal. The following table sets forth information regarding the
Company's ORE balances, net of allowances, as of the dates indicated:
<TABLE>
<CAPTION>
At March 31, At December 31,
-------------- -----------------------------------------------------
1997 1996 1995 1994 1993 1992
-------------- --------- ---------- --------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Vacant undeveloped residential land $ 1,107 $ 1,277 $ 1,717 $ 2,358 $ 2,450 $ 2,454
Vacant developed residential lots 254 254 265 434 600 1,644
Residential houses 2,517 2,541 860 1,313 795 800
Vacant commercial undeveloped land 79 79 79 248 155 155
Commercial land developed for sale 3,200 3,200 4,308 4,516 1,746 2,991
Income-producing commercial buildings 12 12 150 0 3,534 324
Vacant commercial buildings 81 -- 685 409 289 822
------------- -------- --------- -------- --------- ----------
Total ORE $ 7,190 $ 7,363 $ 8,064 $ 9,278 $ 9,569 $ 9,190
============= ======== ========= ======== ========= ==========
ORE to total assets .79% .81% 1.01% 1.48% 1.80% 5.44%
==== ==== ==== ==== ==== ====
</TABLE>
At March 31, 1997, ORE properties with book values in excess of $1.0
million were as follows:
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<PAGE> 63
- - A tract of land in Holiday, Florida, currently carried at $3.2
million, that has been developed as a shopping center site. This
tract was obtained in 1988 through foreclosure in connection with a
$1.8 million loan. The tract contains wetlands, some of which were
required to be filled, and the resultant permitting process took
approximately five years to complete. During that time, over $2.0
million was spent in engineering, environmental, and legal costs
(which costs were capitalized) and approximately $500,000 for the
purchase of several additional parcels of land required for
environmental mitigation purposes pursuant to the permit requirements.
The Company is offering for sale the completed shopping center sites
and other commercial pad sites. One shopping center site was sold to
a developer who constructed the retail space for the anchor tenants,
Publix and Walgreens. The Company presently operates a branch banking
facility on the tract. Federal regulations had required the Bank to
dispose of the tract no later than December 31, 1996 but the FDIC has
approved an extension of the holding period to December 19, 1997.
While the current appraisal indicates that the fair market value of
the tract exceeds book value, a sale to a party other than an end-user
could result in proceeds below the current book value.
- - A 41.7% undivided interest in a 973-acre parcel of undeveloped
residential land in Pasco County, Florida. This interest was acquired
through foreclosure in 1990 and is carried on the Company's books at
$1.1 million. The entire parcel (which includes both the Company's
undivided interest and that of the other owners) was appraised at $4.7
million in January 1997. Negotiations are ongoing to sell
approximately two-thirds of the property to a governmental agency.
Troubled Debt Restructurings
A troubled debt restructuring ("TDR") is a situation in which the
creditor allows the debtor certain concessions that would not normally be
allowed, such as modifying the terms of the debt to a basis more favorable than
those offered to other creditors or accepting third-party receivables in lieu
of the debt. At March 31, 1997 and December 31, 1996 and 1995, respectively,
the loan portfolio included TDRs amounting to $2.5 million, $2.5 million and
$1.7 million, respectively.
INVESTMENT ACTIVITIES
State law requires that a specified minimum amount of liquid assets be
maintained, based on the level of deposits, which are subject to certain
restrictions. At all times during 1996, the amount of liquid assets maintained
exceeded the regulatory minimum. For additional information related to the
Company's investment portfolio, see Note 2, Investment Securities and Note 3,
Mortgage Backed Securities, of the Notes to the Consolidated Financial
Statements.
EMPLOYEES
At March 31, 1997, there were 644 full-time equivalent employees, none
of whom were represented by a union or other collective bargaining agreement.
The Company makes use of part-time and flex-time employees in connection with
its branch operations. One of the Company's primary operating principles is to
nurture its staff through, among other things, fair compensation, a good
working environment, and career development and enhancement opportunities.
Management considers its relations with its employees to be good.
SUPERVISION AND REGULATION
The Company and the Bank are extensively regulated under both federal
and state law. The following is a brief summary of certain statutes, rules,
and regulations affecting the Company and the Bank. This summary is qualified
in its entirety by reference to the particular statutory and regulatory
provisions referred to below and is not intended to be an exhaustive
description of the statutes or regulations applicable to the Company's
business.
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<PAGE> 64
Supervision, regulation, and examination of the Company and the Bank
by the bank regulatory agencies are intended primarily for the protection of
depositors rather than stockholders.
The Company is a bank holding company, registered with the Federal
Reserve under the Bank Holding Company Act of 1956, as amended ("BHC Act"). As
such, the Company and its subsidiaries are subject to the supervision,
examination, and reporting requirements of the BHC Act and the regulations of
the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than five percent (5%) of the voting shares of the bank; (ii) it
or any of its subsidiaries, other than a bank, may acquire all or substantially
all of the assets of the bank; or (iii) it may merge or consolidate with any
other bank holding company.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a
monopoly in any section of the country, or that in any other manner would be in
restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community served. The Federal Reserve is also
required to consider the financial and managerial resources and future
prospects of the bank holding companies and banks concerned and the convenience
and needs of the communities to be served. Consideration of financial
resources generally focuses on capital adequacy, and consideration of
convenience and needs issues includes the parties' performance under the
Community Reinvestment Act of 1977 (the "CRA").
The BHC Act generally prohibits the Company from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. For example,
factoring accounts receivable, acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling credit
life insurance and certain other types of insurance in connection with credit
transactions, and performing certain insurance underwriting activities all have
been determined by the Federal Reserve to be permissible activities of bank
holding companies. The BHC Act does not place territorial limitations on
permissible nonbanking activities of bank holding companies. Despite prior
approval, the Federal Reserve has the power to order a bank holding company or
its subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or such ownership or control constitutes a
serious risk to the financial safety, soundness, or stability of any bank
subsidiary of that bank holding company.
The Bank is organized as a Florida-chartered commercial bank and is
regulated and supervised by the Department. In addition, the Bank is regulated
and supervised by the FDIC, which serves as its primary federal regulator.
Accordingly, the Department and the FDIC conduct regular examinations of the
Bank, reviewing the adequacy of the loan loss reserves, quality of loans and
investments, propriety of management practices, compliance with laws and
regulations, and other aspects of the Bank's operations. In addition to these
regular examinations, the Bank must furnish to the FDIC quarterly reports
containing detailed financial statements and schedules.
Federal and Florida banking laws and regulations govern all areas of
the operations of the Bank, including reserves, loans, mortgages, capital,
issuances of securities, payment of dividends, and establishment of branches.
As its primary federal regulator, the FDIC has authority to impose penalties,
initiate civil and administrative actions,
63
<PAGE> 65
and take other steps intended to prevent the Bank from engaging in unsafe or
unsound practices. The Bank is a member of the Bank Insurance Fund and, as
such, deposits in the Bank are insured by the FDIC to the maximum extent
permissible by law.
The Bank also is subject to the provisions of the CRA. Under the CRA,
the Bank has a continuing and affirmative obligation consistent with its safe
and sound operation to help meet the credit needs of its entire communities,
including low-and moderate-income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does
it limit the Bank's discretion to develop the types of products and services
that it believes are best suited to its particular communities, consistent with
the CRA. The CRA requires the appropriate federal bank regulatory agency (in
the case of the Bank, the FDIC), in connection with its regular examination of
a bank, to assess the Bank's record in meeting the credit needs of the
community serviced by the bank, including low-and moderate-income
neighborhoods. The FDIC's assessment of the Bank's record is made available to
the public. Further, such assessment is required whenever the Bank applies to,
among other things, establish a new branch that will accept deposits, relocate
an existing office or merge or consolidate with, or acquire the assets of or
assume the liabilities of, a federally-regulated financial institution. In the
case where Republic applies for approval to acquire a bank or other bank
holding company, the Federal Reserve will also assess the CRA records of the
Bank. The Bank received a "Satisfactory" CRA rating in its most recent
examination.
In April 1995, the federal banking agencies adopted amendments
revising their CRA regulations, with a phase-in schedule applicable to various
provisions. Among other things, the amended CRA regulations, when fully
implemented on July 1, 1997, will substitute for the prior process-based
assessment factors a new evaluation system that will rate an institution based
on its actual performance in meeting community needs. In particular, the
system will focus on three tests: (i) a lending test, to evaluate the
institution's record of making loans in its service areas; (ii) an investment
test, to evaluate the institution's record of investing in community
development projects; and (iii) a service test, to evaluate the institution's
delivery of services through its branches and other offices. The amended CRA
regulations also clarify how an institution's CRA performance will be
considered in the application process. Republic does not anticipate that the
revised CRA regulations will have any material impact on the Bank's operations
or that they will have any impact on the Bank's CRA rating.
Capital Requirements
The Company and the Bank are required to comply with the capital
adequacy standards established by the Federal Reserve (for the Company), and
the FDIC (for the Bank). There are three basic measures of capital adequacy
for banks that have been promulgated by the Federal Reserve; two risk-based
measures and a leverage measure. All applicable capital standards must be
satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total risk-
weighted assets and off-balance-sheet items.
Under Federal Reserve policy, bank holding companies are expected to
act as a sources of financial strength to, and to commit resources to support,
their subsidiary banks. This support may be required at times when, absent
such Federal Reserve policy, the holding company may not be inclined to provide
it. In addition, any capital loans by a bank holding company to any bank
subsidiary are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority payment.
64
<PAGE> 66
Payment of Dividends
As a Florida-chartered commercial bank, the Bank is subject to the
laws of Florida as to the payment of dividends. Under the Florida Financial
Institutions Code, the prior approval of the Department is required if the
total of all dividends declared by a bank in any calendar year will exceed the
sum of the bank's net profits for that year and its retained net profits for
the preceding two years.
Under Federal law, if, in the opinion of the federal banking
regulator, a bank or thrift under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice (which, depending on the financial
condition of the depository institution, could include the payment of
dividends), such regulation may require, after notice and hearing, that such
institution cease and desist from such practice. The federal banking agencies
have indicated that paying dividends that deplete a depository institution's
capital base to an inadequate level would be an unsafe and unsound banking
practice. Under the Prompt Corrective Action regulations adopted by the
federal banking agencies in December 1992, a depository institution may not pay
any dividend to its holding company if payment would cause it to become
undercapitalized or if it already is undercapitalized.
Due to the Bank's anticipated continued growth and management's intent
to maintain certain regulatory capital levels, dividend payments on the
Company's common stock are not expected in the foreseeable future.
Deposit Insurance
The Bank is subject to FDIC deposit insurance assessments. In 1994,
the Bank became subject to a new risk- based assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. The new
system assigns an institution to one of three capital categories: (i) well
capitalized; (ii) adequately capitalized; and (iii) undercapitalized. An
institution is also assigned, by the FDIC, to one of three supervisory
subgroups within each capital group. The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and information which the
FDIC determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates on deposits for an institution
in the highest category (i.e., "well capitalized" and "healthy") are less than
assessment rates on deposits for an institution in the lowest category (i.e.,
"undercapitalized" and "substantial supervisory concern").
The Bank, as a state-chartered commercial bank, is a member of the
Bank Insurance Fund (the "BIF"). However, as part of a deposit assumption
transaction with CrossLand, FSB in December 1993, the Bank acquired $327.7
million in deposits insured by the Savings Association Insurance Fund (the
"SAIF") and thereby became a so-called Oakar bank. Based on that deposit
assumption, the Bank is required to pay insurance premiums to the FDIC on a
substantial portion of its deposits at the SAIF assessment rate notwithstanding
its status as a BIF member. As of March 31, 1997, the most recent measurement
date for assessment purposes, approximately __% of the Bank's deposits were
treated as SAIF-insured deposits, with the remaining __% of deposits being
assessed at the BIF rate. The Bank's ratio of SAIF- and BIF-assessed deposits
will increase somewhat following Republic's planned acquisition in 1997 of FFO
and its wholly-owned subsidiary First Federal Savings and Loan Association of
Osceola County. FFO's deposits at March 31, 1997 were $________.
Until recently, the FDIC had established separate risk-based
assessment schedules for the BIF and the SAIF. In November 1995, the FDIC
established the current assessment schedule for BIF-assessed deposits, with
assessment rates ranging from zero percent to 0.27 percent (or 27 basis points)
of deposits. The SAIF-based deposits had much higher assessment rates. In
December 1996, following enactment of federal legislation to recapitalize the
SAIF (described below), the FDIC adopted the same zero percent to 0.27 percent
assessment schedule, effective October
65
<PAGE> 67
1, 1996, for SAIF-assessed deposits. During 1996, the Bank paid $8,800 in
insurance assessments to the BIF and $796,800 to the SAIF. The Bank realized
savings of approximately $194,000 in insurance premiums costs during the fourth
quarter of 1996 resulting from the new SAIF assessment schedule.
As part of the omnibus budget legislation passed last fall, Congress
enacted the Deposit Insurance Funds Act of 1996 (the "Funds Act"). With
certain exceptions, the Funds Act imposed a one-time special assessment on
SAIF-assessable deposits held by all depository institutions in an aggregate
amount that would cause the SAIF to meet its designated reserves-to-deposits
ratio of 1.25 percent. Pursuant to the Funds Act, the Bank on November 27,
1996 paid a special assessment to the SAIF of $2.5 million. This assessment
was determined by taking the Bank's SAIF-assessable deposits as of March 31,
1995 and multiplying that amount by a 0.657 percent (or 65.7 basis point)
assessment rate that the FDIC had calculated would be necessary to capitalize
fully the SAIF. (A lower assessment rate was imposed on certain Oakar banks,
but the Bank did not qualify for the reduction.)
Prior to enactment of the Funds Act, the SAIF assessments were used to
pay interest on bonds issued by the Financing Corporation (the "FICO") in the
late 1980s to fund the resolution of troubled thrifts, and only insurance
payments by SAIF-member institutions were available to satisfy FICO's interest
payment obligations. A second provision of the Funds Act severs the linkage
that had existed between the SAIF and the FICO funding requirements,
authorizing the FICO to impose its own assessments separate and apart from any
insurance fund assessment. The Funds Act also shifts a portion of the FICO
funding obligations to BIF-member institutions beginning in 1997. Through the
end of 1999, the FICO assessment rate on BIF-assessable deposits is required by
the statute to be one-fifth of the SAIF rate. Thereafter, FICO assessment
rates for members of both insurance funds will presumably be equalized.
Currently, the BIF assessment rate is 0.013 percent (or 1.3 basis
points) and the SAIF assessment rate if 0.0648 percent or (6.48 basis points).
For the first half of 1997, the Bank has been assessed a semiannual FICO
payment obligation of $192,480, $176,449 of which was attributable to the
Bank's SAIF-assessable deposits and the balance of which was attributable to
its BIF-assessable deposits.
Federal Reserve System
The Federal Reserve regulations require banks to maintain
non-interest-earning reserves against their transaction accounts (primarily NOW
and regular checking accounts). The new Federal Reserve regulations effective
April 1, 1997, generally require that reserves be maintained against aggregate
transaction accounts as follows: for accounts aggregating $49.3 million or less
(subject to adjustment by the Federal Reserve) the reserve requirement is 3.0%;
and for accounts greater than $49.3 million, the reserve requirement is
$1,479,000 plus 10.0% (subject to adjustment by the Federal Reserve between
8.0% and 14.0%) against that portion of total transaction accounts in excess of
$49.3 million. The first $4.4 million of otherwise reservable balances
(subject to adjustments by the Federal Reserve) are exempted from the reserve
requirements. The Bank anticipates that it will be in compliance with the
foregoing requirements. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve may be used to satisfy liquidity
requirements imposed by the Department. Because required reserves must be
maintained in the form of either vault cash, a noninterest-bearing account at a
Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve, the effect of this reserve requirement is to reduce the Bank's
interest-earning assets. FHLB System members also are authorized to borrow
from the Federal Reserve "discount window", but Federal Reserve regulations
require institutions to exhaust all FHLB sources before borrowing from a
Federal Reserve Bank.
Monetary Policy and Economic Controls
The banking business is affected not only by general economic
conditions, but also by the monetary policies of the Board of Governors of the
Federal Reserve. Changes in the discount rate on member bank borrowing,
availability of borrowing at the "discount window," open market operations, the
imposition of changes in reserve requirements against bank deposits and the
imposition of and changes in reserve requirements against certain
66
<PAGE> 68
borrowings by banks and their affiliates are some of the instruments of
monetary policy available to the Federal Reserve. The monetary policies have
had a significant effect on the operating results of commercial banks and are
expected to continue to do so in the future. The monetary policies of the
Federal Reserve are influenced by various factors, including inflation,
unemployment and short- and long-term changes in the international trade
balance and in the fiscal policies of the United States Government. Future
monetary policies and the effect of such policies on the future business and
earnings of the Bank cannot be predicted.
CHANGES IN ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") recently adopted or
issued proposals and guidelines that may have a significant impact on the
accounting practices of commercial enterprises in general and financial
institutions in particular.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," which requires that a mortgage banking enterprise recognize
as a separate asset the right to service mortgage loans for others, regardless
of the manner in which such servicing rights are acquired. Moreover, this
statement requires that the total cost of acquiring mortgage loans be allocated
to the servicing rights and the loans based on their relative fair values, if
practicable. This standard is effective for fiscal years beginning after
December 15, 1995 but earlier implementation is encouraged. Management
implemented SFAS No. 122 beginning July 1, 1995. The impact upon the results
of operations of the Bank was not material.
During 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities," which is
effective for the Company's fiscal year beginning January 1, 1997. SFAS 125
provides standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. The impact of the adoption
of SFAS 125 upon the results of operations of the Company was not material.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share,"
which is effective for the Company's fourth quarter and year ended December 31,
1997. Early application is not permitted and after the effective date, prior
period earnings per share presented must be restated. SFAS No. 128 establishes
new standards for computing and presenting EPS. Specifically, SFAS No. 128
replaces the presentation of primary earnings per share with basic earnings per
share, requires dual presentation for companies with complex capital structures
of basic and diluted earnings per share and requires a conciliation of the
numerator and denominator of the basic earnings per share computation to those
of the diluted earnings per share computation. Management has not determined
the effect of the adoption of SFAS No. 128 on the Company's financial
statements, but does not expect it to be material.
LEGAL PROCEEDINGS
The Company is party to various legal proceedings in the ordinary
course of its business. Based on information presently available, management
does not believe that the ultimate outcome of such proceedings, in the
aggregate, would have a material adverse effect on the Company's financial
position or results of operations.
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MANAGEMENT
The table below sets forth the names and ages of the directors and
executive officers of the Company and the Bank as well as the positions and
offices held by such persons. The Company's directors also serve on the Bank's
Board of Directors. The Company's directors are elected for a one-year term.
<TABLE>
<CAPTION>
NAME AGE POSITION Year First
---- --- -------- Became a
Director
--------
<S> <C> <C> <C>
John W. Sapanski 60 Chairman of the Board; President and Chief Executive 1993
Officer
Fred Hemmer 42 Director of the Bank, Senior Executive Vice 1986
President of the Bank
William R. Falzone 49 Treasurer, Executive Vice President and Chief
Financial Officer of the Bank
John W. Fischer, Jr. 48 Executive Vice President of the Bank
Richard G. Gleitsman 43 Executive Vice President and Chief Administrative
Officer of the Bank
Kathleen A. Reinagel 45 Executive Vice President of the Bank
Steve McWhorter 35 Head of Mortgage Banking Division
William R. Hough 69 Director 1993
Marla Hough 39 Director 1997
Alfred T. May 58 Director 1993
William J. Morrison 64 Director 1980
</TABLE>
John W. Sapanski. Mr. Sapanski has been Chairman of the Board, Chief
Executive Officer and President of the Bank since June 1993 and Chairman of the
Board, Chief Executive Officer and President of the Company since March 1996.
He has 45 years of banking experience, including service with the Dime Savings
Bank in New York, New York from 1949 to 1987, where he served as President and
Chief Operating Officer from 1981 to 1987 and with Florida Federal Savings Bank
in St. Petersburg, Florida ("Florida Federal") from 1988 to 1991 where he acted
as President and Chief Executive Officer from 1988 to 1991. Mr. Sapanski was
President and Chief Executive Officer of Florida Federal at the time the Office
of Thrift Supervision placed Florida Federal in conservatorship. Mr. Sapanski
was retained by the Resolution Trust Corporation (the "RTC"), the conservator
for Florida Federal, to assist in managing the institution in conservatorship
until it was sold by the RTC to First Union Corporation in August 1991.
Fred Hemmer. Mr. Hemmer has served as Executive Vice President of the
Bank in charge of Corporate Banking and Special Assets since joining the Bank
in 1991. He previously served as Executive Vice President of Rutenberg
Corporation, a real estate development company based in Clearwater, Florida,
from 1980 to 1991. Mr. Hemmer is a certified public accountant and was
employed by Arthur Andersen & Co. from 1976 to 1980. Mr. Hemmer is also a
licensed real estate broker and certified general contractor.
William R. Falzone. Mr. Falzone has served as Treasurer of the Company
since March 1996 and Executive Vice President and Chief Financial Officer of
the Bank since February 1994. He was employed at Florida Federal from 1983
through 1991 where he served as Senior Vice President and Controller and as
Director of Financial Services. Most recently, he was a Senior Consultant for
Stogniew and Associates, a nationwide consulting firm. He has over 20 years of
banking experience and is also a certified public accountant.
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<PAGE> 70
John W. Fischer, Jr. Mr. Fischer has served as Executive Vice President
of the Bank in charge of Consumer Banking since December 1993. He has over 20
years of banking experience in retail branch management and consumer and
residential lending. Mr. Fischer formerly served as Regional Marketing
Director for Western Reserve Life in Clearwater, Florida, Regional Vice
President of Great Western Bank in Miami and Executive Vice President/Consumer
Financial Services for Florida Federal. Mr. Fischer holds life, health,
annuity and Series 7 securities license.
Richard C. Gleitsman. Mr. Gleitsman has served as Executive Vice
President and Chief Administrative Officer of the Bank since December 1993. He
previously served as Executive Vice President and Regional Manager of CrossLand
since 1986. He has over 25 years of banking experience in retail branch
management, loan servicing, human resources, data processing, and executive
administration.
Kathleen A. Reinagel. Ms. Reinagel served as Executive Vice President of
the Bank in charge of Credit and Loan Administration since August 1993. She
has over 20 years of experience in the lending field with concentration in
credit and underwriting, loan documentation, due diligence and loan review.
Ms. Reinagel formerly served as Vice President of WRH Mortgage, Inc. ("WRH
Mortgage"), St. Petersburg, Florida, a mortgage banking company affiliated with
William R. Hough & Co., and Vice President, Department Manager of Commercial
Real Estate of Florida Federal.
Steve McWhorter. Mr. McWhorter has served as Division Director in charge
of the Company's mortgage banking division since April 1996, having previously
served as Regional Manager of FT Mortgage Company since 1992. He has over 14
years of experience in the mortgage banking industry.
William R. Hough. Mr. Hough has served as President of William R. Hough &
Co., St. Petersburg, Florida, an investment banking firm specializing in state,
county, and municipal bonds, since 1962, President of WRH Mortgage, St.
Petersburg, Florida, since May 1993, Director of FFO since 1993 and President
of Royal Palm Center, II, Inc., Port Charlotte, Florida, a privately-held
retirement center, since September 1991.
Marla Hough. Mrs. Hough has served as President of Hough Engineering,
Inc., an engineering consulting firm, Bradenton, Florida since from March 1997
and Vice President of Bishop & Associates, Bradenton, Florida, an engineering,
planning and surveying firm, since 1992. From 1984 to 1992, Mrs. Hough served
as Project Manager at Zoller, Najjar and Shroyer, Inc., an engineering,
planning, surveying and landscape architecture firm, Bradenton, Florida.
Alfred T. May. Mr. May has served as Director and Chairman of the Board
of FFO and its subsidiary, First Federal Savings & Loan Association of Osceola
County, Kissimmee, Florida, since September 1993. From 1989 to 1992, Mr. May
served as President of Mid-State Federal Savings Bank, Ocala, Florida.
William J. Morrison. Mr. Morrison has served as Senior Partner of
Morrison & Company, P.A., Tampa, Florida, a certified public accounting firm,
since 1995, as General Partner of Best-Morrison Properties, Tampa, Florida, a
real estate investment firm since 1975 and as Managing Partner of Morrison
Investments, Ltd. Tampa, Florida, a real estate and securities investment firm
since 1991.
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<PAGE> 71
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee, Wilmington Trust Company, will act
as indenture trustee for the Preferred Securities under the Trust Agreement for
purposes of complying with the provisions of the Trust Indenture Act. The terms
of the Preferred Securities will include those stated in the Trust Agreement
and those made part of the Trust Agreement by the Trust Indenture Act. The
following summary of the material terms and provisions of the Preferred
Securities and the Trust Agreement does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Agreement, the Delaware Business Trust Act (the "Trust Act"), and the Trust
Indenture Act. Wherever particular defined terms of the Trust Agreement are
referred to, but not defined herein, such defined terms are incorporated herein
by reference. The form of the Trust Agreement has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of
RBI Capital, will issue the Trust Securities. All of the Common Securities will
be owned by the Company. The Preferred Securities will represent preferred
undivided beneficial interests in the assets of RBI Capital and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities, as well as other benefits as described in the Trust
Agreement. The Trust Agreement does not permit the issuance by RBI Capital of
any securities other than the Trust Securities or the incurrence of any
indebtedness by RBI Capital.
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities, except as described under
"--Subordination of Common Securities." Legal title to the Junior Subordinated
Debentures will be held by the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The Guarantee executed by the Company for the
benefit of the holders of the Preferred Securities will be a guarantee on a
subordinated basis with respect to the Preferred Securities, but will not
guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Preferred Securities when RBI Capital does not have funds
on hand available to make such payments. Wilmington Trust Company, as Guarantee
Trustee, will hold the Guarantee for the benefit of the holders of the
Preferred Securities. See "Description of the Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on each Preferred Security will
be payable at the annual rate of ____% of the stated Liquidation Amount of $10,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, to the holders of the Preferred Securities on the relevant record
dates (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). The record date will be the 15th day of the
month in which the relevant Distribution Date occurs. Distributions will
accumulate from the date of original issuance. The first Distribution Date for
the Preferred Securities will be _____________, 1997. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which Distributions
are payable on the Preferred Securities is not a Business Day, then payment of
the Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any additional Distributions, interest or
other payment in respect of any such delay) with the same force and effect as
if made on the date such payment was originally due and payable. "Business Day"
means any day other than a Saturday or a Sunday, a day on which banking
institutions in the City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office
of the Property Trustee or the Debenture Trustee is closed for business.
Extension Period. The Company has the right under the Indenture, so long
as no Debenture Event of Default has occurred and is continuing, to defer the
payment of interest on the Junior Subordinated Debentures at any time,
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<PAGE> 72
or from time to time (each, an "Extended Interest Payment Period"), which, if
exercised, would result in quarterly Distributions on the Preferred Securities
also being deferred during any such Extended Interest Payment Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of ____%
thereof, compounded quarterly from the relevant Distribution Date. The term
"Distributions," as used herein, includes any such additional Distributions.
The right to defer the payment of interest on the Junior Subordinated
Debentures is limited, however, to a period, in each instance, not exceeding 20
consecutive quarters and no Extended Interest Payment Period may extend beyond
the Stated Maturity of the Junior Subordinated Debentures. During any such
Extended Interest Payment Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (other
than (a) the reclassification of any class of the Company's capital stock into
another class of capital stock, (b) dividends or distributions payable in any
class of the Company's Common Stock, (c) any declaration of a dividend in
connection with the implementation of a shareholder rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto and (d) purchases of the
Company's Common Stock related to the rights under any of the Company's benefit
plans for its or its subsidiaries' directors, officers or employees), (ii) make
any payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that rank pari passu with or
junior in interest to the Junior Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu with or junior
in interest to the Junior Subordinated Debentures (other than payments under
the Guarantee), or (iii) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extended Interest Payment Period, the Company may
further defer the payment of interest; provided that such Extended Interest
Payment Period may not exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Junior Subordinated Debentures. Upon the termination of
any such Extended Interest Payment Period and the payment of all amounts then
due, the Company may elect to begin a new Extended Interest Payment Period,
subject to the above requirements. Subject to the foregoing, there is no
limitation on the number of times that the Company may elect to begin an
Extended Interest Payment Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
Source of Distribution. The funds of RBI Capital available for
distribution to holders of its Preferred Securities will be limited to payments
received from the Junior Subordinated Debentures in which RBI Capital will
invest the proceeds from the issuance and sale of its Trust Securities. See
"Description of the Junior Subordinated Debentures." Distributions will be paid
through the Property Trustee who will hold amounts received in respect of the
Junior Subordinated Debentures in the Property Account for the benefit of the
holders of the Trust Securities. If the Company does not make interest payments
on the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (but only if and to the extent RBI Capital has funds legally
available for the payment of such Distributions and cash sufficient to make
such payments) is guaranteed by the Company. See "Description of the
Guarantee." Distributions on the Preferred Securities will be payable to the
holders thereof as they appear on the register of holders of the Preferred
Securities on the relevant record dates, which will be the 15th day of the
month in which the relevant Distribution Date occurs.
REDEMPTION OR EXCHANGE
General. The Junior Subordinated Debentures will mature on ____________,
2027. The Company will have the right to redeem the Junior Subordinated
Debentures (i) on or after _____________, 2002, in whole at any time or in part
from time to time, or (ii) at any time, in whole (but not in part), within 180
days following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event, in each case subject to prior Federal Reserve
approval, if then required under applicable Federal Reserve capital guidelines
or policies. Subject to the foregoing events, the Company will not have the
right to purchase the Junior Subordinated Debentures, in whole
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<PAGE> 73
or in part, from RBI Capital until after _____________, 2002. See "Description
of the Junior Subordinated Debentures--General."
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Junior Subordinated Debentures, whether at Stated Maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption will be applied by the Property Trustee to redeem a
Like Amount (as defined herein) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date"). See "Description of the Junior Subordinated
Debentures--Redemption or Exchange." If less than all of the Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then
the proceeds from such repayment or redemption will be allocated to the
redemption of the Trust Securities pro rata.
Distribution of Junior Subordinated Debentures. Subject to the Company
having received prior Federal Reserve approval, if then required under
applicable Federal Reserve capital guidelines or policies, the Company, as
holder of the Common Securities, will have the right at any time to dissolve,
wind-up or terminate RBI Capital and, after satisfaction of the liabilities of
creditors of RBI Capital as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of Trust Securities in
liquidation of RBI Capital. See "--Liquidation Distribution Upon Termination."
Tax Event Redemption, Investment Company Event Redemption or Capital
Treatment Event Redemption. If a Tax Event, an Investment Company Event or a
Capital Treatment Event occurs and is continuing, the Company has the right to
redeem the Junior Subordinated Debentures in whole (but not in part) and
thereby cause a mandatory redemption of the Trust Securities in whole (but not
in part) at the Redemption Price within 180 days following the occurrence of
such Tax Event, Investment Company Event or Capital Treatment Event. In the
event a Tax Event, an Investment Company Event or a Capital Treatment Event in
respect of the Trust Securities has occurred and the Company does not elect to
redeem the Junior Subordinated Debentures and thereby cause a mandatory
redemption of the Trust Securities or to liquidate RBI Capital and cause the
Junior Subordinated Debentures to be distributed to holders of such Trust
Securities in liquidation of RBI Capital as described below under "-Liquidation
Distribution Upon Termination," such Preferred Securities will remain
outstanding and Additional Interest (as defined herein) may be payable on the
Junior Subordinated Debentures.
"Additional Interest" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by RBI Capital on
the outstanding Trust Securities will not be reduced as a result of any
additional taxes, duties and other governmental charges to which RBI Capital
has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture, which will be used to pay the
Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities
in connection with a dissolution or liquidation of RBI Capital, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed. Each Junior Subordinated Debenture distributed
pursuant to clause (ii) above will carry with it accumulated interest in an
amount equal to the accumulated and unpaid interest then due on such Junior
Subordinated Debentures.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
There can be no assurance as to the market prices of the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of RBI
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<PAGE> 74
Capital were to occur. The Preferred Securities that an investor may purchase,
or the Junior Subordinated Debentures that an investor may receive on
dissolution and liquidation of RBI Capital, may trade at a discount to the
price that the investor paid to purchase the Preferred Securities offered
hereby.
Redemption Procedures. Preferred Securities redeemed on each Redemption
Date will be redeemed at the Redemption Price with the applicable proceeds from
the contemporaneous redemption of the Junior Subordinated Debentures.
Redemptions of the Preferred Securities will be made and the Redemption Price
will be payable on each Redemption Date only to the extent that RBI Capital has
funds on hand available for the payment of such Redemption Price. See
"--Subordination of Common Securities."
If RBI Capital gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date,
to the extent funds are available, the Property Trustee will irrevocably
deposit with the paying agent for the Preferred Securities funds sufficient to
pay the aggregate Redemption Price and will give the paying agent for the
Preferred Securities irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Preferred Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any Preferred
Securities called for redemption will be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Preferred Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any additional Distribution, interest or other
payment in respect of any such delay) with the same force and effect as if made
on such date. In the event that payment of the Redemption Price in respect of
Preferred Securities called for redemption is improperly withheld or refused
and not paid either by RBI Capital or by the Company pursuant to the Guarantee,
Distributions on such Preferred Securities will continue to accrue at the then
applicable rate, from the Redemption Date originally established by RBI Capital
for such Preferred Securities to the date such Redemption Price is actually
paid, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the Redemption Price. See
"Description of the Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law) and, further provided, that the Company has not and is
not continuing to exercise its right to defer interest payments, the Company or
its subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Preferred
Securities will be made to the applicable recordholders thereof as they appear
on the register for the Preferred Securities on the relevant record date, which
date will be the date 15 days prior to the Redemption Date or liquidation date,
as applicable.
If less than all of the Trust Securities are to be redeemed on a
Redemption Date, then the aggregate Liquidation Amount of such Trust Securities
to be redeemed will be allocated pro rata to the Trust Securities based upon
the relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed will be selected by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee deems fair and appropriate and which may provide
for the selection for redemption of portions (equal to $10 or an integral
multiple of $10 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $10. The Property Trustee will
promptly notify the registrar for the Preferred Securities in writing of the
Preferred Securities selected for redemption and, in the case of any Preferred
Securities selected for partial redemption, the Liquidation Amount thereof to
be redeemed. For all purposes of the Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
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Securities will relate to the portion of the aggregate Liquidation Amount of
Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the redemption price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on such Junior Subordinated
Debentures or portions thereof (and Distributions will cease to accrue on the
related Preferred Securities or portions thereof) called for redemption.
Subordination of Common Securities. Payment of Distributions on, and the
Redemption Price of, the Preferred Securities and Common Securities, as
applicable, will be made pro rata based on the Liquidation Amount of the
Preferred Securities and Common Securities; provided, however, that if on any
Distribution Date or Redemption Date a Debenture Event of Default has occurred
and is continuing, no payment of any Distribution on, or Redemption Price of,
any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, will be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the outstanding
Preferred Securities then called for redemption, will have been made or
provided for, and all funds available to the Property Trustee will first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Preferred Securities then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will be deemed to have
waived any right to act with respect to any such Event of Default under the
Trust Agreement until the effect of all such Events of Default with respect to
the Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee will act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Company, as holder of the Common
Securities, and only the holders of the Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
Liquidation Distribution Upon Termination. The Company will have the
right at any time to dissolve, wind-up or terminate RBI Capital and cause the
Junior Subordinated Debentures to be distributed to the holders of the
Preferred Securities. Such right is subject, however, to the Company having
received prior Federal Reserve approval, if then required under applicable
Federal Reserve capital guidelines or policies.
Pursuant to the Trust Agreement, RBI Capital will automatically terminate
upon expiration of its term and will terminate earlier on the first to occur of
(i) certain events of bankruptcy, dissolution or liquidation of the Company,
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures to
the holders of its Trust Securities, if the Company, as depositor, has given
written direction to the Property Trustee to terminate RBI Capital (which
direction is optional and wholly within the discretion of the Company, as
depositor), (iii) redemption of all of the Preferred Securities as described
under "Description of the Preferred Securities--Redemption or
Exchange--Mandatory Redemption," or (iv) the entry of an order for the
dissolution of RBI Capital by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv) of
the preceding paragraph, RBI Capital will be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of RBI Capital as provided by
applicable law, to the holders of such Trust Securities a Like Amount of the
Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practical, in which event such holders will be
entitled to receive out of the assets of RBI Capital available for distribution
to holders, after satisfaction of liabilities to creditors of RBI Capital as
provided by applicable law, an amount equal to, in the case of holders of
Preferred Securities, the aggregate of the
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Liquidation Amount plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If such Liquidation
Distribution can be paid only in part because RBI Capital has insufficient
assets available to pay in full the aggregate Liquidation Distribution, then
the amounts payable directly by RBI Capital on the Preferred Securities will be
paid on a pro rata basis. The Company, as the holder of the Common Securities,
will be entitled to receive distributions upon any such liquidation pro rata
with the holders of the Preferred Securities, except that, if a Debenture Event
of Default has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities. See "--Subordination of Common
Securities."
After the liquidation date fixed for any distribution of Junior
Subordinated Debentures (i) the Preferred Securities will no longer be deemed
to be outstanding, (ii) DTC or its nominee, as the registered holder of
Preferred Securities, will receive a registered global certificate or
certificates representing the Junior Subordinated Debentures to be delivered
upon such distribution with respect to Preferred Securities held by DTC or its
nominee and (iii) any certificates representing the Preferred Securities not
held by DTC or its nominee will be deemed to represent the Junior Subordinated
Debentures having a principal amount equal to the stated Liquidation Amount of
the Preferred Securities and bearing accrued and unpaid interest in an amount
equal to the accumulated and unpaid Distributions on the Preferred Securities
until such certificates are presented to the security registrar for the Trust
Securities for transfer or reissuance.
Under current United States federal income tax law and interpretations and
assuming, as expected, that RBI Capital is treated as a grantor trust, a
distribution of the Junior Subordinated Debentures should not be a taxable
event to holders of the Preferred Securities. Should there be a change in law,
a change in legal interpretation, a Tax Event or other circumstances, however,
the distribution could be a taxable event to holders of the Preferred
Securities. See "Certain Federal Income Tax Consequences--Receipt of Junior
Subordinated Debentures or Cash Upon Liquidation of RBI Capital."
If the Company elects neither to redeem the Junior Subordinated Debentures
prior to maturity nor to liquidate RBI Capital and distribute the Junior
Subordinated Debentures to holders of the Preferred Securities, the Preferred
Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures. If the Company elects to liquidate RBI Capital and
thereby causes the Junior Subordinated Debentures to be distributed to holders
of the Preferred Securities in liquidation of RBI Capital, the Company will
continue to have the right to shorten the maturity of such Junior Subordinated
Debentures, subject to certain conditions. See "Description of the Junior
Subordinated Debentures--General."
Liquidation Value. The amount of the Liquidation Distribution payable on
the Preferred Securities in the event of any liquidation of RBI Capital is $10
per Preferred Security plus accrued and unpaid Distributions thereon to the
date of payment, which may be in the form of a distribution of such amount in
Junior Subordinated Debentures with a like amount of accrued interest, subject
to certain exceptions. See "--Liquidation Distribution Upon Termination."
Events of Default; Notice. Any one of the following events constitutes an
event of default under the Trust Agreement (an "Event of Default") with respect
to the Preferred Securities (whatever the reason for such Event of Default and
whether voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of
the Junior Subordinated Debentures- Debenture Events of Default"); or
(ii) default by RBI Capital in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days; or
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(iii) default by RBI Capital in the payment of any Redemption Price of any
Trust Security when it becomes due and payable: or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustee(s) in the Trust Agreement (other
than a covenant or warranty a default in the performance of which or the
breach of which is dealt with in clauses (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the Trustee(s) by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Preferred Securities, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" under the Trust Agreement: or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint
a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such Event of
Default has been cured or waived. The Company, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of RBI Capital. See "--Liquidation Distribution Upon Termination."
The existence of an Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
Removal of RBI Capital Trustee. Unless a Debenture Event of Default has
occurred and is continuing, any Trustee may be removed at any time by the
holder of the Common Securities. If a Debenture Event of Default has occurred
and is continuing, the Property Trustee and the Delaware Trustee may be removed
by the holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event, however, will the holders of the Preferred Securities
have the right to vote to appoint, remove or replace the Administrative
Trustees, which voting rights are vested exclusively in the Company as the
holder of the Common Securities. No resignation or removal of a Trustee and no
appointment of a successor trustee will be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
Co-Trustees and Separate Property Trustee. Unless an Event of Default has
occurred and is continuing, at any time or times, for the purpose of meeting
the legal requirements of the Trust Indenture Act or of any jurisdiction in
which any part of the Trust Property (as defined in the Trust Agreement) may at
the time be located, the Company, as the holder of the Common Securities, will
have power to appoint one or more Persons (as defined in the Trust Agreement)
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to act as separate trustee of any such Trust
Property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such Person or Persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. In case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone will have power to make
such appointment.
Merger or Consolidation of Trustees. Any Person into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
such Trustee is a party, or any Person succeeding to all or substantially all
the corporate trust business of such Trustee, will be the successor of such
Trustee under the Trust Agreement, provided such Person is otherwise qualified
and eligible.
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Mergers, Consolidations, Amalgamations or Replacements of RBI Capital.
RBI Capital may not merge with or into, consolidate, amalgamate, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, except as described below. RBI Capital may, at the
request of the Company, with the consent of the Administrative Trustees, which
consent may not be unreasonably withheld and without the consent of the holders
of the Preferred Securities, the Property Trustee or the Delaware Trustee,
merge with or into, consolidate, amalgamate, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to a
trust organized as such under the laws of any State; provided, that (i) such
successor entity either (a) expressly assumes all of the obligations of RBI
Capital with respect to the Preferred Securities, or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as
the Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Company expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee in its
capacity as the holder of the Junior Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed (including, if
applicable, The Nasdaq Stock Market's National Market), if any, (iv) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Preferred Securities (including any Successor Securities) in any
material respect, (v) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Company has received an opinion
from independent counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, and
(b) following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither RBI Capital nor such successor entity
will be required to register as an "investment company" under the Investment
Company Act, and (vi) the Company owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, RBI Capital will not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other Person or
permit any other Person to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause RBI Capital or the successor entity
to be classified as other than a grantor trust for United States federal income
tax purposes.
Voting Rights; Amendment of Trust Agreement. Except as provided below and
under "Description of the Guarantee--Amendments and Assignment" and as
otherwise required by the Trust Act and the Trust Agreement, the holders of the
Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) with respect to acceptance of
appointment by a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement (provided such amendment is not
inconsistent with the other provisions of the Trust Agreement), or (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as is necessary to ensure that RBI Capital will be classified for United
States federal income tax purposes as a grantor trust at all times that any
Trust Securities are outstanding or to ensure that RBI Capital will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (ii), such action may not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of such Trust Agreement will become effective
when notice thereof is given to the holders of Trust Securities. The Trust
Agreement may otherwise be amended by the Trustees and the Company with (i) the
consent of holders representing not less than a majority in the aggregate
Liquidation Amount of the outstanding Trust Securities, and (ii) receipt by the
Trustees of an opinion of counsel to the effect that such
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amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect RBI Capital's status as a grantor trust for
United States federal income tax purposes or RBI Capital's exemption from
status as an "investment company" under the Investment Company Act.
Notwithstanding anything in this paragraph to the contrary, without the consent
of each holder of Trust Securities, the Trust Agreement may not be amended to
(a) change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made
in respect of the Trust Securities as of a specified date, or (b) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
The Trustees will not, so long as any Junior Subordinated Debentures are
held by the Property Trustee, (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures will
be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where such
consent is required, without, in each case, obtaining the prior approval of the
holders of a majority in aggregate Liquidation Amount of all outstanding
Preferred Securities; provided, however, that where a consent under the
Indenture requires the consent of each holder of Junior Subordinated Debentures
affected thereby, no such consent will be given by the Property Trustee without
the prior consent of each holder of the Preferred Securities. The Trustees may
not revoke any action previously authorized or approved by a vote of the
holders of the Preferred Securities except by subsequent vote of the holders of
the Preferred Securities. The Property
Trustee will notify each holder of Preferred Securities of any notice of
default with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Trustees must obtain an
opinion of counsel experienced in such matters to the effect that RBI Capital
will not be classified as an association taxable as a corporation for United
States federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Preferred Securities in the manner set
forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for RBI Capital to redeem and cancel its Preferred Securities in accordance
with the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Trustees or any
affiliate of the Company or any Trustee, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
Book Entry, Delivery and Form. The Preferred Securities will be issued in
the form of one or more fully registered global securities which will be
deposited with, or on behalf of, DTC and registered in the name of DTC's
nominee. Unless and until it is exchangeable in whole or in part for the
Preferred Securities in definitive form, a global security may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or by DTC or any such nominee to a successor
of such Depository or a nominee of such successor.
Ownership of beneficial interests in a global security will be limited to
persons that have accounts with DTC or its nominee ("Participants") or persons
that may hold interests through Participants. The Company expects that,
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upon the issuance of a global security, DTC will credit, on its book-entry
registration and transfer system, the Participants' accounts with their
respective principal amounts of the Preferred Securities represented by such
global security. Ownership of beneficial interests in such global security
will be shown on, and the transfer of such ownership interest will be effected
only through, records maintained by DTC (with respect to interests of
Participants). Beneficial owners will not receive written confirmation from
DTC of their purchase, but are expected to receive written confirmations from
the Participants through which the beneficial owner entered into the
transaction. Transfers of ownership interests will be accomplished by entries
on the books of Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a global
security, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such global security
for all purposes under the Junior Subordinated Indenture. Except as provided
below, owners of beneficial interests in a global security will not be entitled
to receive physical deliver of the Preferred Securities in definitive form and
will not be considered the owners or holders thereof under the Junior
Subordinated Indenture. Accordingly, each person owning a beneficial interest
in such a global security must rely on the procedures of DTC and, if such
person is not a Participant, on the procedures of the Participant through which
such person owns its interest, to exercise any rights of a holder of Preferred
Securities under the Junior Subordinated Indenture. The Company understands
that, under DTC's existing practices, in the event that the Company requests
any action of holders, or an owner of a beneficial interest in such a global
security desires to take any action which a holder is entitled to take under
the Junior Subordinated Indenture, DTC would authorize the Participants holding
the relevant beneficial interest to take such action, and such Participants
would authorize beneficial owners owning through such Participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them. Redemption notices will also be sent to DTC. If less than all
of the Preferred Securities are being redeemed, the Company understands that it
is DTC's existing practice to determine by lot the amount of the interest of
each Participant to be redeemed.
Distributions on the Preferred Securities registered in the name of DTC or
its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the global security representing such Preferred Securities.
None of the Company, the Trustees, the Administrators, any Paying Agent or any
other agent of the Company or the Trustees will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interest in the global security for such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. Disbursements of Distributions to
Participants shall be the responsibility of DTC. DTC's practice is to credit
Participants' accounts on a payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to
beneficial owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, the Company, the Trustees, the Paying Agent or
any other agent of the Company, subject to any statutory or regulatory
requirements as ma be in effect from time to time.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice to
the Company or the Trustees. If DTC notifies the Company that it is unwilling
to continue as such, or if it is unable to continue or ceases to be a clearing
agency registered under the Exchange Act and a successor depository is not
appointed by the Company within ninety days after receiving such notice or
becoming aware that DTC is no longer so registered, the Company will issue the
Preferred Securities in definitive form upon registration of transfer or, or in
exchange for, such global security. In addition, the Company may at any time
and in its sole discretion determine not to have the Preferred Securities
represented by one or more global securities and, in such event, will issue
Preferred Securities in definitive form in exchange for all of the global
securities representing such Preferred Securities.
DTC has advised the Company and the Issuer Trust as follows: DTC is a
limited purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve, a "clearing corporation"
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within the meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants
through electronic book entry changes to accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with a Participant, either directly or indirectly.
Same-Day Settlement and Payment. Settlement for the Preferred Securities
will be made by the Underwriters in immediately available funds.
Secondary trading in Preferred Securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the
Preferred Securities will trade in DTC's Same-Day Funds Settlement System, and
secondary market trading activity in the Preferred Securities will therefore be
required by DTC to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Preferred Securities.
Payment and Paying Agent. Payments in respect of the Preferred Securities
will be made to DTC, which will credit the relevant accounts at DTC on the
applicable Distribution Dates or, if the Preferred Securities are not held by
DTC, such payments will be made by check mailed to the address of the holder
entitled thereto as such address appears on the securities register for the
Trust Securities. The paying agent (the "Paying Agent") will initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees. The Paying Agent will be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee
and the Administrative Trustees. If the Property Trustee is no longer the
Paying Agent, the Property Trustee will appoint a successor (which must be a
bank or trust company reasonably acceptable to the Administrative Trustees) to
act as Paying Agent.
Registrar and Transfer Agent. The Property Trustee will act as the
registrar and the transfer agent for the Preferred Securities. Registration of
transfers of Preferred Securities will be effected without charge by or on
behalf of RBI Capital, except for the payment of any tax or other governmental
charges that may be imposed in connection with any transfer or exchange. In the
event of any redemption, RBI Capital will not be required to (i) issue,
register the transfer of, or exchange any Preferred Securities during a period
beginning at the opening of business 15 days before the date of mailing of a
notice of redemption of any Preferred Securities called for redemption and
ending at the close of business on the day of such mailing; or (ii) register
the transfer of or exchange any Preferred Securities so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Preferred Securities being redeemed in part.
Information Concerning the Property Trustee. The Property Trustee, other
than upon the occurrence and during the continuance of an Event of Default,
undertakes to perform only such duties as are specifically set forth in the
Trust Agreement and, after such Event of Default, must exercise the same degree
of care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the Property Trustee is
under no obligation to exercise any of the powers vested in it by the Trust
Agreement at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no Event of Default has occurred and is
continuing and the Property Trustee is required to decide between alternative
causes of action, construe ambiguous provisions in the Trust Agreement or is
unsure of the application of any provision of the Trust Agreement, and the
matter is not one on which holders of Preferred Securities are entitled under
the Trust Agreement to vote, then the Property Trustee will take such action as
is directed by the Company and if not so directed, will take such action as it
deems advisable and in the best interests of the holders of the Trust
Securities and will have no liability except for its own bad faith, negligence
or willful misconduct.
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Miscellaneous. The Administrative Trustees are authorized and directed to
conduct the affairs of and to operate RBI Capital in such a way that RBI
Capital will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or classified as an association
taxable as a corporation for United States federal income tax purposes and so
that the Junior Subordinated Debentures will be treated as indebtedness of the
Company for United States federal income tax purposes. In this connection, the
Company and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of RBI Capital or
the Trust Agreement, that the Company and the Administrative Trustees determine
in their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, RBI Capital
will invest the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Junior Subordinated Debentures issued
by the Company. The Junior Subordinated Debentures will be issued as unsecured
debt under the Indenture, to be dated as of June __, 1997 (the "Indenture"),
between the Company and Wilmington Trust Company, as trustee (the "Debenture
Trustee"). The Indenture will be qualified as an indenture under the Trust
Indenture Act. The following summary of the material terms and provisions of
the Junior Subordinated Debentures and the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture and to the Trust Indenture Act. Wherever particular defined terms
of the Indenture are referred to, but not defined herein, such defined terms
are incorporated herein by reference. The form of the Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.
General. The Junior Subordinated Debentures will be limited in aggregate
principal amount to approximately $____ million (or $____ million if the
Underwriters' over-allotment option is exercised in full by the Underwriters),
such amount being the sum of the aggregate stated Liquidation Amount of the
Trust Securities. The Junior Subordinated Debentures will bear interest at the
annual rate of ____% of the principal amount thereof, payable quarterly in
arrears on March 31, June 30, September 30, and December 31 of each year (each,
an "Interest Payment Date") beginning ____________, 1997, to the Person (as
defined in the Indenture) in whose name each Junior Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of RBI Capital, the Junior Subordinated
Debentures will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Preferred Securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which interest is payable
on the Junior Subordinated Debentures is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) with the same force and effect as if made on the date such payment
was originally due and payable. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of ____%
thereof, compounded quarterly. The term "interest," as used herein, includes
quarterly interest payments, interest on quarterly interest payments not paid
on the applicable Interest Payment Date and Additional Interest, as applicable.
The Junior Subordinated Debentures will mature on ____________, 2027, the
Stated Maturity. Such date may be shortened at any time by the Company to any
date not earlier than _____________, 2002, subject to the Company having
received prior regulatory approval if then required under applicable capital
guidelines or regulatory policies. In the event that the Company elects to
shorten the Stated Maturity of the Junior Subordinated Debentures,
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it will give notice thereof to the Debenture Trustee, RBI Capital and to the
holders of the Junior Subordinated Debentures no more than 180 days and no less
than 90 days prior to the effectiveness thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt and Subordinated Debt
of the Company. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of a subsidiary, including
the Bank, upon any liquidation or reorganization or otherwise of such
subsidiary (and thus the ability of holders of the Junior Subordinated
Debentures to benefit indirectly from such distribution), is subject to the
prior claim of creditors of the subsidiary (including depositors in the Bank),
except to the extent that the Company may itself be recognized as a creditor of
the subsidiary. The Junior Subordinated Debentures will, therefore, be
effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, including the Bank, and holders of
Junior Subordinated Debentures should look only to the assets of the
Company for payments on the Junior Subordinated Debentures. The Indenture does
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Debt and Subordinated Debt, whether under the
Indenture or any existing indenture or other indenture that the Company or any
of its subsidiaries may enter into in the future or otherwise. See
"--Subordination."
The Indenture does not contain provisions that afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
Option to Extend Interest Payment Period. The Company has the right under
the Indenture at any time during the term of the Junior Subordinated
Debentures, so long as no Debenture Event of Default has occurred and is
continuing, to defer the payment of interest at any time, or from time to time.
The right to defer the payment of interest on the Junior Subordinated
Debentures is limited, however, to a period, in each instance, not exceeding 20
consecutive quarters and no Extended Interest Payment Period may extend beyond
the Stated Maturity of the Junior Subordinated Debentures. At the end of each
Extended Interest Payment Period, the Company must pay all interest then
accrued and unpaid (together with interest thereon at the annual rate of ____%,
compounded quarterly, to the extent permitted by applicable law). During an
Extended Interest Payment Period, interest will continue to accrue and holders
of Junior Subordinated Debentures (or the holders of Preferred Securities if
such securities are then outstanding) will be required to accrue and recognize
income for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
During any such Extended Interest Payment Period, the Company may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (other than (a) the reclassification of any class of the Company's
capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's common stock, (c) any
declaration of a dividend in connection with the implementation of a
shareholder rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto and
(d) purchases of the Company's common stock related to the rights under any of
the Company's benefit plans for its or its subsidiaries' directors, officers or
employees), (ii) make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Junior Subordinated Debentures or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu or junior in interest to the Junior Subordinated Debentures (other than
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the Junior Subordinated Debentures or any of the Preferred Securities.
Prior to the termination of any such Extended Interest Payment Period, the
Company may further defer the payment of interest; provided that no Extended
Interest Payment Period may exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Junior Subordinated Debentures. Upon the termination of
any such Extended Interest Payment Period and the payment of all amounts then
due on any Interest Payment Date, the Company may elect
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to begin a new Extended Interest Payment Period subject to the above
requirements. No interest will be due and payable during an Extended Interest
Payment Period, except at the end thereof. The Company must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of its
election of such Extended Interest Payment Period at least two Business Days
prior to the earlier of (i) the next succeeding date on which Distributions on
the Trust Securities would have been payable except for the election to begin
such Extended Interest Payment Period, or (ii) the date the Trust is required
to give notice of the record date, or the date such Distributions are payable,
to The Nasdaq Stock Market's National Market (or other applicable
self-regulatory organization) or to holders of the Preferred Securities, but in
any event at least one Business Day before such record date. Subject to the
foregoing, there is no limitation on the number of times that the Company may
elect to begin an Extended Interest Payment Period.
Additional Sums. If RBI Capital or the Property Trustee is required to
pay any additional taxes, duties or other governmental charges as a result of
the occurrence of a Tax Event, the Company will pay as additional amounts
(referred to herein as "Additional Interest") on the Junior Subordinated
Debentures such additional amounts as may be required so that the net amounts
received and retained by RBI Capital after paying any such additional taxes,
duties or other governmental charges will not be less than the amounts RBI
Capital would have received had such additional taxes, duties or other
governmental charges not been imposed.
Redemption or Exchange. The Company will have the right to redeem the
Junior Subordinated Debentures prior to maturity (i) on or after _____________,
2002, in whole at any time or in part from time to time, or (ii) at any time in
whole (but not in part), within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event, in each case
at a redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof. Any such redemption prior to the Stated
Maturity will be subject to prior regulatory approval if then required under
applicable capital guidelines or regulatory policies.
"Tax Event" means the receipt by RBI Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) interest payable by the Company on the Junior
Subordinated Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Company, in whole or in part, for United
States federal income tax purposes, (ii) RBI Capital is, or will be within 90
days after the date of such opinion of counsel, subject to United States
federal income tax with respect to income received or accrued on the Junior
Subordinated Debentures, or (iii) RBI Capital is, or will be within 90 days
after the date of such opinion of counsel, subject to more than a de minimis
amount of other taxes, duties, assessments or other governmental charges. The
Company must request and receive an opinion with regard to such matters within
a reasonable period of time after it becomes aware of the possible occurrence
of any of the events described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by RBI Capital of an opinion
of counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, RBI Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change becomes effective on or after the date of original
issuance of the Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
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effective or such proposed change pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred
Securities, there is more than an insubstantial risk that the Company will not
be entitled to treat an amount equal to the Liquidation Amount of the Preferred
Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the Federal Reserve (or any successor
regulatory authority with jurisdiction over bank holding companies), or any
capital adequacy guidelines as then in effect and applicable to the Company.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company
defaults in payment of the redemption price for the Junior Subordinated
Debentures, on and after the redemption date interest ceases to accrue on such
Junior Subordinated Debentures or portions thereof called for redemption.
The Junior Subordinated Debentures will not be subject to any sinking
fund.
Distribution Upon Liquidation. As described under "Description of the
Preferred Securities-Liquidation Distribution Upon Termination," under certain
circumstances involving the termination of RBI Capital, the Junior Subordinated
Debentures may be distributed to the holders of the Preferred Securities in
liquidation of RBI Capital after satisfaction of liabilities to creditors of
RBI Capital as provided by applicable law. Any such distribution will be
subject to receipt of prior regulatory approval if then required under
applicable regulatory policies or guidelines. If the Junior Subordinated
Debentures are distributed to the holders of Preferred Securities upon the
liquidation of RBI Capital, the Company will use its best efforts to list the
Junior Subordinated Debentures on The Nasdaq Stock Market's National Market or
such stock exchanges, if any, on which the Preferred Securities are then
listed. There can be no assurance as to the market price of any Junior
Subordinated Debentures that may be distributed to the holders of Preferred
Securities.
Restrictions on Certain Payments. If at any time (i) there has occurred a
Debenture Event of Default, (ii) the Company is in default with respect to its
obligations under the Guarantee, or (iii) the Company has given notice of its
election of an Extended Interest Payment Period as provided in the Indenture
with respect to the Junior Subordinated Debentures and has not rescinded such
notice, or such Extended Interest Payment Period, or any extension thereof, is
continuing, the Company will not (1) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (other than (a) the
reclassification of any class of the Company's capital stock into another class
of capital stock, (b) dividends or distributions payable in any class of the
Company's Common Stock, (c) any declaration of a dividend in connection with
the implementation of a shareholder rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto and (d) purchases of the Company's Common Stock related to the
rights under any of the Company's benefit plans for its or its subsidiaries'
directors, officers or employees), (2) make any payment of principal, interest
or premium, if any, on or repay or repurchase or redeem any debt securities of
the Company that rank pari passu with or junior in interest to the Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu or junior in interest to the Junior
Subordinated Debentures (other than payments under the Guarantee), or (3)
redeem, purchase or acquire less than all of the Junior Subordinated Debentures
or any of the Preferred Securities.
Subordination. The Indenture provides that the Junior Subordinated
Debentures are subordinated and junior in right of payment to all Senior Debt
and Subordinated Debt of the Company. Upon any payment or distribution of
assets to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshaling of assets
or any bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceedings of the Company, the
holders of Senior Debt and Subordinated Debt of the Company will first be
entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt and Subordinated Debt of the Company
before the holders of Junior
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Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior
Subordinated Debentures, the holders of all Senior Debt and Subordinated Debt
of the Company outstanding at the time of such acceleration will first be
entitled to receive payment in full of all amounts due thereon (including any
amounts due upon acceleration) before the holders of the Junior Subordinated
Debentures will be entitled to receive or retain any payment in respect of the
principal of or interest on the Junior Subordinated Debentures.
No payments on account of principal or interest in respect of the Junior
Subordinated Debentures may be made if there has occurred and is continuing a
default in any payment with respect to Senior Debt and Subordinated Debt of the
Company or an event of default with respect to any Senior Debt and Subordinated
Debt of the Company resulting in the acceleration of the maturity thereof, or
if any judicial proceeding is pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every capital lease obligation of such Person, and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means, with respect to the Company, the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior Debt will not be
deemed to include (i) any Debt of the Company which when incurred and without
respect to any election under section 1111(b) of the United States Bankruptcy
Code of 1978, as amended, was without recourse to the Company, (ii) any Debt of
the Company to any of its subsidiaries, (iii) any Debt to any employee of the
Company, (iv) any Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to
the extent that payments made to the holders of such Debt by the holders of the
Junior Subordinated Debentures as a result of the subordination provisions of
the Indenture would be greater than they otherwise would have been as a result
of any obligation of such holders to pay amounts over to the obligees on such
trade accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject,
and (v) Debt which constitutes Subordinated Debt.
"Subordinated Debt" means, with respect to the Company, the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not such claim for post-petition interest is allowed
in such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, which is by its terms expressly provided to
be junior and subordinate to other Debt of the Company (other than the Junior
Subordinated Debentures). On December 31, 1996, the Company had $6.0 million
outstanding of 6% Subordinated Debt due December 1, 2011.
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The Indenture places no limitation on the amount of additional Senior Debt
and Subordinated Debt that may be issued or incurred by the Company. The
Company may from time to time issue or incur additional indebtedness
constituting Senior Debt and Subordinated Debt. As of December 31, 1996, the
Company had aggregate Senior Debt and Subordinated Debt of $6.0 million.
Because the Company is a holding company, the Junior Subordinated Debentures
are effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, including obligations to depositors of the Bank.
Registration, Denomination and Transfer. The Junior Subordinated
Debentures will initially be registered in the name of RBI Capital. If the
Junior Subordinated Debentures are distributed to holders of Preferred
Securities, it is anticipated that the depositary arrangements for the Junior
Subordinated Debentures will be substantially identical to those in effect for
the Preferred Securities. See "Description of Preferred Securities -- Book
Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Junior Subordinated Debentures to be issued in
definitive form.
Payments on Junior Subordinated Debentures represented by a global
security will be made to Cede & Co., the nominee for DTC, as the registered
holder of the Junior Subordinated Debentures, as described under "Description
of Preferred Securities -- Book Entry, Delivery and Form." If Junior
Subordinated Debentures are issued in certificated form ,principal and interest
will be payable, the transfer of the Junior Subordinated Debentures will be
registrable, and Junior Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures of other authorized denominations of a like aggregate
principal amount, at the corporate trust office of the Debentures Trustee in
New York, New York or at the offices of any Paying Agent or transfer agent
appointed by the Company, provided that payments of interest may be made at the
option of the Company by check mailed to the address of the persons entitled
thereto. However, a holder of $1 million or more in aggregate principal amount
of Junior Subordinated Debentures may receive payments of interest (other than
interest payable at the Stated Maturity) by wire transfer of immediately
available funds upon written request to the Debenture Trustee not later than 15
calendar days prior to the date on which the interest is payable.
Registrar and Transfer Agent. The Debenture Trustee will act as the
registrar and the transfer agent for the Junior Subordinated Debentures. Junior
Subordinated Debentures may be presented for registration of transfer (with the
form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed) at the office of the registrar. The Company may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts; provided, that the
Company maintains a transfer agent in the place of payment. The Company may at
any time designate additional transfer agents with respect to the Junior
Subordinated Debentures. In the event of any redemption, neither the Company
nor the Debenture Trustee will be required to (i) issue, register the transfer
of or exchange Junior Subordinated Debentures during a period beginning at the
opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures and ending at the close of business on the day
of mailing of the relevant notice of redemption, or (ii) transfer or exchange
any Junior Subordinated Debentures so selected for redemption, except, in the
case of any Junior Subordinated Debentures being redeemed in part, any portion
thereof not to be redeemed.
Modification of Indenture. The Company and the Debenture Trustee may,
from time to time without the consent of the holders of the Junior Subordinated
Debentures, amend, waive or supplement the Indenture for specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies
and qualifying, or maintaining the qualification of, the Indenture under the
Trust Indenture Act. The Indenture also contains provisions permitting the
Company and the Debenture Trustee, with the consent of the holders of not less
than a majority in principal amount of the outstanding Junior Subordinated
Debentures, to modify the Indenture; provided, that no such
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modification may, without the consent of the holder of each outstanding Junior
Subordinated Debenture affected by such proposed modification, (i) extend the
fixed maturity of the Junior Subordinated Debentures, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or (ii) reduce the percentage of principal amount of Junior
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture; provided that so long as any of the
Preferred Securities remain outstanding, no such modification may be made that
requires the consent of the holders of the Junior Subordinated Debentures, and
no termination of the Indenture may occur, and no waiver of any Debenture Event
of Default may be effective, without the prior consent of the holders of at
least a majority of the aggregate Liquidation Amount of the Preferred
Securities and that if the consent of the holder of each Junior Subordinated
Debenture is required, such modification will not be effective until each
holder of Trust Securities has consented thereto.
Debenture Events of Default. The Indenture provides that any one or more
of the following described events with respect to the Junior Subordinated
Debentures that has occurred and is continuing constitutes an event of default
(each, a "Debenture Event of Default") with respect to the Junior Subordinated
Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due (subject to the deferral of any due date in the case
of an Extended Interest Payment Period); or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at Stated Maturity, upon redemption by declaration or
otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
the Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of the Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee, or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures,
may declare the principal due and payable immediately upon a Debenture Event of
Default. The holders of a majority in aggregate outstanding principal amount
of the Junior Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of the
Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee. Should the holders of the Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate Liquidation Amount of the Preferred
Securities will have such right.
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Junior Subordinated Debentures.
Enforcement of Certain Rights by Holders of the Preferred Securities. If
a Debenture Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest on or the principal
of the Junior Subordinated Debentures on the payment date on which such payment
is due and payable, then a holder of Preferred Securities may institute a legal
proceeding directly against the Company for enforcement
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of payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Company will have a right
of set-off under the Indenture to the extent of any payment made by the Company
to such holder of Preferred Securities in the Direct Action. The Company may
not amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Preferred
Securities. If the right to bring a Direct Action is removed, RBI Capital may
become subject to the reporting obligations under the Exchange Act.
The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Junior Subordinated Debentures unless there has
been an Event of Default under the Trust Agreement. See "Description of the
Preferred Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions. The Company
may not consolidate with or merge into any other Person or convey or transfer
its properties and assets substantially as an entirety to any Person, and any
Person may not consolidate with or merge into the Company or sell, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to the Company, unless (i) in the event the Company consolidates with
or merges into another Person or conveys or transfers its properties and assets
substantially as an entirety to any Person, the successor Person is organized
under the laws of the United States or any State or the District of Columbia,
and such successor Person expressly assumes by supplemental indenture the
Company's obligations on the Junior Subordinated Debentures issued under the
Indenture, (ii) immediately after giving effect thereto, no Debenture Event of
Default, and no event which, after notice or lapse of time or both, would
become a Debenture Event of Default, has occurred and is continuing, and (iii)
certain other conditions as prescribed in the Indenture are met.
Satisfaction and Discharge. The Indenture will cease to be of further
effect (except as to the Company's obligations to pay certain sums due pursuant
to the Indenture and to provide certain officers' certificates and opinions of
counsel described therein) and the Company will be deemed to have satisfied and
discharged the Indenture when, among other things, all Junior Subordinated
Debentures not previously delivered to the Debenture Trustee for cancellation
(i) have become due and payable, or (ii) will become due and payable at their
Stated Maturity within one year or are to be called for redemption within one
year, and the Company deposits or causes to be deposited with the Debenture
Trustee funds, in trust, for the purpose and in an amount sufficient to pay and
discharge the entire indebtedness on the Junior Subordinated Debentures not
previously delivered to the Debenture Trustee for cancellation, for the
principal and interest to the date of the deposit or to the Stated Maturity or
redemption date, as the case may be.
Governing Law. The Indenture and the Junior Subordinated Debentures will
be governed by and construed in accordance with the laws of the State of
Florida.
Information Concerning the Debenture Trustee. The Debenture Trustee has
and is subject to all the duties and responsibilities specified with respect to
an indenture trustee under the Trust Indenture Act. Subject to such provisions,
the Debenture Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of Junior
Subordinated Debentures, unless offered reasonable indemnity by such holder
against the costs, expenses and liabilities which might be incurred thereby.
The Debenture Trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties
if the Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
Miscellaneous. The Company has agreed, pursuant to the Indenture, for so
long as Trust Securities remain outstanding, (i) to maintain directly or
indirectly 100% ownership of the Common Securities of RBI Capital (provided
that certain successors which are permitted pursuant to the Indenture may
succeed to the Company's ownership of the Common Securities), (ii) not to
voluntarily terminate, wind up or liquidate RBI Capital without
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prior regulatory approval if then so required under applicable capital
guidelines or regulatory policies, and (a) in connection with a distribution of
Junior Subordinated Debentures to the holders of the Preferred Securities in
liquidation of RBI Capital, or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, and (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
Trust Agreement, to cause RBI Capital to remain classified as a grantor trust
and not as an association taxable as a corporation for United States federal
income tax purposes.
DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will be
executed and delivered by the Company concurrently with the issuance of the
Preferred Securities for the benefit of the holders of the Preferred
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Guarantee Trustee will act as indenture trustee under the
Guarantee for purposes of complying with the provisions of the Trust Indenture
Act. The Guarantee Trustee, Wilmington Trust Company, will hold the Guarantee
for the benefit of the holders of the Preferred Securities. The following
summary of the material terms and provisions of the Guarantee does not purport
to be complete and is subject to, and qualified in its entirety by reference
to, all of the provisions of the Guarantee and the Trust Indenture Act.
Wherever particular defined terms of the Guarantee are referred to, but not
defined herein, such defined terms are incorporated herein by reference. The
form of the Guarantee has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
General. The Guarantee will be an irrevocable guarantee on a subordinated
basis of RBI Capital's obligations under the Preferred Securities, but will
apply only to the extent that RBI Capital has funds sufficient to make such
payments. The Company will, pursuant to the Guarantee, irrevocably agree to
pay in full on a subordinated basis, to the extent set forth therein, the
Guarantee Payments (as defined below) to the holders of the Preferred
Securities, as and when due, regardless of any defense, right of set-off or
counterclaim that RBI Capital may have or assert other than the defense of
payment. The following payments with respect to the Preferred Securities, to
the extent not paid by or on behalf of RBI Capital (the "Guarantee Payments"),
will be subject to the Guarantee: (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that RBI Capital
has funds available therefor at such time, (ii) the Redemption Price with
respect to any Preferred Securities called for redemption to the extent that
RBI Capital has funds available therefor at such time, and (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of RBI Capital
(other than in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities or a redemption of all of the
Preferred Securities), the lesser of (a) the amount of the Liquidation
Distribution, to the extent RBI Capital has funds available therefor at such
time, and (b) the amount of assets of RBI Capital remaining available for
distribution to holders of Preferred Securities in liquidation of RBI Capital.
The obligation of the Company to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of the
Preferred Securities or by causing RBI Capital to pay such amounts to such
holders.
The Guarantee will not apply to any payment of Distributions except to the
extent RBI Capital has funds available therefor. If the Company does not make
interest payments on the Junior Subordinated Debentures held by RBI Capital,
RBI Capital will not pay Distributions on the Preferred Securities and will not
have funds legally available therefor.
Status of the Guarantee. The Guarantee will constitute an unsecured
obligation of the Company and will rank subordinate and junior in right of
payment to all Senior Debt and Subordinated Debt of the Company in the same
manner as the Junior Subordinated Debentures. The Guarantee does not place a
limitation on the amount of additional Senior Debt and Subordinated Debt that
may be incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Debt and Subordinated Debt. The
Guarantee will constitute a guarantee of payment and not of collection (that
is, the guaranteed party may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against any other Person). The Guarantee will not be
discharged except by payment of the Guarantee Payments in
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full to the extent not paid by RBI Capital or upon distribution of the Junior
Subordinated Debentures to the holders of the Preferred Securities. Because the
Company is a holding company, the right of the Company to participate in any
distribution of assets of a subsidiary, including the Bank, upon a liquidation
or reorganization or otherwise is subject to the prior claims of creditors of
the subsidiary, except to the extent the Company may itself be recognized as a
creditor of the subsidiary. The Company's obligations under the Guarantee,
therefore, will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, including the Bank, and claimants
should look only to the assets of the Company for payments thereunder.
Amendments and Assignment. Except with respect to any changes which do
not materially adversely affect the rights of holders of the Preferred
Securities (in which case no vote will be required), the Guarantee may not be
amended without the prior approval of the holders of not less than a majority
of the aggregate Liquidation Amount of the outstanding Preferred Securities.
See "Description of the Preferred Securities--Voting Rights; Amendment of Trust
Agreement." All guarantees and agreements contained in the Guarantee will bind
the successors, assigns, receivers, trustees and representatives of the Company
and will inure to the benefit of the holders of the Preferred Securities then
outstanding.
Events of Default. An event of default under the Guarantee will occur
upon the failure of the Company to perform any of its payment or other
obligations thereunder. The holders of not less than a majority in aggregate
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of the Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against RBI Capital, the Guarantee Trustee
or any other Person.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
Information Concerning the Guarantee Trustee. The Guarantee Trustee,
other than during the occurrence and continuance of a default by the Company in
performance of the Guarantee, undertakes to perform only such duties as are
specifically set forth in the Guarantee and, after default with respect to the
Guarantee, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to such
provisions, the Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Guarantee at the request of any holder of any
Preferred Securities, unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
Termination of the Guarantee. The Guarantee will terminate and be of no
further force and effect upon (a) full payment of the Redemption Price of the
Preferred Securities, (b) full payment of the amounts payable upon liquidation
of RBI Capital, or (c) distribution of the Junior Subordinated Debentures to
the holders of the Preferred Securities. The Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Preferred Securities must restore payment of any sums paid under such
Preferred Securities or the Guarantee.
Governing Law. The Guarantee will be governed by and construed in
accordance with the laws of the State of Florida.
Expense Agreement. The Company will, pursuant to the Agreement as to
Expenses and Liabilities entered into by it under the Trust Agreement (the
"Expense Agreement"), irrevocably and unconditionally guarantee to each person
or entity to whom RBI Capital becomes indebted or liable, the full payment of
any costs, expenses or liabilities of RBI Capital, other than obligations of
RBI Capital to pay to the holders of the Preferred Securities or
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other similar interests in RBI Capital of the amounts due such holders pursuant
to the terms of the Preferred Securities or such other similar interests, as
the case may be. Third party creditors of RBI Capital may proceed directly
against the Company under the Expense Agreement, regardless of whether such
creditors had notice of the Expense Agreement.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee. Payments of Distributions and other
amounts due on the Preferred Securities (to the extent RBI Capital has funds
available for the payment of such Distributions) are irrevocably guaranteed by
the Company as and to the extent set forth under "Description of the
Guarantee." The Company and RBI Capital believe that, taken together, the
obligations of the Company under the Junior Subordinated Debentures, the
Indenture, the Trust Agreement, the Expense Agreement, and the Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee, on
a subordinated basis, of payment of Distributions and other amounts due on the
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
obligations of RBI Capital under the Preferred Securities. However, if and to
the extent that the Company does not make payments on the Junior Subordinated
Debentures, RBI Capital will not pay Distributions or other amounts due on the
Preferred Securities and the Guarantee does not cover payment of Distributions
when RBI Capital does not have sufficient funds to pay such Distributions. In
such event, the remedy of a holder of Preferred Securities is to institute a
legal proceeding directly against the Company for enforcement of payment of
such Distributions to such holder. The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all Senior Debt and
Subordinated Debt of the Company.
Sufficiency of Payments. As long as payments of interest and other
payments are made when due on the Junior Subordinated Debentures, such payments
will be sufficient to cover Distributions and other payments due on the
Preferred Securities, primarily because (i) the aggregate principal amount of
the Junior Subordinated Debentures will be equal to the sum of the aggregate
stated Liquidation Amount of the Trust Securities, (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
Preferred Securities, (iii) the Company will pay for all and any costs,
expenses and liabilities of RBI Capital (except the obligations of RBI Capital
to the holders of the Preferred Securities), and (iv) the Trust Agreement
further provides that RBI Capital will not engage in any activity that is not
consistent with the limited purposes of RBI Capital.
Enforcement Rights of Holders of Preferred Securities. A holder of any
Preferred Security may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Guarantee Trustee, RBI Capital or any other
Person. A default or event of default under any Senior Debt and Subordinated
Debt of the Company would not constitute a default or Event of Default. In the
event, however, of payment defaults under, or acceleration of, Senior Debt and
Subordinated Debt of the Company, the subordination provisions of the Indenture
provide that no payments may be made in respect of the Junior Subordinated
Debentures until such Senior Debt and Subordinated Debt has been paid in full
or any payment default thereunder has been cured or waived. Failure to make
required payments on the Junior Subordinated Debentures would constitute an
Event of Default.
Limited Purpose of RBI Capital. The Preferred Securities evidence
preferred undivided beneficial interests in the assets of RBI Capital. RBI
Capital exists for the sole purpose of issuing the Trust Securities and
investing the proceeds thereof in Junior Subordinated Debentures. A principal
difference between the rights of a holder of a Preferred Security and the
rights of a holder of a Junior Subordinated Debenture is that a holder of a
Junior Subordinated Debenture is entitled to receive from the Company the
principal amount of and interest accrued on Junior Subordinated Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions from RBI Capital (or from the Company under the Guarantee) if and
to the extent RBI Capital has funds available for the payment of such
Distributions.
Rights Upon Termination. Upon any voluntary or involuntary termination,
winding-up or liquidation of RBI Capital involving the liquidation of the
Junior Subordinated Debentures, the holders of the Preferred Securities will
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be entitled to receive, out of assets held by RBI Capital, the Liquidation
Distribution in cash. See "Description of the Preferred Securities--Liquidation
Distribution Upon Termination." Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Property Trustee, as holder of the Junior
Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Debt and Subordinated Debt of
the Company (as set forth in the Indenture), but entitled to receive payment in
full of principal and interest before any shareholders of the Company receive
payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of RBI
Capital (other than the obligations of RBI Capital to the holders of its
Preferred Securities), the positions of a holder of the Preferred Securities
and a holder of the Junior Subordinated Debentures relative to other creditors
and to shareholders of the Company in the event of liquidation or bankruptcy of
the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary of the material United States federal
income tax considerations that may be relevant to a person that purchases
Preferred Securities on their original issue at their original offering price.
The statements of law or legal conclusions set forth in this summary constitute
the opinion of Holland & Knight LLP, counsel to the Company and RBI Capital.
The conclusions expressed herein are based upon current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), regulations thereunder
and current administrative rulings and court decisions, all of which are
subject to change at any time, with possible retroactive effect. Subsequent
changes to these authorities may cause tax consequences to vary substantially
from the consequences described below. Furthermore, the authorities on which
the following summary is based are subject to various interpretations, and it
is therefore possible that the United States federal income tax treatment of
the purchase, ownership, and disposition of Preferred Securities may differ
from the treatment described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion generally focuses on holders of Preferred
Securities who are individual citizens or residents of the United States and
who acquire Preferred Securities on their original issue at their offering
price and hold Preferred Securities as capital assets. The discussion has only
limited application to dealers in securities, corporations, estates, trusts or
nonresident aliens and does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as, for
example, banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Preferred Securities as a position in
a "straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. The following summary also does not address the tax consequences
to persons that have a functional currency other than the U.S. dollar or the
tax consequences to shareholders, partners or beneficiaries of a holder of
Preferred Securities. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities. Accordingly, each prospective investor should consult, and should
rely exclusively on, such investor's own tax advisors in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of Preferred Securities.
Classification of the Junior Subordinated Debentures. The Company intends
to take the position that the Junior Subordinated Debentures will be classified
for United States federal income tax purposes as indebtedness of the Company
under current law, and, by acceptance of a Preferred Security, each holder
covenants to treat the Junior Subordinated Debentures as indebtedness and the
Preferred Securities as evidence of an indirect beneficial ownership interest
in the Junior Subordinated Debentures. Counsel for the Company is of the
opinion that, under current law, and based upon the representations, facts and
assumptions set forth herein, the Junior Subordinated Debentures will be
classified as indebtedness for United States federal income tax purposes. As an
opinion of counsel is not binding upon the Internal Revenue Service or the
courts, no assurance can be given that such position of the Company will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful.
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The remainder of this discussion assumes that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company.
Classification of RBI Capital. Under current law and assuming full
compliance with the terms of the Trust Agreement and Indenture (and certain
other documents described herein), RBI Capital will be classified for United
States federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. As a result, each beneficial owner of Preferred
Securities will be treated for federal income tax purposes as a holder of its
pro rata share of Junior Subordinated Debentures held by RBI Capital.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be treated as owning an undivided
beneficial interest in the Junior Subordinated Debentures, and each holder will
be required to include in its gross income its pro rata share of interest
income, including any original issue discount ("OID"), paid or accrued with
respect to its allocable share of the Junior Subordinated Debentures.
Interest Income and Original Issue Discount. Under applicable Treasury
regulations (the "Regulations"), a "remote" contingency that stated interest
will not be timely paid will be ignored in determining whether a debt
instrument is issued with OID. The Company believes that the likelihood of its
exercising its option to defer payments of interest is remote. Based on the
foregoing, the Company intends to take the position that the Junior
Subordinated Debentures are not considered to be issued with OID at the time of
their original issuance and, accordingly, except as set forth below, a holder
should include in gross income such holder's allocable share of interest on the
Junior Subordinated Debentures at the time it is paid or accrued in accordance
with such holder's method of tax accounting.
However, under the Regulations, if the Company exercised its option to
defer any payment of interest, the Junior Subordinated Debentures would at that
time and at all times thereafter be treated as OID instruments, and all stated
interest (and de minimis OID, if any) on the Junior Subordinated Debentures
would thereafter be treated as OID as long as the Junior Subordinated
Debentures remained outstanding. In such event, the taxable interest income of
all holders with respect to the Junior Subordinated Debentures would be
determined on a daily economic accrual basis regardless of such holder's method
of tax accounting, and actual distributions of stated interest would not be
reported as taxable income.
Consequently, a holder would be required to include OID in gross income
even though the Company would not make any actual cash payments during an
Extended Interest Payment Period and even through some holders may use the cash
method of tax accounting.
The Regulations have not been addressed in any published rulings or other
published interpretations by the Internal Revenue Service, and it is possible,
however, that the Internal Revenue Service could take a position contrary to
the interpretation herein.
Because income on the Preferred Securities will constitute interest or
OID, corporate holders will not be entitled to a dividends-received deduction
with respect to any income recognized with respect to the Preferred Securities.
Subsequent uses of the term "interest" in this summary include income in
the form of OID.
Market Discount and Acquisition Premium. Holders of Preferred Securities
other than a holder who purchased the Preferred Securities upon original
issuance may be considered to have acquired their undivided interests in the
Junior Subordinated Debentures with "market discount" or "acquisition premium"
as such phrases are defined for United States federal income tax purposes. Such
holders are advised to consult their tax advisors as to the income tax
consequences of the acquisition, ownership and disposition of the Preferred
Securities.
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Receipt of Junior Subordinated Debentures or Cash upon Liquidation of RBI
Capital. Under certain circumstances, as described under "Description of the
Preferred Securities--Redemption or Exchange" and "--Liquidation Distribution
Upon Termination," the Junior Subordinated Debentures may be distributed to
holders of Preferred Securities upon a liquidation of RBI Capital. Under
current United States federal income tax law, such a distribution would be
treated as a nontaxable event to each such holder in which each holder is
deemed to receive directly its pro rata share of Junior Subordinated Debentures
previously held indirectly through this Trust. A holder's aggregate tax basis
in the Junior Subordinated Debentures received in the liquidation will be equal
to such holder's aggregate tax basis in the Preferred Securities immediately
before the distribution. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of RBI Capital would include the period
for which such holder held the Preferred Securities.
If, however, a Tax Event occurs which results in RBI Capital being treated
as an association taxable as a corporation, the distribution would constitute a
taxable event to RBI Capital and the holders of the Preferred Securities, and
each holder of Preferred Securities would recognize gain or loss as if the
holder had exchanged its Preferred Securities for Junior Subordinated
Debentures, and the holder's holding period in the Junior Subordinated
Debentures would not include the period for which such holder held the
Preferred Securities. Under certain circumstances described herein, the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Preferred Securities.
Under current law, such a redemption would, for United States federal income
tax purposes, constitute a taxable disposition of the redeemed Preferred
Securities, and a holder would recognize gain or loss as if the holder sold
such Preferred Securities for cash. See "Description of the Preferred
Securities--Redemption or Exchange" and "--Liquidation Distribution Upon
Termination."
Sales of Preferred Securities. A holder that sells Preferred Securities
will recognize gain or loss equal to the difference between its adjusted tax
basis in the Preferred Securities and the amount realized on the sale of such
Preferred Securities. Assuming that the Company does not exercise its option to
defer payment of interest on the Junior Subordinated Debentures, and the
Preferred Securities are not considered issued with OID, a holder's adjusted
tax basis in the Preferred Securities generally will be its initial purchase
price. If the Junior Subordinated Debentures are deemed to be issued with OID
as a result of the Company's deferral of any interest payment, or otherwise, a
holder's tax basis in the Preferred Securities generally will be its initial
purchase price, increased by OID previously includible in such holder's gross
income to the date of disposition and decreased by distributions or other
payments received on the Preferred Securities since and including the date of
commencement of the first Extended Interest Payment Period. Such gain or loss
generally will be a capital gain or loss (except to the extent of any accrued
interest with respect to such holder's pro rata share of the Junior
Subordinated Debentures required to be included in income) and generally will
be a long-term capital gain or loss if the Preferred Securities have been held
for more than one year.
Should the Company exercise its option to defer any payment of interest on
the Junior Subordinated Debentures, the Preferred Securities may trade at a
price that does not accurately reflect the value of accrued but unpaid interest
with respect to the underlying Junior Subordinated Debentures. In the event of
such a deferral, a holder that disposes of its Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Junior Subordinated Debentures to the date
of disposition as OID, but may not receive the cash related thereto. However,
such Securityholder will add such amount to its adjusted tax basis in the
Preferred Securities. To the extent the selling price is less than the holder's
adjusted tax basis in the Preferred Securities, such holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes.
Effect of Proposed Changes in Tax Laws. On February 6, 1997, President
Clinton released his budget proposals for fiscal year 1998. One of the revenue
provisions of those proposals would generally deny interest deductions for
interest on an instrument such as the Junior Subordinated Debentures which is
issued by a corporation that has a maximum term of more than 15 years and that
is not shown as indebtedness on the separate balance sheet
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of the issuer or, where the instrument is issued to a related party (other than
a corporation), where the holder or some other related party issues a related
instrument that is not shown as indebtedness on the issuer's consolidated
balance sheet. If enacted as proposed by the President, this provision would be
effective for instruments issued on or after the date of first action by a
Congressional committee with respect to the proposal. It is not clear from the
President's proposals as to what constitutes Congressional "committee action"
with respect to this proposal. If the provision were enacted and were to apply
to the Junior Subordinated Debentures, the Company would be unable to deduct
interest on the Junior Subordinated Debentures. Under current law, the Company
will be able to deduct interest on the Junior Subordinated Debentures. However,
counsel for the Company has advised that such proposed legislation could change
the deductibility of the interest paid by the Company on the Junior
Subordinated Debentures for federal income tax purposes, and that Congress
could amend such legislation giving it retroactive effect prior to its
enactment to law. There can be no assurance that future legislative proposals
or final legislation will not affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures. Such a change would give rise
to a Tax Event. A Tax Event would permit the Company, upon prior regulatory
approval if then required under applicable capital guidelines or regulatory
policies, to cause a redemption of the Preferred Securities before, as well as
after, _____________, 2002. See "Description of the Junior Subordinated
Debentures-- Redemption or Exchange" and "Description of the Preferred
Securities--Redemption or Exchange-- Tax Event Redemption, Investment Company
Event Redemptions or Capital Treatment Event Redemptions."
Backup Withholding and Information Reporting. The amount of OID accrued
on the Preferred Securities held of record by individual citizens or residents
of the United States, or certain trusts, estates, and partnerships, will be
reported to the Internal Revenue Service on Forms 1099, which forms should be
mailed to such holders of Preferred Securities by January 31 following each
calendar year. Payments made on, and proceeds from the sale of, the Preferred
Securities may be subject to a "backup" withholding tax (currently at 31%)
unless the holder complies with certain identification and other requirements.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against the holder's United States federal income tax liability,
provided the required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE
PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED
SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans"), generally may purchase Preferred Securities, subject to the
investing fiduciary's determination that the investment in Preferred Securities
satisfies ERISA's fiduciary standards and other requirements applicable to
investments by the Plan.
In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain plans
(generally, Plans maintained or sponsored by, or contributed to by, any such
persons with respect to which the Company or an affiliate is a fiduciary or
Plans for which the Company or an affiliate provides services). The acquisition
and ownership of Preferred Securities by a Plan (or by an individual retirement
arrangement or other Plans described in Section 4975(e)(1) of the Code) with
respect to which the Company or any of its affiliates is considered a party in
interest or a disqualified person may constitute or result in a prohibited
transaction under
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ERISA or Section 4975 of the Code, unless such Preferred Securities are
acquired pursuant to and in accordance with an applicable exemption.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable exemption. Any other Plans or other
entities whose assets include Plan assets subject to ERISA or Section 4975 of
the Code proposing to acquire Preferred Securities should consult with their
own counsel.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters, William R. Hough & Co. and Ryan, Beck & Co., Inc.,
have severally agreed to purchase from RBI Capital the number of Preferred
Securities set forth opposite their respective names below. The Underwriters
are committed to purchase and pay for all Preferred Securities if any Preferred
Securities are purchased.
<TABLE>
<CAPTION>
Underwriter Number of Shares
----------- ----------------
<S> <C>
William R. Hough & Co. . . . . . . . . . . . . . . . ___________
Ryan, Beck & Co., Inc. . . . . . . . . . . . . . . . ___________
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . ___________
</TABLE>
The Company has been advised by the Underwriters that the Underwriters
propose initially to offer the Preferred Securities to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $____ per Preferred
Security. The Underwriters may allow and such dealers may re-allow a concession
not in excess of $____ per Preferred Security to certain other dealers. After
the offering, the price to the public and other selling terms may be changed by
the Underwriters.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued
by the Company, the Underwriting Agreement provides that the Company will pay
as compensation an amount of $______ per Preferred Security for the
Underwriters' arranging the investment therein of such proceeds.
RBI Capital has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional 375,000
Preferred Securities at the offering price set forth on the cover page hereof
less underwriting discounts. The Underwriters may exercise such option to
purchase additional Preferred Securities solely for the purpose of covering
over-allotments, if any, incurred in the sale of the Preferred Securities.
To the extent that the Underwriters exercise their option to purchase
additional Preferred Securities, RBI Capital will issue and sell to the Company
additional Common Securities and the Company will issue and sell to RBI Capital
Junior Subordinated Debentures in an aggregate principal amount equal to the
total aggregate Liquidation Amount of the additional Preferred Securities being
purchased pursuant to the option and the additional Common Securities.
Because the NASD is expected to view the Preferred Securities as interests
in a direct participation program, the offering of the Preferred Securities is
being made in compliance with the applicable provisions of Rule 2810 of the
NASD's Conduct Rules.
The Company and RBI Capital have agreed to indemnify the Underwriters
against and contribute toward certain liabilities, including liabilities under
the Securities Act. The Company has agreed to reimburse the Underwriters for
certain expenses and legal fees related to the sale of the Preferred
Securities.
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The Preferred Securities are a new issue of securities having no trading
market. Application has been made to have the Preferred Securities listed for
quotation on The Nasdaq Stock Market's National Market. The Underwriters have
advised RBI Capital that they presently intend to make a market in the
Preferred Securities after the commencement of trading, but no assurances can
be made as to the liquidity of such Preferred Securities or that an active and
liquid trading market will develop or, if developed, that it will be sustained.
The Underwriters will have no obligation to make a market in the Preferred
Securities, however, and may cease market-making activities, if commenced, at
any time.
Under the Conduct Rules of the NASD, no member of the NASD or an affiliate
of such member may participate in the distribution of a public offering of
equity or debt securities issued by a company if the member and/or its
affiliates have a conflict of interest (as defined) unless the price at which
such equity securities or, the yield at which such debt securities, are to be
distributed to the public is no higher with respect to price or no less with
respect to yield than that recommended by a "qualified independent underwriter"
meeting certain standards. As defined by the NASD, a "conflict of interest"
exists when, among other things, a member and/or its affiliates in the
aggregate beneficially own 10% or more of the any class of equity of a company.
William R. Hough, a controlling stockholder of William R. Hough & Co., owns
more than 10% of the Company's Common and Preferred Stock. Accordingly,
William R. Hough & Co. is deemed by the NASD to be an affiliate of the Company
and this offering is subject to the foregoing qualified independent underwriter
requirement.
Ryan, Beck & Co. has agreed to act as a qualified independent underwriter
in connection with the Offering. The price and term of the Preferred
Securities to be distributed to the public will be no more (with respect to
price) and no less with respect to yield than that recommended by Ryan, Beck &
Co. Acting as qualified independent underwriter, Ryan, Beck & Co. has
participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus is part and has exercised the usual
standards of due diligence with respect thereto and will receive a fee of
$10,000 in connection with its services as qualified independent underwriter
which will be paid from the underwriting discounts set forth on the cover page
of this Prospectus. The Company and RBI Capital have agreed to indemnify Ryan,
Beck & Co. as the qualified independent underwriter against certain
liabilities, including liabilities under the Securities Act.
For a description of certain relationships between the Company and William
R. Hough and certain of his affiliates, including William R. Hough & Co., see
Note 16 to the Company's Consolidated Financial Statements as of December 31,
1996.
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VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of RBI
Capital will be passed upon by Richards, Layton & Finger, special Delaware
counsel to the Company and RBI Capital. Certain legal matters for the Company
and RBI Capital, including the validity of the Guarantee and the Junior
Subordinated Debentures will be passed upon for the Company and RBI Capital by
Holland & Knight LLP ("Holland & Knight"), counsel to the Company and RBI
Capital. Certain legal matters will be passed upon for the Underwriters by
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. ("Stearns Weaver").
Holland & Knight and Stearns Weaver will rely on the opinion of Richards,
Layton & Finger as to matters of Delaware law. Certain matters relating to
United States federal income tax considerations will be passed upon for the
Company by Holland & Knight LLP.
EXPERTS
The consolidated financial statements of Republic Bancshares, Inc. as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, included herein and in the Registration Statement have
been audited by Arthur Andersen, LLP, independent certified public accountants,
as indicated in their reports with respect thereto, and are included herein in
reliance and upon the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov.
The Company and RBI Capital have filed with the Commission a Registration
Statement on Form S-2 (together with all amendments thereto, the "Registration
Statement"), of which this Prospectus is a part, under the Securities Act of
1933, as amended (the"Securities Act"), with respect to the Preferred
Securities, the Junior Subordinated Debentures and the Guarantee. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. In addition, certain
documents filed by the Company with the Commission have been incorporated in
this Prospectus by reference. See "Incorporation of Certain Documents by
Reference." For further information with respect to the Company, RBI Capital,
the Preferred Securities and the Junior Subordinated Debentures, reference is
made to the Registration Statement, including the exhibits thereto and the
documents incorporated herein by reference. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission or incorporated
by reference herein are not necessarily complete, and, in each instance,
reference is made to the copy of such document so filed for a more complete
description of the matter involved. Each such statement is qualified in its
entirety by such reference. The Registration Statement may be inspected without
charge at the principal office of the Commission in Washington, D.C., and
copies of all or part of it may be obtained from the Commission upon payment of
the prescribed fees.
No separate financial statements of RBI Capital have been included herein.
The Company does not consider that such financial statements would be material
to holders of Preferred Securities because (i) all of the voting
99
<PAGE> 101
securities of RBI Capital will be owned by the Company, a reporting company
under the Exchange Act, (ii) RBI Capital has no independent operations but
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of RBI Capital and investing the proceeds
thereof in Junior Subordinated Debentures issued by the Company, and (iii) the
obligations of the Company described herein to provide certain indemnities in
respect of and be responsible for certain costs, expenses, debts and
liabilities of RBI Capital under the Indenture and pursuant to the Trust
Agreement, the guarantee issued by the Company with respect to the Preferred
Securities, the Junior Subordinated Debentures purchased by RBI Capital, the
related Indenture and the Expense Agreement, taken together, constitute, in the
belief of the Company and RBI Capital, a full and unconditional guarantee of
payments due on the Preferred Securities. See "Description of the Junior
Subordinated Debentures" and "Description of the Guarantee."
RBI Capital is not currently subject to the information reporting
requirements of the Exchange Act and the Company does not expect that RBI
Capital will file reports, proxy statements and other information under the
Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated in this Prospectus by reference and made a part hereof:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1996, filed with the Commission on March 31, 1997.
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, filed with the Commission on April 15, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Junior Subordinated Debentures shall be deemed to be incorporated by
reference into this Prospectus and to be a part of this Prospectus from the
date of filing thereof. Any statement contained in a document incorporated by
reference herein, shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference, other than
certain exhibits to such documents. Written requests should be directed to
Republic Bancshares, Inc., 111 Second Avenue N.E., St. Petersburg, Florida
33701, Attention: Secretary, telephone: (813) 823-7300.
100
<PAGE> 102
REPUBLIC BANCSHARES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
REPUBLIC BANCSHARES, INC.
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets at December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the three years ended December 31, 1996, 1995 and 1994 . . . . . . . F-3
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1996, 1995 and 1994 . . F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
REPUBLIC BANCSHARES, INC.
Consolidated Balance sheets at March 31, 1997 (unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . F-26
Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996 (unaudited) . . . . . F-27
Consolidated Statements of Stockholders' Equity for the three months ended March 31, 1997 (unaudited) and the
year ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28
Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) . . . . . F-29
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-30
F.F.O. FINANCIAL GROUP, INC.
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
Consolidated Balance Sheets at December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-34
Consolidated Statements of Income for the three years ended December 31, 1996, 1995 and 1994 . . . . . . . . . F-35
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1996, 1995 and 1994 . . F-36
Consolidated Statements of Cash Flows for the three years ended December 31, 1996, 1995 and 1994 . . . . . . . . F-37
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-39
F.F.O. FINANCIAL GROUP, INC.
Condensed Consolidated Balance Sheets at March 31, 19967 (unaudited) and December 31, 1996 . . . . . . . . . . F-61
Condensed Consolidated Statements of Income for the three months ended March 31, 1997 and 1996 (unaudited) . . F-62
Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 1997 (unaudited) F-63
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) F-64
Notes to Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . F-66
Review by Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-69
Report on Review by Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . F-70
</TABLE>
<PAGE> 103
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors of Republic Bancshares, Inc.:
We have audited the accompanying consolidated balance sheets of Republic
Bancshares, Inc. (a Florida corporation) and subsidiary as of December 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Republic Bancshares, Inc. and
subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
Tampa, Florida
February 7, 1997 (except with respect to the matter discussed in Note 18,
as to which the date is March 10, 1997)
F-1
<PAGE> 104
REPUBLIC BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUES)
<TABLE>
<CAPTION>
DECEMBER 31, December 31,
ASSETS 1996 1995
- ------ ------ -----
<S> <C> <C>
Cash and due from banks $ 27,810 $ 19,806
Interest bearing deposits in banks 118 2
Investment securities:
Held to maturity (Note 2) - 7,015
Available for sale 74,397 38,147
Mortgage backed securities (Note 3):
Held to maturity - 17,112
Available for sale 20,004 2,527
FHLB stock 4,830 3,540
Federal funds sold 8,000 14,621
Loans held for sale (Note 4) 36,590 4,711
Loans, net (Notes 4 and 5) 693,270 649,795
Premises and equipment, net (Note 6) 19,715 18,991
Other real estate owned (Note 7):
Acquired through foreclosure, net 7,363 8,064
Held for investment - 2,498
Other assets (Note 8) 15,771 15,166
-------- --------
Total assets $907,868 $801,995
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits-
Noninterest-bearing checking $ 50,060 $ 45,641
Interest checking 87,639 71,592
Money market 32,665 38,535
Savings 245,951 91,935
Time deposits (includes $49,323 and $57,213, respectively 411,665 495,402
of time deposits of $100,000 or more) --------- --------
Total deposits 827,980 743,105
Securities sold under agreements to repurchase 15,372 3,072
Subordinated debt, 6% rate, matures December 1, 2011, (Note 9) 6,000 -
Other liabilities 4,197 4,915
-------- --------
Total liabilities 853,549 751,092
-------- --------
Off-balance-sheet risk, commitments & contingencies (Note 10)
Stockholders' equity (Note 13):
Perpetual preferred convertible stock ($20.00 par, 100,000 shares authorized,
75,000 shares issued and outstanding. Liquidation preference $6,600
at December 31, 1996 and 1995.) 1,500 1,500
Common stock ($2.00 par, 20,000,000 shares authorized and 4,183,507
shares issued and outstanding at December 31, 1996 and 1995) 8,367 8,367
Capital surplus 26,699 26,699
Retained earnings 17,849 14,329
Net unrealized gains (losses) on available-for-sale securities, net of tax effect (96) 8
-------- --------
Total stockholders' equity 54,319 50,903
-------- --------
Total liabilities and stockholders' equity $907,868 $801,995
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-2
<PAGE> 105
REPUBLIC BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
INTEREST INCOME: 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest and fees on loans $ 62,244 $ 52,389 $ 32,699
Interest on investment securities 1,413 1,431 1,939
Interest on mortgage-backed securities 1,325 827 -
Interest on federal funds sold 1,633 2,968 2,448
Interest on other investments 332 248 29
--------- --------- ---------
Total interest income 66,947 57,863 37,115
--------- --------- ---------
INTEREST EXPENSE:
Interest on deposits 32,426 29,874 16,767
Interest on FHLB advances 52 - 36
Interest on other borrowings 448 127 68
--------- --------- ---------
Total interest expense 32,926 30,001 16,871
--------- --------- ---------
Net interest income 34,021 27,862 20,244
PROVISION FOR LOAN LOSSES (Note 5) 1,800 1,685 1,575
--------- --------- ---------
Net interest income after
provision for possible loan losses 32,221 26,177 18,669
--------- --------- ---------
NONINTEREST INCOME:
Service charges and fees on deposits 1,606 1,395 1,247
Income from mortgage banking activities 1,002 124 -
Gain on sale of ORE - held for investment 1,207 - -
Securities gains, net 370 27 1
Other operating income 1,431 1,205 1,364
--------- --------- ---------
Total noninterest income 5,616 2,751 2,612
NONINTEREST EXPENSES:
Salaries and employee benefits 14,309 11,251 7,339
Net occupancy expense 4,507 3,211 1,308
Data processing fees 1,451 1,152 1,472
FDIC and state assessments 949 1,566 1,187
Other operating expense 6,136 4,939 3,610
--------- --------- ---------
Total general and administrative expenses 27,352 22,119 14,916
SAIF special assessment 2,539 - -
Provisions for losses on ORE 1,611 - 10
ORE expense, net of ORE income (172) 289 422
Amortization of premium on deposits 491 450 1,269
--------- --------- ---------
Total noninterest expenses 31,821 22,858 16,617
--------- --------- ---------
Income before negative goodwill
accretion and income taxes 6,016 6,070 4,664
Negative goodwill accretion (Note 1) - 1,578 2,705
--------- --------- ---------
Income before income taxes 6,016 7,648 7,369
Income tax provision (Note 8) 2,232 1,875 468
--------- --------- ---------
NET INCOME $ 3,784 $ 5,773 $ 6,901
========= ========= =========
PER SHARE DATA:
Net income per common and common
equivalent share (Note 14) $ .76 $ 1.26 $ 1.67
========= ========= =========
Weighted average common and common
equivalent shares outstanding (Note 14) 4,952,937 4,562,642 4,136,790
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 106
REPUBLIC BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERPETUAL PREFERRED NET UNREALIZED
CONVERTIBLE STOCK COMMON STOCK GAINS (LOSSES)
------------------- ------------------ ON AVAILABLE
SHARES SHARES CAPITAL RETAINED FOR SALE
ISSUED AMOUNT ISSUED AMOUNT SURPLUS EARNINGS SECURITIES TOTAL
------ ------ ------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 75,000 $ 1,500 3,365,387 $ 6,731 $ 19,041 $ 2,182 $ - $ 29,454
Net income - - - - - 6,901 - 6,901
Net unrealized losses
on available-for-sale
securities, net of tax effect - - - - - - (54) (54)
Proceeds from exercise of
stock options - - 14,950 30 98 - - 128
Dividends on preferred
stock - - - - - (264) - (264)
------ -------- --------- -------- -------- -------- ---- --------
BALANCE, DECEMBER 31, 1994 75,000 1,500 3,380,337 6,761 19,139 8,819 (54) 36,165
Net income - - - - - 5,773 - 5,773
Net unrealized gains on
available-for-sale securities,
net of tax effect - - - - - - 62 62
Issuance of common stock - - 800,000 1,600 7,537 - - 9,137
Proceeds from exercise of
stock options - - 3,170 6 23 - - 29
Dividends on preferred
stock - - - - - (263) - (263)
------ -------- --------- -------- -------- -------- ---- --------
BALANCE, DECEMBER 31, 1995 75,000 1,500 4,183,507 8,367 26,699 14,329 8 50,903
Net income - - - - - 3,784 - 3,784
Net unrealized loss on
available-for-sale securities,
net of tax effect - - - - - - (104) (104)
Dividends on preferred
stock - - - - - (264) - (264)
------ -------- --------- -------- -------- -------- ---- --------
BALANCE, DECEMBER 31, 1996 75,000 $ 1,500 4,183,507 $ 8,367 $ 26,699 $ 17,849 $(96) $ 54,319
====== ======== ========= ======== ======== ======== ==== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-4
<PAGE> 107
REPUBLIC BANCSHARES, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,784 $ 5,773 $ 6,901
Reconciliation of net income to net cash provided:
Provision for loan and ORE losses 3,411 1,685 1,585
Depreciation and amortization, net (1,539) (26) 129
Amortization of premium and (accretion) of fair value, net 553 (901) (1,162)
Gain on sale of loans (1,002) (124) -
Gain on sale of investment securities (370) (27) -
Gain on sale of other real estate owned (1,442) (4) (89)
Capitalization of mortgage servicing (1,741) - -
Gain on disposal of premises and equipment (2) - 75
Net increase in deferred tax benefit (1,574) (1,024) -
Net (increase) decrease in other assets 2,222 (3,455) (1,887)
Net increase (decrease) in other liabilities (719) 2,179 (339)
-------- -------- --------
Net cash provided by operating activities 1,581 4,076 5,213
-------- -------- --------
INVESTING ACTIVITIES:
Net (increase) decrease in interest bearing deposits in banks (116) 148 550
Proceeds from sale of premises and equipment - - 13
Proceeds from sales & maturities of:
Investment securities held to maturity 7,000 24,000 18,900
Investment securities available for sale 72,545 3,972 6,991
Mortgage backed securities available for sale 21,848 9,732 -
Purchase of investment securities held to maturity - - (19,669)
Purchase of investment securities available for sale (108,636) (33,083) (10,989)
Purchase of mortgage backed securities (20,105) - -
Principal repayment on mortgage backed securities 4,431 714 -
Purchase of FHLB stock (1,291) (2,248) (1,292)
Net increase in loans (85,087) (178,001) (197,859)
Purchase of premises and equipment (2,201) (6,282) (3,088)
Proceeds from sale of other real estate owned 8,270 3,234 5,260
Investments in other real estate owned (net) 232 358 (7,246)
---------- --------- ----------
Net cash used in investing activities (103,110) (177,456) (208,429)
---------- --------- ---------
FINANCING ACTIVITIES:
Net increase in deposits 84,875 159,212 89,551
Net increase in repurchase agreements 12,301 991 916
Proceeds from issuance of subordinated debt 6,000 - -
Proceeds from issuance of common stock - 9,166 128
Dividends on perpetual preferred stock (264) (263) (264)
--------- ---------- ---------
Net cash provided by financing activities 102,912 169,106 90,331
--------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,383 (4,274) (112,885)
CASH AND CASH EQUIVALENTS, beginning of period 34,427 38,701 151,586
---------- ---------- --------
CASH AND CASH EQUIVALENTS, end of period $ 35,810 $ 34,427 $ 38,701
========== ========== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for-
Interest $ 33,031 $ 29,419 $ 16,448
Income taxes 4,144 1,516 2,222
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-5
<PAGE> 108
REPUBLIC BANCSHARES, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Organization
The consolidated financial statements of Republic Bancshares, Inc. (the
Company) include the accounts of the Company, and Republic Bank (the "Bank")
and the Bank's wholly-owned subsidiaries, RBREO, Inc., Tampa Bay Equities,
Inc., VQH Development, Inc., and Republic Insurance Agency, Inc. All
significant intercompany accounts and transactions have been eliminated. On
November 21, 1995, the Bank's Board of Directors approved for shareholder
consideration an Amended and Restated Plan of Share Exchange and Reorganization
(the "Reorganization") under which the Bank became a wholly-owned subsidiary of
Company. On the effective date and time of the Reorganization, all holders of
shares of the Bank's Common and Preferred Stock at the November 30, 1995 record
date received one share of Company Common Stock for each share of the Bank's
Common Stock held of record and one share of Company Preferred Stock for each
share of the Bank's Preferred Stock held of record. Holders of outstanding
options to purchase or acquire the Bank's Common Stock received options to
purchase an equal number of shares of Company Common Stock. All necessary
governmental and shareholder approvals for the Reorganization were received.
The Company's primary source of income is from its banking subsidiary which
operates 32 branches throughout west central Florida. The Bank's primary
source of revenue is derived from net interest income on loans and investments
and income from mortgage banking activities.
Negative Goodwill
On May 28, 1993 (the "Purchase Date") over 99 percent of the Company's
outstanding common stock was acquired for $4,450,000 (the "Purchase Price").
Also, on May 28, 1993, 583,334 additional shares of common stock were issued
for $3,500,000. The acquisition was accounted for by the purchase method of
accounting. Assets and liabilities were restated based upon their fair value
as of the Purchase Date. The excess of the restated net book value over the
Purchase Price was recorded as a reduction of the non current assets, to the
extent available. The remaining difference was recorded as excess of fair
value over purchase price ("negative goodwill"), as follows (in thousands):
<TABLE>
<S> <C>
Adjustments to fair market value:
Loans $ 596
Investment securities 161
Time deposits 36
Write-off of noncurrent assets:
Premises and equipment (1,432)
Other assets (43)
Adjustments to equity accounts:
Retained earnings 1,320
Capital surplus 5,224
-------
Excess of fair value over purchase price $ 5,862
=======
</TABLE>
The negative goodwill was accreted into income on a straight-line basis over 26
months beginning May 28, 1993 and ending July 31, 1995, which was based on the
estimated life of the loans, investments and deposits acquired. The premiums
on loans and investment securities and the discount on demand and other time
deposits were amortized into income on a straight-line basis over periods based
on the estimated life of the related loans, securities or deposits ranging from
12 to 30 months.
Dependence on Estimates, Appraisals and Evaluations
The financial statements, in conformity with generally accepted accounting
principles, are dependent upon
F-6
<PAGE> 109
estimates, appraisals and evaluations of loans, other real estate owned and
other assets and liabilities, and disclosure of contingent assets and
liabilities. Changes in such estimates, appraisals and evaluations might be
required because of rapidly changing economic conditions, changing economic
prospects of borrowers and other factors. Actual results may differ from those
estimates.
Investment Securities
Securities that the Company has both the positive intent and ability to hold to
maturity are classified as Held to Maturity and are carried at historical cost,
adjusted for amortization of premiums and accretion of discounts. Securities
Available for Sale, which are those securities that may be sold prior to
maturity as part of asset/liability management or in response to other factors,
are carried at fair value with any valuation adjustment reported in a separate
component of stockholders' equity, net of tax effect.
Interest and dividends on investment securities and amortization of premiums
and accretion of discounts are reported in interest on investment securities.
Gains (losses) realized on sales of investment securities are generally
determined on the specific identification method and are reported under
non-interest income.
Loans
Interest on commercial and real estate loans and substantially all installment
loans is recognized monthly on the loan balance outstanding. The Company's
policy is to discontinue accruing interest on loans 90 days or more delinquent
and restructured loans that have not yet demonstrated a sufficient payment
history, which, in the opinion of management, may be doubtful as to the
collection of interest or principal. These loans are designated as
"non-accrual" and any accrued but unpaid interest previously recorded is
reversed against current period interest revenue.
Loan origination and commitment fees net of certain costs are deferred, and the
amount is amortized as an adjustment to the related loan's yield, generally
over the contractual life of the loan. Unearned discounts and premiums on
loans purchased are deferred and amortized as an adjustment to interest income
on a basis that approximates level rates of return over the terms of the loan.
Hedging Contracts and Loans Held for Sale
The Company manages its interest rate market risk on the loans held for sale
and its estimated future commitments to originate and close mortgage loans for
borrowers at fixed prices ("Locked Loans") through hedging techniques which
include derivative contracts and fixed price forward delivery commitments
("Forward Commitments") to sell mortgage- backed securities or specific whole
loans to investors on a mandatory or best efforts basis. The Company records
the inventory of loans held for sale at the lower of cost or market on an
aggregate basis after considering any market value changes in the loans held
for sale, Locked Loans, and Forward Commitments.
Mortgage Servicing Rights
On July 1, 1995, SFAS No. 122, "Accounting for Mortgage Servicing Rights, an
amendment of FASB Statement No. 65", was adopted. SFAS No. 122 permits an
allocation of a portion of the cost of loan origination to the rights to
service mortgage loans. Approximately $1,188,000 and $117,000 was capitalized
relating to originated mortgage servicing rights ("OMSRs") during 1996 and
1995, respectively. As of December 31, 1996 and 1995, the unamortized portion
of these OMSRs were $1,271,000 and $113,000, respectively. For purposes of
measuring impairment, OMSRs are stratified based on the loan type, interest
rate and maturity of the underlying loans.
Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities
The FASB has issued SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and
F-7
<PAGE> 110
Extinguishment of Liabilities", which is effective for the Company's fiscal
year beginning January 1, 1997. SFAS 125 provides standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. The impact of the adoption of SFAS 125 upon the results of
operations of the Company is not expected to be material.
Allowance for Loan Losses
The allowance for loan losses provides for risks of losses inherent in the
credit extension process. Losses and recoveries are either charged or credited
to the allowance. The Company's allowance is an amount that management
believes will be adequate to absorb possible losses on existing loans that may
become uncollectible, based on evaluations of the collectibility of loans and
prior loan loss experience. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrower's ability to pay. The evaluations are
periodically reviewed and adjustments are recorded in the period in which
changes become known.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the related assets,
except for leasehold improvements for which the lesser of the estimated useful
life of the asset or the term of the lease is used. The useful lives used in
computing depreciation and amortization are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements 39
Furniture and equipment 7
Leasehold improvements 5 - 15
</TABLE>
Gains and losses on routine dispositions are reflected in current operations.
Maintenance, repairs and minor improvements are charged to operating expenses,
and major replacements and improvements are capitalized.
Other Real Estate
Other real estate owned ("ORE") represents property acquired through
foreclosure proceedings held for sale and real estate held for investment. ORE
is carried at its fair value, net of a valuation allowance established to
reduce cost to fair value. Losses are charged to the valuation allowance and
recoveries are credited to the allowance. Declines in market value and gains
and losses on disposal are reflected in current operations in ORE expense.
Recoverable costs relating to the development and improvement of ORE are
capitalized whereas routine holding costs are charged to expense. The sales of
these properties are dependent upon various market conditions. Management is
of the opinion that such sales will result in net proceeds at least equal to
present carrying values.
Accounting for Impairment of Long-Lived Assets
The FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of," which was effective for
the Company's fiscal year beginning January 1, 1996. SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles to be held and used
be reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable. If the sum of the
expected future cash flows from the use of the asset and its eventual
disposition is less than the carrying amount of the asset, an impairment loss
is recognized. SFAS No. 121 also requires that certain assets to be disposed
of be measured at the lower of carrying amount or the net realizable value.
The impact of adopting SFAS 121 upon the results of operations of the Company
was not material.
Income Taxes
The Company follows the liability method which establishes deferred tax assets
and liabilities for the temporary
F-8
<PAGE> 111
differences between the financial reporting bases and the tax bases of the
Company's assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled. Net deferred tax assets, whose
realization is dependent on taxable earnings of future years, are recognized
when a more-likely-than-not criterion is met, that is, unless a greater than
50% probability exists that the tax benefits will not actually be realized
sometime in the future.
Effective April 1, 1995, federal regulations restricted the amount of deferred
tax assets that can be used to meet regulatory capital requirements to an
amount that the institution expects to realize within one year, or 10% of Tier
1 capital, whichever is less.
The Company and its subsidiary file consolidated tax returns with the federal
and state taxing authorities. A tax sharing agreement exists between the
Company and the Bank whereby taxes for the Bank are computed as if the Bank
were a separate entity. Amounts to be paid or credited with respect to current
taxes are paid to or received from the Company.
Premium on Deposits
A premium on deposits is recorded for the difference between cash received and
the carrying value of deposits acquired in purchase transactions. This premium
is being amortized on a straight-line basis over 3 to 4 years. Approximately
$527,000 and $1,017,000 was included in other assets in the accompanying
financial statements, as of December 31, 1996 and 1995.
Stock-Based Compensation Plans
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25). Effective in 1996, the Company adopted the disclosure option of SFAS
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which requires
that companies not electing to account for stock-based compensation as
prescribed by the statement, disclose the pro forma effects on earnings and
earnings per share as if SFAS 123 had been adopted. Additionally, certain
other disclosures are required with respect to stock compensation and the
assumptions used are to determine the pro forma effects of SFAS 123.
Cash Equivalents
For purposes of preparing the Consolidated Statements of Cash Flows, cash
equivalents are defined to include cash and due from banks and federal funds
sold.
Reclassifications
Certain reclassifications have been made to prior period financial statements
to conform with the 1996 financial statement presentation.
F-9
<PAGE> 112
2. INVESTMENT SECURITIES:
The Company's investment securities consisted primarily of U.S. Treasury Bills
and Notes. The investment securities of the Company at December 31, 1996 and
1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996:
Securities available-for-sale:
U.S. Government Treasuries $ 72,905 $ - $ (53) $ 72,852
Revenue bond 1,545 - - 1,545
--------- --------- -------- ---------
Securities available-for-sale $ 74,450 $ - $ (53) $ 74,397
========= ========= ======== =========
AT DECEMBER 31, 1995:
U.S. Government Treasuries held to maturity $ 7,015 $ - $ (6) $ 7,009
U.S. Government Treasuries available for sale 38,121 27 (1) 38,147
--------- --------- -------- ---------
Total U.S. Treasuries & Federal Agency Notes $ 45,136 $ 27 $ (7) $ 45,156
======== ========= ======== =========
BOOK VALUE AT DECEMBER 31: 1996 1995
---- ----
Securities held to maturity $ - $ 7,015
Securities available-for-sale 74,397 38,147
------- -------
Total U.S. Treasuries $74,397 $45,162
======= =======
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1996, by contractual maturity are shown below (in thousands):
<TABLE>
<CAPTION>
Available-for-Sale
------------------------------------------------
Estimated Weighted
Amortized Market Average
Cost Value Yield
-------- --------- -------
<S> <C> <C> <C>
Due in 1 year or less $ 61,367 $ 61,358 4.84%
Due after 1 year through 5 years 13,083 13,039 6.02
-------- --------
Total $ 74,450 $ 74,397 5.05%
======== ========
</TABLE>
Proceeds from sales of U.S. Treasury and Federal Agency Notes during the years
ended 1996, 1995 and 1994, were $7,545,000, $2,972,000, and $6,991,000,
respectively. Gross losses of $0, $27,891 and $0 were realized for the years
ended December 31, 1996, 1995 and 1994. Gross gains of $45,404, $0, and
$1,094, were realized during the years ended December 31, 1996, 1995 and 1994,
respectively. U.S. Treasuries and Federal Agency Notes with a par value of
$19,000,000 and $8,000,000 at December 31, 1996 and 1995, respectively, were
pledged to secure public deposits and for other purposes.
F-10
<PAGE> 113
3. MORTGAGE BACKED SECURITIES:
Mortgage-backed securities ("MBS"), sometimes referred to as pass-through
certificates, represent an interest in a pool of loans. The securities are
issued by three government agencies or corporations: (i) the Government
National Mortgage Association ("GNMA"), (ii) the Federal Home Loan Mortgage
Corporation ("FHLMC") and (iii) the Federal National Mortgage Association
("FNMA"). During 1996 and 1995 the Company securitized loans with a carrying
value of $6,282,000 and $30,048,000, respectively, through FHLMC. The
Company's MBS portfolio at December 31, 1996 consisted solely of variable rate
securities issued by GNMA, and payments on those securities are backed by that
government agency. MBS securities held to maturity are recorded at amortized
cost, while securities available-for-sale are recorded at estimated market
value. Mortgage backed securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996:
GNMA held to maturity $ - $ - $ - $ -
GNMA available for sale 20,105 - (101) 20,004
--------- -------- ---------- --------
Total mortgage backed securities $ 20,105 $ - $ (101) $ 20,004
========= ======== ========== ========
AT DECEMBER 31, 1995:
FHLMC held to maturity $ 17,112 $ 114 $ (20) $ 17,206
FHLMC available for sale 2,540 - (13) 2,527
--------- -------- ---------- --------
Total mortgage backed securities $ 19,652 $ 114 $ (33) $ 19,733
========= ======== ========== ========
BOOK VALUE AT DECEMBER 31: 1996 1995
---- ----
Securities held to maturity $ - $ 17,112
Securities available-for-sale 20,004 2,527
-------- --------
Total MBS $ 20,004 $ 19,639
======== ========
</TABLE>
At December 31, 1996 all MBS securities available for sale were scheduled to
reprice in one year or less.
The amortized cost and estimated market value of the MBS portfolio at December
31, 1996, by contractual maturity are shown below (in thousands). Actual
maturities may differ from contractual maturities as a result of prepayments of
the underlying mortgages:
<TABLE>
<CAPTION>
Available-for-Sale
-------------------------------------
Estimated Weighted
Amortized Market Average
Cost Value Yield
--------- -------- -------
<S> <C> <C> <C>
Due after 10 years $ 20,105 $ 20,004 5.53%
-------- --------
Total $ 20,105 $ 20,004 5.53%
======== ========
</TABLE>
During 1996, the Company sold FHLMC securities, with an amortized cost of
$15,455,000, which had previously been classified as "Held-to-Maturity",
recording net gains of $300,201, and purchased GNMA securities. The purpose of
this transaction was to reduce the Company's capital requirements. As a
result, and in compliance with SFAS 115 "Accounting for Certain Investments in
Debt and Equity Securities", all investment securities are classified as
"available-for-sale" as of December 31, 1996.
Proceeds from sales of MBS securities during the years ended December 31, 1996
and 1995 were $21,077,000 and $9,732,000, respectively. Gross gains of
$354,837 and $55,038 and gross losses of $31,845 and $0, respectively, were
realized on these sales. None of the MBS securities were pledged to secure
public deposits or for other purposes at December 31, 1996.
F-11
<PAGE> 114
4. LOANS AND LOANS HELD FOR SALE:
Loans at December 31, 1996 and 1995, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Real estate mortgage loans:
One-to-four family residential $ 385,701 $ 386,524
Multi-family residential 70,967 77,802
Commercial real estate 182,298 153,193
Construction/land development 27,050 13,974
Commercial loans 34,617 29,898
Consumer loans 9,860 6,798
Other loans 1,294 2,367
---------- ----------
Total gross portfolio loans 711,787 670,556
Less-allowance for loan losses (Note 5) (13,134) (14,910)
Less-premiums and unearned discounts on loans purchased (4,731) (4,561)
Less-unamortized loan fees (652) (1,290)
--------- ----------
Total loans held for portfolio 693,270 649,795
Residential loans held for sale 36,590 4,711
---------- ----------
Total loans $ 729,860 $ 654,506
========== ==========
</TABLE>
As of December 31, 1996, the Company had $36,590,000 of 1-4 residential
mortgage loans available for sale with a weighted average interest rate of
8.72%. As of December 31, 1995 loans available for sale were approximately
$4,711,000, which approximated market value, with a weighted average interest
rate of 7.47%. Mortgage loans serviced for others as of December 31, 1996 and
1995 were $120,711,000 and $39,951,000, respectively.
Loans on which interest was not being accrued totaled approximately
$15,351,000, $14,504,000, and $12,948,000 at December 31, 1996, 1995 and 1994,
respectively. Had interest been accrued on these loans at their originally
contracted rates, interest income would have been increased by approximately
$1,138,000, $1,329,000, and $647,000 in the years ended December 31, 1996, 1995
and 1994, respectively. Loans past due 90 days or more and still accruing
interest at December 31, 1996 and 1995, totaled approximately $113,000 and
$1,876,000, respectively. The Company restructured loans totaling $2,516,000
and $145,000 during 1996 and 1995, respectively.
5. ALLOWANCE FOR LOAN LOSSES:
Changes in the allowance for loan losses were as follows (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
BALANCE,
beginning of period $ 14,910 $ 7,065 $ 6,539
Provision for possible
loan losses 1,800 1,685 1,575
Discount on purchased loans
allocated to (from) loan
loss reserve (1,732) 7,658 643
Loans charged off (2,110) (1,947) (1,870)
Recoveries of loans
charged off 266 449 178
-------- --------- ---------
BALANCE,
end of period $ 13,134 $ 14,910 $ 7,065
======== ======== ========
</TABLE>
F-12
<PAGE> 115
While management believes that the allowance for loan losses is adequate at
December 31, 1996, based on currently available information, future additions
to the allowance may be necessary due to changes in economic conditions,
deterioration of creditworthiness of the borrower, the value of underlying
collateral or other factors. Additionally, the Florida Department of Banking
and Finance, the FDIC, and the Federal Reserve, as an integral part of their
regular examination process, periodically review the allowance for loan losses.
These agencies may require additions to the allowance based on their judgments
about information available to them at the time of examination.
The portion of the allowance for loan losses which arose due to the allocation
of discounts on purchased loans may only be used to absorb losses on the
related acquired loans. As of December 31, 1996 and 1995, approximately
$7,150,000 and $10,249,000 of the reserve had arisen through an allocation of
discounts on purchased loans.
6. PREMISES AND EQUIPMENT:
Premises and equipment at December 31, 1996 and 1995, included (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land $ 4,951 $ 4,951
Buildings and improvements 9,216 8,671
Furniture and equipment 7,371 6,120
Leasehold improvements 1,051 903
Construction in progress 268 11
-------- --------
Total premises and equipment 22,857 20,656
Less-accumulated depreciation and amortization (3,142) (1,665)
-------- ---------
Premises and equipment, net $ 19,715 $ 18,991
======== ========
</TABLE>
7. OTHER REAL ESTATE (ORE):
State banking regulations require the Company to dispose of all ORE acquired
through foreclosure within five years of acquisition, with a possibility for
additional extensions, each of up to five years. Failure to receive additional
extensions could result in losses on ORE. There were two ORE properties
totaling $4,477,000 at December 31, 1996, which were required to be disposed of
by year-end. The Company has been granted an extension on these properties by
the State. As of December 31, 1996, a third property, in the amount of
approximately $254,000, is required to be disposed of no later than December
31, 1997. Management expects an extension will also be granted by the State on
this property if not sold. In addition, federal banking regulations had
required the Bank to dispose of one of these properties amounting to $3,200,000
by December 31, 1996 but the FDIC has granted an extension of the holding
period to December 19, 1997. While the current appraisal on this property
indicates that the market value of the tract exceeds its book value, a sale to
a party other than an end-user could result in proceeds below the current book
value.
During 1995, the former headquarter building was vacated and that space was
leased to a third party. Since that building was no longer used for banking
purposes, approximately $2,498,000 was transferred from premises and equipment
to ORE held for investment. During 1996, this building was sold and a gain of
$1,207,000 was recorded.
Loans converted to ORE through foreclosure proceedings totaled $6,910,000, and
$2,639,000, for the years ended December 31, 1996 and 1995, respectively.
Sales of ORE that were financed by the Company totaled $3,676,000 and
$1,358,000 for the years ended December 31, 1996 and 1995, respectively.
F-13
<PAGE> 116
Changes in the valuation allowance for ORE were as follows (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
BALANCE, beginning of period $ 966 $ 1,170 $ 1,718
Provision 1,611 - 10
Charge-offs (63) (204) (558)
------- ------- -------
BALANCE, end of period $ 2,514 $ 966 $ 1,170
======= ======= =======
</TABLE>
8. INCOME TAXES:
Income taxes are comprised of the following (in thousands):
<TABLE>
<CAPTION>
For the
Years Ended
December 31,
----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current provision $ 3,744 $ 2,899 $ 2,612
Deferred benefit (1,512) (1,024) (2,144)
------- ------- -------
$ 2,232 $ 1,875 $ 468
======= ======= =======
</TABLE>
At December 31, 1996, the Company had approximately $670,000 of remaining
federal and $2,393,000 of state net operating loss carryforwards. These
carryforwards expire in the years 2006 through 2008.
Following the change of ownership in 1993, recognition of net operating loss
carryforwards were limited to approximately $259,000 each year. If the full
amount of the limitation is not used in any years, the amount not used
increases the allowable limit in the subsequent year.
Deferred tax assets and liabilities were comprised of the following at December
31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Gross deferred tax assets:
Tax bases over financial bases for loans
(loan loss reserve & discounts) $ 2,329 $ 1,230
Financial amortization of premium over tax amortization 646 533
Interest on non-accrual loans 315 250
Tax bases over financial bases for ORE 1,286 634
Net operating losses and tax credit carryforward 314 411
Mark-to-market-loans held for sale 232 -
Other 145 160
-------- -------
Gross deferred tax asset 5,267 3,218
Gross deferred tax liabilities 567 93
-------- -------
Net deferred tax asset $ 4,700 $ 3,125
======== =======
</TABLE>
The valuation allowance for the deferred tax asset decreased by $177,000 and
$1,427,000 for the years ended December 31, 1995 and 1994, respectively. The
net deferred tax asset increased during 1996 and 1995 by approximately $63,000
and $38,000, respectively, relating to the unrealized gain on available for
sale securities which is recorded directly to stockholders' equity.
F-14
<PAGE> 117
The Company's effective tax rate varies from the statutory rate of 34 percent.
The reasons for this difference are as follows (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax
provision $ 2,045 $ 2,600 $ 2,505
Increase (reduction) of taxes:
Tax-exempt interest
income (22) (27) (29)
Valuation allowance - (177) (1,427)
Amortization of excess
of fair value over
purchase price - (536) (1,017)
State taxes 217 216 265
Other (8) (201) 171
------- ------- --------
Total $ 2,232 $ 1,875 $ 468
======= ======= ========
</TABLE>
9. SUBORDINATED DEBT:
On December 27, 1996, the Company issued $6,000,000 in convertible subordinated
debentures at a fixed interest rate of 6.00%, interest payable semi-annually,
with a maturity of December 1, 2011. The Company has the right to redeem the
debentures beginning in 2001 at 106% of face value, with the premium declining
1% per year thereafter and without any premium if the price of the Company's
common stock equals or exceeds 130% of the conversion price for not less than
20 consecutive trading days. The debentures are convertible by the holder at
any time prior to maturity into the Company's $2.00 par value common stock at a
conversion price of $17.85714 per share (equivalent to a conversion rate of 56
common shares per $1,000 principal amount of debentures). The Company incurred
$213,000 in issuance costs which will be amortized over 36 months.
10. OFF-BALANCE-SHEET RISK, COMMITMENTS AND CONTINGENCIES:
Concentration of Credit Risk
The Company's core customer loan origination base is located along the west
coast and in central Florida. The majority of the Company's purchased loan
portfolio is concentrated in the states of Florida, California, Texas, and in
the northeastern United States. At December 31, 1996 and 1995, approximately
94 percent of the Company's loan portfolio was secured by real estate.
Mortgage loans secured by 1-4 family properties comprised approximately 60 and
61 percent, respectively, of total mortgage loans at December 31, 1996 and
1995.
Off-Balance-Sheet Items
The Company enters into financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to limit exposure to changes in the value of loans held for sale. These
financial instruments include commitments to extend credit, commercial and
standby letters of credit, and forward contracts for the delivery of loans.
These instruments involve, to varying degrees, elements of credit and
interest-rate risk that are not recognized in the accompanying consolidated
balance sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments discussed above is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments.
F-15
<PAGE> 118
A summary of financial instruments with off-balance-sheet risk at December 31,
1996, is as follows (in thousands):
<TABLE>
<CAPTION>
Contractual
Amount
-----------
<S> <C>
Commitments to extend credit $ 51,754
Unfunded lines of credit 64,604
Commercial and standby letters of credit 7,415
---------
Total $ 123,773
=========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the agreement.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary upon extension of credit is based on management's
credit evaluation of the counterparty. Collateral held varies but may include
premises and equipment, inventory and accounts receivable. Unfunded lines of
credit represent the undisbursed portion of lines of credit which have been
extended to customers.
Commercial and standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a third party which
typically do not extend beyond one year. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers. The Company typically holds certificates of deposit
as collateral supporting those commitments, depending on the strength of the
borrower. Outstanding unsecured standby letters of credit at December 31,
1996, totaled approximately $1,376,000.
At December 31, 1996, in connection with managing the interest rate market risk
on its loans held for sale and Locked Loans totaling $37,416,000, the Company
had outstanding $15,000,000 (estimated fair value of $15,165,000) of Forward
Commitments which expire over the next two months, the period when the loans
are expected to be sold and Locked Loans are expected to close.
The Company reduces its risk of nonperformance under the hedging contracts by
entering into those contracts with reputable security dealers and investors and
evaluating their financial condition. However, there is a risk that certain of
the Locked Loans do not close or are renegotiated in a declining interest rate
market and close at lower prices. The Company reduces this risk by collecting
nonrefundable commitment fees on certain of the Locked Loans and enters into
Forward Commitments to deliver loans to investors primarily on a best efforts
basis.
Commitments
The Company has entered into a number of noncancelable operating leases
primarily for branch banking locations. At December 31, 1996, minimum rental
commitments based on the remaining noncancelable lease terms were as follows
(in thousands):
<TABLE>
<S> <C>
1997 $ 2,008
1998 1,809
1999 1,432
2000 1,186
2001 1,123
Thereafter 3,839
-------
11,397
Less-sublease rentals (1,063)
-------
$10,334
=======
</TABLE>
F-16
<PAGE> 119
Total rent expense for the years ended December 31, 1996, 1995 and 1994 was
$1,653,000, $1,009,000, and $435,000, respectively. Total rental income from
subleases for the years ended December 31, 1996, 1995 and 1994 was $971,000,
$1,113,000, and $1,132,000, respectively.
During 1994 a capital lease obligation of approximately $981,000 was incurred
related to the leasing of data processing equipment with an implicit rate of
7.49%. Minimum lease payments under this capital lease are approximately
$214,000 in each of the years 1997, 1998 and $107,000 in 1999. In addition,
the Company is obligated to make processing payments in relation to its
computer facilities of approximately $966,000 in each of the years 1997 and
1998, $1,073,000 in 1999, $1,181,000 in 2000, and $197,000 in 2001.
Contingencies
The Company is subject to various other legal proceedings and claims which
arise in the normal course of business. In the opinion of management, the
amount of liability with respect to these other proceedings would not have a
material effect on the financial statements.
11. EMPLOYEE BENEFIT PLANS
On January 1, 1987, a retirement plan was adopted, covering substantially all
employees, which includes a 401(k) arrangement. Each employee of the Company
automatically becomes eligible to participate in the savings plan on the
January 1 immediately following the date on which such employee attains the age
of 18 and completes six months of service. An employee must complete 1,000
hours of service during each subsequent plan year, and failure to complete
1,000 hours of service in a subsequent plan year will constitute a "one year
break in service" and a forfeiture of eligibility to participate in the plan.
Employees' before-tax contributions are limited based on restrictions
established by the Internal Revenue Service. Employees also may elect to make
after-tax contributions to their account. In each plan year, the Company will
make matching contributions to each account equal to 25% of the employees
elective contributions, but only up to the amount that does not exceed 6% of
compensation. Beginning January 1, 1997, if the Company attains a return on
equity in excess of 10.0% for a quarterly period, the matching contribution
will be increased to 50% for that period, concurrently. Employees are 100%
vested at all times in their contributions and regular matching contributions.
In addition, the 401(k) arrangement plan permits the Company to contribute a
discretionary amount to all of the participants for any plan year, and that
contribution will be allocated among the participants based upon their
respective shares of the total compensation paid during the plan year to all
participants eligible. The Company's contributions were $108,900, $58,200, and
$38,500 in the years ended December 31, 1996, 1995 and 1994, respectively.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Generally, the Company's practice and intent is to hold its financial
instruments to maturity, unless otherwise designated. Where available, quoted
market prices are used to determine fair value. However, many of the Company's
financial instruments lack quoted market prices. Although the Company has
incorporated what it considers to be appropriate estimation methodologies for
those financial instruments which lack quoted market prices, a significant
number of assumptions must be used in determining such estimated fair values.
Such assumptions include subjective assessments of current market conditions,
perceived risks associated with these financial instruments and other factors.
Different assumptions might be considered by the user of the financial
statements to be more appropriate, and the use of alternative assumptions or
estimation methodologies could have a significant effect on the resulting
estimated fair values. The estimated fair values presented neither include nor
give effect to the values associated with the Company's business, existing
customer relationships, and branch banking network, amount other things.
The following estimates of the fair value of certain financial instruments held
by the Company include only instruments that could reasonably be evaluated.
The investment securities portfolio was evaluated using market quotes as of
December 31, 1996 and 1995. The fair value of the loan portfolio was evaluated
using market
F-17
<PAGE> 120
quotes for similar financial instruments, where available. Otherwise,
discounted cash flows, after adjusting for credit deterioration, were used
based upon current rates the Company would use in extending credit with similar
characteristics. These rates may not necessarily be the same as those which
might be used by other financial institutions for similar loans. Cash and due
from banks and federal funds sold were valued at cost. The fair values
disclosed for checking accounts, savings accounts, securities sold under
agreements to repurchase, and certain money market accounts are, by definition,
equal to the amount payable on demand at the reporting date, i.e., their
carrying amounts. Fair values for time deposits are estimated using a
discounted cash flow calculation that applies current interest rates to
aggregated expected maturities. Standby letters of credit and commitments to
extend credit were valued at book value as the majority of these instruments
are based on variable rates.
These evaluations may incorporate specific value to the Company in accordance
with its asset/liability strategies, interest rate projections and business
plans at a specific point in time and therefore, should not necessarily be
viewed as liquidation value. They should also not be used in determining
overall value of the Company due to undisclosed and intangible aspects such as
business and franchise value, and due to changes to assumptions of interest
rates and expected cash flows which might need to be made to reflect
expectations of returns to be earned on instruments with higher credit risks.
The table below illustrates the estimated fair value of the Company's financial
instruments as of December 31 using the assumptions described above (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash and due from banks $ 27,810 $ 19,806
========== =========
Interest bearing deposits in banks 118 2
========== =========
Investment securities 94,401 68,429
========== =========
Federal funds sold 8,000 14,621
========== =========
Loans 754,445 681,163
========== =========
Mortgage servicing rights 1,690 113
========== =========
Deposits 830,562 746,904
========== =========
Securities sold under agreements to repurchase 15,372 3,072
========== =========
Subordinated debt 6,000 -
==========
Standby letters of credit 7,415 6,178
========== =========
Commitments to extend credit and unfunded lines of credit 116,358 103,076
========== ========
</TABLE>
13. STOCKHOLDERS' EQUITY:
Perpetual Preferred Convertible Stock
The Company has 75,000 outstanding shares of perpetual preferred convertible
stock. The preferred stock has a liquidation preference of $88 per share and
carries a noncumulative dividend of $3.52 per year, payable quarterly.
Dividends on the preferred stock must be paid before any dividends on common
stock can be paid. Beginning December 16, 1994 and thereafter, the preferred
stock can be converted by the holders into 10 shares of common stock for each
share of preferred stock. The preferred stock was redeemable at the option of
the Company through December 16, 1996, at a price of $96.80 per share. The
holders of the preferred stock vote with the holders of the common stock and
are entitled to 10 votes per share of preferred stock.
Dividends
Florida Statutes limit the amount of dividends the Bank can pay in any given
year to that year's net income plus retained net income from the two preceding
years. Additionally, the Bank and the Company cannot pay dividends which would
cause either to be undercapitalized as defined by federal regulations.
F-18
<PAGE> 121
1995 Rights and Public Stock Offerings
On June 27, 1995, an offering was completed to the public and to the
stockholders of 800,000 shares of the $2.00 par value Common Stock. The Common
Stock was offered through a combined subscription Rights Offering and an
underwritten Public Offering (the "Offerings"). The number of shares
subscribed for in the Rights Offering totaled 287,049 with 512,951 shares sold
in the Public Offering. The price per share was $12.50 for the Offerings and
net proceeds amounted to $9,137,000.
1993 Non-qualified Stock Option Plan
On May 28, 1993, the Company adopted a non-qualified stock option plan (the
Option Plan) which reserved 80,000 shares of common stock for future issuance
under the Option Plan to eligible employees of the Company. As of December 31,
1996, 60,000 options were granted under the Option Plan and 35,000 were
outstanding. The per share exercise price of each stock option is determined
by the Board of Directors at the date of grant. The plan terminates in 2003 or
at the discretion of the Board of Directors.
1995 Incentive Stock Option Plan
On April 29, 1994, the shareholders approved a qualified incentive stock option
plan to certain key employees. In connection with the Company's holding
company reorganization and share exchange in which all of the Company's
stockholders became stockholders of the Company, the Company adopted the
Republic Bancshares, Inc. 1995 Stock Option Plan (the "Plan") as a replacement
for the Company's 1994 Stock Option Plan. The Plan was approved by the
stockholders of the Bank at the Bank's Special Meeting held on February 27,
1996. On April 23, 1996, the shareholders approved certain amendments to the
Plan (the "Amendment"). Under the Amendment, the total number of shares that
may be purchased pursuant to the plan cannot exceed 525,000 over the life of
the plan and provides that the maximum number of options granted to any one
individual in any fiscal year under the plan cannot exceed 62,000. There is no
limitation on the annual aggregate number of options to be granted in any
fiscal year. Each option granted under the plan will be exercisable by the
grantee during a term, not to exceed ten years, fixed by the compensation
committee of the Board of Directors ("the Committee"). However, no more than
20% of the shares subject to such options shall vest annually beginning at date
of grant. However, in the event of a change in control, or termination of
employment without cause, all options granted become exercisable immediately.
Options under the plan, which have been granted to the employees of the
Flagship/Capital mortgage banking division of the Company, vest at the rate of
20% at the end of each 12 month period over five years, contingent upon that
division meeting specified net income performance goals as set by the Board of
Directors. If the performance goal for each year is not met, then the options
that would have become exercisable at the end of the 12 month period shall
expire and be null and void. In addition, options granted to employees of this
division shall not vest and become exercisable if there is a change in control
or a termination of employment without cause, until the performance goal for at
least one year has been met.
Upon the grant of an option to a key employee, the Committee will fix the
number of shares of common stock that the grantee may purchase upon exercise of
the option, and the price at which the shares may be purchased. The exercise
price for all options shall not be less than the fair market value. During
1996, 1995 and 1994, options to purchase 270,900, 59,700 and 46,450 shares,
respectively, under the incentive stock option plan were granted. Of the
options previously granted, 12,460 shares have expired through the termination
of key employees without having exercised their options, thereby making these
options available for future grants. As of December 31, 1996, 361,470 options
remained outstanding.
Aggregate Stock Option Activity
The Company adopted SFAS 123 for disclosure purposes in 1996. For SFAS 123
purposes, the fair value of each option grant has been estimated as of the date
of grant using the Black-Scholes option pricing model with the following
assumptions (weighted averages): risk-free interest rate of 6.42 percent,
expected life of 7 years, dividend rate of zero percent, and expected
volatility of 23 percent. Using these assumptions, the fair value of the stock
options granted in 1996 and 1995 is $1,583,000 and $346,900, respectively,
which would be amortized
F-19
<PAGE> 122
as compensation expense over the vesting period of the options. Options vest
equally over five years. Had compensation cost been determined consistent with
SFAS 123, utilizing the assumptions detailed above, the Company's net income
and earnings per share as reported would have been the following pro forma
amounts (in thousands except share data):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Income
As reported $3,784 $5,773
Pro forma 3,588 5,730
Earnings per share
As reported 0.76 1.26
Pro forma 0.72 1.26
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that expected in future years. A summary of the
status of the Company's stock option plans at December 31, 1996, 1995 and 1994
and for the years then ended is presented in the table and narrative below:
<TABLE>
<CAPTION>
1994 1995 1996
------------------------------------------------------------------------
Wtd Avg Wtd Avg Wtd Avg
Shares Ex Price Shares Ex Price Shares Ex Price
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Options
-------------
Outstanding - beg. of year 50,000 $ 6.44 81,500 $ 8.75 131,810 $11.00
Granted 46,450 10.50 59,700 14.00 70,900 13.63
Exercised (14,950) 6.46 (3,170) 9.58 - -
Forfeited - - (6,220) 11.06 (6,240) 13.42
Expired - - - - - -
-------- -------- -------
Outstanding - end of year 81,500 8.75 131,810 11.00 196,470 11.87
======== ======== =======
Exercisable - end of year 14,340 9.41 45,112 9.07 92,530 10.29
Wtd. avg. fair value
of options granted 5.81 5.84
Performance Options
-------------------
Outstanding - beg. of year - - - - - $ -
Granted - - - - 200,000 13.63
Exercised - - - - - -
Forfeited - - - - - -
Expired - - - - - -
-------- ------- -------
Outstanding - end of year - - - 200,000 13.63
======== ======= =======
Exercisable - end of year - - - - - -
Wtd. avg. fair value
of options granted 5.84
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- --------------------------------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/31/96 Contractual Life Exercise Price at 12/31/96 Exercise Price
--------------- ----------- ---------------- ------------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
5.40-10.50 72,370 6.89 years $ 8.57 56,630 $ 8.04
13.63-14.00 324,100 9.21 years 13.69 35,900 13.86
</TABLE>
F-20
<PAGE> 123
14. EARNINGS PER SHARE:
Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share has been computed by dividing
net income by the weighted average common and common equivalent shares
outstanding during the periods. The weighted average common and common
equivalent shares outstanding has been adjusted to include the number of shares
that would have been outstanding if the stock options granted had been
exercised, with the proceeds being used to buy shares from the market (i.e.,
the treasury stock method) and the perpetual preferred convertible stock had
been converted to common stock at the earlier of the beginning of the year or
the issue date (i.e., the if-converted method). Net income per common and
common equivalent shares represents both primary and fully diluted per share
information.
15. REGULATORY CAPITAL REQUIREMENTS
The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve (for the Company) and the FDIC
(for the Bank). There are three basic measures of capital adequacy for banks
that have been promulgated by the Federal Reserve; two risk-based measures and
a leverage measure. All applicable capital standards must be satisfied for a
bank holding company to be considered in compliance.
The minimum guidelines for the ratio ("Risk-Based Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital (i.e., 4.0% of risk-weighted assets) must comprise common
stock, minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for banks that meet certain
specified criteria, including having the highest regulatory rating. All other
bank holding companies generally are required to maintain a Leverage Ratio of
at least 3.0%, plus an additional cushion of 100 to 200 basis points. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve
has indicated that it will consider a "tangible Tier I Capital leverage ratio"
(deducting all intangibles) and other indicators of capital strength in
evaluating proposals for expansion or new activities.
The Bank had previously undertaken in writing to the FDIC to achieve a Leverage
Ratio of at least 5.50% by September 30, 1995, which it did, and will consider
raising additional capital or reducing internal growth should the ratio fall
below that level in the future. The Company's leverage ratio requirement
remains at 5.00%. Other than the foregoing commitment, the Bank has not been
advised by the FDIC of any specific minimum capital ratio requirement
applicable to it.
Failure to meet capital guidelines could subject a bank or a bank holding
company to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on
the taking of brokered deposits, and certain other restrictions on its
business. Substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements under
the federal prompt corrective action regulations.
F-21
<PAGE> 124
As of December 31, 1996 and 1995, the Company and the Bank were considered
"well capitalized" under the federal banking agencies for prompt corrective
action regulations. The table which follows sets forth the amounts of capital
and capital ratios of the Company and the Bank as of December 31, 1996 and
1995, and the applicable regulatory minimums (in thousands):
<TABLE>
<CAPTION>
COMPANY BANK
-------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C>
As of December 31, 1996:
RISK-BASED CAPITAL:
Tier 1 Capital
Actual $51,325 8.82% $57,113 9.82%
Minimum required to be "Adequately Capitalized" 23,268 4.00 23,260 4.00
Excess over minimum to be "Adequately Capitalized" 28,057 4.82 33,853 5.82
To be "Well Capitalized" 34,902 6.00 34,890 6.00
Excess over "Well Capitalized" requirements 16,423 2.82 22,223 3.82
Total Capital
- ---------------
Actual 64,630 11.11 64,418 11.08
Minimum required to be "Adequately Capitalized" 46,536 8.00 46,519 8.00
Excess over minimum to be "Adequately Capitalized" 18,094 3.11 17,899 3.08
To be "Well Capitalized" 58,170 10.00 58,149 10.00
Excess over "Well Capitalized" requirements 6,460 1.11 6,269 1.08
TIER 1 CAPITAL TO TOTAL ASSETS (LEVERAGE):
Actual 51,325 5.90 57,113 6.57
Minimum required to be "Adequately Capitalized" 34,807 4.00 34,798 4.00
Excess over minimum to be "Adequately Capitalized" 16,518 1.90 22,315 2.57
To be "Well Capitalized" 43,509 5.00 47,848 5.50
Excess over "Well Capitalized" requirements 7,816 0.90% 9,265 1.07
As of December 31, 1995:
RISK-BASED CAPITAL:
Tier 1 Capital
- ----------------
Actual N/A N/A 47,940 9.17
Minimum required to be "Adequately Capitalized" N/A N/A 20,904 4.00
Excess over minimum to be "Adequately Capitalized" N/A N/A 27,036 5.17
To be "Well Capitalized" N/A N/A 31,356 6.00
Excess over "Well Capitalized" requirements N/A N/A 16,584 3.17
Total Capital
- ---------------
Actual N/A N/A 53,833 10.30
Minimum required to be "Adequately Capitalized" N/A N/A 41,809 8.00
Excess over minimum to be "Adequately Capitalized" N/A N/A 12,024 2.30
To be "Well Capitalized" N/A N/A 52,260 10.00
Excess over "Well Capitalized" requirements N/A N/A 1,573 0.30
TIER 1 CAPITAL TO TOTAL ASSETS (LEVERAGE):
Actual N/A N/A 47,940 6.00
Minimum required to be "Adequately Capitalized" N/A N/A 31,962 4.00
Excess over minimum to be "Adequately Capitalized" N/A N/A 15,978 2.00
To be "Well Capitalized" N/A N/A 43,948 5.50
Excess over "Well Capitalized" requirements N/A N/A 3,992 0.50%
</TABLE>
F-22
<PAGE> 125
16. RELATED PARTY TRANSACTIONS
William R. Hough, a director and one of the two controlling shareholders, is
President and the controlling shareholder of William R. Hough & Co., an
NASD-member investment banking firm. In December 1996, the Company offered
$6,000,000 of convertible subordinated debentures through a private placement
on a "best efforts" basis exclusively through William R. Hough & Co. as "Sales
Agent" for the Company. The sales agent agreement provided for the payment to
William R. Hough & Co. of a fee of 1.50% for each $1,000 principal amount of
debentures sold to directors of the Company or their spouses and 3% for each
$1,000 of debentures sold to all others. The total amount of fees paid to
William R. Hough & Company for the sale of the debentures was $162,000. In
addition, the Company agreed to indemnify the sales agent against and
contribute toward certain liabilities, including liabilities under the
Securities Act, and to reimburse William R. Hough & Co. for certain expenses
and legal fees related to the sale of the debentures of approximately $51,000.
In July 1996, William R. Hough & Co. began offering sales of insurance and
mutual fund products and investment advisory services on the premises of the
Company. The Company was paid a monthly fee of $300 for each banking office
participating in the program plus a fee of 15% of the gross commissions earned
from sales of non-insurance products. On January 1, 1997, this agreement was
terminated and replaced with a new agreement where the Company will be paid 50%
of the net profits earned from sales of investment products on the Company's
premises.
In June 1995, in connection with a rights offering of the Company Common Stock
conducted by the Company, William R. Hough & Co. participated as a soliciting
dealer, and as such was entitled to receive solicitation fees in an amount
equal to approximately $11,900. William R. Hough & Co. also participated in
the selling group for the public offering of the Company Common Stock that took
place in conjunction with the rights offering. In connection with the public
offering, William R. Hough & Co. received approximately $18,000 in discounts
and other fees.
In addition, WRH Mortgage, Inc., a related interest of William R. Hough, acted
as the Company's agent in the purchase of two loan pools from the Resolution
Trust Corporation on May 23, 1995 and was paid due diligence fees totaling
$39,997. The Company also entered into an agreement with William R. Hough &
Co. on August 15, 1995 to periodically purchase securities under agreement to
repurchase at a rate based on the prevailing federal funds rate plus 1/8 of 1%.
Certain directors and executive officers of the Company and Bank, members of
their immediate families, and entities with which such persons are associated
are customers of the Bank. As such, they had transactions in the ordinary
course of business with the Bank during 1996 and will have additional
transactions in the future. All loans and commitments to lend included in
those transactions were made in the ordinary course of business, upon
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and, in
the opinion of management, have not involved more than the normal risk of
collectibility or presented other unfavorable features.
F-23
<PAGE> 126
17. BANK HOLDING COMPANY FINANCIAL STATEMENTS:
Condensed financial statements of the Company (Republic Bancshares, Inc.) are
presented below. Amounts shown as investment in the wholly-owned subsidiary
and equity in earnings of the subsidiary are eliminated in consolidation.
REPUBLIC BANCSHARES, INC.
PARENT-ONLY CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996
----
ASSETS
<S> <C>
Cash $ 0
Investment in wholly-owned subsidiary 60,111
Prepaid issuance costs-subordinated debt 212
--------
Total $ 60,323
========
LIABILITIES
Subordinated debt $ 6,000
Accrued interest on subordinated debt 4
--------
Total liabilities 6,004
--------
STOCKHOLDERS' EQUITY
Perpetual preferred convertible stock 1,500
Common stock 8,367
Capital surplus 26,699
Retained earnings 17,849
Unrealized losses on available-for-sale securities (96)
--------
Total stockholders' equity 54,319
--------
Total $ 60,323
========
</TABLE>
<TABLE>
<CAPTION>
PARENT-ONLY CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
INCOME 1996
----
<S> <C>
Dividends from bank $ 264
Interest expense on subordinated debt (5)
Equity in undistributed net income
of subsidiary 3,525
--------
Net Income $ 3,784
========
</TABLE>
F-24
<PAGE> 127
18. MERGERS AND ACQUISITIONS
On December 19, 1996, the Company announced that an agreement had been reached
for the acquisition of Firstate Financial, F.A. ("Firstate"), a thrift
institution headquartered in Orlando, Florida, for a cash purchase price of
$5,501,000. Firstate is not publicly traded. The agreement is subject to
final approval by the Department, FDIC and FRB. At December 31, 1996, Firstate
had total assets of $103,624,000 (unaudited) and total deposits of $84,842,000
(unaudited). Firstate currently maintains a branch office in downtown Orlando
and an office in Winter Park, Florida. The acquisition will be accounted for
using purchase accounting rules.
On March 10, 1997, the Company and F.F.O. Financial Group, Inc., St. Cloud,
Florida ("FFO") announced their board of directors had executed a letter of
intent for the combination of the two companies. FFO has 11 branch offices in
Osceola, Orange and Brevard counties with total assets of $316,949,000 and
total deposits of $286,927,000. Mr. William R. Hough, president of an
investment banking firm in St. Petersburg, Florida, owns a controlling interest
in both companies. Under the terms of the letter of intent, the Company will
exchange shares of Company Common Stock for all of the 8,430,000 outstanding
shares of FFO common stock at a ratio of 0.29 share of the Company for each
share of FFO. In the event that the product of the exchange ratio and the
average closing price of the Company Common Stock on each of the twenty
consecutive trading days ending on the third business day preceding the
effective date of the transaction is below $4.10, the exchange ratio will be
adjusted for decreases in the price of the Company Common Stock price; however,
in no event will the exchange ratio exceed 0.30. FFO has the right to
terminate the agreement if the average of the Company's stock price is less
than $13.50. Either party has the right to terminate the agreement if the
merger does not occur by November 1, 1997. Outstanding options for FFO common
stock will be converted into options for Company Common Stock on the same
basis. The transaction will be accounted for as a corporate reorganization
under which the controlling shareholder's interest in FFO will be carried
forward at its historical cost while the minority interest in FFO will be
recorded at fair value. The transaction is subject to completion of a
definitive agreement, shareholder approval by the parties, approval by various
regulatory authorities, receipt of opinion that the transaction qualifies as a
tax-free reorganization, and receipt of fairness opinions by each companies'
financial advisor.
The above financial information regarding Firstate and FFO was derived from
unaudited financial statements at December 31, 1996.
F-25
<PAGE> 128
REPUBLIC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - MARCH 31, 1997 AND DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUES)
<TABLE>
<CAPTION>
MARCH 31, December 31,
ASSETS 1997 1996
------ ------
(UNAUDITED)
<S> <C> <C>
Cash and due from banks $ 23,803 $ 27,810
Interest bearing deposits in banks - 118
Investment securities:
Held to maturity - -
Available for sale 42,709 74,397
Mortgage-backed securities:
Held to maturity - -
Available for sale 20,489 20,592
FHLB stock 5,081 4,830
Federal funds sold 41,000 8,000
Loans held for sale 40,201 36,590
Loans, net of allowance for loan losses (Notes 2 and 3) 694,784 693,270
Premises and equipment, net 20,015 19,715
Other real estate owned, acquired through foreclosure, net 7,250 7,363
Other assets 16,761 15,183
--------- ---------
Total assets $ 912,093 $ 907,868
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits-
Noninterest-bearing checking $ 49,066 $ 50,060
Interest checking 89,895 87,639
Money market 32,017 32,665
Savings 251,345 245,951
Time deposits 406,737 411,665
--------- ---------
Total deposits $ 829,060 $ 827,980
Securities sold under agreements to repurchase 16,160 15,372
Subordinated debt (6% rate, matures December 1, 2011) 6,000 6,000
Other liabilities 5,294 4,197
--------- ---------
Total liabilities $ 856,514 $ 853,549
--------- ---------
Stockholders' equity:
Noncumulative perpetual preferred convertible stock ($20.00 par,
100,000 shares authorized, 75,000 shares issued and outstanding.
Liquidation preference $6,600 at March 31, 1997 and December 31, 1996.) 1,500 1,500
Common stock ($2.00 par, 20,000,000 shares authorized and 4,183,507
shares issued and outstanding at March 31, 1997 and December 31, 1996) 8,367 8,367
Capital surplus 26,699 26,699
Retained earnings 19,386 17,849
Net unrealized gains (losses) on available-for-sale securities, net of tax effect (373) (96)
--------- ---------
Total stockholders' equity 55,579 54,319
--------- ---------
Total liabilities and stockholders' equity $ 912,093 $ 907,868
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-26
<PAGE> 129
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1997 1996
---- ----
(unaudited)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 16,506 $ 14,778
Interest on investment securities 486 428
Interest on mortgage-backed securities 306 291
Interest on federal funds sold 685 297
Interest on other investments 87 68
---------- ----------
Total interest income 18,070 15,862
---------- ----------
INTEREST EXPENSE:
Interest on deposits 8,662 7,879
Interest on subordinated debt 108 -
Interest on other borrowings 199 48
---------- ----------
Total interest expense 8,969 7,927
---------- ----------
Net interest income 9,101 7,935
PROVISION FOR LOAN LOSSES 1,138 450
---------- ----------
Net interest income after
provision for possible loan losses 7,963 7,485
---------- ----------
NONINTEREST INCOME:
Service charges on deposit accounts 438 376
Loan fee income 125 125
Income from mortgage banking activities 898 -
Gain (loss) on sale of loans, net 1,188 (11)
Gain on sale of securities, net 42 4
Other operating income 433 184
---------- ----------
Total noninterest income 3,124 678
NONINTEREST EXPENSES:
General and administrative ("G&A") expenses 8,240 5,956
Provision for losses on ORE 170 180
Other ORE (income) expense (13) 1
Amortization of premium on deposits 123 123
---------- ----------
Total noninterest expenses $ 8,520 $ 6,260
---------- ----------
Income (loss) before income taxes 2,567 1,903
Income tax provision 964 699
---------- ----------
NET INCOME $ 1,603 $ 1,204
========== ==========
PER SHARE DATA:
Net income per common and common
equivalent share $ .32 $ .24
========== ==========
Weighted average common and common
equivalent shares outstanding $4,980,167 $4,953,119
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-27
<PAGE> 130
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Perpetual Preferred Net Unrealized
Convertible Stock Common Stock Gains (Losses)
------------------- ------------------ on Available
Shares Shares Capital Retained for Sale
Issued Amount Issued Amount Surplus Earnings Securities Total
------ ------ ------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 75,000 $1,500 4,183,507 $8,367 $26,699 $14,329 $ 8 $50,903
Net income for the twelve
months ended December 31,
1996 - - - - - 3,784 - 3,784
Net unrealized losses on
available-for-sale securities - - - - - - (104) (104)
Dividends on preferred
stock - - - - - (264) - (264)
------- ------ ---------- ------ ------- ------- ----- -------
BALANCE, DECEMBER 31, 1996 75,000 1,500 4,183,507 8,367 26,699 17,849 (96) 54,319
Net income for the three
months ended March 31,
1997 - - - - - 1,603 - 1,603
Net unrealized losses on
available-for-sale securities - - - - - - (277) (277)
Dividends on preferred
stock - - - - - (66) - (66)
------- ------ ---------- ------ ------- ------- ----- -------
BALANCE, MARCH 31, 1997 75,000 $1,500 $4,183,507 $8,367 $26,699 $19,386 $(373) $55,579
======= ====== ========== ====== ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-28
<PAGE> 131
REPUBLIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1997 1996
---- ----
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,603 $ 1,204
Reconciliation of net income to net cash provided by (used in):
Provision for losses on loans and ORE 1,308 450
Depreciation and amortization, net (259) (66)
Amortization of premium and accretion of fair value 289 131
(Gain) loss on sale of loans (2,086) 11
(Gain) on sale of investment securities (42) (4)
(Gain) loss on sale of ORE (108) 10
Capitalization of mortgage servicing (839) 15
Net increase in deferred tax benefit (897) (114)
Gain on disposal of premises & equipment (1) -
Net (increase) decrease in other assets (205) (4,963)
Net increase (decrease) in other liabilities 1,098 (649)
-------- --------
Net cash provided by (used in) operating activities (139) (3,975)
-------- --------
INVESTING ACTIVITIES:
Net (increase) decrease in interest bearing deposits in banks 118 (9)
Proceeds from sales & maturities of:
Investment securities held to maturity - 7,000
Investment securities available for sale 68,447 25,006
Purchase of securities available for sale (36,815) (18,030)
Principal repayment on mortgage backed securities 93 749
Purchase of FHLB stock (251) (1,290)
Net increase in loans (4,431) (10,160)
Purchase of premises and equipment (696) (206)
Proceeds from sale of ORE 844 439
(Investments) disposals in other real estate owned (net) 21 -
-------- --------
Net cash provided by (used in) investing activities 27,330 3,499
-------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 1,081 (1,022)
Net increase (decrease) in repurchase agreements 787 1,344
Dividends on perpetual preferred stock (66) (66)
-------- --------
Net cash provided by (used in) financing activities 1,802 256
-------- --------
Net increase (decrease) in cash and
cash equivalents 28,993 (220)
Cash and cash equivalents, beginning of period 35,810 34,427
-------- --------
Cash and cash equivalents, end of period $ 64,803 $ 34,207
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for-
Interest $ 8,607 $ 6,868
Income taxes 531 865
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-29
<PAGE> 132
REPUBLIC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Organization
Republic Bancshares, Inc. (the "Company") is a bank holding company organized
in March 1996 under the laws of the State of Florida and is the holding company
for Republic Bank (the "Bank"). In connection with the reorganization which
resulted in the Company becoming the holding company for the Bank, the Company
became the owner of all of the outstanding capital stock of the Bank. The
Company does not currently conduct any activities other than its ownership and
operation of the Bank.
The Bank is a state-chartered, federally-insured commercial bank organized in
1972 and providing a full range of retail and commercial banking products and
related financial services. The Bank's headquarters are in St. Petersburg,
Florida. Its principal business is attracting checking, savings and time
deposits from the public and general business customers and using these
deposits to originate residential mortgages, commercial real estate mortgages,
business loans, and consumer loans. The Bank opened an office in Spring Hill,
Florida, in January 1997 bringing the total to 33 branch banking offices
located in Hernando, Pasco, Pinellas, Manatee and Sarasota counties. There are
also eight residential and two commercial loan production offices in Florida
and one residential loan production office in Boston, Massachusetts. The Bank
is the largest independent financial institution headquartered on the west
coast of Florida.
The FASB has issued SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities", which is effective for the
Bank's fiscal year beginning January 1, 1997. SFAS 125 provides standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. The impact of the adoption of SFAS 125 upon the
results of operations of the Company was not material.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share", which is
effective for the Company's fourth quarter and year ended December 31, 1997.
Early application is not permitted and after the effective date, prior period
earnings per share presented must be restated. SFAS No. 128 establishes new
standards for computing and presenting EPS. Specifically, SFAS No. 128
replaces the presentation of primary earnings per share with basic earnings per
share, requires dual presentation for companies with complex capital structures
of basic and diluted earnings per share and requires a reconciliation of the
numerator and denominator of the basic earnings per share computation to those
of the diluted earnings per share computation. Management has not determined
the effect of the adoption of SFAS No. 128 on the Company's financial
statements, but does not expect it to be material.
These consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report for the year ended December 31, 1996, filed with the Securities and
Exchange Commission ("SEC") on Form 10-K. The results of the three months
ended March 31, 1997 are not necessarily indicative of the results to be
expected for the fiscal year ending December 31, 1997.
F-30
<PAGE> 133
2. LOANS AND LOANS HELD FOR SALE:
Loans at March 31, 1997 and December 31, 1996, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------ ------
<S> <C> <C>
Real estate mortgage loans:
One-to-four family residential $372,498 $383,015
Multifamily residential 67,531 68,337
Commercial real estate 192,509 182,298
Construction/land development 29,812 27,050
Commercial loans 33,126 34,427
Consumer loans 11,747 9,983
Other loans 1,069 1,294
-------- --------
Total gross portfolio loans 708,292 706,404
Less-allowance for loan losses 13,508 13,134
-------- --------
Total loans held for portfolio 694,784 693,270
Loans held for sale 40,201 36,590
-------- --------
Total loans $734,985 $729,860
======== ========
</TABLE>
As of March 31, 1997 and December 31, 1996 loans available for sale, primarily
one-to-four family residential mortgages, had weighted average interest rates
of 9.05% and 8.72%, respectively. Mortgage loans serviced for others as of
March 31, 1997 and December 31, 1996 were $141,980,000 and $120,711,000,
respectively.
3. ALLOWANCES FOR LOSSES:
Allowance for Loan Losses:
The allowance for loan losses provides for risks of losses inherent in the
credit extension process. Losses are charged to the allowance for loan losses
and recoveries are credited to the allowance. The Company's allowance is an
amount that management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The evaluations take
into consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrower's ability to pay. The
evaluations are periodically reviewed and adjustments are recorded in the
period in which changes become known.
As part of the risk assessment for purchased loans, management has
allocated a portion of the discount on such loan purchases to the allowance
for loan losses in amounts consistent with the Company's loan loss policy
guidelines. Amounts added to the allowance for loan losses resulting from
discount allocation are available to absorb potential losses only for those
purchased loans and are not available for losses from other loan
portfolios. To the extent that losses in certain pools or portfolios of
loans exceed the allowance for loan losses and any remaining unamortized
loan discount allocated to such pool or portfolio, or available as a
general allowance, the Company would have to recognize a loss to the
extent of such shortfall in the then current period. During the first
quarter of 1997, management sold $6,005,000 of loans purchased and
transferred $642,000 of the amount originally allocated to the allowance
for purchased loans into the allocation for originated loans. After this
transfer was completed and taking into consideration loan loss provisions,
charge-offs and recoveries for the first quarter of 1997 the allowance for
loan losses was comprised of $7,089,000 allocated to originated loans and
$6,419,000 allocated to the various pools of purchased loans.
Additionally, as of March 31, 1997, the balance of loan discounts
available to absorb losses on pools or portfolios of purchased loans
exceeding amounts transferred to the allowance amounted to $4,119,000.
Loans on which interest was not being accrued totaled $16,191,000 and
$15,351,000 at March 31, 1997 and December 31, 1996, respectively. Loans
past due 90 days or more and still accruing interest at March 31, 1997 and
December 31, 1996, totaled $122,000 and $113,000, respectively.
F-31
<PAGE> 134
Changes in the allowance for loan losses were as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1997 1996
---- ----
<S> <C> <C>
Balance, beginning of period $13,134 $14,910
Provision for loan losses 1,138 450
Allowance for loan losses
on purchased loans transferred
to discount (includes amounts
taken to income on loans sold) (642) (30)
Loans charged off (188) (649)
Recoveries of loans charged off 66 65
------- -------
Balance, end of period $13,508 $14,746
======= =======
</TABLE>
Allowance for Losses on Other Real Estate ("ORE"):
The Company recognizes any estimated potential decline in the value of ORE
between appraisal dates through periodic additions to the allowance for losses
on ORE. Writedowns charged against this allowance are taken if the related
real estate is sold at a loss. For the three months ended March 31, 1997, the
Company had recorded a provision expense for losses on ORE of $170,000.
Included in the ORE balance is a tract of land carried at $3,200,000 acquired
through foreclosure in 1988 that has partially been developed as a shopping
center site. Federal law and regulations require the Company to dispose of
this tract by December 31, 1997.
2. SUBSEQUENT EVENT
Effective April 21, 1997, the Company acquired all of the outstanding common
stock of EHL Holdings, Inc., the privately- held parent company of First
Financial, F.A., a thrift headquartered in Orlando, Florida with total assets
at acquisition of $71,147,000. The thrift subsidiary of EHL Holdings, Inc. was
simultaneously merged into the Bank. The purchase price paid was a cash amount
of $5,501,000 and goodwill of $1,366,000 was recorded. That goodwill will be
amortized over a period of 48 months.
F-32
<PAGE> 135
REPUBLIC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Organization
Republic Bancshares, Inc. (the "Company") is a bank holding company organized
in March 1996 under the laws of the State of Florida and is the holding company
for Republic Bank (the "Bank"). In connection with the reorganization which
resulted in the Company becoming the holding company for the Bank, the Company
became the owner of all of the outstanding capital stock of the Bank. The
Company does not currently conduct any activities other than its ownership and
operation of the Bank.
The Bank is a state-chartered, federally-insured commercial bank organized in
1972 and providing a full range of retail and commercial banking products and
related financial services. The Bank's headquarters are in St. Petersburg,
Florida. Its principal business is attracting checking, savings and time
deposits from the public and general business customers and using these
deposits to originate residential mortgages, commercial real estate mortgages,
business loans, and consumer loans. The Bank opened an office in Spring Hill,
Florida, in January 1997 bringing the total to 33 branch banking offices
located in Hernando, Pasco, Pinellas, Manatee and Sarasota counties. There are
also eight residential and two commercial loan production offices in Florida
and one residential loan production office in Boston, Massachusetts. The Bank
is the largest independent financial institution headquartered on the west
coast of Florida.
The FASB has issued SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities", which is effective for the
Bank's fiscal year beginning January 1, 1997. SFAS 125 provides standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. The impact of the adoption of SFAS 125 upon the
results of operations of the Company was not material.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share", which is
effective for the Company's fourth quarter and year ended December 31, 1997.
Early application is not permitted and after the effective date, prior period
earnings per share presented must be restated. SFAS No. 128 establishes new
standards for computing and presenting EPS. Specifically, SFAS No. 128
replaces the presentation of primary earnings per share with basic earnings per
share, requires dual presentation for companies with complex capital structures
of basic and diluted earnings per share and requires a reconciliation of the
numerator and denominator of the basic earnings per share computation to those
of the diluted earnings per share computation. Management has not determined
the effect of the adoption of SFAS No. 128 on the Company's financial
statements, but does not expect it to be material.
These consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report for the year ended December 31, 1996, filed with the Securities and
Exchange Commission ("SEC") on Form 10-K. The results of the three months
ended March 31, 1997 are not necessarily indicative of the results to be
expected for the fiscal year ending December 31, 1997.
5
<PAGE> 136
2. LOANS AND LOANS HELD FOR SALE:
Loans at March 31, 1997 and December 31, 1996, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------ ------
<S> <C> <C>
Real estate mortgage loans:
One-to-four family residential $372,498 $383,015
Multifamily residential 67,531 68,337
Commercial real estate 192,509 182,298
Construction/land development 29,812 27,050
Commercial loans 33,126 34,427
Consumer loans 11,747 9,983
Other loans 1,069 1,294
-------- --------
Total gross portfolio loans 708,292 706,404
Less-allowance for loan losses 13,508 13,134
-------- --------
Total loans held for portfolio 694,784 693,270
Loans held for sale 40,201 36,590
-------- --------
Total loans $734,985 $729,860
======== ========
</TABLE>
As of March 31, 1997 and December 31, 1996 loans available for sale, primarily
one-to-four family residential mortgages, had weighted average interest rates
of 9.05% and 8.72%, respectively. Mortgage loans serviced for others as of
March 31, 1997 and December 31, 1996 were $141,980,000 and $120,711,000,
respectively.
3. ALLOWANCES FOR LOSSES:
Allowance for Loan Losses:
The allowance for loan losses provides for risks of losses inherent in the
credit extension process. Losses are charged to the allowance for loan losses
and recoveries are credited to the allowance. The Company's allowance is an
amount that management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The evaluations take
into consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrower's ability to pay. The
evaluations are periodically reviewed and adjustments are recorded in the
period in which changes become known.
As part of the risk assessment for purchased loans, management has
allocated a portion of the discount on such loan purchases to the allowance
for loan losses in amounts consistent with the Company's loan loss policy
guidelines. Amounts added to the allowance for loan losses resulting from
discount allocation are available to absorb potential losses only for those
purchased loans and are not available for losses from other loan
portfolios. To the extent that losses in certain pools or portfolios of
loans exceed the allowance for loan losses and any remaining unamortized
loan discount allocated to such pool or portfolio, or available as a
general allowance, the Company would have to recognize a loss to the
extent of such shortfall in the then current period. During the first
quarter of 1997, management sold $6,005,000 of loans purchased and
transferred $642,000 of the amount originally allocated to the allowance
for purchased loans into the allocation for originated loans. After this
transfer was completed and taking into consideration loan loss provisions,
charge-offs and recoveries for the first quarter of 1997 the allowance for
loan losses was comprised of $7,089,000 allocated to originated loans and
$6,419,000 allocated to the various pools of purchased loans.
Additionally, as of March 31, 1997, the balance of loan discounts
available to absorb losses on pools or portfolios of purchased loans
exceeding amounts transferred to the allowance amounted to $4,119,000.
Loans on which interest was not being accrued totaled $16,191,000 and
$15,351,000 at March 31, 1997 and December 31, 1996, respectively. Loans
past due 90 days or more and still accruing interest at March 31, 1997 and
December 31, 1996, totaled $122,000 and $113,000, respectively.
6
<PAGE> 137
Changes in the allowance for loan losses were as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1997 1996
---- ----
<S> <C> <C>
Balance, beginning of period $13,134 $14,910
Provision for loan losses 1,138 450
Allowance for loan losses
on purchased loans transferred
to discount (includes amounts
taken to income on loans sold) (642) (30)
Loans charged off (188) (649)
Recoveries of loans charged off 66 65
------- -------
Balance, end of period $13,508 $14,746
======= =======
</TABLE>
Allowance for Losses on Other Real Estate ("ORE"):
The Company recognizes any estimated potential decline in the value of ORE
between appraisal dates through periodic additions to the allowance for losses
on ORE. Writedowns charged against this allowance are taken if the related
real estate is sold at a loss. For the three months ended March 31, 1997, the
Company had recorded a provision expense for losses on ORE of $170,000.
Included in the ORE balance is a tract of land carried at $3,200,000 acquired
through foreclosure in 1988 that has partially been developed as a shopping
center site. Federal law and regulations require the Company to dispose of
this tract by December 31, 1997.
2. SUBSEQUENT EVENT
Effective April 21, 1997, the Company acquired all of the outstanding common
stock of EHL Holdings, Inc., the privately- held parent company of First
Financial, F.A., a thrift headquartered in Orlando, Florida with total assets
at acquisition of $71,147,000. The thrift subsidiary of EHL Holdings, Inc. was
simultaneously merged into the Bank. The purchase price paid was a cash amount
of $5,501,000 and goodwill of $1,366,000 was recorded. That goodwill will be
amortized over a period of 48 months.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Selected Consolidated Financial Data
The following selected consolidated operating data, per share data, balance
sheet data and selected financial ratios as of and for each of the preceding
eight consecutive quarters are derived from unaudited consolidated financial
statements. Financial data for those interim periods include all adjustments,
consisting of normal accruals, that the Company's management considers
necessary for a fair presentation of the Company's financial condition and
results of operations for such interim periods.
7
<PAGE> 138
INDEPENDENT AUDITORS' REPORT
The Board of Directors
F.F.O. Financial Group, Inc.
St. Cloud, Florida:
We have audited the accompanying consolidated balance sheets of F.F.O.
Financial Group, Inc. and Subsidiaries (the "Company") as of December 31, 1996
and 1995 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995 and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1996 in conformity with generally accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB
Orlando, Florida
February 11, 1997, except for Note 21,
as to which the date is March 11, 1997
F-33
<PAGE> 139
F.F.O. FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,300 6,989
Interest-bearing deposits with banks 11,665 2,768
Federal funds sold -- 669
--------- -------
Cash and cash equivalents 17,965 10,426
Trading securities 9,580 23,076
Securities available for sale 41,445 49,832
Securities held to maturity, at cost 15,343 17,636
Loans held for sale, net of unrealized losses of $150 in 1996 10,462 22,765
Loans receivable, net of allowances for loan losses of
$5,613 in 1996 and $5,138 in 1995 209,005 161,190
Accrued interest receivable 1,710 1,821
Premises and equipment 5,324 5,700
5,700 Restricted securities - Federal Home Loan Bank stock, at cost 2,378 2,514
Foreclosed real estate, net of allowances of $158 in 1996 and
$1,124 in 1995 799 3,358
Deferred tax asset 1,490 2,249
Other assets 1,448 918
--------- -------
Total assets $ 316,949 301,485
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits 14,303 13,107
Savings and NOW deposits 57,981 63,682
Time deposits 214,643 172,147
--------- -------
Total deposits 286,927 248,936
Accrued interest on deposits 256 282
Due to bank 424 1,120
Advances from Federal Home Loan Bank 7,000 30,000
Advance payments by borrowers for taxes and insurance 608 819
Other liabilities 1,454 1,548
--------- -------
Total liabilities 296,669 282,705
--------- -------
Commitments and Contingencies (Notes 6, 12, 13, 15 and 21)
Stockholders' Equity:
Preferred stock, $.10 par value, 2,500,000 shares
authorized, none outstanding -- --
Common stock, $.10 par value, 20,000,000 shares authorized,
8,430,000 shares issued and outstanding 843 843
Additional paid-in capital 17,599 17,599
Retained earnings 1,844 244
Net unrealized (depreciation) appreciation on securities
available for sale, net of tax of $4 in 1996
and $(56) in 1995 (6) 94
--------- -------
Total stockholders' equity 20,280 18,780
--------- -------
Total liabilities and stockholders' equity $ 316,949 301,485
========= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-34
<PAGE> 140
F.F.O. FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans receivable $ 16,712 15,357 13,752
Securities available for sale 2,524 1,218 1,963
Securities held to maturity 1,179 1,297 684
Trading securities 1,214 1,267 --
Federal funds sold 80 150 125
Deposits with banks 288 441 358
----------- --------- ---------
Total interest income 21,997 19,730 16,882
----------- --------- ---------
Interest expense:
Deposits 11,710 9,948 7,142
Other borrowed funds 313 163 411
----------- --------- ---------
Total interest expense 12,023 10,111 7,553
----------- --------- ---------
Net interest income 9,974 9,619 9,329
Provision (credit) for loan losses 782 477 (1,403)
----------- --------- ---------
Net interest income after provision (credit)
for loan losses 9,192 9,142 10,732
----------- --------- ---------
Noninterest income:
Service charges on deposits 1,306 1,269 1,297
Loan related fees and service charges 443 375 246
Loan servicing fees 279 367 409
Net trading account (losses) profit (196) 229 (76)
Net realized gain on sales of available-for-sale securities 87 66 --
Net gain on sale of loans 144 86
131
Unrealized loss on loans held for sale (150) -- --
Net gain on sale of premises and equipment -- -- 277
Other income 474 210 203
----------- --------- ---------
Total noninterest income 2,387 2,602 2,487
----------- --------- ---------
Noninterest expenses:
Salaries and employee benefits 4,192 4,043 3,802
Occupancy expense 1,925 1,814 1,755
(Gain) loss on foreclosed real estate (1,818) 613 3,784
Deposit insurance premium 657 646 645
SAIF recapitalization assessment 1,466 -- --
Marketing and advertising 381 299 298
Data processing 668 564 563
Printing and office supplies 280 284 279
Telephone expense 255 271 272
Other expense 1,170 923 1,147
----------- --------- ---------
Total noninterest expenses 9,176 9,457 12,545
----------- --------- ---------
Income before income taxes 2,403 2,287 674
Income tax expense 803 641 234
----------- --------- ---------
Net income $ 1,600 1,646 440
=========== ========= =========
Net income per share of common stock $ .19 .20 .06
=========== ========= =========
Weighted average number of shares outstanding 8,430,000 8,430,000 7,354,658
=========== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-35
<PAGE> 141
F.F.O. FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED
(DEPRECIATION)
APPRECIATION
RETAINED ON
ADDITIONAL EARNINGS SECURITIES TOTAL
COMMON PAID-IN (ACCUMULATED AVAILABLE STOCKHOLDERS'
STOCK CAPITAL DEFICIT) FOR SALE EQUITY
----- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $718 15,324 (1,842) 327 14,527
Proceeds from issuance of 1,250,000
shares of common stock 125 2,275 -- -- 2,400
Net income for 1994 -- -- 440 -- 440
Net change in unrealized (depreciation)
appreciation on securities available
for sale -- -- -- (822) (822)
---- ------ ------ ----- ------
Balance at December 31, 1994 843 17,599 (1,402) (495) 16,545
Net income for 1995 -- -- 1,646 -- 1,646
Net change in unrealized (depreciation)
appreciation on securities available
for sale -- -- -- 589 589
---- ------ ------ ----- ------
Balance at December 31, 1995 843 17,599 244 94 18,780
Net income for 1996 -- -- 1,600 -- 1,600
Net change in unrealized (depreciation)
appreciation on securities available
for sale -- -- -- (100) (100)
---- ------ ------ ----- ------
Balance at December 31, 1996 $843 17,599 1,844 (6) 20,280
==== ====== ===== ===== ======
</TABLE>
See Notes to Consolidated Financial Statements.
F-36
<PAGE> 142
F.F.O. FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
------- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,600 1,646 440
Adjustments to reconcile net income to
net cash provided by (used in) operations:
Provision (credit) for loan losses 782 477 (1,403)
(Credit) provision for losses on foreclosed real estate (1,500) 240 3,410
Net amortization of premiums and discounts 159 (210) (115)
Net gain on sale of premises and equipment -- -- (277)
Net amortization of deferred loan fees (180) 52 (168)
Depreciation of premises and equipment 554 566 597
Net gain on sale of foreclosed real estate (368) (35) (175)
Net realized gain on sales of available-for-sale securities (87) (66) --
Net decrease (increase) in trading account securities 13,496 (16,106) (6,970)
Provision (benefit) for deferred income taxes 819 1,012 (276)
Proceeds from sales of loans held for sale 25,745 8,924 9,858
Originations of loans held for sale (13,448) (23,673) (6,311)
Decrease (increase) in accrued interest receivable 111 (356) (143)
Increase in other assets (530) (216) (157)
Gain on sale of loans (144) (86) (131)
Unrealized loss on loans held for sale 150 -- --
(Decrease) increase in accrued interest payable (26) 123 9
(Decrease) increase in other liabilities and due to bank (790) (1,131) 997
-------- ------- ------
Net cash provided by (used in) operating activities 26,343 (28,839) (815)
-------- ------- ------
Cash flows from investing activities:
Purchase of available-for-sale securities (47,400) (35,104) (19,868)
Purchase of held-to-maturity securities -- -- (47,504)
Proceeds from maturities of held-to-maturity securities -- 12,526 47,129
Proceeds from sale of available-for-sale securities 26,673 7,755 --
Proceeds from maturities of available-for-sale securities 10,000 -- --
Principal repayments on available-for-sale securities 18,832 746 1,916
Principal repayments on held-to-maturity securities 2,343 1,613 --
Net (increase) decrease in loans receivable (45,860) (10,512) 1,110
Proceeds from sale of premises and equipment -- -- 524
Net purchases of premises and equipment (178) (501) (365)
Proceeds from sale of foreclosed real estate 2,001 7,389 4,123
Payments capitalized to foreclosed real estate (131) (43) (7)
Redemption (purchase) of Federal Home Loan Bank stock 136 -- (31)
-------- ------- ------
Net cash used in investing activities (33,584) (16,131) (12,973)
-------- ------- ------
</TABLE>
F-37
(continued)
<PAGE> 143
F.F.O. FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from financing activities:
Net decrease in demand, savings and NOW deposits (4,505) (6,180) (5,979)
Net increase in time deposits 42,496 44,284 5,693
(Repayments of) proceeds from Federal Home Loan Bank advances (23,000) 8,600 1,400
Net proceeds from issuance of common stock -- -- 2,400
Net (decrease) increase in advances by borrowers for taxes
and insurance (211) 126 (109)
-------- ------ -----
Net cash provided by financing activities 14,780 46,830 3,405
-------- ------ -----
Net increase (decrease) in cash and cash equivalents 7,539 1,860 (10,383)
Cash and cash equivalents at beginning of year 10,426 8,566 18,949
-------- ------ -----
Cash and cash equivalents at end of year $ 17,965 10,426 8,566
======== ====== =====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
(Refunds received) income tax paid $ (134) 550 311
======== ====== =====
Interest $ 12,049 9,957 7,544
======== ====== =====
Noncash investing and financing activities:
Transfers of loans to foreclosed real estate $ 339 6,382 1,447
======== ====== =====
Loans originated for the sale of foreclosed real estate $ 2,896 1,527 1,346
======== ====== =====
</TABLE>
See Notes to Consolidated Financial Statements.
F-38
<PAGE> 144
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
F.F.O. Financial Group, Inc. (the "Holding Company" or "F.F.O.") is the
holding company for First Federal Savings and Loan Association of
Osceola County (the "Association"). The Holding Company's operations
are limited to ownership of the Association. The Association is a
federally chartered savings and loan association which conducts
business from its headquarters and main office in Kissimmee, Florida
and ten branch offices located in Central Florida. The Association's
deposits are insured by the Federal Deposit Insurance Corporation
("FDIC") up to applicable limits through the Savings Association
Insurance Fund ("SAIF").
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Holding Company and its wholly-owned subsidiary,
First Federal Savings and Loan Association of Osceola County, and
the Association's wholly-owned subsidiary, Gulf American Financial
Corporation. Gulf American Financial Corporation is currently
inactive. All significant intercompany transactions and balances
have been eliminated in consolidation.
GENERAL. The accounting and reporting policies of F.F.O. Financial Group,
Inc. and Subsidiaries (together, the "Company") conform to generally
accepted accounting principles and to general practices within the
thrift industry. The following summarizes the significant accounting
policies of the Company:
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
TRADING SECURITIES. Securities held principally for resale in the near
term are classified as trading account securities and recorded at
their fair values. Unrealized gains and losses on trading account
securities are included immediately in noninterest income.
SECURITIES HELD TO MATURITY. Securities for which the Company has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for premiums and discounts that are recognized in interest
income using the interest method over the period to maturity.
SECURITIES AVAILABLE FOR SALE. Available-for-sale securities consist of
securities not classified as trading securitie s nor as held-to-
maturity securities.
(continued)
F-39
<PAGE> 145
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED SECURITIES AVAILABLE
FOR SALE, CONTINUED. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are reported as a separate component of
stockholders' equity until realized.
Gains and losses on the sale of available-for-sale securities are
determined using the specific identification method.
Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
LOANS HELD FOR SALE. Mortgage loans originated and intended for sale in
the secondary market are carried at the lower of cost or estimated
market value in the aggregate . Net unrealized losses are recognized
through a valuation allowance by charges to income.
LOANS RECEIVABLE. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or
pay-off are reported at their outstanding principal balance adjusted
for any charge-offs, the allowance for loan losses, and any deferred
fees or costs on originated loans and unamortized premiums or
discounts on purchased loans.
Discounts and premiums on purchased real estate loans are amortized
to income using the interest method over the remaining period to
contractual maturity, adjusted for anticipated prepayments.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the
related loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Company's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral and current economic
conditions.
(continued)
F-40
<PAGE> 146
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FORECLOSED REAL ESTATE. Real estate properties acquired through, or in
lieu of, loan foreclosure are to be sold and are initially recorded
at fair value at the date of foreclosure establishing a new cost
basis. After foreclosure, valuations are periodically performed by
management and the real estate is carried at the lower of carrying
amount or fair value less costs to sell. Revenue and expenses from
operations and changes in the valuation allowance are included in
the consolidated statements of income.
INCOME TAXES. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicabl e to the period in which
the deferred tax assets or liabiliti es are expected to be realized
or settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabiliti es are adjusted through the provision for income
taxes.
PREMISES AND EQUIPMENT. Land is carried at cost. The Company's premises,
furniture and equipment and leasehold improvements are carried at
cost, less accumulated depreciation and amortization computed
principally by the straight-line method.
OFF-BALANCE SHEET INSTRUMENTS. In the ordinary course of business the
Company has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit. Such financial
instruments are recorded in the financial statements when they are
funded or related fees are incurred or received.
FAIR VALUES OF FINANCIAL INSTRUMENTS. The following methods and
assumptions were used by the Company in estimating fair values of
financial instruments:
CASH AND CASH EQUIVALENTS. The carrying amounts of cash and
short-term instruments approximate their fair value.
TRADING SECURITIES. Fair values for trading account securities, which
also are the amounts recognized in the consolidated balance sheets,
are based on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market
prices of comparable instruments.
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES. Fair values for
available-for-sale and held-to-maturity securities, excluding
restricted equity securities, are based on quoted market prices.
LOANS RECEIVABLE. For variable rate loans that reprice frequently and
have no significant change in credit risk, fair values are based on
carrying values. Fair values for certain fixed-rate mortgage (e.g.
one-to-four family residential), commercial real estate and
commercial loans are estimated using discounted cash flow analyses,
using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.
FEDERAL HOME LOAN BANK STOCK. Fair value of the Company's investment
in FHLB stock is based on its redemption value, which is its cost of
$100 per share.
(continued)
F-41
<PAGE> 147
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED. DEPOSITS. The fair values
disclosed for demand, NOW, money market and savings deposits are, by
definition, equal to the amount payable on demand at the reporting
date (that is, their carrying amounts). Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities
on time deposits.
SHORT-TERM BORROWINGS. The carrying amounts of borrowings maturing
within 90 days approximate their fair values. Fair values of other
borrowings are estimated using discounted cash flow analysis based on
the Company's current incremental borrowing rates for similar types
of borrowing arrangements.
ACCRUED INTEREST RECEIVABLE. The carrying amounts of accrued interest
receivable approximate their fair values.
OFF-BALANCE-SHEET INSTRUMENTS. Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
NET INCOME PER SHARE. Net income per share of common stock has been
computed on the basis of the weighted average number of shares of
common stock outstanding.
RECLASSIFICATIONS. Certain reclassifications have been made to the
financial statements for 1994 and 1995 to conform to the presentat
ions used in the financial statement s for 1996.
FUTURE ACCOUNTING REQUIREMENTS. The Financial Accounting Standards Board
(the "FASB") has issued Statement of Financial Accounting Standards
No. 125 ("SFAS 125"). This Statement provides accounting and
reporting standards for transfers and servicing of financial assets
as well as extinguishments of liabilities. This Statement also
provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. SFAS 125 is effective for transfers and servicing of
financial assets as well as extinguishments of liabilities occurring
after December 31, 1996. Management does not anticipate SFAS 125 will
have a material impact on the Company.
(continued)
F-42
<PAGE> 148
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) SECURITIES
Securities have been classified in the consolidated balance sheets
according to management's intent. The carrying amounts of securitie s
and their approximate fair values at December 31, were as follows
(in thousands ):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C>
TRADING SECURITIES:
DECEMBER 31, 1996:
Agency notes and debentures $ 4,000 32 -- 4,032
Collateralized mortgage-backed obligations 5,554 -- (6) 5,548
------- --- --- ------
$ 9,554 32 (6) 9,580
======= === --- ======
DECEMBER 31, 1995:
Agency notes and debentures 9,359 42 -- 9,401
Collateralized mortgage-backed obligations 13,616 59 -- 13,675
------- --- --- ------
$22,975 101 -- 23,076
======= === ==== ======
SECURITIES AVAILABLE FOR SALE:
DECEMBER 31, 1996-
Mortgage-backed securities $41,455 108 (118) 41,445
======= === ==== ======
DECEMBER 31, 1995:
U.S. Treasury notes 9,996 23 -- 10,019
Mortgage-backed securities 39,686 127 -- 39,813
------- --- ---- ------
$49,682 150 -- 49,832
======= === ===== ======
SECURITIES HELD TO MATURITY:
DECEMBER 31, 1996-
Mortgage-backed securities $15,343 218 (47) 15,514
======= === ===== ======
DECEMBER 31, 1995-
Mortgage-backed securities $17,636 204 -- 17,840
======= === ===== ======
</TABLE>
Gross realized gains and gross realized losses on sales of
available-for-sale securities were $141,000 and $54,000, respectively
in 1996 and $75,000 and $9,000, respectively in 1995. There
were no sales of available-for-sale securities during the year
ended December 31, 1994.
Net unrealized holding gains on trading securities of $26,000, $101,000
and $76,000 were included in income during 1996, 1995 and 1994,
respectively.
The Board of Directors has authorized the Company to purchase and sell,
from time to time, securities through third parties including through
William R. Hough & Co. ("WRHC"), an investment banking firm
headquartered in St. Petersburg, Florida. Mr. Hough (a director and
principal shareholder of the Company) is Chairman and principal
shareholder of WRHC. During the years ended December 31, 1996, 1995
and 1994, the Company purchased approximately $53.3 million, $69.5
million and $30.5 million of securities through WRHC, respectively.
During the years ended December 31, 1996 and 1995, the Company sold
approximately $46.0 million and $19.7 million of securities through
WRHC, respectively. No securities were sold through WRHC in 1994. In
connection with such transactions, the Company paid WRHC an aggregate
of $118,000, $92,000 and $20,000 in commissions during the years
ended December 31, 1996, 1995 and 1994, respectively.
(continued)
F-43
<PAGE> 149
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS RECEIVABLE
The components of loans in the consolidated balance sheets were as follows
(in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Mortgage Loans:
Conventional 1-4 family residential $ 112,827 78,680
FHA and VA single family residential 10,131 11,529
Multifamily residential 19,778 18,576
Land 8,279 6,476
Other nonresidential real estate 34,138 26,927
Construction residential 14,166 10,288
Construction nonresidential 990 --
--------- -------
Total mortgage loans 200,309 152,476
--------- -------
Other Loans:
Deposit account loans 957 868
Credit card loans 594 2,637
Consumer loans 20,537 13,717
SBA loans 3,009 3,633
Home improvement loans 55 76
--------- -------
Total other loans 25,152 20,931
--------- -------
Total loans 225,461 173,407
--------- -------
Deduct:
Undisbursed portion of loans in process (10,824) (6,880)
Deferred net loan origination fees and discounts (19) (199)
Allowance for loan losses (5,613) (5,138)
--------- -------
Total deductions (16,456) (12,217)
--------- -------
Loans receivable, net $ 209,005 161,190
========= =======
</TABLE>
(continued)
F-44
<PAGE> 150
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS RECEIVABLE, CONTINUED
An analysis of the change in the allowance for loan losses was as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at January 1 $ 5,138 8,207 9,333
Loans charged-off, net of recoveries (307) (3,546) (260)
Provision (credit) for loan losses 782 477 (1,403)
Reclassification due to adoption of SFAS 114 and 118 -- -- 537
----------- ----- -----
Balance at December 31 $ 5,613 5,138 8,207
=========== ===== =====
</TABLE>
The amounts of impaired loans, all of which were collateral-dependent,
were as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
-------- ------
<S> <C> <C>
Loans identified as impaired:
Gross loans with related allowances for losses recorded $ 8,256 6,380
Less: Allowances on these loans (1,766) (1,537)
--------- -----
Net investment in impaired loans $ 6,490 4,843
========= =====
</TABLE>
The average net investment in impaired loans and interest income recognized
and received on impaired loans were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Average investment in impaired loans $ 6,175 5,037 7,259
======== ===== =====
Interest income recognized on impaired loans $ 521 337 307
======== ===== =====
Interest income received on impaired loans $ 521 337 307
======== ===== =====
</TABLE>
(continued)
F-45
<PAGE> 151
F.F.O. FINANCIAL GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(3) Loans Receivable, Continued
Nonaccrual and renegotiated loans for which interest has been reduced
totalled approximately $8.9 million, $7.6 million and $13.8 million
at December 31, 1996, 1995 and 1994, respectively. Interest income
that would have been recorded under the original terms of such loans
and the interest income actually recognized are summarized below (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest income that would have been recorded $ 863 742 971
Interest income recognized (340) (342) (383)
----- --- ---
Interest income foregone $ 523 400 588
===== === ===
</TABLE>
The Company is not committed to lend additional funds to debtors whose
loans have been modified.
(4) LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of
mortgage loans serviced for others was $103.6 million, $89.6 million
and $101.2 million at December 31, 1996, 1995 and 1994, respectively.
Custodial escrow balances maintained in connection with the foregoing loan
servicing are included in advance payments by borrowers for taxes and
insurance, and were approximately $494,000 and $498,000 at December
31, 1996 and 1995, respectively.
(5) FORECLOSED REAL ESTATE
Activity in the allowance for losses on foreclosed real estate was as
follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at January 1 $ 1,124 2,873 62
(Credit) provision charged to operations (1,500) 240 3,410
Recoveries (charge-offs), net 534 (1,989) (62)
158 1,124 3,410
Reclassification due to adoption of SFAS 114 and 118 -- -- (537)
------- ----- -----
Balance at December 31 $ 158 1,124 2,873
======= ===== =====
</TABLE>
Gain or loss on foreclosed real estate for the years ended December 31,
1996, 1995 and 1994 includes net expense of $50,000, $408,000 and
$549,000, respectively, from operation of foreclosed real estate.
(continued)
F-46
<PAGE> 152
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(6) PREMISES AND EQUIPMENT
Components of premises and equipment were as follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Cost:
Land $ 1,298 1,298
Premises and leasehold improvements 5,154 5,207
Furniture and equipment 5,263 5,772
-------- ------
Total cost 11,715 12,277
Less accumulated depreciation (6,391) (6,577)
-------- ------
Total $ 5,324 5,700
======== ======
</TABLE>
At December 31, 1996, the Company was obligated under noncancelable
operating leases for office space. Certain leases contain escalation
clauses providing for increased rentals based primarily on increases
in real estate taxes or in the average consumer price index. Net rent
expense under operating leases, included in occupancy expense, was
approximately $378,000, $363,000 and $341,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
At December 31, 1996, future minimum rental commitments under
noncancellable leases were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
<S> <C>
1997 $ 364
1998 309
1999 229
2000 54
2001 54
Thereafter 126
-------
Total $ 1,136
=======
</TABLE>
(7) ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows (in thousands):
<TABLE>
<CAPTION>
At December 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Loans $1,279 1,164
Securities 431 657
Total $1,710 1,821
</TABLE>
(continued)
F-47
<PAGE> 153
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(8) DEPOSITS
The aggregate amount of short-term jumbo certificates of deposit, each
with a minimum denomination of $100,000, was approximately $13.2
million and $14.2 million at December 31, 1996 and 1995,
respectively.
At December 31, 1996, the scheduled maturities of certificates of
deposit were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
<S> <C>
1997 $ 132,990
1998 53,346
1999 13,834
2000 11,962
2001 and thereafter 2,511
---------
Total $ 214,643
=========
</TABLE>
(9) ADVANCES FROM FEDERAL HOME LOAN BANK
Maturities and interest rates of advances from the Federal Home Loan Bank
of Atlanta ("FHLB") were as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDING INTEREST AT DECEMBER 31,
DECEMBER 31, RATE 1996 1995
------------ ---- ---- ----
<S> <C> <C> <C>
1996 5.85% $ - 30,000
1997 6.95% 7,000 -
------- ------
Total $ 7,000 30,000
======= ======
</TABLE>
At December 31, 1996, the Association was required by its collateral
agreement with the FHLB to maintain qualifying first mortgage loans
in an amount equal to at least 150% of the FHLB advances outstanding
at December 31, 1996 as collateral. The Association's FHLB stock is
also pledged as collateral for such advances. The FHLB advances
outstanding at December 31, 1995 were collateralized by certain
securities with a book value of $32.2 million and a market value of
$32.6 million as allowed by the Association's collateral agreement
with the FHLB. The Association's FHLB stock was also pledged as
collateral for those advances while outstanding.
(continued)
F-48
<PAGE> 154
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) INCOME TAXES
The provision (credit) for income taxes is summarized as follows
(in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Federal $ (16) 695 679
State -- 124 124
----- ----- ---
Total $ (16) 819 803
===== ===== ===
YEAR ENDED DECEMBER 31, 1995:
Federal (371) 864 493
State -- 148 148
----- ----- ---
Total $(371) 1,012 641
===== ===== ===
YEAR ENDED DECEMBER 31, 1994:
Federal 435 (236) 199
State 75 (40) 35
----- ----- ---
Total $ 510 (276) 234
===== ===== ===
</TABLE>
The effective tax rate on income before income taxes differs from the
U.S. statutory rate of 34%. The following summary reconciles taxes at
the U.S. statutory rate with the effective rates (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994
-------------- ---------------- -------------------
Amount % Amount % Amount %
------ - ------ - ------ ---
<S> <C> <C> <C> <C> <C> <C>
Taxes on income at U.S.
statutory rate $ 817 34.0% $ 777 34.0% $ 229 34.0%
State income taxes, net of
federal tax benefit 87 3.6 82 3.6 24 3.6
Recomputed bad-debt reserve -- -- (178) (7.8) -- --
Other - net (101) (4.2) (40) (1.8) (19) (2.8)
----- ----- ------ ----- ----- -----
Taxes on income at
effective rates $ 803 33.4% $ 641 28.0% $ 234 34.7%
===== ===== ====== ===== ===== =====
</TABLE>
(continued)
F-49
<PAGE> 155
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) INCOME TAXES, CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities related to the
following (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $1,454 1,516
Allowance for losses on foreclosed real estate 59 423
Accrued pension expense -- 141
Charitable contributions 4 --
Net operating loss carryforwards 1,601 2,149
Alternative minimum tax credit carryforwards 121 122
Unrealized depreciation on securities available for sale 4 --
------ -----
Total gross deferred tax assets 3,243 4,351
------ -----
Deferred tax liabilities:
Deferred loan fees 1,504 1,711
Federal Home Loan Bank stock 226 239
Accumulated depreciation on premises
and equipment 23 66
Unrealized appreciation on securities available for sale -- 56
Other -- 30
------ -----
Total gross deferred tax liabilities 1,753 2,102
------ -----
Deferred tax asset $1,490 2,249
====== =====
</TABLE>
With respect to the net deferred tax asset of $1.5 million at December 31,
1996, management believes that it is more likely than not that the
Company will have sufficient future taxable income to recover this
asset. However, for purposes of calculating regulatory capital,
Office of Thrift Supervision ("OTS") regulations limit the amount of
deferred tax assets that can be included in regulatory capital to the
lesser of (i) 10% of Tier 1 capital or (ii) the amount the
Association expects to realize within the subsequent twelve-month
period. OTS guidelines require the Association to recalculate this
capital component on a quarterly basis.
(continued)
F-50
<PAGE> 156
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) INCOME TAXES, CONTINUED
At December 31, 1996, the Company's net operating loss carryforwards for
federal income tax purposes which are available to offset future
federal taxable income were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR OF
EXPIRATION AMOUNT
---------- ------
<S> <C>
2007 $ 1,324
2008 1,826
2010 980
-------
Total $ 4,130
=======
</TABLE>
Net operating loss carryforwards of $3,150,000 included above are subject
to an annual limitation of $268,000 due to section 382 of the
Internal Revenue Code. In addition, the Company has alternative
minimum tax credit carryforwards of approximately $121,000 which are
available to reduce future federal regular income taxes over an
indefinite period.
(11) PENSION AND PROFIT SHARING PLANS
Prior to 1996, the Company had a noncontributory defined benefit pension
plan ("Plan") covering all employees who meet certain eligibility
requirements. It was the Company's policy to fund the maximum amount
that could be deducted for federal income tax purposes. Prior to
1992, the Company periodically made contributions to a profit sharing
plan covering all full-time employees in amounts determined by the
Board of Directors. No contributions were made to the Plan during any
of the years in the three-year period ended December 31, 1995. During
1994, the Company decided to terminate the pension and profit sharing
plans effective December 31, 1994 and ceased accrual of benefits as
of that date. The Company submitted plan termination documents, which
were subsequently approved, to the Internal Revenue Service ("IRS")
and the Pension Benefit Guarantee Corporation for the Plan, and to
the IRS for the profit sharing plan. Distributions from the plans
were made during January and February of 1996.
The following table sets forth the Plan's status as of December 31, 1995
(in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
1995
----
<S> <C>
Actuarial present value of accumulated benefit obligation, including
vested benefits of $1,626 $ 1,626
=======
Accrued pension liability:
Projected benefit obligation for service rendered to date (1,626)
Plan assets at fair value 1,264
=======
Plan assets less than projected benefit obligation (362)
Unrecognized net loss 450
Unrecognized net asset being amortized over 15 years (388)
-------
Accrued pension liability included in other liabilities $ (300)
=======
</TABLE>
(continued)
F-51
<PAGE> 157
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(11) Pension and Profit Sharing Plans, Continued
Net periodic pension costs under the Plan prior to 1996 were as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994
---- ----
<S> <C> <C>
Service cost-benefits earned during the year $ - 150
Interest cost of projected benefit obligation 75 79
Actual return on plan assets 173 (82)
Net amortization and deferral adjustments (324) (96)
------ --
Net periodic pension costs $ (76) 51
====== ==
</TABLE>
Disclosure assumptions used in accounting for the Plan as of December 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Weighted average discount rate 4.5% 5.0%
Rate of increase in compensation levels N/A 6.0%
Expected long-term rate of return on assets 6.0% 6.0%
</TABLE>
In connection with the plan terminations, the Company adopted a new defined
contribution profit sharing 401(k) plan (the "401(k) Plan") effective
January 1, 1995. All employees who meet certain eligibility requirements
are covered under the 401(k) Plan. Under the 401(k) Plan, an employee may
elect to contribute up to 15% of their annual compensation. Employer
contributions to the 401(k) Plan are made at the discretion of the Board of
Directors. Contributions to the 401(k) Plan for the years ended December
31, 1996 and 1995 were $78,000 and $49,000, respectively.
(12) FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments are commitments to extend
credit and may involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract amounts of these
instruments reflect the extent of involvement the Company has in
these financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in making commitments as it
does for on-balance-sheet instruments.
(continued)
F-52
<PAGE> 158
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(12) FINANCIAL INSTRUMENTS, CONTINUED
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained by the
Company upon extension of credit is based on management's credit
evaluation of the counterparty.
The estimated fair values of the Company's financial instruments were as
follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996 AT DECEMBER 31, 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 17,965 17,965 10,426 10,426
Trading securities 9,580 9,580 23,076 23,076
Securities available for sale 41,445 41,445 49,832 49,832
Securities held to maturity 15,343 15,514 17,636 17,840
Loans receivable 209,005 209,354 161,190 163,660
Loans held for sale 10,462 10,462 22,765 22,765
Accrued interest receivable 1,710 1,710 1,821 1,821
Federal Home Loan Bank stock 2,378 2,378 2,514 2,514
Financial Liabilities:
Deposits 286,927 289,326 248,936 251,116
Advances from Federal Home Loan Bank 7,000 7,000 30,000 30,000
</TABLE>
The notional amount, which approximates fair value, of the Company's
financial instruments with off-balance-sheet risk at December 31,
1996, was as follows (in thousands):
<TABLE>
<CAPTION>
NOTIONAL
AMOUNT
<S> <C>
Commitments to extend credit $ 5,062
</TABLE>
(13) SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
The Company grants real estate, commercial and consumer loans to
customers primarily in the State of Florida with the majority of such
loans in the Central Florida area. Therefore, the Company's exposure
to credit risk is significantly affected by changes in the economy of
the Central Florida area.
The contractual amounts of credit related financial instruments such as
commitments to extend credit represent the amounts of potential
accounting loss should the contract be fully drawn upon, the customer
default and the value of any existing collateral become worthless.
(continued)
F-53
<PAGE> 159
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) RELATED PARTIES
Loans to directors and officers of the Company, which were made at market
rates, were made in the ordinary course of business and did not
involve more than normal risk of collectibility or present other
unfavorable features. Activity in loans to directors and officers
were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1996 1995
---- ----
<S> <C> <C>
Beginning balance $ 793 867
Amounts related to new officers and directors 15 7
Loans originated - 7
Principal repayments (35) (88)
Ending balance $ 773 793
===== ===
</TABLE>
(15) COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements. In addition, the
Company is a defendant in certain claims and legal actions arising in
the ordinary course of business. In the opinion of management, after
consultation with legal counsel, the ultimate disposition of these
matters is not expected to have a material adverse effect on the
consolidated balance sheets of the Company.
(16) RESTRICTIONS ON RETAINED EARNINGS
The Association is subject to certain restrictions on the amount of
dividends that it may declare without prior regulatory approval. At
December 31, 1996, the Association was a Tier 2 institution for
purposes of the regulations relating to capital distributions; as
such, the Association may make capital distributions of up to 75% of
its net income over the most recent four-quarter period (depending on
its risk-based capital level) without prior regulatory approval.
(17) REGULATORY MATTERS
The Association is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory-and possibly
additional discretionary-actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Association must meet
specific capital guidelines that involve quantitative measures of the
Association's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The
Association's capital amounts and classification are also subject to
qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts (set forth in the
following table) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined). Management
believes, as of December 31, 1996, that the Association meets all
capital adequacy requirements to which it is subject.
(continued)
F-54
<PAGE> 160
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(17) REGULATORY MATTERS, CONTINUED
As of December 31, 1996, the most recent notification from the OTS
categorized the Association as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized the Association must maintain minimum Tier I (core), Tier
I (risk-based) and total risk-based capital ratios as set forth
below. There are no conditions or events since that notification that
management believes have changed the Association's category.
The Association's actual capital amounts and ratios at December 31, 1996
were as follows (dollars in thousands):
<TABLE>
<CAPTION>
TO BE WELL
MINIMUM CAPITALIZED
FOR CAPITAL FOR PROMPT
ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
----------------- ----------------- ---------------------
RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT
----- ------ ----- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity, and
ratio to total assets 6.4% $ 20,167
Less - nonincludable portion
of deferred tax asset
and mortgage
servicing rights (1,401)
Add back - unrealized
depreciation on
available-for-sale
securities 6
---------
Tangible capital, and ratio
to adjusted total assets 5.9% $ 18,772 1.5% $ 4,734
========= ========
Tier 1 (core) capital, and
ratio to adjusted total
assets 5.9% $ 18,772 3.0% $ 9,469 5.0% $ 15,782
========= ======== ========
Tier 1 capital, and ratio
to risk-weighted assets 11.1% 18,772 4.0% $ 6,786 6.0% $ 10,179
========= ======== ========
Tier 2 capital (excess allowance
for loan losses) 2,154
---------
Total risk-based capital,
and ratio to risk-
weighted assets 12.3% $ 20,926 8.0% $ 13,572 10.0% $ 16,965
========= ======== ========
Total assets $ 317,024
=========
Adjusted total assets $ 315,630
=========
Risk-weighted assets $ 169,647
=========
</TABLE>
(continued)
F-55
<PAGE> 161
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(17) REGULATORY MATTERS, CONTINUED
On September 30, 1996, legislation was enacted which, among other
things, imposed a special one-time assessment on SAIF member
institutions, including the Association, to recapitalize the SAIF and
spread the obligations for payments of Financing Corporation ("FICO")
bonds across all SAIF and Bank Insurance Fund ("BIF") members. That
legislation eliminated the substantial disparity between the amount
that BIF and SAIF members had been paying for deposit insurance
premiums. The FDIC special assessment levied amounted to 65.7 basis
points on SAIF assessable deposits held as of March 31, 1995. The
special assessment was recognized in the third quarter and is tax
deductible. The Association recorded a charge of $1.5 million before
taxes as a result of the FDIC special assessment.
Beginning on January 1, 1997, BIF members will pay a portion of the FICO
payment equal to 1.3 basis points on BIF-insured deposits, compared
to 6.48 basis points payable by SAIF members on SAIF-insured
deposits, and will pay a pro rata share of the FICO payment on the
earlier of January 1, 2000 or the date upon which the last savings
association, such as the Association, ceases to exist. The
legislation also requires BIF and SAIF to be merged by January 1,
1999 provided that subsequent legislation is adopted to eliminate the
savings association charter and no savings associations remain as of
that time.
The FDIC recently lowered SAIF assessments to a range comparable to those
of BIF members, however, SAIF members will continue to pay the higher
FICO payments described above. Management cannot predict the level of
FDIC insurance assessments on an ongoing basis or whether the BIF and
SAIF will eventually be merged.
(18) STOCK OPTION PLAN
In 1988, the Company adopted a stock option program (the "Program") for
the benefit of its directors, officers and other selected key
employees of the Company. Four kinds of rights are contained in the
program and are available for grant: incentive stock options (options
to purchase common stock, granted to officers and key employees),
compensatory stock options (options to purchase common stock, granted
to directors), stock appreciation rights and performance share
awards. A total of 241,500 shares of common stock were reserved for
issuance pursuant to the exercise of stock options under the Program.
As of December 31, 1996, the Company had granted incentive stock
options and compensatory stock options as discussed in more detail
below. No stock appreciation rights or performance share awards have
been issued to date. The Program provides that incentive stock
options and compensatory stock options are granted to purchase stock
at the market value of the stock at the date of the grant; such
grants are exercisable immediately for compensatory stock options,
and ratably over a three-year period for incentive stock options. All
stock options expire at the earlier of ten years from the date of the
grant, or three months after the director, officer or employee ceases
employment with the Company.
(continued)
F-56
<PAGE> 162
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(18) STOCK OPTION PLAN, CONTINUED
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 applies to stock-based
compensation under the Company's Program. As allowed by SFAS 123, the
Company elected to continue to measure compensation cost for the
options or shares granted under the Program using the intrinsic value
method of accounting prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees." Under that accounting method, the
Company recorded no compensation expense related to the Program
during the years ended December 31, 1996, 1995 and 1994.
During the years ended December 31, 1996 and 1995, 47,000 and 52,100
options were granted under the Program. If compensation cost for the
Program had been determined based on the fair value of the awards at
the grant date, using the fair value method defined in SFAS 123, the
Company's net income and net income per share for 1996 and 1995 would
not have been materially reduced.
The stock option transactions were as follows:
<TABLE>
<CAPTION>
INCENTIVE COMPENSATORY
STOCK OPTIONS STOCK OPTIONS
--------------------------- --------------------------
OPTION PRICE OPTION PRICE
SHARES PER SHARE SHARES PER SHARE
------ --------- ------ ---------
<S> <C> <C> <C> <C> <C>
Outstanding, December 31, 1993 133,125 $ 2.13 15,813 $ 2.13
Granted 10,000 $ 2.13 - -
------- ------
Outstanding, December 31, 1994 143,125 $ 2.13 15,813 $ 2.13
Granted 52,100 $ 2.25 - -
Cancelled or expired (10,000) $ 2.13 (2,875) $ 2.13
------- ------
Outstanding, December 31, 1995 185,225 $2.13 - $ 2.25 12,938 $ 2.13
Granted 47,000 $ 2.75 - -
Cancelled or expired (37,600) $2.13 - $ 2.25 (4,313) $ 2.13
------- ------
Outstanding, December 31, 1996 194,625 $2.13 - $ 2.75 8,625 $ 2.13
======= ======
</TABLE>
At December 31, 1996, the weighted-average option price per share for
the incentive stock options was $2.30 and for the compensatory stock
options was $2.13. The weighted- average option price per share of
all options under the Program at December 31, 1996 was $2.29. Of the
total incentive stock options outstanding at December 31, 1996, 1995
and 1994, 114,624, 82,083 and 44,375, respectively, were exercisable.
(continued)
F-57
<PAGE> 163
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(19) PARENT COMPANY ONLY FINANCIAL STATEMENTS
Condensed financial statements of the Holding Company are presented below.
Amounts shown as investment in wholly-owned subsidiaries and equity
in earnings of subsidiaries are eliminated in consolidation (in
thousands).
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1996 1995
---- ----
ASSETS
<S> <C> <C>
Cash, deposited with subsidiary $ 113 117
Investment in wholly-owned subsidiaries 20,167 18,663
------- ------
Total $20,280 18,780
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities -- --
Stockholders' equity 20,280 18,780
Total $20,280 18,780
======= ======
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income:
Equity in undistributed earnings of subsidiaries $ 1,604 1,591 379
Other income 120 120 120
Expense (124) (65) (59)
------- ----- ---
Net income $ 1,600 1,646 440
======= ===== ===
</TABLE>
(continued)
F-58
<PAGE> 164
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(19) PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------ ---- ------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 1,600 1,646 440
Adjustments to reconcile net earnings to net cash
(used in) provided by operations:
Equity in earnings of subsidiaries (1,604) (1,591) (379)
------- ----- ---
Net cash (used in) provided by operating activities (4) 55 61
------- ----- ---
Cash Flows from Financing Activities:
Proceeds from sale of common stock -- -- 2,400
Investment in subsidiary -- -- (2,400)
------- ----- ---
Net cash provided by financing activities -- -- --
------- ----- ---
Net (decrease) increase in cash (4) 55 61
Cash at beginning of year 117 62 1
------- ----- ---
Cash at end of year $ 113 117 62
======= ===== ===
</TABLE>
(20) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables present summarized quarterly data (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Interest income $5,466 5,398 5,340 5,793 21,997
Interest expense 3,140 2,942 2,824 3,117 12,023
------ ----- ----- ----- ------
Net interest income 2,326 2,456 2,516 2,676 9,974
Provision for loan losses 150 -- 7 625 782
------ ----- ----- ----- ------
Net interest income
after provision for loan losses 2,176 2,456 2,509 2,051 9,192
Noninterest income 304 563 535 985 2,387
Noninterest expenses 2,391 2,187 3,771 827 9,176
------ ----- ----- ----- ------
Income (loss) before income taxes 89 832 (727) 2,209 2,403
Provision (credit) for income taxes 33 310 (270) 730 803
------ ----- ----- ----- ------
Net income (loss) $ 56 522 (457) 1,479 1,600
====== ===== ===== ===== ======
Income (loss) per share $ .01 .06 (.05) .17 .19
====== ===== ===== ===== ======
</TABLE>
(continued)
F-59
<PAGE> 165
F.F.O. FINANCIAL GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(20) QUARTERLY FINANCIAL DATA (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Interest income $4,978 4,780 4,897 5,075 19,730
Interest expense 2,259 2,477 2,616 2,759 10,111
------ ----- ----- ----- ------
Net interest income 2,719 2,303 2,281 2,316 9,619
Provision for loan losses 141 30 154 152 477
------ ----- ----- ----- ------
Net interest income
after provision for loan losses 2,578 2,273 2,127 2,164 9,142
Noninterest income 663 665 604 670 2,602
Noninterest expenses 2,530 2,428 2,182 2,317 9,457
------ ----- ----- ----- ------
Income before income taxes 711 510 549 517 2,287
Provision for income taxes 250 174 190 27 641
------ ----- ----- ----- ------
Net income $ 461 336 359 490 1,646
====== ===== ===== ===== ======
Income per share $ .05 .04 .05 .06 .20
====== ===== ===== ===== ======
</TABLE>
(21) SUBSEQUENT EVENT - PENDING MERGER
On March 10, 1997, the Holding Company executed a Letter of Intent to
merge with Republic Bancshares, Inc. ("Republic"). Under the terms of
the Letter of Intent, Republic will exchange shares of its common
stock for all of the outstanding shares of F.F.O.'s common stock at
an exchange ratio of .29 share of Republic common stock for each
share of F.F.O. common stock. The exchange ratio may be adjusted for
decreases in Republic's stock price, but in no event will the
exchange ratio exceed .30 share of Republic common stock for each
share of F.F.O. common stock. F.F.O. has the right to terminate the
transaction if Republic's stock price is less than $13.50 shortly
before closing. Outstanding options for F.F.O.'s common stock will be
converted into options for Republic common stock on the same terms.
The transaction is expected to be completed in 1997, and is to be
accounted for as a corporate reorganization under which the
controlling shareholder's interest in F.F.O. will be carried forward
at its historical cost while the minority interest in F.F.O. will be
recorded at fair value. The proposed merger is subject to completion
of a definitive agreement, approval by the respective shareholders of
F.F.O. and Republic, and approval by applicable regulatory
authorities. Upon completion of the proposed merger, the
then-outstanding options under the Company's stock option program
(see Note 18) will become immediately exercisable.
F-60
<PAGE> 166
F.F.O. FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT AT
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and due from banks $ 6,491 $ 6,300
Interest-bearing deposits with banks 7,688 11,665
Federal funds sold 764 -
--------- ---------
Cash and cash equivalents 14,943 17,965
Trading securities 13,169 9,580
Securities available for sale 43,713 41,445
Securities held to maturity, at cost 14,702 15,343
Loans held for sale, at lower of cost or market value 4,573 10,462
Loans receivable, net 215,926 209,005
Accrued interest receivable 1,972 1,710
Premises and equipment 5,268 5,324
Restricted securities - Federal Home Loan Bank stock, at cost 2,378 2,378
Foreclosed real estate, net 1,425 799
Deferred tax asset 1,576 1,490
Other assets 386 1,448
--------- ---------
Total assets $ 320,031 316,949
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits 16,597 14,303
Savings and NOW deposits 58,060 57,981
Time deposits 211,015 214,643
--------- ---------
Total deposits 285,672 286,927
Accrued interest on deposits 217 256
Due to bank 988 424
Current income tax liability 351 -
Advances from Federal Home Loan Bank 9,000 7,000
Advance payments by borrowers for taxes and insurance 1,419 608
Other liabilities 1,624 1,454
--------- ---------
Total liabilities 299,271 296,669
--------- ---------
Stockholders' equity:
Preferred stock - -
Common stock 845 843
Additional paid-in capital 17,633 17,599
Retained income 2,431 1,844
Net unrealized depreciation on securities available for sale (149) (6)
--------- ---------
Total stockholders' equity 20,760 20,280
--------- ---------
Total liabilities and stockholders' equity $ 320,031 316,949
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-61
<PAGE> 167
F.F.O. FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Interest income:
Loans receivable $ 4,591 4,018
Securities available for sale 619 593
Securities held to maturity 237 251
Trading securities 269 510
Federal funds sold 27 19
Deposits with banks 64 75
------------ ---------
Total interest income 5,807 5,466
------------ ---------
Interest expense:
Deposits 3,163 2,897
Other borrowed funds 10 243
------------ ---------
Total interest expense 3,173 3,140
------------ ---------
Net interest income 2,634 2,326
Provision for loan losses - 150
------------ ---------
Net interest income after provision for loan losses 2,634 2,176
------------ ---------
Noninterest income:
Service charges on deposits 328 323
Loan related fees and service charges 122 117
Loan servicing fees 83 68
Net trading account losses (138) (178)
Unrealized gain (loss) on loans held for sale 84 (111)
Net gain on sale of loans 54 43
Other income 68 42
------------ ---------
Total noninterest income 601 304
------------ ---------
Noninterest expenses:
Salaries and employee benefits 1,021 1,016
Occupancy expense 478 467
Loss on foreclosed real estate 34 33
Deposit insurance premium 63 173
Marketing and advertising 111 132
Data processing 179 151
Printing and office supplies 73 78
Telephone expense 66 71
Other expense 272 270
------------ ---------
Total noninterest expenses 2,297 2,391
------------ ---------
Income before income taxes 938 89
Income tax expense 351 33
------------ ---------
Net income $ 587 56
============ =========
Net income per share of common stock $ .07 .01
============ =========
Dividends per share $ - -
============ =========
Weighted average number of shares outstanding 8,430,181 8,430,000
============ =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-62
<PAGE> 168
F.F.O. FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED
DEPRECIATION
ADDITIONAL ON SECURITIES TOTAL
COMMON PAID-IN RETAINED AVAILABLE STOCKHOLDERS'
STOCK CAPITAL INCOME FOR SALE EQUITY
--------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 843 17,599 1,844 (6) 20,280
Net proceeds from the issuance
of 16,266 shares of common
stock (unaudited) 2 34 - - 36
Net change in unrealized depreciation
on securities available for
sale net of income taxes
of $86 (unaudited) - - - (143) (143)
Net income for the three months
ended March 31, 1997
(unaudited) - - 587 - 587
----- ------ ----- ---- ------
Balance at March 31, 1997
(unaudited) $ 845 17,633 2,431 (149) 20,760
===== ====== ===== ==== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-63
<PAGE> 169
F.F.O. FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 587 56
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses - 150
Net amortization of deferred loan fees (3) 39
Depreciation of premises and equipment 137 137
Net (increase) decrease in trading securities (3,589) 7,184
Provision for deferred income taxes - 16
Proceeds from sales of loans held for sale 6,027 7,171
Gain on sale of loans (54) (43)
Unrealized (gain) loss on loans held for sale (84) 111
(Increase) decrease in accrued interest receivable (262) 64
Decrease (increase) in other assets 1,062 (501)
Decrease in accrued interest payable (39) (74)
Increase in current income tax liability 351 -
Increase in other liabilities and due to bank 734 245
-------- -------
Net cash provided by operating activities 4,867 14,555
-------- -------
Cash flows from investing activities:
Purchase of available-for-sale securities (2,988) -
Proceeds from maturities of available-for-sale securities - 2,000
Principal repayments on available-for-sale securities 479 899
Principal repayments on held-to-maturity securities 653 568
Net increase in loans receivable (7,544) (8,787)
Proceeds from sales of foreclosed real estate - 112
Payments capitalized to foreclosed real estate - (55)
Net purchases of premises and equipment (81) (101)
-------- -------
Net cash used in investing activities (9,481) (5,364)
-------- -------
Cash flows from financing activities:
Net increase in demand, savings and NOW deposits 2,373 54
Net (decrease) increase in time deposits (3,628) 19,732
Net proceeds from the sale of common stock 36 -
Net proceeds from (repayment of) Federal Home Loan Bank advances 2,000 (16,000)
Net increase in advance payments by borrowers for taxes
and insurance 811 613
-------- -------
Net cash provided by financing activities 1,592 4,399
-------- -------
Net (decrease) increase in cash and cash equivalents (3,022) 13,590
Cash and cash equivalents at beginning of period 17,965 10,426
-------- -------
Cash and cash equivalents at end of period $ 14,943 24,016
======== =======
(continued)
</TABLE>
F-64
<PAGE> 170
F.F.O. FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ - 18
======= =======
Interest $ 3,212 3,214
======= =======
Noncash investing and financing activities:
Transfers of loans to foreclosed real estate $ 626 199
======= =======
Transfer of loans held for sale to loans receivable, at market $ - 10,603
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-65
<PAGE> 171
F.F.O. FINANCIAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL. In the opinion of the management of F.F.O. Financial Group, Inc.
(the "Company" or "F.F.O."), the accompanying condensed consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position
at March 31, 1997, and the results of operations and cash flows for the
three-month periods ended March 31, 1997 and 1996. These financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. The results
of operations for the three months ended March 31, 1997, are not
necessarily indicative of the operating results to be anticipated for
the full year.
F.F.O. Financial Group, Inc. is a Florida corporation organized in 1988
as a unitary savings and loan holding company. The accompanying
unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, First Federal
Savings and Loan Association of Osceola County (the "Association"), and
the Association's wholly-owned subsidiary, Gulf American Financial
Corporation, which is currently inactive. All significant intercompany
transactions and accounts have been eliminated in consolidation.
2. NET INCOME PER SHARE. Net income per share has been computed by dividing
net income by the weighted average number of shares outstanding during
the period. No adjustment has been made to give effect to the shares
that would be outstanding, assuming the exercise of outstanding stock
options, since the impact is deemed immaterial.
3. LOAN IMPAIRMENT AND LOSSES. The following summarizes the amounts of
impaired loans, as defined by Statements of Financial Accounting
Standards No. 114 and 118 ("SFAS No. 114 and 118"), all of which were
collateral-dependent, at March 31, 1997 and December 31, 1996, and the
average net investment in impaired loans and interest income recognized
and received on impaired loans during the three-month periods ended
March 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Loans identified as impaired:
Gross loans with related allowance for credit
losses recorded $ 7,989 8,256
Less: Allowances on these loans (1,848) (1,766)
------- -------
Net investment in impaired loans $ 6,141 6,490
======= =======
(continued)
</TABLE>
F-66
<PAGE> 172
F.F.O. FINANCIAL GROUP, INC.
3. LOAN IMPAIRMENT AND LOSSES, CONTINUED.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Average investment in impaired loans $ 6,316 4,697
======= =====
Interest income recognized on impaired loans $ 130 118
======= =====
Interest income received on impaired loans $ 130 118
======= =====
</TABLE>
An analysis of the change in the allowance for loan losses follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Balance at January 1 $ 5,613 5,138
Provision for loan losses - 150
Loans charged-off, net of recoveries (34) (78)
------- -----
Balance at March 31 $ 5,579 5,210
======= =====
</TABLE>
4. FORECLOSED REAL ESTATE. Activity in the allowance for losses on foreclosed
real estate was as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Balance at January 1 $ 158 1,124
Recoveries, net of charge-offs 5 51
----- -----
Balance at March 31 $ 163 1,175
===== =====
(continued)
</TABLE>
F-67
<PAGE> 173
F.F.O. FINANCIAL GROUP, INC.
5. IMPACT OF NEW ACCOUNTING STANDARDS. In June 1996, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). That Statement
provides accounting and reporting standards for transfers and servicing
of financial assets as well as extinguishments of liabilities. The
Statement also provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are
secured borrowings. SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. The adoption of SFAS No. 125 had no
significant effect on the Company's financial position at March 31,
1997 or results of operations for the three months then ended.
6. PENDING MERGER. On April 14, 1997, the Company executed a definitive
agreement to merge with Republic Bancshares, Inc. ("Republic"). Under
the terms of the definitive agreement, Republic will exchange shares of
its common stock for all of the outstanding shares of F.F.O.'s common
stock at an exchange ratio of .29 share of Republic common stock for
each share of F.F.O. common stock. The exchange ratio may be adjusted
for decreases in Republic's stock price, but in no event will the
exchange ratio exceed .30 share of Republic common stock for each share
of F.F.O. common stock. F.F.O. has the right to terminate the
transaction if Republic's stock price is less than $13.50 shortly
before closing. Outstanding options for F.F.O.'s common stock will be
converted into options for Republic common stock on the same terms.
The transaction is expected to be completed in 1997, and is to be
accounted for as a corporate reorganization under which the controlling
shareholder's interest in F.F.O. will be carried forward at its
historical cost while the minority interest in F.F.O. will be recorded
at fair value. The proposed merger is subject to approval by the
respective shareholders of F.F.O. and Republic, and approval by
applicable regulatory authorities.
F-68
<PAGE> 174
F.F.O. FINANCIAL GROUP, INC.
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Hacker, Johnson, Cohen & Grieb, the Company's independent certified public
accountants, have made a limited review of the financial data as of March 31,
1997, and for the three-month periods ended March 31, 1997 and 1996 presented
in this document, in accordance with standards established by the American
Institute of Certified Public Accountants.
Their report, furnished pursuant to Article 10 of Regulation S-X, is included
herein.
F-69
<PAGE> 175
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors
F.F.O. Financial Group, Inc.
St. Cloud, Florida:
We have reviewed the condensed consolidated balance sheet of F.F.O.
Financial Group, Inc. and Subsidiaries (the "Company") as of March 31, 1997,
and the related condensed consolidated statements of income and cash flows for
the three-month periods ended March 31, 1997 and 1996, and the condensed
consolidated statement of stockholders' equity for the three-month period ended
March 31, 1997. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended (not presented herein), and in our report dated
February 11, 1997, except for Note 21, as to which the date was March 11, 1997,
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1996 is fairly stated in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
HACKER, JOHNSON, COHEN & GRIEB
Orlando, Florida
April 17, 1997
F-70
<PAGE> 176
No dealer, salesman or any other person has been
authorized to give any information or to make any
2,500,000 PREFERRED SECURITIES representations other than
those contained in this Prospectus in connection with the
offer made by this Prospectus and, if given or made, such
RBI CAPITAL TRUST I information or representations must not be
relied upon as having been authorized by the Company, RBI
____% Preferred Securities Capital or the Underwriters. This
Prospectus does Cumulative Trust not
constitute an offer to sell or a solicitation
(Liquidation Amount $10 per Preferred Security) of an offer to
buy any security other than the
Guaranteed, as described herein, by Preferred Securities
offered by this Prospectus, nor does it constitute an offer to
sell or a Republic Bancshares,
Inc. solicitation of an offer to buy the Preferred Securities
by anyone in any jurisdiction in which
PROSPECTUS such an offer or solicitation is not authorized,
or in which the person making such offer or solicitation is
not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that the
information contained herein is correct as of any time
subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Summary . . . . . . . . . . . . . . . . . . 6
Risk Factors . . . . . . . . . . . . . . . 15
Use of Proceeds . . . . . . . . . . . . . . 24
Market for the Preferred Securities . . . . 24
Accounting Treatment. . . . . . . . . . . . 24
Capitalization. . . . . . . . . . . . . . . 25
Pro Forma Financial Data . . . . . . . . . 26
Selected Consolidated Financial Data . . . 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . 33
Business . . . . . . . . . . . . . . . . . 50
Management . . . . . . . . . . . . . . . . 68
Description of the Preferred Securities . . 70
Description of the Junior Subordinated
Debentures . . . . . . . . . . . . . . . 81
Description of the Guarantee . . . . . . . 89
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee . . . . . . 92
Certain Federal Income Tax Consequences . . 93
ERISA Considerations . . . . . . . . . . . 96
Underwriting . . . . . . . . . . . . . . . 97
Validity of Securities . . . . . . . . . . 99
Experts . . . . . . . . . . . . . . . . . . 99
Available Information . . . . . . . . . . . 99
Incorporation of Certain Documents
by reference . . . . . . . . . . . . . . 100
Index to Financial Statements
and Schedule . . . . . . . . . . . . . . F-1
2,500,000 PREFERRED SECURITIES
RBI CAPITAL TRUST I
____ % PREFERRED SECURITIES CUMULATIVE TRUST
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
REPUBLIC BANCSHARES, INC.
---------------
PROSPECTUS
---------------
WILLIAM R. HOUGH & CO.
RYAN, BECK & CO.
-------- ---, 1997
<PAGE> 177
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
-------------------------------------------
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,713.00
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nasdaq National Market Listing Fee . . . . . . . . . . . . . . . . . . . . . . . .
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustee Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing and Mailing Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850 of the Florida Business Corporation Act and the Articles
of Incorporation and Bylaws of Republic Bancshares, Inc. (the "Company")
provide for indemnification of the Company's directors and officers against
claims, liabilities, amounts paid in settlement and expenses in a variety of
circumstances, which may include liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). In addition, the Company carries insurance
permitted by the laws of the State of Florida on behalf of Directors, officers,
employees or agents which may cover liabilities under the Securities Act.
Under the Trust Agreement of RBI Capital Trust I ("RBI Capital"), the
Company will agree to indemnify each of the Trustees of RBI Capital or any
predecessor Trustee for RBI Capital, and to hold each Trustee harmless against,
any loss, damage, claim, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with he acceptance or
administration of the Trust Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under the Trust Agreement.
ITEM 16. EXHIBITS
The following exhibits either are filed herewith or incorporated by
reference to documents previously filed or will be filed by amendment, as
indicated below:
<TABLE>
<S> <C>
Exhibits Description
1 Form of Underwriting Agreement.*
3.1 Amended and Restated Articles of Incorporation of the Company.*
3.2 Bylaws of the Company.*
4.1 Form of Indenture with respect to the Company's __% Junior Subordinated Debentures.
4.2 Form of Specimen Junior Subordinated Debenture.*
4.3 Certificate of Trust of RBI Capital Trust I.
4.4 Trust Agreement of RBI Capital Trust I.
4.5 Form of Amended and Restated Trust Agreement of RBI Capital Trust I.
4.6 Form of Certificate for Cumulative Trust Preferred Security of RBI Capital Trust I.*
4.7 Form of Guarantee Agreement for RBI Capital Trust I.*
4.8 Form of Agreement as to Expenses and Liabilities.
</TABLE>
II-1
<PAGE> 178
<TABLE>
<S> <C> <C>
5.1 Opinion of Holland & Knight LLP regarding the Junior Subordinated Debentures.*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, regarding the Cumulative
Trust Preferred Securities to be issued by RBI Capital Trust I.*
8.1 Tax Opinion of Holland & Knight LLP.*
12 Statement regarding computation of earnings to fixed charges.*
23.1 Consent of Holland & Knight LLP (included in Exhibit 5.1).
23.2 Consent of Richards, Layton & Finger (included in Exhibit 5.2).
23.3 Consent of Arthur Andersen, LLP.
23.4 Consent of Hacker, Johnson, Cohen & Grieb.
24 Power of Attorney (included with signature pages to this Registration Statement).
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee.*
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee and
Restated Trust Agreement.*
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee and
Agreement for RBI Capital Trust I.*
_______________________
* To be filed by amendment.
</TABLE>
ITEM 17. UNDERTAKINGS
Each of the undersigned Registrants hereby undertake:
(a) That, for purposes of determining any liability under the Securities
Act, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) (1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 179
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunder duly
authorized, in the City of St. Petersburg, State of Florida, on the 30th day of
May, 1997.
REPUBLIC BANCSHARES, INC.
By: /s/ John Sapanski
--------------------
John Sapanski
Chairman of the Board of Directors,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, RBI Capital
Trust I certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunder duly authorized, in the City of St. Petersburg, State of Florida, on
the 30th day of May, 1997.
RBI CAPITAL TRUST I
By: /s/ John W. Sapanski
--------------------------------
John W. Sapanski, Trustee
By: /s/ William R. Falzone
------------------------------
William R. Falzone, Trustee
By: /s/ Christopher M. Hunter
------------------------------
Christopher M. Hunter, Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John W. Sapanski and William R. Falzone and
each of them acting alone, his true and lawful attorneys-in-fact and against,
each with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
II-3
<PAGE> 180
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE TITLE
- --------- ---- -----
<S> <C>
/s/ John W. Sapanski Chairman, Chief Executive Officer and
- -------------------------------------------- Director (principal executive officer)
John W. Sapanski
/s/ William R. Falzone Treasurer (principal financial and
- -------------------------------------------- accounting officer)
William R. Falzone
/s/ Fred Hemmer Director
- --------------------------------------------
Fred Hemmer
Director
- --------------------------------------------
Marla Hough
/s/ William R. Hough Director
- --------------------------------------------
William R. Hough
/s/ Alfred T. May Director
- --------------------------------------------
Alfred T. May
Director
- --------------------------------------------
William J. Morrison
</TABLE>
II-4
<PAGE> 181
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C>
Exhibits Description
1 Form of Underwriting Agreement.*
3.1 Amended and Restated Articles of Incorporation of the Company.*
3.2 Bylaws of the Company.*
4.1 Form of Indenture with respect to the Company's __% Junior Subordinated Debentures.
4.2 Form of Specimen Junior Subordinated Debenture.*
4.3 Certificate of Trust of RBI Capital Trust I.
4.4 Trust Agreement of RBI Capital Trust I.
4.5 Form of Amended and Restated Trust Agreement of RBI Capital Trust I.
4.6 Form of Certificate for Cumulative Trust Preferred Security of RBI Capital Trust I.*
4.7 Form of Guarantee Agreement for RBI Capital Trust I.*
4.8 Form of Agreement as to Expenses and Liabilities.
5.1 Opinion of Holland & Knight LLP regarding the Junior Subordinated Debentures.*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, regarding the Cumulative
Trust Preferred Securities to be issued by RBI Capital Trust I.*
8.1 Tax Opinion of Holland & Knight LLP.*
12 Statement regarding computation of earnings to fixed charges.*
23.1 Consent of Holland & Knight LLP (included in Exhibit 5.1).
23.2 Consent of Richards, Layton & Finger (included in Exhibit 5.2).
23.3 Consent of Arthur Andersen, LLP.
23.4 Consent of Hacker, Johnson, Cohen & Grieb
24 Power of Attorney (included with signature pages to this Registration Statement).
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee.*
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee and
Restated Trust Agreement.*
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as Trustee and
Agreement for RBI Capital Trust I.*
</TABLE>
- --------------
* To be filed by amendment
II-5
<PAGE> 1
EXHIBIT 4.1
[FORM OF INDENTURE]
REPUBLIC BANCSHARES, INC.
AND
WILMINGTON TRUST COMPANY,
AS TRUSTEE
INDENTURE
_______% JUNIOR SUBORDINATED DEBENTURES DUE 2027
DATED AS OF ______________ ____, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 DEFINITIONS OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS
REGISTRATION AND EXCHANGE OF THE DEBENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.2 MATURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.3 FORM AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.4 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.5 EXECUTION AND AUTHENTICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 TEMPORARY DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN
DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.9 CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.10 BENEFIT OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.11 AUTHENTICATION AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.12 RIGHT OF SET-OFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III REDEMPTION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.1 REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.2 SPECIAL EVENT REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.4 NOTICE OF REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.5 PAYMENT UPON REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.6 NO SINKING FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.2 NOTICE OF EXTENSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.3 LIMITATION ON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.2 MAINTENANCE OF AGENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.3 PAYING AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.4 APPOINTMENT TO FILL VACANCY IN
OFFICE OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.6 LIMITATION ON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.7 COVENANTS AS TO THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.8 COVENANTS AS TO PURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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<TABLE>
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ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND
ADDRESSES OF DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.2 PRESERVATION OF INFORMATION;
COMMUNICATIONS WITH DEBENTUREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.3 REPORTS BY THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.4 REPORTS BY THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.1 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS
FOR ENFORCEMENT BY TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.3 APPLICATION OF MONEYS COLLECTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.4 LIMITATION ON SUITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE;
DELAY OR OMISSION NOT WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.6 CONTROL BY DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.7 UNDERTAKING TO PAY COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.1 FORM OF DEBENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.3 GLOBAL DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX CONCERNING THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.2 NOTICE OF DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS,
ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.5 MAY HOLD DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.6 MONEYS HELD IN TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.7 COMPENSATION AND REIMBURSEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT
OF SUCCESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION
OR SUCCESSION TO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<TABLE>
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ARTICLE X CONCERNING THE DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.3 WHO MAY BE DEEMED OWNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY
DISREGARDED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.5 ACTIONS BINDING ON FUTURE
DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XI SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT
OF DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT
OF DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL
INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE XII SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE XIII SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.2 DISCHARGE OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13.5 REPAYMENT TO COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 14.1 NO RECOURSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE XV MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 15.2 ACTIONS BY SUCCESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 15.3 SURRENDER OF COMPANY POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 15.4 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 15.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 15.8 PAYMENTS ON BUSINESS DAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
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SECTION 15.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 15.11 SEPARABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 15.12 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XVI SUBORDINATION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 16.1 AGREEMENT TO SUBORDINATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED
DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 16.4 SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 16.6 NOTICE BY THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF
SENIOR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
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CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
- ------------------- ---------
<S> <C>
310(a) 9.10
310(b) 9.9
9.11
310(c) N/A
311(a) 9.14
311(b) 9.14
311(c) N/A
312(a) 6.1
6.2(a)
312(b) 6.2(c)
312(c) 6.2(c)
313(a) 6.4(a)
313(b) 6.4(b)
313(c) 6.4(a)
6.4(b)
313(d) 6.4(c)
314(a) 6.3(a)
314(b) N/A
314(c) 15.7
314(d) N/A
314(e) 15.7
314(f) N/A
315(a) 9.1(a)
9.3
315(b) 9.2
315(c) 9.1(a)
315(d) 9.1(b)
315(e) 7.7
316(a) 1.1
7.6
316(b) 7.4(b)
316(c) 10.1(b)
317(a) 7.2
317(b) 5.3
318(a) 15.9
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Indenture
and shall not affect the interpretation of any of its terms or provisions.
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<PAGE> 7
INDENTURE
INDENTURE, dated as of _________, 1997, between REPUBLIC BANCSHARES, INC., a
Florida corporation (the "Company"), and WILMINGTON TRUST COMPANY, a banking
corporation duly organized and existing under the laws of the State of
Delaware, as trustee (the "Trustee");
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the
execution and delivery of this Indenture to provide for the issuance of
unsecured securities to be known as its _____% Junior Subordinated Debentures
due 2027 (hereinafter referred to as the "Debentures"), the form and substance
of such Debentures and the terms, provisions and conditions thereof to be set
forth as provided in this Indenture; and
WHEREAS, RBI Capital Trust I, a Delaware statutory business trust (the "Trust"),
has offered to the public $_______ million aggregate liquidation amount of its
Preferred Securities (as defined herein) and proposes to invest the proceeds
from such offering, together with the proceeds of the issuance and sale by the
Trust to the Company of $_______ million aggregate liquidation amount of its
Common Securities (as defined herein), in $_________ million aggregate principal
amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver this
Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid instrument
in accordance with its terms, and to make the Debentures, when executed by the
Company and authenticated and delivered by the Trustee, the valid obligations
of the Company, have been performed, and the execution and delivery of this
Indenture have been duly authorized in all respects; and
WHEREAS, to provide the terms and conditions upon which the Debentures are to
be authenticated, issued and delivered, the Company has duly authorized the
execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of the
Debentures by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of the Debentures and
intending to be legally bound hereby:
<PAGE> 8
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS OF TERMS.
The terms defined in this Section 1.1 (except as in this Indenture otherwise
expressly provided or unless the context otherwise requires) for all purposes
of this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.1 and shall include the plural
as well as the singular. All other terms used in this Indenture that are
defined in the Trust Indenture Act, or that are by reference in the Trust
Indenture Act defined in the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise requires), shall have the
meanings assigned to such terms in the Trust Indenture Act and in the
Securities Act as in force at the date of the execution of this instrument.
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with Generally Accepted
Accounting Principles as in effect at the time of computation.
"25% Capital Limitation" means the limitation imposed by the Federal Reserve
that the proceeds of certain qualifying securities like the Trust Securities
will qualify as Tier 1 capital of the issuer up to an amount not to exceed 25%
of the issuer's Tier 1 capital, or any subsequent limitation adopted by the
Federal Reserve.
"Accelerated Maturity Date" means if the Company elects to accelerate the
Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is prior to the Scheduled Maturity Date, but is after
_____________, 2002.
"Additional Interest" shall have the meaning set forth in Section 2.4.
"Administrative Trustees" shall have the meaning set forth in the Trust
Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person directly
or indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities or other ownership interests of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities or
other ownership interests are directly or indirectly owned, controlled or held
with power to vote by the specified Person; (c) any Person directly or
indirectly controlling, controlled by, or under common control with the
specified Person; (d) a partnership in which the specified Person is a general
partner; (e) any officer or director of the specified Person; and (f) if the
specified Person is an
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<PAGE> 9
individual, any entity of which the specified Person is an officer, director or
general partner.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Debenture or beneficial interest therein, the rules and
procedures of the Depositary for such Global Debenture, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means an authenticating agent with respect to the
Debentures appointed by the Trustee pursuant to Section 2.11.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law
for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any duly
authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification.
"Business Day" means, with respect to the Debentures, any day other than a
Saturday or a Sunday or a day on which federal or state banking institutions in
the Borough of Manhattan, The City of New York, or the State of Florida are
authorized or required by law, executive order or regulation to close, or a day
on which the Corporate Trust Office of the Trustee or the Property Trustee is
closed for business.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of any amendment to, or change (including any proposed
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change pronouncement, action or decision is announced on or after
the date of original issuance of the Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk that the Company will not
be entitled to treat an amount equal to the Liquidation Amount (as defined in
the Trust Agreement) of such Preferred Securities as "Tier 1 Capital" (or the
then equivalent thereof), except as otherwise restricted under the 25% Capital
Limitation, for purposes of the risk-based
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<PAGE> 10
capital adequacy guidelines of the Federal Reserve (or any successor regulatory
authority with jurisdiction over bank holding companies), as then in effect and
applicable to the Company.
"Certificate" means a certificate signed by the principal executive officer,
the principal financial officer, the principal accounting officer, the
treasurer or any vice president of the Company. The Certificate need not
comply with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the definition of
"Investment Company Event."
"Commission" means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act.
"Common Securities" means undivided beneficial interests in the assets of the
Trust which rank pari passu with the Preferred Securities; provided, however,
that upon the occurrence of an Event of Default, the rights of holders of
Common Securities to payment in respect of (i) distributions, and (ii) payments
upon liquidation, redemption and otherwise are subordinated to the rights of
holders of Preferred Securities.
"Company" means Republic Bancshares, Inc., a corporation duly organized and
existing under the laws of the State of Florida, and, subject to the provisions
of Article XII, shall also include its successors and assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at any
particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at
________________________, Attention:_________________.
"Coupon Rate" shall have the meaning set forth in Section 2.4.
"Custodian" means any receiver, trustee, assignee, liquidator, or similar
official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder," or other
similar term, means the Person or Persons in whose name or names a particular
Debenture shall be registered on the books of the Company or the Trustee kept
for that purpose in accordance with the terms of this Indenture.
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"Debenture Register" shall have the meaning set forth in Section 2.6(b).
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse of time,
or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Depositary" means, with respect to the Debentures issuable or issued in whole
or in part in the form of one or more Global Debentures, the Person designated
as Depositary by the Company.
"Dissolution Event" means that as a result of the occurrence and continuation
of a Special Event, the Trust is to be dissolved in accordance with the Trust
Agreement and the Debentures held by the Property Trustee are to be distributed
to the holders of the Trust Securities issued by the Trust pro rata in
accordance with the Trust Agreement.
"Event of Default" means, with respect to the Debentures, any event specified
in Section 7.1 , which has continued for the period of time, if any, and after
the giving of the notice, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, and any statute
successor thereto, in each case as amended from time to time.
"Extended Interest Payment Period" shall have the meaning set forth in Section
4.1.
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"Federal Reserve" means the Board of Governors of the Federal Reserve System.
"Generally Accepted Accounting Principles" means such accounting principles as
are generally accepted at the time of any computation required hereunder.
"Global Debenture" means a Debenture in the form prescribed in Exhibit A hereto
evidencing all or part of the Debentures, issued to the Depositary or its
nominee, and registered in the name of such Depositary or its nominee.
"Governmental Obligations" means securities that are (i) direct obligations of
the United States of America for the payment of which its full faith and credit
is pledged; or (ii) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depositary receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar import, refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
"Indenture" means this instrument as originally executed or as it may from time
to time be supplemented or amended by one or more indentures supplemental
hereto entered into in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of interest
on the Debentures, means the date specified in the Debenture or in a Board
Resolution or in an indenture supplemental hereto with respect to the
Debentures as the fixed date on which an installment of interest with respect
to the Debentures is due and payable.
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"Investment Company Act" means the Investment Company Act of 1940, and any
statute successor thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Trust of an Opinion of
Counsel, rendered by a law firm experienced in such matters, to the effect
that, as a result of the occurrence of a change in law or regulation or a
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), the Trust is or shall be considered an "investment company" that is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after the date of original issuance of the
Preferred Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature and on which the
principal shall be due and payable together with all accrued and unpaid
interest thereon including Compounded Interest and Additional Interest, if any.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Controller or
an Assistant Controller or the Secretary or an Assistant Secretary, of the
Company, and delivered to the Trustee. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Indenture shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary
to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
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"Opinion of Counsel" means an opinion in writing of legal counsel, who may be an
employee of or counsel for the Company, that is delivered to the Trustee in
accordance with the terms hereof.
"Outstanding," when used with reference to the Debentures, means, subject to
the provisions of Section 10.4, as of any particular time, all Debentures
theretofore authenticated and delivered by the Trustee under this Indenture,
except (a) Debentures theretofore canceled by the Trustee or any paying agent,
or delivered to the Trustee or any paying agent for cancellation or that have
previously been canceled; (b) Debentures or portions thereof for the payment or
redemption of which moneys or Governmental Obligations in the necessary amount
shall have been deposited in trust with the Trustee or with any paying agent
(other than the Company) or shall have been set aside and segregated in trust
by the Company (if the Company shall act as its own paying agent); provided,
however, that if such Debentures or portions of such Debentures are to be
redeemed prior to the maturity thereof, notice of such redemption shall have
been given as provided in Article III or provision satisfactory to the Trustee
shall have been made for giving such notice; and (c) Debentures in lieu of or
in substitution for which other Debentures shall have been authenticated and
delivered pursuant to the terms of Section 2.6.
"Person" means any individual, corporation, partnership, joint-venture, trust,
joint-stock company, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment" means the place or places where the principal of and
interest on the Debentures are payable in accordance with the terms of this
Indenture.
"Predecessor Debenture" means every previous Debenture evidencing all or a
portion of the same debt as that evidenced by such particular Debenture; and,
for the purposes of this definition, any Debenture authenticated and delivered
under Section 2.8 in lieu of a lost, destroyed or stolen Debenture shall be
deemed to evidence the same debt as the lost, destroyed or stolen Debenture.
"Preferred Securities" means undivided beneficial interests in the assets of
the Trust which rank pari passu with Common Securities issued by the Trust;
provided, however, that upon the occurrence of an Event of Default, the rights
of holders of Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the Company may enter
into with the Trustee or other Persons that
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operate directly or indirectly for the benefit of holders of Preferred
Securities.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Responsible Officer" when used with respect to the Trustee means the Chairman
of the Board of Directors, the President, any Vice President, the Secretary,
the Treasurer, any trust officer, any corporate trust officer or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the Persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means _____________, 2027.
"Securities Act," means the Securities Act of 1933, and any statute successor
thereto, in each case as amended from time to time.
"Senior Debt" means the principal of (and premium, if any) and interest, if any
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under Section 1111(b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Company; (ii) any Debt of the Company to any of its subsidiaries; (iii) any
Debt to any employee of the Company; (iv) any Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Debentures as a result of the subordination
provisions of this Indenture would be greater than they otherwise would have
been as a result of any obligation of such holders to pay amounts over to the
obligees on such trade accounts payable or accrued liabilities arising in the
ordinary course of business as a result of subordination provisions to which
such Debt is subject; and (v) any Debt which constitutes Subordinated Debt.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
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"Special Event" means a Tax Event, an Investment Company Event or a Capital
Treatment Event.
"Subordinated Debt" means the principal of (and premium, if any) and interest,
if any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of this Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Debentures) including, without
limitation, the Company's currently outstanding 6% Convertible Subordinated
Debentures due 2011.
"Subsidiary" means, with respect to any Person, (i) any corporation at least a
majority of whose outstanding Voting Stock shall at the time be owned, directly
or indirectly, by such Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries; (ii) any general partnership, joint
venture, trust or similar entity, at least a majority of whose outstanding
partnership or similar interests shall at the time be owned by such Person, or
by one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; and (iii) any limited partnership of which such Person or any of
its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel, rendered
by a law firm experienced in such matters, to the effect that, as a result of
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or shall be within 90 days after the
date of such Opinion of Counsel, subject to United States federal income tax
with respect to income received or accrued on the Debentures; (ii) interest
payable by the Company on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, shall not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes; or (iii) the
Trust is, or shall be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges. The Trust or the Company shall request and receive
such Opinion of Counsel with regard to such matters within a reasonable period
of time after the Trust or the Company shall have become aware of the possible
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occurrence of any of the events described in clauses (i) through (iii) above.
"Trust" means RBI Capital Trust I, a Delaware statutory business trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
______________, 1997, of the Trust, as amended, modified or supplemented from
time to time, among the trustees of the trust named therein, the Company, as
depositor, and the holders from time to time of undivided beneficial ownership
interests in the assets of the Trust.
"Trustee" means Wilmington Trust Company and, subject to the provisions of
Article IX, shall also include its successors and assigns, and, if at any time
there is more than one Person acting in such capacity hereunder, "Trustee" shall
mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939, as amended,
subject to the provisions of Sections 11.1, 11.2, and 12.1 and any statute
successor thereto, in each case as amended from time to time.
"Trust Securities" means the Common Securities and Preferred Securities,
collectively.
"Voting Stock," as applied to stock of any Person, means shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person having ordinary voting power for the election of a majority of
the directors (or the equivalent) of such Person, other than shares, interests,
participations or other equivalents having such power only by reason of the
occurrence of a contingency.
ARTICLE II
ISSUE, DESCRIPTION, TERMS, CONDITIONS
REGISTRATION AND EXCHANGE OF THE DEBENTURES
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT.
There is hereby authorized Debentures designated the "____% Junior Subordinated
Debentures due 2027," limited in aggregate principal amount to $_____________
million, which amount shall be as set forth in any written order of the Company
for the authentication and delivery of Debentures pursuant to Section 2.5.
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SECTION 2.2 MATURITY.
(a) The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date
to be a date prior to the Scheduled Maturity Date in
accordance with Section 2.2(b), the Accelerated
Maturity Date.
(b) The Company may at any time before the day which is 90 days
before the Scheduled Maturity Date and after ______________,
2002, elect to shorten the Maturity Date only once to the
Accelerated Maturity Date provided that the Company has
received the prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of
the Federal Reserve.
(c) If the Company elects to accelerate the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice
to the registered holders of the Debentures, the Property
Trustee and the Trust of the acceleration of the Maturity Date
and the Accelerated Maturity Date at least 90 days and no more
than 180 days before the Accelerated Maturity Date.
SECTION 2.3 FORM AND PAYMENT.
The Debentures shall be issued in fully registered certificated form without
interest coupons. Principal and interest on the Debentures issued in
certificated form shall be payable, the transfer of such Debentures shall be
registrable and such Debentures shall be exchangeable for Debentures bearing
identical terms and provisions at the office or agency of the Trustee;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the holder at such address as shall appear in the
Debenture Register or by wire transfer to an account maintained by the holder
as specified in the Debenture Register, provided that the holder provides
proper transfer instructions by the regular record date. Notwithstanding the
foregoing, so long as the holder of any Debentures is the Property Trustee, the
payment of the principal of and interest (including Compounded Interest and
Additional Interest, if any) on such Debentures held by the Property Trustee
shall be made at such place and to such account as may be designated by the
Property Trustee.
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SECTION 2.4 INTEREST.
(a) Each Debenture shall bear interest at the rate of ____% per
annum (the "Coupon Rate") from the original date of issuance
until the principal thereof becomes due and payable, and on
any overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) on any overdue
installment of interest at the Coupon Rate, compounded
quarterly, payable (subject to the provisions of Article IV)
quarterly in arrears on March 31, June 30, September 30, and
December 31 of each year (each, an "Interest Payment Date,"
commencing on __________, 1997), to the Person in whose name
such Debenture or any Predecessor Debenture is registered, at
the close of business on the regular record date for such
interest installment, which shall be the fifteenth day of the
last month of the calendar quarter.
(b) The amount of interest payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day
months. Except as provided in the following sentence, the
amount of interest payable for any period shorter than a full
quarterly period for which interest is computed, shall be
computed on the basis of the actual number of days elapsed in
such a 30-day period. In the event that any date on which
interest is payable on the Debentures is not a Business Day,
then payment of interest payable on such date shall be made on
the next succeeding day which is a Business Day (and without
any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally
payable.
(c) If, at any time while the Property Trustee is the holder of
any Debentures, the Trust or the Property Trustee is required
to pay any taxes, duties, assessments or governmental charges
of whatever nature (other than withholding taxes) imposed by
the United States, or any other taxing authority, then, in any
case, the Company shall pay as additional interest
("Additional Interest") on the Debentures held by the Property
Trustee, such additional amounts as shall be required so that
the net amounts received and retained by the Trust and the
Property Trustee after paying such taxes, duties, assessments
or other governmental charges shall be equal to the amounts
the Trust and the Property Trustee would
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have received had no such taxes, duties, assessments or other
governmental charges been imposed.
SECTION 2.5 EXECUTION AND AUTHENTICATIONS.
(a) The Debentures shall be signed on behalf of the Company by its
Chief Executive Officer, President or one of its Vice
Presidents, under its corporate seal attested by its Secretary
or one of its Assistant Secretaries. Signatures may be in the
form of a manual, imprinted or facsimile signature. The
Company may use the imprinted or facsimile signature of any
Person who shall have been a Chief Executive Officer,
President or Vice President thereof, or of any Person who
shall have been a Secretary or Assistant Secretary thereof,
notwithstanding the fact that at the time the Debentures shall
be authenticated and delivered or disposed of such Person
shall have ceased to be the Chief Executive Officer, President
or a Vice President, or the Secretary or an Assistant
Secretary, of the Company. The seal of the Company may be in
the form of a facsimile of such seal and may be impressed,
affixed, imprinted or otherwise reproduced on the Debentures.
The Debentures may contain such notations, legends or
endorsements required by law, stock exchange rule or usage.
Each Debenture shall be dated the date of its authentication
by the Trustee.
(b) A Debenture shall not be valid until authenticated manually by
an authorized signatory of the Trustee, or by an
Authenticating Agent. Such signature shall be conclusive
evidence that the Debenture so authenticated has been duly
authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture.
(c) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Debentures
executed by the Company to the Trustee for authentication,
together with a written order of the Company for the
authentication and delivery of such Debentures signed by its
Chief Executive Officer, President or any Vice President and
its Secretary or any Assistant Secretary, and the Trustee in
accordance with such written order shall authenticate and
deliver such Debentures.
(d) In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such
Debentures, the Trustee shall be
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entitled to receive, and (subject to Section 9.1) shall
be fully protected in relying upon, an Opinion of Counsel
stating that the form and terms thereof have been established
in conformity with the provisions of this Indenture.
(e) The Trustee shall not be required to authenticate such
Debentures if the issue of such Debentures pursuant to this
Indenture shall affect the Trustee's own rights, duties or
immunities under the Debentures and this Indenture or
otherwise in a manner that is not reasonably acceptable to the
Trustee.
(f) Debentures distributed to holders of Global Preferred
Securities (as defined in the Trust Agreement) upon the
dissolution of the Trust shall be distributed in the form of
one or more Global Debentures registered in the name of a
Depositary or its nominee, and deposited with the Debenture
Registrar, as custodian for such Depositary, or with such
Depositary, for credit by the Depositary to the respective
accounts of the beneficial owners of the Debentures
represented thereby (or such other accounts as they may
direct). Debentures distributed to holders of Preferred
Securities other than Global Preferred Securities upon the
dissolution of the Trust shall not be issued in the form of a
Global Debenture or any other form intended to facilitate
book-entry trading in beneficial interests in such Debentures.
SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE.
(a) Debentures may be exchanged upon presentation thereof at the
office or agency of the Company designated for such purpose,
for other Debentures and for a like aggregate principal
amount, upon payment of a sum sufficient to cover any tax or
other governmental charge in relation thereto, all as provided
in this Section 2.6. In respect of any Debentures so
surrendered for exchange, the Company shall execute, the
Trustee shall authenticate and such office or agency shall
deliver in exchange therefor the Debenture or Debentures that
the Debenture holder making the exchange shall be entitled to
receive, bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose or such other location
designated by the Company a register or registers (herein
referred to as the "Debenture Register") in which, subject to
such reasonable
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regulations as it may prescribe, the Company shall register the
Debentures and the transfers of Debentures as in this Article
II provided and which at all reasonable times shall be open for
inspection by the Trustee. The registrar for the purpose of
registering Debentures and transfer of Debentures as herein
provided shall be appointed as authorized by Board Resolution
(the "Debenture Registrar"). Upon surrender for transfer of
any Debenture at the office or agency of the Company designated
for such purpose, the Company shall execute, the Trustee shall
authenticate and such office or agency shall deliver in the
name of the transferee or transferees a new Debenture or
Debentures for a like aggregate principal amount. All
Debentures presented or surrendered for exchange or
registration of transfer, as provided in this Section 2.6,
shall be accompanied (if so required by the Company or the
Debenture Registrar) by a written instrument or instruments of
transfer, in form satisfactory to the Company or the Debenture
Registrar, duly executed by the registered holder or by such
holder's duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or
registration of transfer of Debentures, or issue of new
Debentures in case of partial redemption, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge in relation thereto, other than exchanges
pursuant to Section 2.7, Section 3.5(b) and Section 11.4 not
involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period
beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of less than all the
Outstanding Debentures and ending at the close of business on
the day of such mailing; nor (ii) to register the transfer of
or exchange any Debentures or portions thereof called for
redemption.
SECTION 2.7 TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Company may execute, and
the Trustee shall authenticate and deliver, temporary Debentures (printed,
lithographed, or typewritten). Such temporary Debentures shall be
substantially in the form of the definitive Debentures in lieu of which they
are issued, but with such omissions, insertions and variations as may be
appropriate for temporary Debentures, all as may be determined by the Company.
Every temporary Debenture shall be executed by the Company and be
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authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with like effect, as the definitive Debentures. Without
unnecessary delay the Company shall execute and shall furnish definitive
Debentures and thereupon any or all temporary Debentures may be surrendered in
exchange therefor (without charge to the holders), at the office or agency of
the Company designated for such purpose, and the Trustee shall authenticate and
such office or agency shall deliver in exchange for such temporary Debentures an
equal aggregate principal amount of definitive Debentures, unless the Company
advises the Trustee to the effect that definitive Debentures need not be
executed and furnished until further notice from the Company. Until so
exchanged, the temporary Debentures shall be entitled to the same benefits under
this Indenture as definitive Debentures authenticated and delivered hereunder.
SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.
(a) In case any temporary or definitive Debenture shall become
mutilated or be destroyed, lost or stolen, the Company
(subject to the next succeeding sentence) shall execute, and
upon the Company's request the Trustee (subject as aforesaid)
shall authenticate and deliver, a new Debenture bearing a
number not contemporaneously outstanding, in exchange and
substitution for the mutilated Debenture, or in lieu of and in
substitution for the Debenture so destroyed, lost or stolen.
In every case the applicant for a substituted Debenture shall
furnish to the Company and the Trustee such security or
indemnity as may be required by them to save each of them
harmless, and, in every case of destruction, loss or theft,
the applicant shall also furnish to the Company and the
Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Debenture and of the
ownership thereof. The Trustee may authenticate any such
substituted Debenture and deliver the same upon the written
request or authorization of any officer of the Company. Upon
the issuance of any substituted Debenture, the Company may
require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith. In case any
Debenture that has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Debenture, pay or authorize
the payment of the same (without surrender thereof except in
the case of a mutilated Debenture) if the applicant for such
payment
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shall furnish to the Company and the Trustee such security or
indemnity as they may require to save them harmless, and, in
case of destruction, loss or theft, evidence to the
satisfaction of the Company and the Trustee of the
destruction, loss or theft of such Debenture and of the
ownership thereof.
(b) Every replacement Debenture issued pursuant to the provisions
of this Section 2.8 shall constitute an additional contractual
obligation of the Company whether or not the mutilated,
destroyed, lost or stolen Debenture shall be found at any
time, or be enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately
with any and all other Debentures duly issued hereunder. All
Debentures shall be held and owned upon the express condition
that the foregoing provisions are exclusive with respect to
the replacement or payment of mutilated, destroyed, lost or
stolen Debentures, and shall preclude (to the extent lawful)
any and all other rights or remedies, notwithstanding any law
or statute existing or hereafter enacted to the contrary with
respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
SECTION 2.9 CANCELLATION.
All Debentures surrendered for the purpose of payment, redemption, exchange or
registration of transfer shall, if surrendered to the Company or any paying
agent, be delivered to the Trustee for cancellation, or, if surrendered to the
Trustee, shall be canceled by it, and no Debentures shall be issued in lieu
thereof except as expressly required or permitted by any of the provisions of
this Indenture. On request of the Company at the time of such surrender, the
Trustee shall deliver to the Company canceled Debentures held by the Trustee.
In the absence of such request the Trustee may dispose of canceled Debentures
in accordance with its standard procedures and deliver a certificate of
disposition to the Company. If the Company shall otherwise acquire any of the
Debentures, however, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Debentures unless and
until the same are delivered to the Trustee for cancellation.
SECTION 2.10 BENEFIT OF INDENTURE.
Nothing in this Indenture or in the Debentures, express or implied, shall give
or be construed to give to any Person, other than the parties hereto and the
holders of the Debentures (and, with respect
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to the provisions of Article XVI, the holders of Senior Indebtedness) any legal
or equitable right, remedy or claim under or in respect of this Indenture, or
under any covenant, condition or provision herein contained; all such covenants,
conditions, and provisions being for the sole benefit of the parties hereto and
of the holders of the Debentures (and, with respect to the provisions of Article
XVI, the holders of Senior Indebtedness).
SECTION 2.11 AUTHENTICATION AGENT.
(a) So long as any of the Debentures remain Outstanding there may
be an Authenticating Agent for any or all such Debentures,
which the Trustee shall have the right to appoint. Said
Authenticating Agent shall be authorized to act on behalf of
the Trustee to authenticate Debentures issued upon exchange,
transfer or partial redemption thereof, and Debentures so
authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder. All references
in this Indenture to the authentication of Debentures by the
Trustee shall be deemed to include authentication by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall be a corporation that has
a combined capital and surplus, as most recently reported or
determined by it, sufficient under the laws of any
jurisdiction under which it is organized or in which it is
doing business to conduct a trust business, and that is
otherwise authorized under such laws to conduct such business
and is subject to supervision or examination by federal or
state authorities. If at any time any Authenticating Agent
shall cease to be eligible in accordance with these
provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the
Company. The Trustee may at any time (and upon request by the
Company shall) terminate the agency of any Authenticating
Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation,
termination or cessation of eligibility of any Authenticating
Agent, the Trustee may appoint an eligible successor
Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment
hereunder, shall become vested with all the rights, powers and
duties of its predecessor hereunder as if originally named as
an Authenticating Agent pursuant hereto.
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SECTION 2.12 RIGHT OF SET-OFF.
With respect to the Debentures initially issued to the Trust,
notwithstanding anything to the contrary herein, the Company shall have the
right to set off any payment it is otherwise required to make in respect of any
such Debenture to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Preferred
Securities Guarantee relating to such Debenture or to a holder of Preferred
Securities pursuant to an action undertaken under Section 15.13 of this
Indenture.
ARTICLE III
REDEMPTION OF DEBENTURES
SECTION 3.1 REDEMPTION.
Subject to the Company having received prior approval of the Federal Reserve,
if then required under applicable capital guidelines or policies of the Federal
Reserve, the Company may redeem the Debentures issued hereunder on and after
the dates set forth in and in accordance with the terms of this Article III.
SECTION 3.2 SPECIAL EVENT REDEMPTION.
Subject to the Company having received prior approval of the Federal Reserve,
if then required under applicable capital guidelines or policies of the Federal
Reserve, if a Special Event has occurred and is continuing, then,
notwithstanding Section 3.3(a), the Company shall have the right upon not less
than 30 days nor more than 60 days notice to the holders of the Debentures to
redeem the Debentures, in whole but not in part, for cash within 180 days
following the occurrence of such Special Event (the "180-Day Period") at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest thereon to the date of such redemption (the
"Redemption Price"), provided that if at the time there is available to the
Company the opportunity to eliminate, within the 180-Day Period, a Tax Event by
taking some ministerial action (a "Ministerial Action"), such as filing a form
or making an election, or pursuing some other similar reasonable measure which
has no adverse effect on the Company, the Trust or the holders of the Trust
Securities issued by the Trust, the Company shall pursue such Ministerial
Action in lieu of redemption, and, provided further, that the Company shall
have no right to redeem the Debentures while the Trust is pursuing any
Ministerial Action pursuant to its obligations under the Trust Agreement. The
Redemption Price shall be paid prior to 12:00 noon, New York time, on the date
of such redemption or such earlier time as the Company determines, provided
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that the Company shall deposit with the Trustee an amount sufficient to pay the
Redemption Price by 10:00 a.m., New York time, on the date such Redemption
Price is to be paid.
SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY.
(a) Subject to the provisions of Section 3.3(b), except as
otherwise may be specified in this Indenture, the Company
shall have the right to redeem the Debentures, in whole or in
part, from time to time, on or after ____________, 2002, at a
Redemption Price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest thereon to the
date of such redemption. Any redemption pursuant to this
Section 3.3(a) shall be made upon not less than 30 days nor
more than 60 days notice to the holder of the Debentures, at
the Redemption Price. If the Debentures are only partially
redeemed pursuant to this Section 3.3, the Debentures shall be
redeemed pro rata or by lot or in such other manner as the
Trustee shall deem appropriate and fair in its discretion.
The Redemption Price shall be paid prior to 12:00 noon, New
York time, on the date of such redemption or at such earlier
time as the Company determines provided that the Company shall
deposit with the Trustee an amount sufficient to pay the
Redemption Price by 10:00 a.m., New York time, on the date
such Redemption Price is to be paid.
(b) If a partial redemption of the Debentures would result in the
delisting of the Preferred Securities issued by the Trust from
The Nasdaq Stock Market's National Market or any national
securities exchange or other organization on which the
Preferred Securities are then listed, the Company shall not be
permitted to effect such partial redemption and may only
redeem the Debentures in whole.
SECTION 3.4 NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to
redeem all or a portion of the Debentures in accordance with
the right reserved so to do, the Company shall, or shall cause
the Trustee to upon receipt of 45 days' written notice from
the Company, give notice of such redemption to holders of the
Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and
not more than 60 days before the date fixed for redemption to
such holders at their last addresses as they shall appear upon
the Debenture Register unless a shorter period is
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specified in the Debentures to be redeemed. Any notice that is
mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the registered
holder receives the notice. In any case, failure duly to give
such notice to the holder of any Debenture designated for
redemption in whole or in part, or any defect in the notice,
shall not affect the validity of the proceedings for the
redemption of any other Debentures. In the case of any
redemption of Debentures prior to the expiration of any
restriction on such redemption provided in the terms of such
Debentures or elsewhere in this Indenture, the Company shall
furnish the Trustee with an Officers' Certificate evidencing
compliance with any such restriction. Each such notice of
redemption shall specify the date fixed for redemption and the
Redemption Price and shall state that payment of the Redemption
Price shall be made at the office or agency of the Company or
at the Corporate Trust Office, upon presentation and surrender
of such Debentures, that interest accrued to the date fixed for
redemption shall be paid as specified in said notice and that
from and after said date interest shall cease to accrue. If
less than all the Debentures are to be redeemed, the notice to
the holders of the Debentures shall specify the particular
Debentures to be redeemed. If the Debentures are to be
redeemed in part only, the notice shall state the portion of
the principal amount thereof to be redeemed and shall state
that on and after the redemption date, upon surrender of such
Debenture, a new Debenture or Debentures in principal amount
equal to the unredeemed portion thereof shall be issued.
(b) If less than all the Debentures are to be redeemed, the
Company shall give the Trustee at least 45 days' notice in
advance of the date fixed for redemption as to the aggregate
principal amount of Debentures to be redeemed, and thereupon
the Trustee shall select, by lot or in such other manner as it
shall deem appropriate and fair in its discretion, the portion
or portions (equal to $10 or any integral multiple thereof) of
the Debentures to be redeemed and shall thereafter promptly
notify the Company in writing of the numbers of the Debentures
to be redeemed, in whole or in part. The Company may, if and
whenever it shall so elect pursuant to the terms hereof, by
delivery of instructions signed on its behalf by its President
or any Vice President, instruct the Trustee or any paying
agent to call all or any part of the Debentures for redemption
and to give notice of redemption in the manner set forth in
this Section 3.4, such notice to be in the name of the Company
or its own
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name as the Trustee or such paying agent may deem advisable.
In any case in which notice of redemption is to be given by the
Trustee or any such paying agent, the Company shall deliver or
cause to be delivered to, or permit to remain with, the Trustee
or such paying agent, as the case may be, such Debenture
Register, transfer books or other records, or suitable copies
or extracts therefrom, sufficient to enable the Trustee or such
paying agent to give any notice by mail that may be required
under the provisions of this Section 3.4.
SECTION 3.5 PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been
completed as above provided, the Debentures or portions of
Debentures to be redeemed specified in such notice shall
become due and payable on the date and at the place stated in
such notice at the applicable Redemption Price, and interest
on such Debentures or portions of Debentures shall cease to
accrue on and after the date fixed for redemption, unless the
Company shall default in the payment of such Redemption Price
with respect to any such Debenture or portion thereof. On
presentation and surrender of such Debentures on or after the
date fixed for redemption at the place of payment specified in
the notice, said Debentures shall be paid and redeemed at the
Redemption Price (but if the date fixed for redemption is an
interest payment date, the interest installment payable on
such date shall be payable to the registered holder at the
close of business on the applicable record date pursuant to
Section 2.4).
(b) Upon presentation of any Debenture that is to be redeemed in
part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debenture is
presented shall deliver to the holder thereof, at the expense
of the Company, a new Debenture of authorized denomination in
principal amount equal to the unredeemed portion of the
Debenture so presented.
SECTION 3.6 NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking fund.
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ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD.
So long as no Event of Default has occurred and is continuing, the Company shall
have the right, at any time and from time to time during the term of the
Debentures, to defer payments of interest by extending the interest payment
period of such Debentures for a period not exceeding 20 consecutive quarters
(the "Extended Interest Payment Period"), during which Extended Interest Payment
Period no interest shall be due and payable; provided that no Extended Interest
Payment Period may extend beyond the Maturity Date. Interest, the payment of
which has been deferred because of the extension of the interest payment period
pursuant to this Section 4.1 , shall bear interest thereon at the Coupon Rate
compounded quarterly for each quarter of the Extended Interest Payment Period
("Compounded Interest"). At the end of the Extended Interest Payment Period,
the Company shall calculate (and deliver such calculation to the Trustee) and
pay all interest accrued and unpaid on the Debentures, including any Additional
Interest and Compounded Interest (together, "Deferred Interest") that shall be
payable to the holders of the Debentures in whose names the Debentures are
registered in the Debenture Register on the first record date after the end of
the Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters, or extend beyond the Maturity Date of the
Debentures. Upon the termination of any Extended Interest Payment Period and
upon the payment of all Deferred Interest then due, the Company may commence a
new Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Company may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period.
SECTION 4.2 NOTICE OF EXTENSION.
(a) If the Property Trustee is the only registered holder of the
Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give written notice
to the Administrative Trustees, the Property Trustee and the
Trustee of its selection of such Extended Interest Payment
Period one Business Day before the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities
issued by the Trust are payable; or (ii) the date the Trust is
required to
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give notice of the record date or the date such Distributions
are payable, to The Nasdaq Stock Market's National Market
or other applicable self-regulatory organization or to holders
of the Preferred Securities issued by the Trust, but in any
event at least one Business Day before such record date.
(b) If the Property Trustee is not the only holder of the
Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give the holders of
the Debentures and the Trustee written notice of its selection
of such Extended Interest Payment Period at least one Business
Day before the earlier of (i) the next succeeding Interest
Payment Date; or (ii) the date the Company is required to give
notice of the record or payment date of such interest payment
to The Nasdaq Stock Market's National Market or other
applicable self-regulatory organization or to holders of the
Debentures.
(c) The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as
one of the 20 quarters permitted in the Extended Interest
Payment Period permitted under Section 4.1.
SECTION 4.3 LIMITATION ON TRANSACTIONS.
If (i) the Company shall exercise its right to defer payment of interest as
provided in Section 4.1; or (ii) there shall have occurred any Event of
Default, then (a) the Company shall not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (1)
the reclassification of any class of its capital stock for another class of its
capital stock; (2) dividends or distributions payable in any class of the
Company's common stock, (3) any declaration of a dividend in connection with
the implementation of a shareholder rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto and (4) purchases of the Company's common stock related to the
rights under any of the Company's benefit plans for its or its subsidiaries'
directors, officers or employees); (b) the Company shall not make any payment
of interest, principal or premium, if any, or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior to
the Debentures or make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any Subsidiary of the Company if such
guarantee ranks pari passu with or junior to the Debentures;
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provided, however, that notwithstanding the foregoing the Company may make
payments pursuant to its obligations under the Preferred Securities Guarantee;
and (c) the Company shall not redeem, purchase or acquire less than all of the
outstanding Debentures or any of the Preferred Securities.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall duly and punctually pay or cause to be paid the principal of
and interest on the Debentures at the time and place and in the manner provided
herein.
SECTION 5.2 MAINTENANCE OF AGENCY.
So long as any of the Debentures remain Outstanding, the Company shall maintain
an office or agency in the Place of Payment where (i) Debentures may be
presented for payment; (ii) Debentures may be presented as hereinabove
authorized for registration of transfer and exchange; and (iii) notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be given or served, such designation to continue with respect to such
office or agency until the Company shall, by written notice signed by its
President or a Vice President and delivered to the Trustee, designate some
other office or agency for such purposes or any of them. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, notices
and demands may be made or served at the Corporate Trust Office of the Trustee,
and the Company hereby appoints the Trustee as its agent to receive all such
presentations, notices and demands. In addition to any such office or agency,
the Company may from time to time designate one or more offices or agencies
where the Debentures may be presented for registration or transfer and for
exchange in the manner provided herein, and the Company may from time to time
rescind such designation as the Company may deem desirable or expedient;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain any such office or agency in
the Place of Payment for such purposes. The Company shall give the Trustee
prompt written notice of any such designation or rescission thereof.
SECTION 5.3 PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents for the
Debentures, other than the Trustee, the Company
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shall cause each such paying agent to execute and deliver to
the Trustee an instrument in which such agent shall agree
with the Trustee, subject to the provisions of this
Section 5.3:
(i) that it shall hold all sums held by it as such agent
for the payment of the principal of or interest on
the Debentures (whether such sums have been paid to
it by the Company or by any other obligor of such
Debentures) in trust for the benefit of the Persons
entitled thereto;
(ii) that it shall give the Trustee notice of any failure
by the Company (or by any other obligor of such
Debentures) to make any payment of the principal of
or interest on the Debentures when the same shall be
due and payable;
(iii) that it shall, at any time during the continuance of
any failure referred to in the preceding paragraph
(a)(ii) above, upon the written request of the
Trustee, forthwith pay to the Trustee all sums so
held in trust by such paying agent; and
(iv) that it shall perform all other duties of paying
agent as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect
to the Debentures, it shall on or before each due date of the
principal of or interest on such Debentures, set aside,
segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay such principal or
interest so becoming due on Debentures until such sums shall
be paid to such Persons or otherwise disposed of as herein
provided and shall promptly notify the Trustee of such action,
or any failure (by it or any other obligor on such Debentures)
to take such action. Whenever the Company shall have one or
more paying agents for the Debentures, it shall, prior to each
due date of the principal of or interest on any Debentures,
deposit with the paying agent a sum sufficient to pay the
principal or interest so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such
principal or interest, and (unless such paying agent is the
Trustee) the Company shall promptly notify the Trustee of this
action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the contrary,
(i) the agreement to hold sums in trust as provided in this
Section 5.3 is subject to the provisions
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of Section 13.3 and 13.4; and (ii) the Company may at any time,
for the purpose of obtaining the satisfaction and discharge of
this Indenture or for any other purpose, pay, or direct any
paying agent to pay, to the Trustee all sums held in trust by
the Company or such paying agent, such sums to be held by the
Trustee upon the same terms and conditions as those upon
which such sums were held by the Company or such paying agent;
and, upon such payment by any paying agent to the Trustee, such
paying agent shall be released from all further liability with
respect to such money.
SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, shall appoint, in the manner provided in Section 9.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS.
The Company shall not, while any of the Debentures remain outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to any other company unless the provisions of
Article XII hereof are complied with.
SECTION 5.6 LIMITATION ON TRANSACTIONS.
If Debentures are issued to the Trust or a trustee of the Trust in connection
with the issuance of Trust Securities by the Trust and (i) there shall have
occurred any event that would constitute an Event of Default; (ii) the Company
shall be in default with respect to its payment of any obligations under the
Preferred Securities Guarantee relating to the Trust; or (iii) the Company
shall have given notice of its election to defer payments of interest on such
Debentures by extending the interest payment period as provided in this
Indenture and such period, or any extension thereof, shall be continuing, then
(a) the Company shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (1)
the reclassification of any class of the Company's capital stock into another
class of capital stock, (2) dividends or distributions payable in any class of
the Company's common stock, (3) any declaration of a dividend in connection
with the implementation of a shareholder rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto and (4) purchases of the Company's common stock related
to the rights
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under any of the Company's benefit plans for its or its subsidiaries' directors,
officers or employees); (b) the Company shall not make any payment of interest,
principal or premium, if any, or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior to the Debentures;
provided, however, that the Company may make payments pursuant to its
obligations under the Preferred Securities Guarantee; and (c) the Company shall
not redeem, purchase or acquire less than all of the outstanding Debentures or
any of the Preferred Securities.
SECTION 5.7 COVENANTS AS TO THE TRUST.
For so long as such Trust Securities of the Trust remain outstanding, the
Company shall (i) maintain 100% direct or indirect ownership of the Common
Securities of the Trust; provided, however, that any permitted successor of the
Company under this Indenture may succeed to the Company's ownership of the
Common Securities; (ii) not voluntarily terminate, wind up or liquidate the
Trust, except upon prior regulatory approval if then so required under
applicable capital guidelines or regulatory policies and use its reasonable
efforts to cause the Trust (a) to remain a business trust, except in connection
with a distribution of Debentures, the redemption of all of the Trust
Securities of the Trust or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement; and (b) to otherwise continue not to
be treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; and (iii) use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an individual
beneficial interest in the Debentures. In connection with the distribution of
the Debentures to the holders of the Preferred Securities issued by the Trust
upon a Dissolution Event, the Company shall use its best efforts to list such
Debentures on The Nasdaq Stock Market's National Market or on such other
exchange as the Preferred Securities are then listed.
SECTION 5.8 COVENANTS AS TO PURCHASES.
Prior to _________, 2002, the Company shall not purchase any Debentures, in
whole or in part, from the Trust.
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ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
DEBENTUREHOLDERS
The Company shall furnish or cause to be furnished to the Trustee (a) on a
monthly basis on each regular record date (as described in Section 2.4) a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the holders of the Debentures as of such regular record date, provided that
the Company shall not be obligated to furnish or cause to furnish such list at
any time that the list shall not differ in any respect from the most recent
list furnished to the Trustee by the Company; and (b) at such other times as
the Trustee may request in writing within 30 days after the receipt by the
Company of any such request, a list of similar form and content as of a date
not more than 15 days prior to the time such list is furnished; provided,
however, that, in either case, no such list need be furnished if the
Trustee shall be the Debenture Registrar.
SECTION 6.2 PRESERVATION OF INFORMATION; COMMUNICATIONS WITH
DEBENTUREHOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and
addresses of the holders of Debentures contained in the most
recent list furnished to it as provided in Section 6.1 and as
to the names and addresses of holders of Debentures received
by the Trustee in its capacity as registrar for the Debentures
(if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided
in Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Debentureholders with
respect to their rights under this Indenture or under the
Debentures.
SECTION 6.3 REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the Company is required to file the same
with the Commission, copies of the annual
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reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations
prescribe) that the Company may be required to file with
the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such
sections, then to file with the Trustee and the Commission, in
accordance with the rules and regulations prescribed from time
to time by the Commission, such of the supplementary and
periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act in respect
of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules
and regulations.
(b) The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such
additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants
provided for in this Indenture as may be required from time to
time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail, first
class postage prepaid, or reputable over-night delivery
service that provides for evidence of receipt, to the
Debentureholders, as their names and addresses appear upon the
Debenture Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to
subsections (a) and (b) of this Section 6.3 as may be required
by rules and regulations prescribed from time to time by the
Commission.
(d) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company ending after
the date hereof, an Officers' Certificate covering the
preceding calendar year, stating whether or not, to the best
knowledge of the signers thereof, the Company is in default
in the performance, observance or fulfillment of or compliance
with any of the terms, provisions, covenants and conditions of
this Indenture, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof
of which they may have knowledge. For the purpose of this
Section 6.3(d), compliance shall be determined without regard
to
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any grace period or requirement of notice provided pursuant
to the terms of this Indenture.
SECTION 6.4 REPORTS BY THE TRUSTEE.
(a) On or before July 15 in each year in which any of the
Debentures are Outstanding, the Trustee shall transmit by
mail, first class postage prepaid, to the Debentureholders, as
their names and addresses appear upon the Debenture Register,
a brief report dated as of the preceding May 15, if and to the
extent required under Section 313(a) of the Trust Indenture
Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of
the Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Debentureholders, be filed by the Trustee with
the Company, with each stock exchange upon which any
Debentures are listed (if so listed) and also with the
Commission. The Company agrees to notify the Trustee when any
Debentures become listed on any stock exchange.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
(a) Whenever used herein with respect to the Debentures, "Event of
Default" means any one or more of the following events that
has occurred and is continuing:
(i) the Company defaults in the payment of any
installment of interest upon any of the Debentures,
as and when the same shall become due and payable,
and continuance of such default for a period of 30
days; provided, however, that a valid extension of an
interest payment period by the Company in accordance
with the terms of this Indenture shall not constitute
a default in the payment of interest for this
purpose;
(ii) the Company defaults in the payment of the principal
on the Debentures as and when the same shall become
due and payable whether at maturity, upon redemption,
by declaration or otherwise;
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(iii) the Company fails to observe or perform any other of
its covenants or agreements with respect to the
Debentures for a period of 90 days after the date on
which written notice of such failure, requiring the
same to be remedied and stating that such notice is a
"Notice of Default" hereunder, shall have been given
to the Company by the Trustee, by registered or
certified mail, or to the Company and the Trustee by
the holders of at least 25% in principal amount of
the Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (i) commences a voluntary case; (ii)
consents to the entry of an order for relief against
it in an involuntary case; (iii) consents to the
appointment of a Custodian of it or for all or
substantially all of its property; or (iv) makes a
general assignment for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order
under any Bankruptcy Law that (i) is for relief
against the Company in an involuntary case;
(ii) appoints a Custodian of the Company for all or
substantially all of its property; or (iii) orders
the liquidation of the Company, and the order or
decree remains unstayed and in effect for 90 days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise
terminated its existence except in connection with
(i) the distribution of Debentures to holders of
Trust Securities in liquidation of their interests in
the Trust; (ii) the redemption of all of the
outstanding Trust Securities of the Trust; or (iii)
certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the
Debentures shall have already become due and payable, either
the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then Outstanding hereunder,
by notice in writing to the Company (and to the Trustee if
given by such Debentureholders) may declare the principal of
all the Debentures to be due and payable immediately, and upon
any such declaration the same shall become and shall be
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immediately due and payable, notwithstanding anything
contained in this Indenture or in the Debentures.
(c) At any time after the principal of the Debentures shall have
been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the holders of a
majority in aggregate principal amount of the Debentures then
Outstanding hereunder, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its
consequences if: (i) the Company has paid or deposited with
the Trustee a sum sufficient to pay all matured installments
of interest upon all the Debentures and the principal of any
and all Debentures that shall have become due otherwise than
by acceleration (with interest upon such principal, and upon
overdue installments of interest, at the rate per annum
expressed in the Debentures to the date of such payment or
deposit) and the amount payable to the Trustee under Section
9.6; and (ii) any and all Events of Default under this
Indenture, other than the nonpayment of principal on
Debentures that shall not have become due by their terms,
shall have been remedied or waived as provided in Section
7.6. No such rescission and annulment shall extend to or
shall affect any subsequent default or impair any right
consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right
with respect to Debentures under this Indenture and such
proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and
in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company
and the Trustee shall continue as though no such proceedings
had been taken.
SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
(a) The Company covenants that (1) in case it shall default in the
payment of any installment of interest on any of the
Debentures, and such default shall have continued for a period
of 90 Business Days; or (2) in case it shall default in the
payment of the principal of any of the Debentures when the
same shall have become due and payable, whether upon maturity
of the Debentures or upon
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redemption or upon declaration or otherwise, then, upon demand
of the Trustee, the Company shall pay to the Trustee, for the
benefit of the holders of the Debentures, the whole amount
that then shall have become due and payable on all such
Debentures for principal or interest, or both, as the case may
be, with interest upon the overdue principal and (if the
Debentures are held by the Trust or a trustee of the Trust,
without duplication of any other amounts paid by the Trust or
trustee in respect thereof) upon overdue installments of
interest at the rate per annum expressed in the Debentures;
and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, and
the amount payable to the Trustee under Section 9.7.
(b) If the Company shall fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute
any action or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the
Company or other obligor upon the Debentures and collect the
moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or other
obligor upon the Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement,
composition or judicial proceedings affecting the Company or
the creditors or property of either, the Trustee shall have
power to intervene in such proceedings and take any action
therein that may be permitted by the court and shall (except
as may be otherwise provided by law) be entitled to file such
proofs of claim and other papers and documents as may be
necessary or advisable in order to have the claims of the
Trustee and of the holders of the Debentures allowed for the
entire amount due and payable by the Company under this
Indenture at the date of institution of such proceedings and
for any additional amount that may become due and payable by
the Company after such date, and to collect and receive any
moneys or other property payable or deliverable on any such
claim, and to distribute the same after the deduction of the
amount payable to the Trustee under Section 9.7; and any
receiver, assignee or trustee in bankruptcy or reorganization
is hereby authorized by each of the holders of the Debentures
to make such payments to the Trustee, and, in the event that
the Trustee shall consent
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to the making of such payments directly to such
Debentureholders, to pay to the Trustee any amount due it
under Section 9.7.
(d) All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect
to Debentures, may be enforced by the Trustee without the
possession of any of such Debentures, or the production
thereof at any trial or other proceeding relating thereto, and
any such suit or proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for payment to
the Trustee of any amounts due under Section 9.7, be for the
ratable benefit of the holders of the Debentures. In case of
an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in
it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and
enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in
aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the
Trustee by this Indenture or by law. Nothing contained herein
shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Debentureholder
any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any
holder thereof or to authorize the Trustee to vote in respect
of the claim of any Debentureholder in any such proceeding.
SECTION 7.3 APPLICATION OF MONEYS COLLECTED.
Any moneys collected by the Trustee pursuant to this Article VII with respect
to the Debentures shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such moneys on account
of principal or interest, upon presentation of the Debentures, and notation
thereon the payment, if only partially paid, and upon surrender thereof if
fully paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XVI; and
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THIRD: To the payment of the amounts then due and unpaid upon the
Debentures for principal and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Debentures for principal and interest, respectively.
SECTION 7.4 LIMITATION ON SUITS.
(a) No holder of any Debenture shall have any right by virtue or
by availing of any provision of this Indenture to institute
any suit, action or proceeding in equity or at law upon or
under or with respect to this Indenture or for the appointment
of a receiver or trustee, or for any other remedy hereunder,
unless (i) such holder previously shall have given to the
Trustee written notice of an Event of Default and of the
continuance thereof with respect to the Debentures specifying
such Event of Default, as hereinbefore provided; (ii) the
holders of not less than 25% in aggregate principal amount of
the Debentures then Outstanding shall have made written
request upon the Trustee to institute such action, suit or
proceeding in its own name as trustee hereunder; (iii) such
holder or holders shall have offered to the Trustee such
reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity, shall have failed to institute
any such action, suit or proceeding; and (v) during such 60
day period, the holders of a majority in principal amount of
the Debentures do not give the Trustee a direction
inconsistent with the request.
(b) Notwithstanding anything contained herein to the contrary or
any other provisions of this Indenture, the right of any
holder of the Debentures to receive payment of the principal
of and interest on the Debentures, as therein provided, on or
after the respective due dates expressed in such Debenture (or
in the case of redemption, on the redemption date), or to
institute suit for the enforcement of any such payment on or
after such respective dates or redemption date, shall not be
impaired or affected without the consent of such holder and by
accepting a Debenture hereunder it is expressly understood,
intended and covenanted by the taker and holder of every
Debenture with every other such taker and holder and the
Trustee, that no one or more holders of Debentures shall have
any right in any manner whatsoever
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by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any
other of such Debentures, or to obtain or seek to obtain
priority over or preference to any other such holder, or
to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common
benefit of all holders of Debentures. For the protection and
enforcement of the provisions of this Section 7.4, each and
every Debentureholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 2.8, all powers and
remedies given by this Article VII to the Trustee or to the
Debentureholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers and
remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements
contained in this Indenture or otherwise established with
respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder of any of
the Debentures to exercise any right or power accruing upon
any Event of Default occurring and continuing as aforesaid
shall impair any such right or power, or shall be construed to
be a waiver of any such default or an acquiescence therein;
and, subject to the provisions of Section 7.4, every power and
remedy given by this Article VII or by law to the Trustee or
the Debentureholders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by
the Debentureholders.
SECTION 7.6 CONTROL BY DEBENTUREHOLDERS.
The holders of a majority in aggregate principal amount of the Debentures at
the time Outstanding, determined in accordance with Section 10.4, shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee; provided, however, that such direction shall not be in conflict
with any rule of law or with this Indenture. Subject to the provisions of
Section 9.1, the Trustee shall have the right to decline to follow any such
direction if the Trustee in good faith shall, by a Responsible Officer or
Officers of the Trustee,
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determine that the proceeding so directed would involve the Trustee in personal
liability. The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding affected thereby, determined in accordance
with Section 10.4, may on behalf of the holders of all of the Debentures waive
any past default in the performance of any of the covenants contained herein
and its consequences, except (i) a default in the payment of the principal of
or interest on, any of the Debentures as and when the same shall become due by
the terms of such Debentures otherwise than by acceleration (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal has been deposited with the Trustee (in accordance with
Section 7.l(c))); (ii) a default in the covenants contained in Section 5.6; or
(iii) in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the holder of each Outstanding Debenture
affected; provided, however, that if the Debentures are held by the Trust or a
trustee of the Trust, such waiver or modification to such waiver shall not be
effective until the holders of a majority in liquidation preference of Trust
Securities of the Trust shall have consented to such waiver or modification to
such waiver; provided further, that if the consent of the holder of each
Outstanding Debenture is required, such waiver shall not be effective until
each holder of the Trust Securities of the Trust shall have consented to such
waiver. Upon any such waiver, the default covered thereby shall be deemed to
be cured for all purposes of this Indenture and the Company, the Trustee and
the holders of the Debentures shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 7.7 UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any Debentures by such
holder's acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 7.7 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders holding more than 10% in aggregate principal amount of the
Outstanding Debentures, or to any suit instituted by any Debentureholder for
the enforcement of the payment of the
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principal of or interest on the Debentures, on or after the respective due
dates expressed in such Debenture or established pursuant to this Indenture.
ARTICLE VIII
FORM OF DEBENTURE AND ORIGINAL ISSUE
SECTION 8.1 FORM OF DEBENTURE.
The Debenture and the Trustee's Certificate of Authentication to be endorsed
thereon are to be substantially in the forms contained as Exhibit A attached
hereto and incorporated herein by reference.
SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES.
Debentures in the aggregate principal amount of $_______________ may, upon
execution of this Indenture, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Debentures to or upon the written order of the Company, signed by
its Chairman, its Vice Chairman, its President, or any Vice President and its
Secretary or an Assistant Secretary, without any further action by the Company.
SECTION 8.3 GLOBAL DEBENTURES.
(a) Each Global Debenture issued under this Indenture shall be
registered in the name of the Depositary designated by the
Company for such Global Debenture or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian
thereof, and each such Global Debenture shall constitute a
single Debenture for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Debenture may be exchanged in whole or in part for
Debentures registered, and no transfer of a Global Debenture
in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Debenture or
a nominee thereof unless (i) such Depositary advises the
Trustee in writing that such Depositary is no longer willing
or able to properly discharge its responsibilities as
Depositary with respect to such Global Debenture, and the
Company is unable to locate a qualified successor, (ii) the
Company executes and delivers to the Trustee an Officers'
Certificate stating that the Company elects to terminate the
book-entry system through the Depositary, or (iii) there
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shall have occurred and be continuing an Event of Default.
(c) If any Global Debenture is to be exchanged for other
Debentures or cancelled in whole, it shall be surrendered by
or on behalf of the Depositary or its nominee to the Debenture
Registrar for exchange or cancellation as provided in this
Indenture. If any Global Debenture is to be exchanged for
other Debentures or cancelled in part, or if another Debenture
is to be exchanged in whole or in part for a beneficial
interest in any Global Debenture, then either (i) such Global
Debenture shall be so surrendered for exchange or cancellation
as provided in this Indenture or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to
the portion thereof to be so exchanged or cancelled, or equal
to the principal amount of such other Debenture to be so
exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records
of the Debenture Registrar, whereupon the Trustee, in
accordance with the Applicable Procedures, shall instruct the
Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Debenture by the
Depositary, accompanied by registration instructions, the
Trustee shall, subject to the other provisions of this
Indenture, authenticate and deliver any Debentures issuable in
exchange for such Global Debenture (or any portion thereof) in
accordance with the instructions of the Depositary.
The Trustee shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be
fully protected in relying on, such instructions.
(d) Every Debenture authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global
Debenture or any portion thereof, whether pursuant to this
Article VIII, Sections 2.5, 3.5 or 11.4 or otherwise, shall be
authenticated and delivered in the form of, and shall be, a
Global Debenture, unless such Debenture is registered in the
name of a Person other than the Depositary for such Global
Debenture or a nominee thereof.
(e) The Depositary or its nominee, as the registered owner of a
Global Debenture, shall be the Holder of such Global Debenture
for all purposes under this Indenture and the Debentures, and
owners of beneficial interests in a Global Debenture shall
hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's
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beneficial interest in a Global Debenture shall be shown only
on, and the transfer of such interest shall be effected only
through, records maintained by the Depositary or its nominee
or agent. Neither the Trustee nor the Debenture Registrar
shall have any liability in respect of any transfers effected
by the Depositary.
(f) The rights of owners of beneficial interests in a Global
Debenture shall be exercised only through the Depositary and
shall be limited to those established by law and agreements
between such owners and the Depositary and/or its Agent
Members.
ARTICLE IX
CONCERNING THE TRUSTEE
SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default that may have
occurred, shall undertake to perform with respect to the
Debentures such duties and only such duties as are
specifically set forth in this Indenture, and no implied
covenants shall be read into this Indenture against the
Trustee. In case an Event of Default has occurred that has
not been cured or waived, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct,
except that:
(1) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default that may have
occurred:
(i) the duties and obligations of the Trustee shall, with
respect to the Debentures, be determined solely by
the express provisions of this Indenture, and the
Trustee shall not be liable with respect to the
Debentures except for the performance of such duties
and obligations as are specifically set forth in this
Indenture, and no implied covenants
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or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may with respect to the
Debentures conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of
any such certificates or opinions that by any
provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or
not they conform to the requirements of this
Indenture;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Responsible Officers
of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority
in principal amount of the Debentures at the time outstanding
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee
under this Indenture with respect to the Debentures; and
(4) none of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for
believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Indenture or
adequate indemnity against such risk is not reasonably assured
to it.
SECTION 9.2 NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the Trustee
of the occurrence of any default hereunder with respect to the Debentures, the
Trustee shall transmit by mail to all holders of the Debentures, as their names
and addresses appear in
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the Debenture Register, notice of such default, unless such default shall have
been cured or waived; provided, however, that, except in the case of any
default in the payment of the principal or interest (including any Additional
Interest) on any Debenture, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of the directors and/or Responsible Officers of the Trustee
determines in good faith that the withholding of such notice is in the
interests of the holders of such Debentures; and provided, further, that in the
case of any default of the character specified in section 7.l(a)(iii), no such
notice to holders of Debentures need be sent until at least 30 days after the
occurrence thereof. For the purposes of this Section 9.2, the term "default"
means any event which is, or after notice or lapse of time or both, would
become, an Event of Default with respect to the Debentures.
SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 9.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, security or other paper or
document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board
Resolution or an instrument signed in the name of the Company
by the President or any Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer thereof (unless other evidence in respect
thereof is specifically prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a default
or an Event of Default, other than an Event of Default
specified in Section 7.1(a)(i) or (ii), unless and until it
receives notification of such Event of Default from the
Company or by holders of at least 25% of the aggregate
principal amount of the Debentures at the time Outstanding;
(d) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action
taken or suffered or omitted hereunder in good faith and in
reliance thereon;
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(e) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Debentureholders,
pursuant to the provisions of this Indenture, unless such
Debentureholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default (that
has not been cured or waived) to exercise with respect to the
Debentures such of the rights and powers vested in it by this
Indenture, and to use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs;
(f) The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and believed by it to
be authorized or within the discretion or rights or powers
conferred upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, security, or other papers or
documents, but the Trustee in its discretion may make such
inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such
inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by
agent or attorney; and
(h) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC.
(a) The Recitals contained herein and in the Debentures, except
the certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
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(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or
application by the Company of any of the Debentures or of the
proceeds of such Debentures, or for the use or application of
any moneys paid over by the Trustee in accordance with any
provision of this Indenture, or for the use or application of
any moneys received by any paying agent other than the
Trustee.
SECTION 9.5 MAY HOLD DEBENTURES.
The Trustee or any paying agent or registrar for the Debentures, in its
individual or any other capacity, may become the owner or pledgee of Debentures
and, subject to Sections 9.9 and 9.14, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, paying agent or Debenture
Registrar.
SECTION 9.6 MONEYS HELD IN TRUST.
Subject to the provisions of Section 13.5, all moneys received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree with the Company to pay thereon.
SECTION 9.7 COMPENSATION AND REIMBURSEMENT.
The Company covenants and agrees to pay to the Trustee, and the Trustee shall
be entitled to, such reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust), as the Company and the Trustee may from time to time agree in writing,
for all services rendered by it in the execution of the trusts hereby created
and in the exercise and performance of any of the powers and duties hereunder
of the Trustee, and, except as otherwise expressly provided herein, the Company
shall pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify the Trustee (and its officers, agents,
directors and employees) for, and to hold it harmless against, any loss,
liability or expense incurred
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without negligence or bad faith on the part of the Trustee and arising out of
or in connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim of liability in
the premises.
SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE.
Except as otherwise provided in Section 9.1, whenever in the administration of
the provisions of this Indenture the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or suffering
or omitting to take any action hereunder, such matter (unless other evidence in
respect thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to
the Trustee and such certificate, in the absence of negligence or bad faith on
the part of the Trustee, shall be full warrant to the Trustee for any action
taken, suffered or omitted to be taken by it under the provisions of this
Indenture upon the faith thereof.
SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS.
If the Trustee has or shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
SECTION 9.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY
There shall at all times be a Trustee with respect to the Debentures issued
hereunder which shall at all times be a corporation organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, and subject to supervision or examination by federal,
state, territorial, or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 9.10, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The Company may not, nor
may any Person directly or indirectly controlling, controlled by, or under
common control with the Company, serve as Trustee. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
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Section 9.10, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.11.
SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at any
time resign by giving written notice thereof to the Company
and by transmitting notice of resignation by mail, first class
postage prepaid, to the Debentureholders, as their names and
addresses appear upon the Debenture Register. Upon receiving
such notice of resignation, the Company shall promptly appoint
a successor trustee with respect to Debentures by written
instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee.
If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the mailing of such
notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a
successor trustee with respect to Debentures, or any
Debentureholder who has been a bona fide holder of a Debenture
or Debentures for at least six months may, subject to the
provisions of Section 9.9, on behalf of himself and all others
similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon
after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions
of Section 9.9 after written request therefor by the
Company or by any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at
least six months; or
(ii) the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.10 and shall fail to
resign after written request therefor by the Company
or by any such Debentureholder; or
(iii) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or
commence a voluntary bankruptcy proceeding, or a
receiver of the Trustee or of
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its property shall be appointed or consented to, or
any public officer shall take charge or control of
the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or
liquidation, then, in any such case, the Company may
remove the Trustee with respect to all Debentures and
appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to
the successor trustee, or, subject to the provisions
of Section 9.9, unless the Trustee's duty to resign
is stayed as provided herein, any Debentureholder who
has been a bona fide holder of a Debenture or
Debentures for at least six months may, on behalf of
that holder and all others similarly situated,
petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after
such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding may at any time remove the
Trustee by so notifying the Trustee and the Company and may
appoint a successor Trustee with the consent of the Company.
(d) No resignation or removal of the Trustee and no appointment of
a successor trustee with respect to the Debentures pursuant to
any of the provisions of this Section 9.11 shall become
effective until acceptance of appointment by the successor
trustee as provided in Section 9.12.
SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor
trustee with respect to the Debentures, every successor
trustee so appointed shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and
such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor trustee all the
rights,
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powers, and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor trustee
all property and money held by such retiring Trustee
hereunder.
(b) Upon request of any successor trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor trustee all such
rights, powers and trusts referred to in paragraph (a) of this
Section 9.12.
(c) No successor trustee shall accept its appointment unless at
the time of such acceptance such successor trustee shall be
qualified and eligible under this Article IX.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section 9.12, the Company shall transmit
notice of the succession of such trustee hereunder by mail,
first class postage prepaid, to the Debentureholders, as their
names and addresses appear upon the Debenture Register. If
the Company fails to transmit such notice within ten days
after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be transmitted at
the expense of the Company.
SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified under the provisions of Section 9.9 and eligible under the provisions
of Section 9.10, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. In case any Debentures shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Debentures so authenticated with the same effect as if such
successor Trustee had itself authenticated such Debentures.
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SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship described in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent included therein.
ARTICLE X
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS.
(a) Whenever in this Indenture it is provided that the holders of
a majority or specified percentage in aggregate principal
amount of the Debentures may take any action (including the
making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact
that at the time of taking any such action the holders of such
majority or specified percentage have joined therein may be
evidenced by any instrument or any number of instruments of
similar tenor executed by such holders of Debentures in Person
or by agent or proxy appointed in writing.
(b) If the Company shall solicit from the Debentureholders any
request, demand, authorization, direction, notice, consent,
waiver or other action, the Company may, at its option, as
evidenced by an Officers' Certificate, fix in advance a record
date for the determination of Debentureholders entitled to
give such request, demand, authorization, direction, notice,
consent, waiver or other action, but the Company shall have no
obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record
date, but only the Debentureholders of record at the close of
business on the record date shall be computed to be
Debentureholders for the purposes of determining whether
Debentureholders of the requisite proportion of Outstanding
Debentures have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding
Debentures shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by
such Debentureholders on the record date shall be deemed
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effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after
the record date.
SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS.
Subject to the provisions of Section 9.1, proof of the execution of any
instrument by a Debentureholder (such proof shall not require notarization) or
his agent or proxy and proof of the holding by any Person of any of the
Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable
to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the
Debenture Registrar thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section 10.2 as it shall deem necessary.
SECTION 10.3 WHO MAY BE DEEMED OWNERS.
Prior to the due presentment for registration of transfer of any Debenture, the
Company, the Trustee, any paying agent, any Authenticating Agent and any
Debenture Registrar may deem and treat the Person in whose name such Debenture
shall be registered upon the books of the Company as the absolute owner of such
Debenture (whether or not such Debenture shall be overdue and notwithstanding
any notice of ownership or writing thereon made by anyone other than the
Debenture Registrar) for the purpose of receiving payment of or on account of
the principal of and interest on such Debenture (subject to Section 2.3) and
for all other purposes; and neither the Company nor the Trustee nor any paying
agent nor any Authenticating Agent nor any Debenture Registrar shall be
affected by any notice to the contrary.
No holder of any beneficial interest in any Global Debenture held on its behalf
by a Depositary shall have any rights under this Indenture with respect to such
Global Debenture, and such Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the owner of such Global
Debenture for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by a
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Depositary or impair, as between a Depositary and such holders of beneficial
interests, the operation of customary practices governing the exercise of the
rights of the Depositary (or its nominee) as holder of any Debenture.
SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED.
In determining whether the holders of the requisite aggregate principal amount
of Debentures have concurred in any direction, consent or waiver under this
Indenture, the Debentures that are owned by the Company or any other obligor on
the Debentures or by any Person directly or indirectly controlling or
controlled by, or under common control with the Company or any other obligor on
the Debentures shall be disregarded and deemed not to be Outstanding for the
purpose of any such determination, except that for the purpose of determining
whether the Trustee shall be protected in relying on any such direction,
consent or waiver, only Debentures that the Trustee actually knows are so owned
shall be so disregarded. The Debentures so owned that have been pledged in
good faith may be regarded as Outstanding for the purposes of this Section
10.4, if the pledgee shall establish to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Debentures and that the pledgee
is not a Person directly or indirectly, controlling or controlled by, or under
direct or indirect common control with the Company or any such other obligor.
In case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee.
SECTION 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS.
At any time prior to (but not after) the evidencing to the Trustee, as provided
in Section 10.1, of the taking of any action by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action, any holder of a Debenture that is
shown by the evidence to be included in the Debentures the holders of which
have consented to such action may, by filing written notice with the Trustee,
and upon proof of holding as provided in Section 10.2, revoke such action so
far as concerns such Debenture. Except as aforesaid any such action taken by
the holder of any Debenture shall be conclusive and binding upon such holder
and upon all future holders and owners of such Debenture, and of any Debenture
issued in exchange therefor, on registration of transfer thereof or in place
thereof, irrespective of whether or not any notation in regard thereto is made
upon such Debenture. Any action taken by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection
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with such action shall be conclusively binding upon the Company, the Trustee
and the holders of all the Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF
DEBENTUREHOLDERS.
In addition to any supplemental indenture otherwise authorized by this
Indenture, the Company and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as then in effect), without the
consent of the Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or in
the Debentures;
(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition to or in
place of certificated Debentures;
(d) to add to the covenants of the Company for the benefit of the
holders of all or any of the Debentures or to surrender any
right or power herein conferred upon the Company;
(e) to evidence the succession of another corporation to the
Company, and the assumption by any such successor of the
covenants of the Company herein and in the Debentures
contained;
(f) to convey, transfer, assign, mortgage or pledge to or with the
Trustee any property or assets which the Company may desire to
convey, transfer, assign, mortgage or pledge;
(g) to add to, delete from, or revise the conditions, limitations,
and restrictions on the authorized amount, terms, or purposes
of issue, authentication, and delivery of Debentures, as
herein set forth;
(h) to make any change that does not adversely affect the rights
of any Debentureholder in any material respect;
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(i) to provide for the issuance of and establish the form and
terms and conditions of the Debentures, to establish the form
of any certifications required to be furnished pursuant to the
terms of this Indenture or of the Debentures, or to add to the
rights of the holders of the Debentures; or
(j) to qualify or maintain the qualification of this Indenture
under the Trust Indenture Act.
The Trustee is hereby authorized to join with the Company in the execution of
any such supplemental indenture, and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section 11.1
may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time Outstanding, notwithstanding any
of the provisions of Section 11.2.
SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS.
With the consent (evidenced as provided in Section 10.1) of the holders of not
less than a majority in aggregate principal amount of the Debentures at the
time Outstanding, the Company, when authorized by Board Resolutions, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of any supplemental indenture or of modifying in any manner not
covered by Section 11.1 the rights of the holders of the Debentures under this
Indenture; provided, however, that no such supplemental indenture shall without
the consent of the holders of each Debenture then Outstanding and affected
thereby, (i) extend the fixed maturity of any Debentures, reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon (other than the Company's right to defer interest pursuant to this
Indenture), without the consent of the holder of each Debenture so affected; or
(ii) reduce the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture; provided further, that
if the Debentures are held by the Trust or a trustee of the Trust, such
supplemental indenture shall not be effective until the holders of a majority
in liquidation preference of Trust Securities of the Trust shall have consented
to such supplemental indenture; provided further, that if the consent of
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the holder of each Outstanding Debenture is required, such supplemental
indenture shall not be effective until each holder of the Trust Securities of
the Trust shall have consented to such supplemental indenture. It shall not be
necessary for the consent of the Debentureholders affected thereby under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture pursuant to the provisions of
this Article XI, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitations of
rights, obligations, duties and immunities under this Indenture of the Trustee,
the Company and the holders of Debentures shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES.
Debentures affected by a supplemental indenture, authenticated and delivered
after the execution of such supplemental indenture pursuant to the provisions
of this Article XI, may bear a notation in form approved by the Company,
provided such form meets the requirements of any exchange upon which the
Debentures may be listed, as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Debentures so modified as to
conform, in the opinion of the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared by the Company, authenticated by the Trustee and delivered in
exchange for the Debentures then Outstanding.
SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES.
(a) Upon the request of the Company, accompanied by their Board
Resolutions authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of
the consent of Debentureholders required to consent thereto as
aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion but shall not be
obligated
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to enter into such supplemental indenture. The Trustee,
subject to the provisions of Section 9.1, may receive an
Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article XI is
authorized or permitted by, and conforms to, the terms of this
Article XI and that it is proper for the Trustee under the
provisions of this Article XI to join in the execution
thereof.
(b) Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this
Section 11.5, the Trustee shall transmit by mail, first class
postage prepaid, a notice, setting forth in general terms the
substance of such supplemental indenture, to the
Debentureholders as their names and addresses appear upon the
Debenture Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental
indenture.
ARTICLE XII
SUCCESSOR CORPORATION
SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC.
Nothing contained in this Indenture or in any of the Debentures shall prevent
any consolidation or merger of the Company with or into any other corporation
or corporations (whether or not affiliated with the Company, as the case may
be), or successive consolidations or mergers in which the Company, as the case
may be, or its successor or successors shall be a party or parties, or shall
prevent any sale, conveyance, transfer or other disposition of the property of
the Company, as the case may be, or its successor or successors as an entirety,
or substantially as an entirety, to any other corporation (whether or not
affiliated with the Company, as the case may be, or its successor or
successors) authorized to acquire and operate the same; provided, however, the
Company hereby covenants and agrees that, (i) upon any such consolidation,
merger, sale, conveyance, transfer or other disposition, the due and punctual
payment, in the case of the Company, of the principal of and interest on all of
the Debentures, according to their tenor and the due and punctual performance
and observance of all the covenants and conditions of this Indenture to be kept
or performed by the Company as the case may be, shall be expressly assumed, by
supplemental indenture (which shall conform to the provisions of the Trust
Indenture Act, as then in effect) satisfactory in form to the Trustee executed
and delivered to the Trustee by the entity formed by such consolidation, or
into which
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the Company, as the case may be, shall have been merged, or by the entity which
shall have acquired such property; (ii) in case the Company consolidates with
or merges into another Person or conveys or transfers its properties and assets
substantially then as an entirety to any Person, the successor Person is
organized under the laws of the United States or any state or the District of
Columbia; and (iii) immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing.
SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the
successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the
Trustee, of, in the case of the Company, the due and punctual
payment of the principal of and interest on all of the
Debentures Outstanding and the due and punctual performance of
all of the covenants and conditions of this Indenture to be
performed by the Company, as the case may be, such successor
corporation shall succeed to and be substituted for the
Company, with the same effect as if it had been named as the
Company herein, and thereupon the predecessor corporation
shall be relieved of all obligations and covenants under this
Indenture and the Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and
form (but not in substance) may be made in the Debentures
thereafter to be issued as may be appropriate.
(c) Nothing contained in this Indenture or in any of the
Debentures shall prevent the Company from acquiring by
purchase or otherwise all or any part of the property of any
other Person (whether or not affiliated with the Company).
SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.
The Trustee, subject to the provisions of Section 9.1 , may receive an Opinion
of Counsel as conclusive evidence that any such consolidation, merger, sale,
conveyance, transfer or other disposition, and any such assumption, comply with
the provisions of this Article XII.
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ARTICLE XIII
SATISFACTION AND DISCHARGE
SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE.
If at any time: (a) the Company shall have delivered to the Trustee for
cancellation all Debentures theretofore authenticated (other than any
Debentures that shall have been destroyed, lost or stolen and that shall have
been replaced or paid as provided in Section 2.8) and Debentures for whose
payment money or Governmental Obligations have theretofore been deposited in
trust or segregated and held in trust by the Company (and thereupon repaid to
the Company or discharged from such trust, as provided in Section 13.5); or (b)
all such Debentures not theretofore delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit or cause to be deposited with the
Trustee as trust funds the entire amount in moneys or Governmental Obligations
sufficient or a combination thereof, sufficient in the opinion of a nationally
recognized firm of independent public accountants expressed in written
certification thereof delivered to the Trustee, to pay at maturity or upon
redemption all Debentures not theretofore delivered to the Trustee for
cancellation, including principal and interest due or to become due to such
date of maturity or date fixed for redemption, as the case may be, and if the
Company shall also pay or cause to be paid all other sums payable hereunder by
the Company; then this Indenture shall thereupon cease to be of further effect
except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3 and 9.10,
that shall survive until the date of maturity or redemption date, as the case
may be, and Sections 9.6 and 13.5, that shall survive to such date and
thereafter, and the Trustee, on demand of the Company and at the cost and
expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture.
SECTION 13.2 DISCHARGE OF OBLIGATIONS.
If at any time all Debentures not heretofore delivered to the Trustee for
cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Company by depositing irrevocably with the
Trustee as trust funds moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all Debentures not theretofore
delivered to the Trustee for cancellation, including principal and interest due
or
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to become due to such date of maturity or date fixed for redemption, as the
case may be, and if the Company shall also pay or cause to be paid all other
sums payable hereunder by the Company, then after the date such moneys or
Governmental Obligations, as the case may be, are deposited with the Trustee,
the obligations of the Company under this Indenture shall cease to be of
further effect except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2,
5.3, 9.6, 9.10 and 13.5 hereof that shall survive until such Debentures shall
mature and be paid. Thereafter, Sections 9.6 and 13.5 shall survive.
SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST.
All monies or Governmental Obligations deposited with the Trustee pursuant to
Sections 13.1 or 13.2 shall be held in trust and shall be available for payment
as due, either directly or through any paying agent (including the Company
acting as its own paying agent), to the holders of the Debentures for the
payment or redemption of which such moneys or Governmental Obligations have
been deposited with the Trustee.
SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS.
In connection with the satisfaction and discharge of this Indenture, all moneys
or Governmental Obligations then held by any paying agent under the provisions
of this Indenture shall, upon demand of the Company, be paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys or Governmental Obligations.
SECTION 13.5 REPAYMENT TO COMPANY.
Any monies or Governmental Obligations deposited with any paying agent or the
Trustee, or then held by the Company in trust, for payment of principal of or
interest on the Debentures that are not applied but remain unclaimed by the
holders of such Debentures for at least two years after the date upon which the
principal of or interest on such Debentures shall have respectively become due
and payable, shall be repaid to the Company, as the case may be, on May 31 of
each year or (if then held by the Company) shall be discharged from such trust;
and thereupon the paying agent and the Trustee shall be released from all
further liability, with respect to such money's or Governmental Obligations,
and the holder of any of the Debentures entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Company for the
payment thereof.
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ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 14.1 NO RECOURSE.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of the Debentures, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, past, present or future as such, of the Company or of any predecessor
or successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or
of any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of
the obligations, covenants or agreements contained in this Indenture or in any
of the Debentures or implied therefrom, are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issuance of such Debentures.
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS.
All the covenants, stipulations, promises and agreements in this Indenture
contained by or on behalf of the Company shall bind their respective successors
and assigns, whether so expressed or not.
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SECTION 15.2 ACTIONS BY SUCCESSOR.
Any act or proceeding by any provision of this Indenture authorized or required
to be done or performed by any board, committee or officer of the Company shall
and may be done and performed with like force and effect by the corresponding
board, committee or officer of any corporation that shall at the time be the
lawful sole successor of the Company.
SECTION 15.3 SURRENDER OF COMPANY POWERS.
The Company by instrument in writing executed by appropriate authority of its
Board of Directors and delivered to the Trustee may surrender any of the powers
reserved to the Company, and thereupon such power so surrendered shall
terminate both as to the Company, as the case may be, and as to any successor
corporation.
SECTION 15.4 NOTICES.
Except as otherwise expressly provided herein any notice or demand that by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Debentures to or on the Company may be given
or served by being deposited first class postage prepaid in a post-office
letter box addressed(until another address is filed in writing by the Company
with the Trustee), as follows: Republic Bancshares, Inc., 111 Second Avenue,
N.E., Saint Petersburg, Florida 33701, Attention: Secretary. Any notice,
election, request or demand by the Company or any Debentureholder to or upon
the Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
SECTION 15.5 GOVERNING LAW.
This Indenture and each Debenture shall be deemed to be a contract made under
the internal laws of the State of Florida and for all purposes shall be
construed in accordance with the laws of said State.
SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT.
It is intended that the Debentures shall be treated as indebtedness and not as
equity for federal income tax purposes. The provisions of this Indenture shall
be interpreted to further this intention.
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SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the proposed action
have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent
have been complied with, except that in the case of any such
application or demand as to which the furnishing of such
documents is specifically required by any provision of this
Indenture relating to such particular application or demand,
no additional certificate or opinion need be furnished.
(b) Each certificate or opinion of the Company provided for in
this Indenture and delivered to the Trustee with respect to
compliance with a condition or covenant in this Indenture
shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as, in the opinion of
such Person, is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not,
in the opinion of such Person, such condition or covenant has
been complied with.
SECTION 15.8 PAYMENTS ON BUSINESS DAYS.
In any case where the date of maturity of interest or principal of any
Debenture or the date of redemption of any Debenture shall not be a Business
Day, then payment of interest or principal may (subject to Section 2.4) be made
on the next succeeding Business Day with the same force and effect as if made
on the nominal date of maturity or redemption, and no interest shall accrue for
the period after such nominal date.
SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
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SECTION 15.10 COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of which
shall be an original, but such counterparts shall together constitute but one
and the same instrument.
SECTION 15.11 SEPARABILITY.
In case any one or more of the provisions contained in this Indenture or in the
Debentures shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Indenture or of the Debentures, but this
Indenture and the Debentures shall be construed as if such invalid or illegal
or unenforceable provision had never been contained herein or therein.
SECTION 15.12 ASSIGNMENT.
The Company shall have the right at all times to assign any of its respective
rights or obligations under this Indenture to a direct or indirect wholly owned
Subsidiary of the Company, provided that, in the event of any such assignment,
the Company shall remain liable for all such obligations. Subject to the
foregoing, this Indenture is binding upon and inures to the benefit of the
parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties hereto.
SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS.
The Company acknowledges that, with respect to any Debentures held by the Trust
or a trustee of the Trust, if the Property Trustee fails to enforce its rights
under this Indenture as the holder of the Debentures held as the assets of the
Trust, any holder of Preferred Securities may institute legal proceedings
directly against the Company to enforce such Property Trustee's rights under
this Indenture without first instituting any legal proceedings against such
Property Trustee or any other person or entity. Notwithstanding the foregoing,
if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), the Company acknowledges that
a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Debentures.
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ARTICLE XVI
SUBORDINATION OF DEBENTURES
SECTION 16.1 AGREEMENT TO SUBORDINATE.
The Company covenants and agrees, and each holder of Debentures issued
hereunder by such holder's acceptance thereof likewise covenants and agrees,
that all Debentures shall be issued subject to the provisions of this Article
XVI; and each holder of a Debenture, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions. The payment by the Company of the principal of and interest on all
Debentures issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated and junior in right of payment to the prior payment
in full of all Senior Debt and Subordinated Debt (collectively, "Senior
Indebtedness") to the extent provided herein, whether outstanding at the date
of this Indenture or thereafter incurred. No provision of this Article XVI
shall prevent the occurrence of any default or Event of Default hereunder.
SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED DEBT.
In the event and during the continuation of any default by the Company in the
payment of principal, premium, interest or any other payment due on any Senior
Indebtedness of the Company, or in the event that the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default, then, in
either case, no payment shall be made by the Company with respect to the
principal (including redemption payments) of or interest on the Debentures. In
the event that, notwithstanding the foregoing, any payment shall be received by
the Trustee when such payment is prohibited by the preceding sentence of this
Section 16.2, such payment shall be held in trust for the benefit of, and shall
be paid over or delivered to, the holders of Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as
their respective interests may appear, but only to the extent that the holders
of the Senior Indebtedness (or their representative or representatives or a
trustee) notify the Trustee in writing within 90 days of such payment of the
amounts then due and owing on the Senior Indebtedness and only the amounts
specified in such notice to the Trustee shall be paid to the holders of Senior
Indebtedness.
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SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all
Senior Indebtedness of the Company shall first be paid in
full, or payment thereof provided for in money in accordance
with its terms, before any payment is made by the Company on
account of the principal or interest on the Debentures; and
upon any such dissolution or winding-up or liquidation or
reorganization, any payment by the Company, or distribution of
assets of the Company of any kind or character, whether
in cash, property or securities, to which the holders of the
Debentures or the Trustee would be entitled to receive from
the Company, except for the provisions of this Article XVI,
shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making
such payment or distribution, or by the holders of the
Debentures or by the Trustee under this Indenture if received
by them or it, directly to the holders of Senior Indebtedness
of the Company (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such
holders, as calculated by the Company) or their representative
or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after
giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness, before any
payment or distribution is made to the holders of Debentures
or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, prohibited
by the foregoing, shall be received by the Trustee before all
Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the
holders of such Senior Indebtedness or their
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representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as
their respective interests may appear, as calculated by the
Company, for application to the payment of all Senior
Indebtedness of the Company, as the case may be, remaining
unpaid to the extent necessary to pay such Senior Indebtedness
in full in money in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the
benefit of the holders of such Senior Indebtedness.
(c) For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article
XVI with respect to the Debentures to the payment of all
Senior Indebtedness of the Company, as the case may be, that
may at the time be outstanding, provided that (i) such Senior
Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or readjustment; and
(ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the
Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in
Article XII shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section
16.3 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article XII. Nothing in Section 16.2 or
in this Section 16.3 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 9.7.
SECTION 16.4 SUBROGATION.
(a) Subject to the payment in full of all Senior Indebtedness of
the Company, the rights of the holders of the Debentures shall
be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash,
property or securities of the
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Company, as the case may be, applicable to such Senior
Indebtedness until the principal of and interest on the
Debentures shall be paid in full; and for the purposes of such
subrogation, no payments or distributions to the holders of
such Senior Indebtedness of any cash, property or securities
to which the holders of the Debentures or the Trustee would be
entitled except for the provisions of this Article XVI, and
no payment over pursuant to the provisions of this Article XVI
to or for the benefit of the holders of such Senior
Indebtedness by holders of the Debentures or the Trustee,
shall, as between the Company, its creditors other than
holders of Senior Indebtedness of the Company, and the holders
of the Debentures, be deemed to be a payment by the Company to
or on account of such Senior Indebtedness. It is understood
that the provisions of this Article XVI are and are intended
solely for the purposes of defining the relative rights of the
holders of the Debentures, on the one hand, and the
holders of such Senior Indebtedness on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair,
as between the Company, its creditors (other than the holders
of Senior Indebtedness of the Company), and the holders of the
Debentures, the obligation of the Company, which is absolute
and unconditional, to pay to the holders of the Debentures the
principal of and interest on the Debentures as and when the
same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights
of the holders of the Debentures and creditors of the Company,
as the case may be, other than the holders of Senior
Indebtedness of the Company, nor shall anything herein or
therein prevent the Trustee or the holder of any Debenture
from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture, subject to the rights,
if any, under this Article XVI of the holders of such Senior
Indebtedness in respect of cash, property or securities of the
Company, as the case may be, received upon the exercise of any
such remedy.
(c) Upon any payment or distribution of assets of the Company
referred to in this Article XVI, the Trustee, subject to the
provisions of Article IX, and the holders of the Debentures
shall be entitled to conclusively rely upon any order or
decree made by any court of competent jurisdiction in which
such dissolution, winding-up, liquidation or reorganization
proceedings are pending, or
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a certificate of the receiver, trustee in bankruptcy,
liquidation trustee, agent or other Person making such payment
or distribution, delivered to the Trustee or to the holders of
the Debentures, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the
holders of Senior Indebtedness and other indebtedness of the
Company, as the case may be, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Article XVI.
SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each holder of Debentures by such holder's acceptance thereof authorizes and
directs the Trustee on such holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article XVI and appoints the Trustee such holder's attorney-in-fact for any and
all such purposes.
SECTION 16.6 NOTICE BY THE COMPANY.
(a) The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that
would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the
provisions of this Article XVI. Notwithstanding the
provisions of this Article XVI or any other provisions of this
Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of
any payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XVI,
unless and until a Responsible Office of the Trustee shall
have received written notice thereof from the Company or a
holder or holders of Senior Indebtedness or from any trustee
therefor, and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 9.1, shall
be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 16.6 at least
two Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal
of or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to
apply the same to the purposes for which they were received,
and shall not
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be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
(b) The Trustee, subject to the provisions of Section 9.1, shall
be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder
of Senior Indebtedness of the Company (or a trustee on behalf
of such holder) to establish that such notice has been given
by a holder of such Senior Indebtedness or a trustee on behalf
of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required
with respect to the right of any Person as a holder of such
Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XVI, the Trustee may
request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of
such Person under this Article XVI, and, if such evidence is
not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
(a) The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article XVI in respect of any
Senior Indebtedness at any time held by it, to the same extent
as any other holder of Senior Indebtedness, and nothing in
this Indenture shall deprive the Trustee of any of its rights
as such holder. The Trustee's right to compensation and
reimbursement of expenses as set forth in Section 9.7 shall
not be subject to the subordination provisions of the Article
XVI.
(b) With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only
such of its covenants and obligations as are specifically set
forth in this Article XVI, and no implied covenants or
obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to have any
fiduciary duty to the holders of such Senior Indebtedness and,
subject to the
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provisions of Section 9.1, the Trustee shall not be liable to any holder of
such Senior Indebtedness if it shall in good faith mistakenly pay over or
deliver to holders of Debentures, the Company or any other Person money or
assets to which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article XVI or otherwise.
SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED.
(a) No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein
provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless
of any knowledge thereof that any such holder may have or
otherwise be charged with.
(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company
may, at any time and from time to time, without the consent of
or notice to the Trustee or the holders of the Debentures,
without incurring responsibility to the holders of the
Debentures and without impairing or releasing the
subordination provided in this Article XVI or the obligations
hereunder of the holders of the Debentures to the holders of
such Senior Indebtedness, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, such Senior
Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same
or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing
such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against
the Company and any other Person.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
REPUBLIC BANCSHARES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Attest: _____________________
WILMINGTON TRUST COMPANY, as trustee
By:_____________________________________
Name:___________________________________
Title:__________________________________
Attest: _____________________
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EXHIBIT A
(FORM OF FACE OF DEBENTURE)
No. _______________ $________________
CUSIP No. ------------------------
REPUBLIC BANCSHARES, INC.
___ % JUNIOR SUBORDINATED DEBENTURE
DUE ____________, 2027
Republic Bancshares, Inc., a Florida corporation (the "Company," which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to, __________ or registered
assigns, the principal sum of _____________________ Dollars ($__________) on
_____________, 2027 (the "Stated Maturity"), and to pay interest on said
principal sum from ______________, 1997, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 31, June 30, September 30 and December 31 of each
year commencing _______________, 1997, at the rate of ___% per annum until the
principal hereof shall have become due and payable, and on any overdue
principal and (without duplication) on any overdue installment of interest at
the same rate per annum compounded quarterly. The amount of interest payable
on any Interest Payment Date shall be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is
payable on this Debenture is not a business day, then payment of interest
payable on such date shall be made on the next succeeding day that is a
business day (and without any interest or other payment in respect of any such
delay), except that, if such business day is in the next succeeding calendar
year, such payment shall be made on the preceding business day, in each case
with the same force and effect as if made on such date. The interest
installment so payable, and punctually, paid or duly provided for, on any
Interest Payment Date shall, as provided in the Indenture, be paid to the
person in whose name this Debenture (or one or more Predecessor Debentures, as
defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, which shall be the close of
business on the business day next preceding such Interest Payment Date unless
otherwise provided in the Indenture. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
registered holders on such regular record date and may be paid to the Person in
whose name this Debenture (or one or more Predecessor Debentures) is registered
at the close of business on a special record date to be
Exhibit A-1
<PAGE> 80
fixed by the Trustee for the payment of such defaulted interest, notice whereof
shall be given to the registered holders of the Debentures not less than 10
days prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Debentures may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture. The principal
of and the interest on this Debenture shall be payable at the office or agency
of the Trustee maintained for that purpose in any coin or currency of the
United States of America that at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the
registered holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long as the holder of this Debenture is the
Property Trustee, the payment of the principal of and interest on this
Debenture shall be made at such place and to such account as may be designated
by the Trustee.
The Stated Maturity may be shortened at any time by the Company to any date not
earlier than ____________________, 2002, subject to the Company having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve.
The indebtedness evidenced by this Debenture is, to the extent provided in the
Indenture, subordinate and junior in right of payment to the prior payment in
full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided; and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until
the Certificate of Authentication hereon shall have been signed by or on behalf
of the Trustee.
The provisions of this Debenture are continued on the reverse side hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
Exhibit A-2
<PAGE> 81
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
REPUBLIC BANCSHARES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Attest:
By:_________________________
Name:_______________________
Title:______________________
Exhibit A-3
<PAGE> 82
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned Indenture.
Dated:
WILMINGTON TRUST COMPANY, ______________________________
as Trustee or Authentication Agent
By_______________________ By______________________________
Authorized Signatory
Exhibit A-4
<PAGE> 83
[FORM OF REVERSE OF DEBENTURE]
_____% JUNIOR SUBORDINATED DEBENTURE
(CONTINUED)
This Debenture is one of the junior subordinated debentures of the Company
(herein sometimes referred to as the "Debentures"), specified in the Indenture,
all issued or to be issued under and pursuant to an Indenture dated as of
_________, 1997 (the "Indenture") duly executed and delivered between the
Company and Wilmington Trust Company, as Trustee (the "Trustee"), to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
The Company has the right to redeem this Debenture at the option of the
Company, without premium or penalty (i) at any time on or after _____, 2002 in
whole or in part, or (ii) at any time in certain circumstances in whole (but
not in part) upon the occurrence of a Special Event, in each case at a
Redemption Price equal to 100% of the principal amount plus any accrued but
unpaid interest, to the date of such redemption (the "Redemption Price"). The
Redemption Price shall be paid prior to 12:00 noon, Eastern Standard Time,
time, on the date of such redemption or at such earlier time as the Company
determines. Any redemption pursuant to this paragraph shall be made upon not
less than 30 days nor more than 60 days notice, at the Redemption Price. If
the Debentures are only partially redeemed by the Company, the Debentures shall
be redeemed pro rata or by lot or by any other method utilized by the Trustee.
In the event of redemption of this Debenture in part only, a new Debenture or
Debentures for the unredeemed portion hereof shall be issued in the name of the
holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have occurred
and be continuing, the principal of all of the Debentures may be declared, and
upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with
the consent of the holders of not less than a majority in aggregate principal
amount of the Debentures at the time outstanding, as defined in the Indenture,
to execute supplemental indentures for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or of modifying in any manner the rights of
the holders of the Debentures; provided,
Exhibit A-5
<PAGE> 84
however, that no such supplemental indenture shall (i) extend the fixed
maturity of the Debentures except as provided in the Indenture, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon (except for deferrals of interest as described below), without
the consent of the holder of each Debenture so affected; or (ii) reduce the
aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of each Debenture then outstanding and affected thereby. The Indenture also
contains provisions permitting the holders of a majority in aggregate principal
amount of the Debentures at the time outstanding, on behalf of all of the
holders of the Debentures, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of the Debentures. Any such consent or waiver
by the registered holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Debenture and of any Debenture issued in exchange
herefor or in place hereof (whether by registration of transfer or otherwise or
whether any notation of such consent or waiver is made upon this Debenture).
No reference herein to the Indenture and no provision of this Debenture or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal and interest on this Debenture
at the time and place and at the rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the Debentures
and from time to time to extend the interest payment period of such Debentures
for up to 20 consecutive quarters (each, an "Extended Interest Payment
Period"), at the end of which period the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for
the Debentures to the extent that payment of such interest is enforceable under
applicable law). Before the termination of any such Extended Interest Payment
Period, the Company may further extend such Extended Interest Payment Period,
provided that such Extended Interest Payment Period together with all such
further extensions thereof shall not exceed 20 consecutive quarters. At the
termination of any such Extended Interest Payment Period and upon the payment
of all accrued and unpaid interest and any additional amounts then due, the
Company may commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee accompanied by
a written instrument
Exhibit A-6
<PAGE> 85
or instruments of transfer in form satisfactory to the Company or the Trustee
duly executed by the registered holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Debentures of authorized
denominations and for the same aggregate principal amount shall be issued to
the designated transferee or transferees. No service charge shall be made for
any such transfer, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Debenture, the
Company, the Trustee, any paying agent and the Debenture Registrar may deem and
treat the registered holder hereof as the absolute owner hereof (whether or not
this Debenture shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Debenture Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
interest due hereon and for all other purposes, and neither the Company nor the
Trustee nor any paying agent nor any Debenture Registrar shall be affected by
any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest on
this Debenture, or for any claim based hereon, or otherwise in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issuance hereof, expressly waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $10 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
[Additional Provisions to be Included if a Global Debenture, substantially in
the following form:
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE
REFERRED TO HEREIN AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE
OF A DEPOSITARY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
Exhibit A-7
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF TRUST
OF
RBI CAPITAL TRUST I
THIS Certificate of Trust of RBI Capital Trust I (the
"Trust"), dated May __, 1997, is being duly executed and filed by Wilmington
Trust Company, a Delaware corporation, John W. Sapanski, William R. Falzone, and
Christopher M. Hunter, as trustees, with the Secretary of State of the State of
Delaware to form a business trust under the Delaware Business Trust Act (12
Del.C. ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby
is RBI Capital Trust I.
2. Delaware Trustee. The name and business address of
the trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 198901-0001.
3. Effective Date. This Certificate of Trust shall be
effective upon filing with the Secretary of State.
IN WITNESS WHEREOF, the undersigned, being the trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY, as trustee
By:_____________________________________
Name:
Title:
---------------------------------------
John W. Sapanski, as trustee
---------------------------------------
William R. Falzone, as trustee
---------------------------------------
Christopher M. Hunter, as trustee
<PAGE> 1
EXHIBIT 4.4
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of May 29, 1997 (this "Trust Agreement"), among
(i) Republic Bancshares, Inc., a Florida corporation (the "Depositor"), (ii)
Wilmington Trust Company, a Delaware banking corporation, as trustee, and (iii)
John W. Sapanski, William R. Falzone and Christopher M. Hunter, each an
individual, as trustees (each of such trustees in (ii) and (iii) a
"Trustee" and collectively, the "Trustees"). The Depositor and the Trustees
hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "RBI Capital Trust
I" in which name the Trustees, or the Depositor to the extent provided herein,
may engage in the transactions contemplated hereby, make and execute contracts,
and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to the
Trustees the sum of $10.00. The Trustees hereby acknowledge receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust Act"),
and that this document constitutes the governing instrument of the Trust. The
Trustees are hereby authorized and directed to execute and file a certificate of
trust with the Delaware Secretary of State in accordance with the provisions of
the Business Trust Act.
3. The Depositor and the Trustees will enter into an amended and restated Trust
Agreement, satisfactory to each such party and substantially in the form
included as an exhibit to the 1933 Act Registration Statement (as defined
below), to provide for the contemplated operation of the Trust created hereby
and the issuance of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and restated Trust
Agreement, the Trustees shall not have any duty or obligation hereunder or with
respect to the trust estate, except as otherwise required by applicable law or
as may be necessary to obtain, prior to such execution and delivery, any
licenses, consents or approvals required by applicable law or otherwise.
4. The Depositor and the Trustees hereby authorize and direct the Depositor, as
the sponsor of the Trust, (i) to file with the Securities and Exchange
Commission (the "Commission") and execute, in each case on behalf of the Trust,
(a) the Registration Statement on Form S-2 (the "1933 Act Registration
Statement"), including any pre-effective or post-effective amendments to the
1933 Act Registration Statement, relating to the registration under the
Securities Act of 1933, as amended, of The Preferred Securities of the Trust and
possibly certain other securities and (b) a Registration Statement on Form 8-A
(the "1934 Act Registration Statement") (including all pre-effective and
post-effective amendments thereto) relating to the registration of the Preferred
Securities of the Trust under the Securities Exchange Act of 1934, as
<PAGE> 2
amended; (ii) to file with The Nasdaq Stock Market's National Market or any
national stock exchange (each, an "Exchange") and execute on behalf of the Trust
one or more listing applications and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on any of the
Exchanges; (iii) to file and execute on behalf of the Trust such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be necessary or
desirable to register the Preferred Securities under the securities or blue sky
laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem
necessary or desirable; and (iv) to execute on behalf of the Trust that certain
Underwriting Agreement relating to the Preferred Securities, among the Trust,
the Depositor and the several Underwriters named therein, substantially in the
form included as an exhibit to the 1933 Act Registration Statement. In the event
that any filing referred to in clauses (i), (ii) and (iii) above is required by
the rules and regulations of the Commission, an Exchange or state securities or
blue sky laws, to be executed on behalf of the Trust by one or more of the
Trustees, each of the Trustees, in its or his capacity as a Trustee of the
Trust, is hereby authorized and, to the extent so required, directed to join in
any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that Wilmington Trust Company in its capacity as
a Trustee of the Trust shall not be required to join in any such filing or
execute on behalf of the Trust any such document unless required by the rules
and regulations of the Commission, the Exchange or state securities or blue sky
laws. In connection with the filings referred to above, the Depositor, and John
W. Sapanski, William R. Falzone and Christopher M. Hunter, each as Trustees and
not in their individual capacities, hereby constitutes and appoints John W.
Sapanski, William R. Falzone and Christopher M. Hunter, and each of them, as its
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for the Depositor or such Trustees or in the Depositor's or
such Trustees' name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Commission, the Exchange and administrators of the state securities or
blue sky laws, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Depositor or such Trustee might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
respective substitute or substitutes, shall do or cause to be done by virtue
hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be five (5) and thereafter the number
of Trustees shall be such number as shall be set forth in the amended and
restated Trust Agreement or as shall be fixed from time to time by a written
instrument signed by the Depositor which may increase or decrease the number of
Trustees; provided, however,
- 2 -
<PAGE> 3
that to the extent required by the Business Trust Act, one Trustee shall
either be a natural person who is a resident of the State of Delaware or, if not
a natural person, an entity which has its principal place of business in the
State of Delaware and otherwise meets the requirements of applicable Delaware
law. Subject to the foregoing, the Depositor is entitled to appoint or remove
without cause any Trustee at any time. The Trustees may resign upon thirty (30)
days' prior notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be
duly executed as of the day and year first above written.
REPUBLIC BANCSHARES, INC.
as Depositor
By: /s/ John W. Sapanski
--------------------
John W. Sapanski
Chairman of the Board
and President
WILMINGTON TRUST COMPANY,
as Trustee
By:/s/ John W. Sapanski
--------------------
JOHN W. SAPANSKI,
as Trustee
By:/s/ William R. Falzone
----------------------
WILLIAM R. FALZONE,
as Trustee
By:/s/ Christopher M. Hunter
-------------------------
CHRISTOPHER M. HUNTER,
as Trustee
- 3 -
<PAGE> 1
EXHIBIT 4.5
RBI CAPITAL TRUST I
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
REPUBLIC BANCSHARES, INC., AS DEPOSITOR
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF __________, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINED TERMS
Section 101. Definitions
ARTICLE II ESTABLISHMENT OF THE TRUST
Section 201. Name
Section 202. Office of the Property Trustee;
Principal Place of Business
Section 203. Initial Contribution of Trust Property;
Organizational Expenses
Section 204. Issuance of the Preferred Securities.
Section 205. Issuance of the Common Securities;
Subscription and Purchase of Debentures.
Section 206. Declaration of Trust
Section 207. Authorization to Enter into Certain
Transactions.
Section 208. Assets of Trust
Section 209. Title to Trust Property
ARTICLE III PAYMENT ACCOUNT
Section 301. Payment Account
ARTICLE IV DISTRIBUTIONS; REDEMPTION
Section 401. Distributions
Section 402. Redemption.
Section 403. Subordination of Common Securities.
Section 404. Payment Procedures
Section 405. Tax Returns and Reports
Section 406. Payment of Taxes, Duties, etc. of the
Trust
Section 407. Payments Under Indenture.
ARTICLE V TRUST SECURITIES CERTIFICATES
Section 501. Initial Ownership
Section 502. The Trust Securities Certificates
Section 503. Execution and Delivery of Trust
Securities Certificates
Section 504. Registration of Transfer and Exchange of
Preferred Securities Certificates
Section 505. Mutilated, Destroyed, Lost or Stolen
Trust Securities Certificates
Section 506. Persons Deemed Securityholders
Section 507. Access to List of Securityholders' Names
and Addresses
Section 508. Maintenance of Office or Agency
Section 509. Appointment of Paying Agent
- i -
<PAGE> 3
PAGE
----
Section 510. Ownership of Common Securities by
Depositor
Section 511. Preferred Securities Certificates
Section 512. [Intentionally Omitted]
Section 513. [Intentionally Omitted]
Section 514. Rights of Securityholders
ARTICLE VI. ACTS OF SECURITYHOLDERS; MEETINGS;
VOTING
Section 601. Limitations on Voting Rights
Section 602. Notice of Meetings
Section 603. Meetings of Preferred Securityholders
Section 604. Voting Rights
Section 605. Proxies, etc.
Section 606. Securityholder Action by Written
Consent
Section 607. Record Date for Voting and Other
Purposes
Section 608. Acts of Securityholders
Section 609. Inspection of Records
ARTICLE VII. REPRESENTATIONS AND WARRANTIES.
Section 701. Representations and Warranties of the
Bank and the Property Trustee
Section 702. Representations and Warranties of
Depositor
ARTICLE VIII. TRUSTEES.
Section 801. Certain Duties and Responsibilities
Section 802. Certain Notices
Section 803. Certain Rights of Property Trustee
Section 804. Not Responsible for Recitals or Issuance
of Securities
Section 805. May Hold Securities
Section 806. Compensation; Indemnity; Fees
Section 807. Corporate Property Trustee Required;
Eligibility of Trustees
Section 808. Conflicting Interests
Section 809. Co-Trustees and Separate Trustee.
Section 810. Resignation and Removal; Appointment of
Successor
Section 811. Acceptance of Appointment by Successor
Section 812. Merger, Conversion, Consolidation or
Succession to Business
Section 813. Preferential Collection of Claims Against
Depositor or Trust
- ii -
<PAGE> 4
PAGE
----
Section 814. Reports by Property Trustee
Section 815. Reports to the Property Trustee
Section 816. Evidence of Compliance with Conditions
Precedent
Section 817. Number of Trustees
Section 818. Delegation of Power
Section 819. Voting
ARTICLE IX. TERMINATION, LIQUIDATION AND MERGER
Section 901. Termination Upon Expiration Date
Section 902. Early Termination
Section 903. Termination
Section 904. Liquidation
Section 905. Mergers, Consolidations, Amalgamations or
Replacements of the Trust
ARTICLE X. MISCELLANEOUS PROVISIONS.
Section 1001. Limitation of Rights of Securityholders
Section 1002. Amendment
Section 1003. Separability
Section 1004. Governing Law
Section 1005. Payments Due on Non-Business Day
Section 1006. Successors
Section 1007. Headings
Section 1008. Reports, Notices and Demands
Section 1009. Agreement Not to Petition
Section 1010. Trust Indenture Act; Conflict with Trust
Indenture Act
Section 1011. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
- iii -
<PAGE> 5
CROSS-REFERENCE TABLE
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
------------------- ------------------
807
310(a)(1) 807
310(a)(2) 807
310(a)(3) 207(a)(ii)
310(a)(4) 808
310(b) 813
311(a) 813
311(b) 507
312(a) 507
312(b) 507
312(c) 814(a)
313(a) 814(b)
313(a)(4) 814(b)
313(b) 1008
313(c) 814(c)
313(d) 815
314(a) Not Applicable
314(b) 816
314(c)(1) 816
314(c)(2) Not Applicable
314(c)(3) Not Applicable
314(d) 101,816
314(e) 801(a), 803(a)
315(a) 802, 1008
315(b) 801(a)
315(c) 801, 803
315(d) Not Applicable
316(a)(2) Not Applicable
316(b) 607
316(c) Not Applicable
317(a)(1) Not Applicable
317(a)(2) 509
317(b) 1010
318(a)
Note: This Cross-Reference Table does not constitute part
of this Agreement and shall not affect any
interpretation of any of its terms or provisions.
- iv -
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of June __, 1997, among (i)
Republic Bancshares, Inc., a Florida corporation (including any successors or
assigns, the "Depositor"), (ii) Wilmington Trust Company, a banking corporation
duly organized and existing under the laws of the State of Delaware, as property
trustee (the "Property Trustee," the "Delaware Trustee" and in its separate
corporate capacity and not in its capacity as Property Trustee, the "Bank")
and, (iii) John W. Sapanski, an individual, William R. Falzone, an individual,
and Christopher M. Hunter, an individual, each of whose address is c/o Republic
Bancshares, Inc., 111 Second Avenue, N.E., Suite 300, St. Petersburg, Florida
33701 (each an "Administrative Trustee" and collectively the "Administrative
Trustees") (the Property Trustee, the Delaware Trustee and the Administrative
Trustees referred to collectively as the "Trustees"), and (v) the several
Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor, the Delaware Trustee, and John W. Sapanski, William R.
Falzone and Christopher M. Hunter, each as an Administrative Trustee, have
heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act by the entering into of that certain Trust
Agreement, dated as of May 29, 1997 (the "Original Trust Agreement"), and by the
execution and filing by the Delaware Trustee, the Depositor and the
Administrative Trustees with the Secretary of State of the State of Delaware of
the Certificate of Trust, filed on May 29, 1997, the form of which is attached
as Exhibit A; and
WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and the
Administrative Trustees desire to amend and restate the Original Trust Agreement
in its entirety as set forth herein to provide for, among other things, (i) the
issuance of the Common Securities (as defined herein) by the Trust (as defined
herein) to the Depositor; (ii) the issuance and sale of the Preferred Securities
(as defined herein) by the Trust pursuant to the Underwriting Agreement (as
defined herein); (iii) the acquisition by the Trust from the Depositor of all of
the right, title and interest in the Debentures (as defined herein); and (iv)
the appointment of the Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party for the benefit of the
other parties and for the benefit of the Securityholders (as defined herein)
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows.
- 1 -
<PAGE> 7
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings
assigned to them in this Article I and include the plural as
well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to
an "Article" or a "Section" refers to an Article or a
Section, as the case may be, of this Trust Agreement; and
(d) the words "herein", "hereof' and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1 of
the Indenture.
"Administrative Trustee" means each of John W. Sapaski, William R. Falzone and
Christopher M. Hunter, solely in his capacity as Administrative Trustee of the
Trust formed and continued hereunder and not in his individual capacity, or such
Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person directly
or indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities or other ownership interests of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities or
other ownership interests are directly or indirectly owned, controlled or held
with power to vote by the specified Person; (c) any Person directly or
indirectly controlling, controlled by, or under common control with the
specified Person; (d) a partnership in which the specified person is a general
partner; (e) any officer or director of the specified Person; and (f) if the
specified Person is an individual, any entity of which the specified Person is
an officer, director or general partner.
"Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction
in the premises adjudging such Person a bankrupt or insolvent, or
approving as properly filed a petition seeking liquidation or
reorganization of or in respect of such Person under the United States
Bankruptcy Code of
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1978, as amended, or any other similar applicable federal or
state law, and the continuance of any such decree or order unvacated
and unstayed for a period of 90 days; or the commencement of an
involuntary case under the United States Bankruptcy Code of 1978, as
amended, in respect of such Person, which shall continue undismissed
for a period of 90 days or entry of an order for relief in such case;
or the entry of a decree or order of a court having jurisdiction in
the premises for the appointment on the ground of insolvency or
bankruptcy of a receiver, custodian, liquidator, trustee or assignee
in bankruptcy or insolvency of such Person or of its property, or for
the winding up or liquidation of its affairs, and such decree or order
shall have remained in force unvacated and unstayed for a period of 90
days; or
(b) the institution by such Person of proceedings to be
adjudicated a voluntary bankrupt, or the consent by such Person
to the filing of a bankruptcy proceeding against it, or the filing by
such Person of a petition or answer or consent seeking liquidation or
reorganization under the United States Bankruptcy Code of 1978, as
amended, or other similar applicable Federal or State law, or the
consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or
custodian or liquidator or trustee or assignee in bankruptcy or
insolvency of such Person or of its property, or shall make a general
assignment for the benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date of
such certification, and delivered to the appropriate Trustee.
"Business Day" means a day other than a Saturday or Sunday, a day on which
banking institutions in the City of New York are authorized or required by law,
executive order or regulation to remain closed, or a day on which the Property
Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Capital Treatment Event" has the meaning specified in Section
1.1 of the Indenture.
"Certificate of Trust" means the certificate of trust filed with the Secretary
of State of the State of Delaware with respect to the Trust, as amended or
restated from time to time.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Closing Date" means the date of execution and delivery of this
Trust Agreement.
"Code" means the Internal Revenue Code of 1986, or any successor statute, in
each case as amended from time to time.
"Commission" means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
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"Common Security" means an undivided beneficial interest in the assets of the
Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means the office at which, at any particular time, the
corporate trust business of the Property Trustee or the Debenture Trustee, as
the case may be, shall be principally administered, which office at the date
hereof, in each such case, is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890 Attention: Corporate Trust Administration.
"Debenture Event of Default" means an "Event of Default" as defined in Section
7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be redeemed
under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as specified in Section 1.1 of the
Indenture.
"Debenture Trustee" means Wilmington Trust Company, a banking corporation
company organized under the laws of the State of New York and any successor
thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the
Depositor's ___% Junior Subordinated Debentures due 2027, issued
pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means the
Preferred Securities Certificates issued in certificated, fully
registered form as provided in Section 513.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may
be amended from time to time.
"Delaware Trustee" means the commercial bank or trust company identified as the
"Delaware Trustee," in the Preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust heretofore formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein provided.
"Depositor" has the meaning specified in the Preamble to this
Trust Agreement.
"Distribution Date" has the meaning specified in Section 401(a)
"Distributions" means amounts payable in respect of the Trust Securities as
provided in Section 401(a).
"Event of Default" means any one of the following events (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of a Debenture Event of Default; or
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(b) default by the Trust or the Property Trustee in the
payment of any Distribution when it becomes due and payable,
and continuation of such default for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the
payment of any Redemption Price of any Trust Security when
it becomes due and payable; or
(d) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in this Trust
Agreement (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause
(b) or (c), above) and continuation of such default or breach for a
period of 60 days after there has been given, by registered or
certified mail, to the defaulting Trustee or Trustees by the Holders
of at least 25% in aggregate liquidation preference of the Outstanding
Preferred Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a
successor property Trustee within 60 days thereof
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
statute, in each case as amended from time to time.
"Expense Agreement" means the Agreement as to Expenses and Liabilities between
the Depositor and the Trust, substantially in the form attached as Exhibit D, as
amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extended Interest Payment Period" has the meaning specified in
Section 4.1 of the Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement executed and
delivered by the Depositor and Wilmington Trust Company, as trustee,
contemporaneously with the execution and delivery of this Trust Agreement, for
the benefit of the holders of the Preferred Securities, as amended from time to
time.
"Indenture" means the Indenture, dated as of ________, 1997 between the
Depositor and the Debenture Trustee, as trustee, as amended or supplemented from
time to time.
"Investment Company Act," means the Investment Company Act of 1940, or any
successor statute, in each case as amended from time to time.
"Investment Company Event" has the meaning specified in Section
1.1 of the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust,
adverse ownership interest, hypothecation, assignment, security interest or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust Securities, Trust
Securities having a Liquidation Amount equal to the principal amount of
Debentures to be contemporaneously redeemed in accordance with the Indenture and
the proceeds of which shall be used to pay the Redemption Price of such Trust
Securities; and (b) with respect to a distribution of Debentures to Holders of
Trust Securities
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<PAGE> 11
in connection with a termination or liquidation of the Trust, Debentures
having a principal amount equal to the Liquidation Amount of the Trust
Securities of the Holder to whom such Debentures are distributed. Each Debenture
distributed pursuant to clause (b) above shall carry with it accumulated
interest in an amount equal to the accumulated and unpaid interest then due on
such Debentures.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed to
Holders of Trust Securities in connection with a termination and liquidation of
the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section
904(d).
"Officers' Certificate" means a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Controller or an
Assistant Controller or the Secretary or an Assistant Secretary, of the
Depositor, and delivered to the appropriate Trustee. One of the officers signing
an Officers' Certificate given pursuant to Section 816 shall be the principal
executive, financial or accounting officer of the Depositor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who may be
counsel for the Trust, the Property Trustee, or the Depositor, but not an
employee of any thereof, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the
Recitals to this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means, as of the
date of determination, all Preferred Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the
Property Trustee or delivered to the Property Trustee for
cancellation;
(b) Preferred Securities for whose payment or redemption money
in the necessary amount has been theretofore deposited with the
Property Trustee or any Paying Agent for the Holders of such Preferred
Securities; provided that, if such Preferred Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Trust Agreement; and
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<PAGE> 12
(c) Preferred Securities which have been paid or in exchange for
or in lieu of which other Preferred Securities have been executed and
delivered pursuant to Sections 504, 505 and 511; provided, however,
that in determining whether the Holders of the requisite Liquidation
Amount of the Outstanding Preferred Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Preferred Securities owned by the Depositor, any Trustee or any
Affiliate of the Depositor or any Trustee shall be disregarded and
deemed not to be Outstanding, except that (a) in determining whether
any Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Preferred Securities that such Trustee knows to be so owned shall be so
disregarded and (b) the foregoing shall not apply at any time when all
of the outstanding Preferred Securities are owned by the Depositor, one
or more of the Trustees and/or any such Affiliate. Preferred Securities
so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Administrative Trustees the pledgee's right so to act with respect to
such Preferred Securities and that the pledgee is not the Depositor or
any Affiliate of the Depositor.
"Paying Agent" means any paying agent or co-paying agent appointed pursuant to
Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust department
for the benefit of the Securityholders in which all amounts paid in respect of
the Debentures shall be held and from which the Property Trustee shall make
payments to the Securityholders in accordance with Sections 401 and 102.
"Person" means any individual, corporation, partnership, joint venture, trust,
limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the assets of the
Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate", means a certificate evidencing ownership of
Preferred Securities, substantially in the form attached as Exhibit E.
"Property Trustee" means the commercial bank or trust company identified as the
"Property Trustee," in the Preamble to this Trust Agreement solely in its
capacity as Property Trustee of the Trust heretofore formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be redeemed, the
date fixed for such redemption by or pursuant to this Trust Agreement; provided
that each Debenture Redemption Date and the stated maturity of the Debentures
shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security, the Liquidation
Amount of such Trust Security, plus accumulated and unpaid Distributions to the
Redemption Date, paid by the Depositor upon the concurrent redemption of a Like
Amount of Debentures, allocated on a pro rata basis (based on Liquidation
Amounts) among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
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<PAGE> 13
"Securities Register" and "Securities Registrar" have the respective meanings
specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust Security or
Securities is registered in the Securities Register; any such Person is a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means the Delaware business trust created and continued hereby and
identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the same
may be modified, amended or supplemented in accordance with the applicable
provisions hereof, including all exhibits hereto, including, for all purposes of
this Trust Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Trust Agreement and any such modification, amendment or supplement,
respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939, as amended, is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of the Property
Trustee under the Guarantee; (c) any cash on deposit in, or owing to, the
Payment Account; and (d) all proceeds and rights in respect of the foregoing and
any other property and assets for the time being held or deemed to be held by
the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the
Delaware Trustee, and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as of ______,
1997, among the Trust, the Depositor and the Underwriters named therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME.
The Trust created and continued hereby shall be known as "RBI Capital Trust I,"
as such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Trust Securities and the other
Trustees, in which name the Trustees may engage in the transactions
contemplated hereby, make and execute contracts and other instruments on behalf
of the Trust and sue and be sued.
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SECTION 202. OFFICE OF THE PROPERTY TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Property Trustee in the State of Delaware is Wilmington Trust
Company, 1100 North Market Square, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administrator, or such other address in the State of Delaware
as the Property Trustee may designate by written notice to the Securityholders
and the Depositor. The principal executive office of the Trust is c/o Republic
Bancshares, Inc., 111 Second Avenue, N.E., Suite 300, St. Petersburg, Florida
33701.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES.
The Trustees acknowledge receipt in trust from the Depositor in connection with
the Original Trust Agreement of the sum of $10, which constituted the initial
Trust Property. The Depositor shall pay organizational expenses of the Trust as
they arise or shall, upon request of any Trustee, promptly reimburse such
Trustee for any such expenses paid by such Trustee. The Depositor shall make no
claim upon the Trust Property for the payment of such expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES.
On ________, 1997, the Depositor and an Administrative Trustee, on behalf of the
Trust and pursuant to the Original Trust Agreement, executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver in accordance with the
Underwriting Agreement, Preferred Securities Certificates, registered in the
name of the Persons entitled thereto, in an aggregate amount of 2,500,000
Preferred Securities having an aggregate Liquidation Amount of $25,000,000
against receipt of the aggregate purchase price of such Preferred Securities of
$25,000,000, which amount such Administrative Trustee shall promptly deliver to
the Property Trustee. If the underwriters exercise their Option and there is an
Option Closing Date (as such terms are defined in the Underwriting Agreement),
then an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver in accordance with the Underwriting
Agreement, Preferred Securities Certificates, registered in the name of the
Persons entitled thereto, in an aggregate amount of up to 375,000 Preferred
Securities having an aggregate Liquidation Amount of up to $3,750,000 against
receipt of the aggregate purchase price of such Preferred Securities of
$3,750,000, which amount such Administrative Trustee shall promptly deliver to
the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF
DEBENTURES.
(a) Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrative Trustee, on behalf of the Trust,
shall execute in accordance with Section 502 and deliver to the
Depositor, Common Securities Certificates, registered in the name of
the Depositor in an aggregate amount of Common Securities having an
aggregate Liquidation Amount of $_________ against payment by the
Depositor of such amount. Contemporaneously therewith, an
Administrative Trustee on behalf of the Trust, shall subscribe to and
purchase from the Depositor Debentures, registered in the name of the
Property Trustee on behalf of the Trust and having an aggregate
principal amount equal to $__________, and, in satisfaction of the
purchase price for such Debentures, the Property Trustee, on behalf
of the Trust, shall deliver to the Depositor the sum of $_________.
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<PAGE> 15
(b) If the underwriters exercise the Option and there is an Option
Closing Date, then an Administrative Trustee, on behalf of the Trust,
shall execute in accordance with Section 502 and deliver to the
Depositor, Common Securities Certificates, registered in the name of
the Depositor, in an aggregate amount of Common Securities having an
aggregate Liquidation Amount of up to $________ against payment by the
Depositor of such amount. Contemporaneously therewith, an
Administrative Trustee, on behalf of the Trust, shall subscribe to and
purchase from the Depositor, Debentures, registered in the name of the
Trust and having an aggregate principal amount of up to $____________
and, in satisfaction of the purchase price of such Debentures, the
Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the amount received from one of the Administrative Trustees
pursuant to the last sentence of Section 204 (being the sum of the
amounts delivered to the Property Trustee pursuant to (i) the third
sentence of Section 204; and (ii) the first sentence of this Section
205(b)).
SECTION 206. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Trust Securities and use the proceeds from such sale to acquire the Debentures;
and (b) to engage in those activities necessary, convenient or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to
have all the rights, powers and duties to the extent set forth herein, and the
Trustees hereby accept such appointment. The Property Trustee hereby declares
that it shall hold the Trust Property in trust upon and subject to the
conditions set forth
herein for the benefit of the Securityholders. The Administrative Trustees shall
have all rights, powers and duties set forth herein and in accordance with
applicable law with respect to accomplishing the purposes of the Trust.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set
forth in paragraph (b) of this Section 207 and Article VIII, and in
accordance with the following provisions (i) and (ii), the
Administrative Trustees shall have the authority to enter into all
transactions and agreements determined by the Administrative Trustees
to be appropriate in exercising the authority, express or implied,
otherwise granted to the Administrative Trustees under this Trust
Agreement, and to perform all acts in furtherance thereof, including
without limitation, the following:
(i) As among the Trustees, each Administrative Trustee,
acting singly or jointly, shall have the power and authority
to act on behalf of the Trust with respect to the following
matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of the
Trust, the Expense Agreement and such other
agreements or documents as may be necessary or
desirable in connection with the purposes and
function of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as
amended, and under state securities or blue sky laws,
and the qualification of this Trust Agreement as a
trust indenture under the Trust
Indenture Act;
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<PAGE> 16
(D) assisting in the listing of the Preferred
Securities upon The Nasdaq Stock Market's National
Market or such securities exchange or exchanges as
shall be determined by the Depositor and the
registration of the Preferred Securities under the
Exchange Act, and the preparation and filing of all
periodic and other reports and other documents
pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust
Securities and the Debentures to the
Securityholders in accordance with this Trust
Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with
this Trust Agreement;
(G) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of
the Trust and the preparation, execution and filing
of the certificate of cancellation with the Secretary
of State of the State of Delaware;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation
of the Trust's valid existence, rights, franchises
and privileges as a statutory business trust under
the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to
protect the limited liability of the Holders of the
Preferred Securities or to enable the Trust to effect
the purposes for which the Trust was created; and
(I) the taking of any action incidental to the
foregoing as the Administrative Trustees may from
time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement for
the benefit of the Securityholders (without
consideration of the effect of any such action on any
particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust
with respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures
in the Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in
accordance with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the
Debentures to the Securityholders in accordance with
this Trust Agreement;
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<PAGE> 17
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust
Agreement, the winding up of the affairs of and
liquidation of the Trust;
(I) after an Event of Default, the taking of any
action incidental to the foregoing as the Property
Trustee may from time to time determine is necessary
or advisable to give effect to the terms of this
Trust Agreement and protect and conserve the Trust
Property for the benefit of the Securityholders
(without consideration of the effect of any such
action on any particular Securityholder);
(J) registering transfers of the Trust Securities
in accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of
the duties, liabilities, powers or the authority of
the Administrative Trustees set forth
in Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust
(or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided herein
or contemplated hereby. In particular, the Trustees shall not (i)
acquire any investments or engage in any activities not authorized by
this Trust Agreement; (ii) sell, assign, transfer, exchange, mortgage,
pledge, setoff or otherwise dispose of any of the Trust Property or
interests therein, including to Securityholders, except as expressly
provided herein; (iii) take any action that would cause the Trust to
fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes; (iv) incur any indebtedness for borrowed money or
issue any other debt; or (v) take or consent to any action that would
result in the placement of a Lien on any of the Trust Property. The
Administrative Trustees shall defend all claims and demands of all
Persons at any time claiming any Lien on any of the Trust Property
adverse to the interest of the Trust or the Securityholders
in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to
assist the Trust with respect to, or effect on behalf of the Trust,
the following (and any actions taken by the Depositor in furtherance
of the following prior to the date of this Trust Agreement are hereby
ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a
registration statement on the appropriate form in relation to
the Preferred Securities and the Debentures, including any
amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or, register for sale all or
part of the Preferred Securities and to do any and all such
acts, other than actions which must be taken by or on behalf
of the Trust, and advise the Trustees of actions they must
take on behalf of the Trust, and prepare for execution and
filing any documents to be executed and filed by the Trust or
on behalf of the Trust, as the Depositor deems necessary or
advisable in order to comply with the applicable laws of any
such States;
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(iii) the preparation for filing by the Trust and
execution on behalf of the Trust of an application to The
Nasdaq Stock Market's National Market or a national stock
exchange or other organizations for listing upon notice of
issuance of any Preferred Securities and to file or cause an
Administrative Trustee to file thereafter with such exchange
or organization such notifications and documents as may be
necessary from time to time;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a
registration statement on Form 8-A relating to the
registration of the Preferred Securities under Section 12(b)
or 12(g) of the Exchange Act, including any amendments
thereto;
(v) the negotiation of the terms of, and the execution
and delivery of, the Underwriting Agreement providing
for the sale of the Preferred Securities; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct
the affairs of the Trust and to operate the Trust so that the Trust
shall not be deemed to be an "investment company" required to be
registered under the Investment Company Act, shall be classified as a
"grantor trust" and not as an association taxable as a corporation for
United States federal income tax purposes and so that the Debentures
shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section
1002, the Depositor and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law or this Trust
Agreement, that each of the Depositor and the Administrative Trustees
determines in their discretion to be necessary or desirable for such
purposes.
SECTION 208. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the Property
Trustee (in its capacity as such) and shall be held and administered by the
Property Trustee for the benefit of the Securityholders in accordance with this
Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of
the Property Trustee shall have exclusive control and sole right of
withdrawal with respect to the Payment Account for the purpose of
making deposits and withdrawals from the Payment Account in accordance
with this Trust Agreement.
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All monies and other property deposited or held from time to time in
the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Securityholders and
for distribution as herein provided, including (and subject to) any
priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on,
and any other payments or proceeds with respect to, the Debentures.
Amounts held in the Payment Account shall not be invested by the
Property Trustee pending distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Trust available
for the payment of Distributions. Distributions shall accumulate from
________,1997, and, except during any Extended Interest Payment Period
with respect to the Debentures, shall be payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year,
commencing on September 30, 1997. If any date on which a Distribution
is otherwise payable on the Trust Securities is not a Business Day,
then the payment of such Distribution shall be made on the next
succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, payment of such
Distribution shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date
(each date on which distributions are payable in accordance with this
Section 401(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests
in the Trust Property and the Distributions on the Trust Securities
shall be payable at a rate of ____% per annum of the Liquidation
Amount of the Trust Securities. The amount of Distributions payable
for any full period shall be computed on the basis of a 360-day year
of twelve 30-day months. The amount of Distributions for any partial
period shall be computed on the basis of the number of days elapsed
in a 360-day year of twelve 30 day months. During any Extended
Interest Payment Period with respect to the Debentures, Distributions
on the Preferred Securities shall be deferred for a period equal to
the Extended Interest Payment Period. The amount of Distributions
payable for any period shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the
Property Trustee solely from the Payment Account and shall be payable
on each Distribution Date only to the extent that the Trust has funds
then on hand and immediately available in the Payment Account for the
payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as
they appear on the Securities Register for the Trust Securities on the
relevant record date, which shall be 15th day of the month in which the
Distribution is payable.
SECTION 402. REDEMPTION.
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(a) On each Debenture Redemption Date and on the stated maturity
of the Debentures the Trust shall be required to redeem a Like Amount
of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date to each Holder of Trust
Securities to be redeemed, at such Holder's address appearing in the
Securities Register. The Property Trustee shall have no responsibility
for the accuracy of any CUSIP number contained in such notice. All
notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities
are to be redeemed, the identification and the
aggregate Liquidation Amount of the particular Trust
Securities to be redeemed; and
(v) that, on the Redemption Date, the Redemption Price
shall become due and payable upon each such Trust Security
to be redeemed and that Distributions thereon shall cease to
accumulate on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the
contemporaneous redemption of Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on
each Redemption Date only to the extent that the Trust has immediately
available funds then on hand and available in the Payment Account for
the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, New York
City time, on the Redemption Date, subject to Section 402(c), the
Property Trustee shall deposit with the Paying Agent funds sufficient
to pay the applicable Redemption Price and shall give the Paying Agent
irrevocable instructions and authority to pay the Redemption Price to
the Holders thereof upon surrender of their Preferred Securities
Certificates. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Trust Securities called for
redemption shall be payable to the Holders of such Trust Securities as
they appear on the Register for the Trust Securities on the relevant
record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then
upon the date of such deposit, all rights of Securityholders holding
Trust Securities so called for redemption shall cease, except the
right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without
interest, and such Securities shall cease to be Outstanding. In the
event that any date on which any Redemption Price is payable is not a
Business Day, then payment of the Redemption Price payable on such
date shall be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar
year, such payment shall be made on the immediately preceding Busines s
Day, in each case, with the same force and effect as if made on such
date. In the event that payment of the Redemption Price in respect of
any Trust Securities called for redemption is improperly withheld or
refused and not paid either by the
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Trust or by the Depositor pursuant to the Guarantee, Distributions on such
Trust Securities shall continue to accumulate, at the then applicable rate,
from the Redemption Date originally established by the Trust for such Trust
Securities to the date such Redemption Price is actually paid, in which case
the actual payment date shall be the date fixed for redemption for purposes of
calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall
be made to the record holders thereof as they appear on the Securities Register
for the Trust Securities on the relevant record date, which shall be the date
15 days prior to the relevant Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Preferred Securities not previously
called for redemption, by such method (including, without limitation, by lot)
as the Property Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to $25 or an integral
multiple of $25 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $25. The Property Trustee shall
promptly notify the Securities Registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of this Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part,
to the portion of the Liquidation Amount of Preferred Securities which has been
or is to be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities, provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of
Default shall have occurred and be continuing, no payment of any Distribution
(including Additional Amounts, if applicable) on, or Redemption Price of, any
Common Security, and no other payment on account of the redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions (including Additional
Amounts, if applicable) on all Outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all
Outstanding Preferred Securities then called for redemption, shall have been
made or provided for, and all funds immediately available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts, if applicable) on, or the
Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Holder of Common Securities shall be
deemed to have waived any right to act with respect to any such Event of
Default under this Trust Agreement until the effect of all such
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<PAGE> 22
Events of Default with respect to the Preferred Securities
shall have been cured, waived or otherwise eliminated. Until any such
Event of Default under this Trust Agreement with respect to the
Preferred Securities shall have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the
Holders of the Preferred Securities and not the Holder of the Common
Securities, and only the Holders of the Preferred Securities shall
have the right to direct the Property Trustee to act on their behalf.
SECTION 404. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable) in
respect of the Preferred Securities shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear on the Securities
Register. Payments in respect of the Common Securities shall be made in such
manner as shall be mutually agreed between the Property Trustee and the Common
Securityholder.
SECTION 405. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
furnished to such Securityholder or the information required to be provided on
such form. The Administrative Trustees shall provide the Depositor with a copy
of all such returns and reports promptly after such filing or furnishing. The
Property Trustee shall comply with United States federal withholding and backup
withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Interest (as defined in Section
1.1 of the Indenture), the Property Trustee, at the direction of an
Administrative Trustee or the Depositor, shall promptly pay any taxes, duties or
governmental charges of whatsoever nature (other than withholding taxes) imposed
on the Trust by the United States or any other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE.
Any amount payable hereunder to any Holder or Preferred Securities shall be
reduced by the amount of any corresponding payment such Holder has directly
received under the Indenture pursuant to Section 514(b) or (c) hereof
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the Depositor pursuant to
Section 203 and until the issuance of the Trust Securities, and at any time
during which no Trust Securities are outstanding,
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the Depositor shall be the sole beneficial owner of the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES.
The Preferred Securities Certificates shall be issued in minimum denominations
of $25 Liquidation Amount and integral multiples of $25 in excess thereof, and
the Common Securities Certificates shall be issued in denominations of $25
Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual, facsimile or
imprinted signature of at least one Administrative Trustee. Trust Securities
Certificates bearing the signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefits of this Trust
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the delivery of such Trust Securities
Certificates or did not hold such offices at the date of delivery of such Trust
Securities Certificates. A transferee of a Trust Securities Certificate shall
become a Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 504 and
511.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date and on the date on which the Underwriter exercises the
option, as applicable (the "Option Closing Date"), the Administrative Trustees
shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as
provided in Sections 204 and 205, to be executed on behalf of the Trust by at
least one of the Administrative Trustees and delivered to the Property Trustee
and upon such delivery, the Property Trustee shall countersign and register such
Trust Securities Certificates and deliver such Trust Securities Certificates
upon the written order of the Depositor, executed by its Chief Executive Officer
or President or any Vice President and the Treasurer or an Assistant Treasurer
or Secretary or Assistant Secretary without further corporate action by the
Depositor, in authorized denominations.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES
CERTIFICATES
(a) The Property Trustee shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 508, a register or
registers for the purpose of registering Trust Securities Certificates
and transfers and exchanges of Preferred Securities Certificates
(herein referred to as the "Securities Register") in which the
registrar and transfer agent (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for
the registration of Preferred Securities Certificates and Common
Securities Certificates (subject to Section 510 in the case of the
Common Securities Certificates) and registration of transfers and
exchanges of Preferred Securities Certificates as herein provided.
The Property Trustee shall be the initial Securities Registrar.
(b) Upon surrender for registration of transfer of any Preferred
Securities Certificate at the office or agency maintained pursuant to
Section 508, the Administrative Trustees or any one of them and the
Property Trustee shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative
Trustee or Trustees. The Securities Registrar shall not be required to
register the transfer of any Preferred Securities that have been called
for redemption. At the option of a Holder, Preferred Securities
Certificates may be exchanged for other Preferred Securities
Certificates in authorized
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<PAGE> 24
denominations of the same class and of a like aggregate Liquidation
Amount upon surrender of the Preferred Securities Certificates to be
exchanged at the office or agency maintained pursuant to Section 508.
(c) Every Preferred Securities Certificate presented or
surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer in form satisfactory
to the Property Trustee and the Securities Registrar duly executed by
the Holder or his attorney duly authorized in writing. Each Preferred
Securities Certificate surrendered for registration of transfer or
exchange shall be canceled subsequently disposed of by the Property
Trustee in accordance with its customary practice. The Trust shall
not be required to (i) issue, register the transfer of, or exchange
any Preferred Securities during a period beginning at the opening of
business 15 calendar days before the date of mailing of a notice of
redemption of any Preferred Securities called for redemption and
ending at the close of business on the day of such mailing; or (ii)
register the transfer of or exchange any Preferred Securities so
selected for redemption, in whole or in part, except the unredeemed
portion of any such Preferred Securities being redeemed in part.
(d) No service charge shall be made for any registration of
transfer or exchange of Preferred Securities Certificates, but the
Securities Registrar may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with
any transfer or exchange of Preferred Securities Certificates.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
SECURITIES CERTIFICATES.
If (a) any mutilated Trust Securities certificate shall be surrendered to the
Securities Registrar, or if the Securities Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate, and (b) there shall be delivered to the Securities Registrar and
the Administrative Trustees such security or indemnity as may be required by
them to save each of them harmless, then in the absence of notice that such
Trust Securities Certificate shall have been acquired by a bona fide purchaser,
the Administrative Trustees, or any one of them, on behalf of the Trust shall
execute and make available for delivery, and the Property Trustee shall
countersign, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Trust Securities Certificate, a new Trust Securities Certificate of
like class, tenor and denomination. In connection with the issuance of any new
Trust Securities Certificate under this Section 505, the Administrative Trustees
or the Securities Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Securities Certificate issued pursuant to this
Section 505 shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Securities Certificate shall be found at any
time.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS.
The Trustees, the Paying Agent and the Securities Registrar shall treat the
Persons in whose name any Trust Securities are issued as the owner of such Trust
Securities Certificate for the purpose of receiving Distributions and for all
other purposes whatsoever, and neither the Trustees nor the Securities Registrar
shall be bound by any notice to the contrary.
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
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At any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or cause
to be furnished to the Property Trustee a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the
Securityholders as of the most recent record date (a) semi-annually on or
before January 15 and July 15 in each year; and (b) promptly after receipt by
any Administrative Trustee or the Depositor of a request therefore from the
Property Trustee in order to enable the Property Trustee to discharge its
obligations under this Trust Agreement, in each case to the extent such
information is in the possession or control of the Administrative Trustees
or the Depositor and is not identical to a previously supplied list or has not
otherwise been received by the Property Trustee in its capacity as Securities
Registrar. The rights of Securityholders to communicate with other
Securityholders with respect to their rights under this Trust Agreement or under
the Trust Securities, and the corresponding rights of the Trustee shall be as
provided in the Trust Indenture Act. Each Holder and each owner shall be deemed
to have agreed not to hold the Depositor, the Property Trustee or the
Administrative Trustees accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.
The Property Trustee shall designate, with the consent of the Administrative
Trustees, which consent shall not be unreasonably withheld, an office or offices
or agency or agencies where Preferred Securities Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Trustees in respect of the Trust Securities Certificates may be served.
The Property Trustee initially designates its corporate trust office at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, as the
principal corporate trust office for such purposes. The Property Trustee shall
give prompt written notice to the Depositor, the Administrative Trustees and to
the Securityholders of any change in the location of the Securities Register or
any such office or agency.
SECTION 509. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall make Distributions to Securityholders from the Payment
Account and shall report the amounts of such Distributions to the Property
Trustee and the Administrative Trustees. Any Paying Agent shall have the
revocable power to withdraw funds from the Payment Account for the purpose of
making the Distributions referred to above. The Property Trustee may revoke such
power and remove the Paying Agent if such Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligation
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustee and the
Property Trustee. In the event that the Property Trustee shall no longer be the
Paying Agent or a successor Paying Agent shall resign or its authority to act
be revoked, the Property Trustee shall appoint a successor that is
reasonably acceptable to the Administrative Trustees to act as Paying Agent to
execute and deliver to the Trustees an instrument in which such successor
Paying Agent or additional Paying Agent shall agree with the Trustees that as
Paying Agent, such successor Paying Agent or additional Paying Agent shall hold
all sums, if any, held by it for payment to the Securityholders in trust for
the benefit of the Securityholders entitled thereto until such sums shall be
paid to such Securityholders. The Paying Agent shall return all unclaimed funds
to the Property Trustee and, upon removal of a Paying Agent, such Paying Agent
shall also return all funds in its possession to the Property Trustee. The
provisions of Sections 801, 803 and 806 shall apply to the Property Trustee
also in its role as Paying Agent, for so long as the Property Trustee shall act
as Paying Agent and, to the extent applicable, to any other paying agent
appointed hereunder. Any reference in this Agreement to the Paying Agent shall
include any
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co-paying agent unless the context requires otherwise.
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain beneficial and
record ownership of the Common Securities. To the fullest extent permitted by
law, any attempted transfer of the Common Securities (other than a transfer in
connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE".
SECTION 511. PREFERRED SECURITIES CERTIFICATES
(a) Each Holder shall receive a Preferred Securities Certificate representing
such owner's interest in such Preferred Securities. Upon the issuance of
Definitive Preferred Securities Certificates, the Trustees shall recognize the
record holders of the Definitive Preferred Securities Certificates as
Securityholders. The Definitive Preferred Securities Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as evidenced by the
execution thereof by the Administrative Trustees or any one of them.
(b) A Single Common Securities Certificate representing the Common Securities
shall be issued to the Depositor in the form of a definitive Common Securities
Certificate.
(c) A Trust Securities Certificate shall not be valid unless signed by the
manual signature of at least one Administrative Trustee or by the facsimile or
imprinted signature of at least one Administrative Trustee and countersigned and
registered by the manual signature of an authorized signatory of the Property
Trustee. These signatures shall be conclusive evidence that the Trust Security
has been validly issued under this Trust Agreement.
SECTION 512.
[INTENTIONALLY OMITTED]
SECTION 513.
[INTENTIONALLY OMITTED]
SECTION 514. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively
in the Property Trustee (in its capacity as such) in accordance with
Section 209, and the Securityholders shall not have any right or title
therein other than the undivided beneficial interest in the assets
of the Trust conferred by their Trust Securities and they shall have
no right to call for any partition or division of property, profits or
rights of the Trust except as described below. The Trust Securities
shall be personal property giving only the rights specifically set
forth therein and in this Trust Agreement. The Trust Securities shall
have no preemptive or similar rights. When issued and delivered to
Holders of the Preferred Securities against payment of the purchase
price therefor, the Preferred Securities shall be fully paid and
nonassessable interests in the Trust. The Holders of the Preferred
Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability
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extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the
holders of not less than 25% in principal amount of the outstanding
Debentures fail to declare the principal of all of the Debentures to be
immediately due and payable, the Holders of at least 25% in Liquidation
Amount of the Preferred Securities then Outstanding shall have such
right by a notice in writing to the Depositor and the Debenture
Trustee; and upon any such declaration such principal amount of and the
accrued interest on all of the Debentures shall become immediately due
and payable, provided that the payment of principal and interest on
such Debentures shall remain subordinated to the extent provided in the
Indenture.
(c) For so long as any Preferred Securities remain outstanding,
if, upon a Debenture Event of Default arising from the failure to pay
interest or principal on the Debentures, the Holders of any Preferred
Securities then Outstanding shall, to the fullest extent permitted by
law, have the right to directly institute proceedings for enforcement
of payment to such Holders of principal of or interest on the
Debentures having a principal amount equal to the Liquidation Amount
of the Preferred Securities of such Holders.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 601, in Sections 514, 810
and 1002 and in the Indenture and as otherwise required by law, no
Holder of Preferred Securities shall have any right to vote or in any
manner otherwise control the administration, operation and management
of the Trust or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Trust
Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an
association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Debenture Trustee with
respect to such Debentures; (ii) waive any past default which is
waivable under Article VII of the Indenture; (iii) exercise any right
to rescind or annul a declaration that the principal of all the
Debentures shall be due and payable; or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures, where
such consent shall be required, without, in each case, obtaining the
prior approval of the Holders of at least a majority in Liquidation
Amount of all Outstanding Preferred Securities; provided, however, that
where a consent under the Indenture would require the consent of each
Holder of Outstanding Debentures affected thereby, no such consent
shall be given by the Property Trustee without the prior written
consent of each holder of Preferred Securities. The Trustees shall not
revoke any action previously authorized or approved by a vote of the
Holders of the Outstanding Preferred Securities, except by a subsequent
vote of the Holders of the Outstanding Preferred Securities. The
Property Trustee shall notify each Holder of the Outstanding Preferred
Securities of any notice of default received from the Debenture Trustee
with respect to the Debentures. In addition to obtaining the foregoing
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approvals of the Holders of the Preferred Securities, prior to taking
any of the foregoing actions, the Trustees shall, at the expense of
the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust shall continue to be classified
as a grantor trust and not as an association taxable as a corporation
for United States federal income tax purposes on account of such
action.
(c) If any proposed amendment to the Trust Agreement provides for,
or the Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the powers, preferences or
special rights of the Preferred Securities, whether by way of amendment
to the Trust Agreement or otherwise; or (ii) the dissolution,
winding-up or termination of the Trust, other than pursuant to the
terms of this Trust Agreement, then the Holders of Outstanding
Preferred Securities as a class shall be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be
effective except with the approval of the Holders of at least a
majority in Liquidation Amount of the Outstanding Preferred Securities.
No amendment to this Trust Agreement may be made if, as a result of
such amendment, the Trust would cease to be classified as a grantor
trust or would be classified as an association taxable as a corporation
for United States federal income tax purposes.
SECTION 602. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders, stating the time, place
and purpose of the meeting, shall be given by the Property Trustee pursuant to
Section 1008 to each Preferred Securityholder of record, at his registered
address, at least 15 days and not more than 90 days before the meeting. At any
such meeting, any business properly before the meeting may be so considered
whether or not stated in the notice of the meeting. Any adjourned meeting may be
held as adjourned without further notice.
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.
(a) No annual meeting of Securityholders is required to be held.
The Administrative Trustees, however, shall call a meeting of
Securityholders to vote on any matter in respect of which Preferred
Securityholders are entitled to vote upon the written request of the
Preferred Securityholders of 25% of the Outstanding Preferred
Securities (based upon their aggregate Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in
their discretion, call a meeting of Preferred Securityholders to vote
on any matters as to which the Preferred Securityholders are entitled
to vote.
(b) Preferred Securityholders of record of 50% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation Amount),
present in person or by proposal shall constitute a quorum at any
meeting of Securityholders
(c) If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy,
holding more than a majority of the Preferred Securities (based upon
their aggregate Liquidation Amount) held by the Preferred
Securityholders of record present, either in person or by proxy, at
such meeting shall constitute the action of the Securityholders unless
this Trust Agreement requires a greater number of affirmative votes.
SECTION 604. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each $10 of Liquidation Amount
represented by their
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Trust Securities in respect of any matter as to which such Securityholders are
entitled to vote.
SECTION 605. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled to vote thereat
may vote by proxy, provided that no proxy shall be voted at any meeting unless
it shall have been placed on file with the Administrative Trustees, or with such
other officer or agent of the Trust as the Administrative Trustees may direct,
for verification prior to the time at which such vote shall be taken. When Trust
Securities are held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Trust Securities, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust Securities. A
proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and, the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT
Any action which may be taken by Securityholders at a meeting may be taken
without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their aggregate Liquidation Amount)
entitled to vote in respect of such action (or such larger proportion thereof as
shall be required by any express provision of this Trust Agreement) shall
consent to the action in writing (based upon their aggregate Liquidation
Amount).
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are entitled to notice
of and to vote at any meeting or by written consent, or to participate in any
Distribution on the Trust Securities in respect of which a record date is not
otherwise provided for in this Trust Agreement, or for the purpose of any other
action, the Administrative Trustees may from time to time fix a date, not more
than 90 days prior to the date of any meeting of Securityholders or the payment
of any Distribution or other action as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
SECTION 608. ACTS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to
be given, made or taken by Securityholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor
signed by such Securityholders in person or by an agent duly appointed
in writing, and, except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments are
delivered to an Administrative Trustee. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Securityholders signing such
instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 801) conclusive
in favor of the Trustees, if made in the manner provided in this
Section 608.
(b) The fact and date of the execution by any Person of any such
instrument or writing may
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be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to
take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of
the execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other manner
which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the
Securities Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Securityholder of any Trust Security shall
bind every future Securityholder of the same Trust Security and the
Securityholder of every Trust Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect
of anything done, omitted or suffered to be done by the Trustees or the
Trust in reliance thereon, whether or not notation of such action is
made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any particular
Trust Security may do so with regard to all or any part of the
Liquidation Amount of such Trust Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such liquidation amount.
(f) A Securityholder may institute a legal proceeding directly
against the Depositor under the Guarantee to enforce its rights under
the Guarantee without first instituting a legal proceeding against the
Guarantee Trustee (as defined in the Guarantee), the Trust or any
Person.
SECTION 609. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property Trustee,
the records of the Trust shall be open to inspection and copying by
Securityholders and their authorized representatives during normal business
hours for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY
TRUSTEE.
The Bank and the Property Trustee, each severally on behalf of and as to itself,
as of the date hereof, and each Successor Property Trustee at the time of the
Successor Property Trustee's acceptance of its appointment as Property Trustee
hereunder hereby represents and warrants (as applicable) for the benefit of the
Depositor and the Securityholders that:
(a) The Bank is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery
and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and constitutes the valid and legally
binding agreement of the Property Trustee enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors, rights and to
general equity principles;
(d) the execution, delivery and performance by the Property Trustee
of this Trust Agreement has been duly authorized by all necessary
corporate or other action on the part of the Property Trustee and does
not require any approval of stockholders of the Bank and such
execution, delivery and performance shall not (i) violate the Bank's
charter or by-laws; (ii) violate any provision of, or constitute, with
or without notice or lapse of time, a default under, or result in the
creation or imposition of, any Lien on any properties included in the
Trust Property pursuant to the provisions of any indenture, mortgage,
credit agreement, license or other agreement or instrument to which the
Property Trustee or the Bank is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the United
States or the State of Delaware, as the case may be, governing the
banking or trust powers of the Bank or the Property Trustee (as
appropriate in context) or any order, judgment or decree applicable to
the Property Trustee or the Bank;
(e) neither the authorization, execution or delivery by the Property
Trustee of this Trust Agreement nor the consummation of any of the
transactions by the Property Trustee contemplated herein or therein
requires the consent or approval of, the giving of notice to, the
registration with or the taking of any other action with respect to any
governmental authority or agency under any existing federal law
governing the banking or trust powers of the Bank or the Property
Trustee, as the case may be, under the laws of the United States or the
State of Delaware; and
(f) there are no proceedings pending or, to the best of the Property
Trustee's knowledge, threatened against or affecting the Bank or the
Property Trustee in any court or before any governmental authority,
agency or arbitration board or tribunal which, individually
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or in the aggregate, would materially and adversely affect the Trust or
would question the right, power and authority of the Property Trustee
to enter into or perform its obligations as one of the Trustees under
this Trust Agreement.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date or
the Option Closing Date, if applicable, on behalf of the Trust have
been duly authorized and, shall have been, duly and validly executed,
issued and delivered by the Administrative Trustees pursuant to the
terms and provisions of, and in accordance with the requirements of,
this Trust Agreement and the Securityholders shall be, as of such
date, entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of
the State of Delaware or any political subdivision thereof in
connection with the execution, delivery and performance by the Bank or
the Property Trustee, as the case may be, of this Trust Agreement.
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ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property
Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no
provision of this Trust Agreement shall require the Trustees to expend
or risk their own funds or otherwise incur any financial liability in
the performance of any of their duties hereunder, or in the exercise of
any of their rights or powers, if they shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. No
Administrative Trustee shall be liable for its act or omissions
hereunder except as a result of its own gross negligence or willful
misconduct. The Property Trustee's liability shall be determined under
the Trust Indenture Act. Whether or not therein expressly so provided,
every provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustees
shall be subject to the provisions of this Section 801. To the extent
that, at law or in equity, an Administrative Trustee has duties
(including fiduciary duties) and liabilities relating thereto to the
Trust or to the Securityholders, such Administrative Trustee shall not
be liable to the Trust or to any Securityholder for such Trustee's good
faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict
the duties and liabilities of the Administrative Trustees otherwise
existing at law or in equity, are agreed by the Depositor and the
Securityholders to replace such other duties and liabilities of the
Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there
shall be sufficient revenue or proceeds from the Trust Property to
enable the Property Trustee or a Paying Agent to make payments in
accordance with the terms hereof. With respect to the relationship of
each Securityholder and the Trustee, each Securityholder, by its
acceptance of a Trust Security, agrees that it shall look solely to the
revenue and proceeds from the Trust Property to the extent legally
available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable
in respect of any Trust Security or for any other liability in respect
of any Trust Security. This Section 801(b) does not limit the liability
of the Trustees expressly set forth elsewhere in this Trust Agreement
or, in the case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) the property Trustee shall not be liable for any error
of judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than
a majority in Liquidation Amount of the Trust Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property
Trustee
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under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the
Debentures and the Payment Account shall be to deal with such
Property in a similar manner as the Property Trustee deals
with similar property for its own account, subject to the
protections and limitations on liability afforded to the
Property Trustee under this Trust Agreement and the Trust
Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may
otherwise agree with the Depositor and money held by the
Property Trustee need not be segregated from other funds held
by it except in relation to the Payment Account maintained by
the Property Trustee pursuant to Section 301 and except to
the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or
the Depositor with their respective duties under this Trust
Agreement, nor shall the Property Trustee be liable for the
negligence, default or misconduct of the Administrative
Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within five (5) Business Days after the occurrence of any
Event of Default actually known to the Property Trustee, the Property
Trustee shall transmit, in the manner and to the extent provided in
Section 1008, notice of such Event of Default to the Securityholders,
the Administrative Trustees and the Depositor, unless such Event of
Default shall have been cured or waived. For purposes of this Section
802 the term "Event of Default" means any event that is, or after
notice or lapse of time or both would become, an Event of Default.
(b) The Administrative Trustees shall transmit, to the
Securityholders in the manner and to the extent provided in Section
1008, notice of the Depositor's election to begin or further extend
an Extended Interest Payment Period on the Debentures (unless such
election shall have been revoked) within the time specified for
transmitting such notice to the holders of the Debentures pursuant to
the Indenture as originally executed.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution,
Opinion of Counsel, certificate, written representation of a Holder
or transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
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<PAGE> 35
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of
action; or (ii) in construing any of the provisions of this Trust
Agreement the Property Trustee finds the same ambiguous or inconsistent
with other provisions contained herein; or (iii) the Property Trustee
is unsure of the application of any provision of this Trust Agreement,
then, except as to any matter as to which the Preferred Securityholders
are entitled to vote under the terms of this Trust Agreement, the
Property Trustee shall deliver a notice to the Depositor requesting
written instructions of the Depositor as to the course of action to be
taken and the Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee shall be instructed in
writing to take, or to refrain from taking, by the Depositor, provided,
however, that if the Property Trustee does not receive such
instructions of the Depositor within 10 Business Days after it has
delivered such notice, or such reasonably shorter period of time set
forth in such notice (which to the extent practicable shall not be
less than 2 Business Days), it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this
Trust Agreement as it shall deem advisable and in the best interests
of the Securityholders, in which event the Property Trustee shall have
no liability except for its own bad faith, negligence or willful
misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently
evidenced by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established
before undertaking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officer's Certificate which, upon receipt of
such request, shall be promptly delivered by the Depositor or the
Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement) or any filing under tax or
securities laws or any rerecording, refiling, or reregistration
thereof;
(f) the Property Trustee may consult with counsel of its choice
(which counsel may be counsel to the Depositor or any of its
Affiliates) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and
in accordance with such advice, the Property Trustee shall have the
right at any time to seek instructions concerning the administration
of this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust
Agreement at the request or direction of any of the Securityholders
pursuant to this Trust Agreement, unless such Securityholders shall
have offered to the Property Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing
to do so by one or more Securityholders, but the Property Trustee may
make such further inquiry or investigation into such facts or matters
as it
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may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys, provided that the Property Trustee
shall be responsible for its own negligence or recklessness with
respect to selection of any agent or attorney appointed by it
hereunder;
(j) whenever in the administration of this Trust Agreement
the Property Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other
action hereunder the Property Trustee (i) may request instructions
from the Holders of the Trust Securities which instructions may only
be given by the Holders of the same proportion in Liquidation Amount
of the Trust Securities as would be entitled to direct the Property
Trustee under the terms of the Trust Securities in respect of such
remedy, right or action; (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are
received; and (iii) shall be protected in acting in accordance with
such instructions; and
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Trust Agreement. No provision of this Trust Agreement shall be deemed
to impose any duty or obligation on the Property Trustee to perform
any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it, in any jurisdiction in which it shall be
illegal, or in which the Property Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act
or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall
be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The Recitals contained herein and in the Trust Securities Certificates shall be
taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees shall not be accountable for
the use or application by the Depositor of the proceeds of the Debentures.
SECTION 805. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in its individual or
any other capacity, may become the owner or pledgee of Trust Securities and,
subject to Sections 808 and 813 and except as provided in the definition of the
term "Outstanding" in Article I, may otherwise deal with the Trust with the same
rights it would have if it were not a Trustee or such other agent.
SECTION 806. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements
and advances incurred or made by the Trustees in
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accordance with anyprovision of this Trust Agreement (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or
advance as may be attributable to such Trustee's negligence, bad faith
or willful misconduct (or, in the case of the Administrative Trustees,
any such expense, disbursement or advance as may be attributable to
its, his or her gross negligence, bad faith or willful misconduct);
and
(c) to indemnify each of the Trustees or any predecessor
Trustee for, and to hold the Trustees harmless against, any loss,
damage, claim, liability, penalty or expense incurred without
negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this Trust Agreement,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except any such expense, disbursement
or advance as may be attributable to such Trustee's negligence, bad
faith or willful misconduct (or, in the case of the Administrative
Trustees, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct).
No Trustee may claim any Lien or charge on any Trust Property as a result of any
amount due pursuant to this Section 806.
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If any such
Person publishes reports of condition at least annually, pursuant to
law or to the requirements of its supervising or examining authority,
then for the purposes of this Section 807, the combined capital and
surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the
provisions of this Section 807, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each
Administrative Trustee shall be either a natural person who is at
least 31 years of age or a legal entity that shall act through one or
more persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with
respect to the Trust Securities. The Delaware Trustee shall either be
(i) a natural person who is at least 21 years of age and a resident of
the State of Delaware; or (ii) a legal entity with its principal place
of business in the State of Delaware and that otherwise meets the
requirements of applicable Delaware law that shall act through one or
more persons authorized to bind such entity.
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SECTION 808. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Property Trust shall either eliminate
such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Trust Agreement.
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) Unless an Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in
which any part of the Trust Property may at the time be located, the
Depositor shall have power to appoint, and upon the written request of
the Property Trustee, the Depositor shall for such purpose join with
the Property Trustee in the execution, delivery and performance of any
instruments and agreements necessary or proper to appoint, one or more
Persons approved by the Property Trustee either to act as co-trustee,
jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee
of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such Person
or Persons in the capacity aforesaid, any property, title, right or
power deemed necessary or desirable, subject to the other provisions
of this Section 809. If the Depositor does not join in such
appointment within 15 days after the receipt by it of a request so to
do, or in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to
this Section 809 shall either be (i) a natural person who is at least
21 years of age and a resident of the United States; or (ii) a legal
entity with its principal place of business in the United States that
shall act through one or more persons authorized to bind such entity.
(b) Should any written instrument from the Depositor be
required by any co-trustee or separate trustee so appointed for
more fully confirming to such co-trustee or separate trustee such
property, title, right, or power, any and all such instruments shall,
on request, be executed, acknowledged, and delivered by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject
to the following terms, namely:
(i) The Trust Securities shall be executed and delivered
and all rights, powers, duties and obligations hereunder in
respect of the custody of securities, cash and other personal
property held by, or required to be deposited or pledged
with, the Trustees specified hereunder, shall be exercised,
solely by such Trustees and not by such co-trustee
or separate trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in
respect of any property covered by such appointment shall be
conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such
co-trustee or separate trustee jointly, as shall be provided
in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed,
the Property Trustee shall be incompetent or unqualified to
perform such act, in which event such rights, powers, duties
and obligations shall be exercised and performed by such
co-trustee or separate trustee.
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(iii) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the
Depositor, may accept the resignation of or remove any
co-trustee or separate trustee appointed under this Section
809, and, in case a Debenture Event of Default has occurred
and is continuing, the Property Trustee shall have the power
to accept the resignation of, or remove, any such co-trustee
or separate trustee without the concurrence of the Depositor.
Upon the written request of the Property Trustee, the
Depositor shall join with the Property Trustee in the
execution, delivery and performance of all instruments
necessary or proper to effectuate such resignation or removal.
A successor to any co-trustee or separate trustee so resigned
or removed may be appointed in the manner provided in this
Section 809.
(iv) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the
Property Trustee or any other trustee hereunder.
(v) The Property Trustee shall not be liable by reason
of any act of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee
and separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to
this Article VIII shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the
applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant
Trustee may resign at any time with respect to the Trust Securities by
giving written notice thereof to the Securityholders. If the instrument
of acceptance by the successor Trustee required by Section 811 shall
not have been delivered to the Relevant Trustee within 30 days after
the giving of such notice of resignation, the Relevant Trustee may
petition, at the expense of the Depositor, any court of competent
jurisdiction for the appointment of a successor Relevant Trustee with
respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and
be continuing, the Property Trustee or the Delaware Trustee, or both of
them, may be removed at such time by Act of the Holders of a majority
in Liquidation Amount of the Preferred Securities, delivered to the
Relevant Trustee (in its individual capacity and on behalf of the
Trust). An Administrative Trustee may be removed by the Common
Securityholder at any time.
(d) If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any
Trustee for any cause, at a time when no Debenture Event of Default
shall have occurred and be continuing, the Common Securityholder, by
Act of the Common Securityholder delivered to the retiring Trustee,
shall promptly appoint a successor Trustee or Trustees with respect to
the Trust Securities and the Trust, and the successor Trustee shall
comply with the applicable requirements of Section 811. If the Property
Trustee shall
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resign, be removed or become incapable of continuing to act as the
Property Trustee at a time when a Debenture Event of Default
shall have occurred and is continuing, the Preferred Securityholders,
by Act of the Securityholders of a majority in Liquidation Amount of
the Preferred Securities then Outstanding delivered to the retiring
Relevant Trustee, shall promptly appoint a successor Relevant Trustee
or Trustees with respect to the Trust Securities and the Trust, and
such successor Trustee shall comply with the applicable requirements
of Section 811. If an Administrative Trustee shall resign, be removed
or become incapable of acting as Administrative Trustee, at a time
when a Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common
Securityholder delivered to an Administrative Trustee, shall promptly
appoint a successor Administrative Trustee or Administrative Trustees
with respect to the Trust Securities and the Trust, and such successor
Administrative Trustee or Administrative Trustees shall comply with
the applicable requirements of Section 811. If no successor Relevant
Trustee with respect to the Trust Securities shall have been so
appointed by the Common Securityholder or the Preferred
Securityholders and accepted appointment in the manner required by
Section 811, any Securityholder who has been a Security holder of
Trust Securities on behalf of himself and all others similarly
situated may petition a court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Trust
Securities.
(e) The Property Trustee shall give notice of each resignation
and each removal of a Trustee and each appointment of a successor
Trustee to all Securityholders in the manner provided in Section 1008
and shall give notice to the Depositor. Each notice shall include the
name of the successor Relevant Trustee and the address of its
Corporate Trust office if it is the Property Trustee.
(f) Notwithstanding the foregoing or any other provision of this
Trust Agreement, in the event any Administrative Trustee who is
a natural person dies or becomes, in the opinion of the Depositor,
incompetent or incapacitated, the vacancy created by such death,
incompetence or incapacity may be filled by (a) the unanimous act of
the remaining Administrative Trustees if there are at least two of
them; or (b) otherwise by the Depositor (with the successor in each
case being a Person who satisfies the eligibility requirement for
Administrative Trustees set forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Relevant
Trustee with respect to the Trust Securities and the Trust, the
retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Trust Securities shall execute and deliver an instrument
hereto wherein each successor Relevant Trustee shall accept such
appointment and which shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Relevant Trustee all the rights, powers, trusts and duties of
the retiring Relevant Trustee with respect to the Trust Securities and
the Trust and, upon the execution and delivery of such instrument, the
resignation or removal of the retiring Relevant Trustee shall become
effective to the extent provided therein and each such successor
Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the
retiring Relevant Trustee with respect to the Trust Securities and the
Trust, but, on request of the Trust or any successor Relevant Trustee
such retiring Relevant Trustee shall duly assign, transfer and deliver
to such successor Relevant Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with
respect to the Trust Securities and the
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Trust.
(b) Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Relevant Trustee all such
rights, powers and trusts referred to in the immediately preceding
paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment
unless at the time of such acceptance such successor Relevant
Trustee shall be qualified and eligible under this Article VIII.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee or any Administrative Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such Person shall be
otherwise qualified and eligible under this Article VIII, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST.
If and when the Property Trustee shall be or become a creditor of the Depositor
or the Trust (or any other obliger upon the Debentures or the Trust Securities),
the Property Trustee shall be subject to and shall take all actions necessary in
order to comply with the provisions of the Trust Indenture Act regarding the
collection of claims against the Depositor or Trust (or any such other obliger).
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) Not later than July 15 of each year commencing with July 15,
1997, the Property Trustee shall transmit to all Securityholders in
accordance with Section 1008, and to the Depositor, a brief report
dated as of such December 31 with respect to:
(i) its eligibility under Section 807 or, in lieu
thereof, if to the best of its knowledge it has continued to
be eligible under said Section, a written statement to such
effect; and
(ii) any change in the property and funds in its
possession as Property Trustee since the date of its last
report and any action taken by the Property Trustee in
the performance of its duties hereunder which it has not
previously reported and which in its opinion materially
affects the Trust Securities
(b) In addition the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its
actions under this Trust Agreement as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant
thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with The
Nasdaq Stock Market's National Market, and each national securities
exchange or other organization upon which the Trust Securities are
listed, and also with
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the Commission and the Depositor.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(l) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the
Holder of all of the Common Securities by written instrument may
increase or decrease the number of Administrative Trustees. The
Property Trustee and the Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section
817(a), or if the number of Trustees is increased pursuant to Section
817(a), a vacancy shall occur. The vacancy shall be filled with a
Trustee appointed in accordance with Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not
operate to annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by
the appointment of an Administrative Trustee in accordance with Section
810, the Administrative Trustees in office, regardless of their number
(and notwithstanding any other provision of this Agreement), shall have
all the powers granted to the Administrative Trustees and shall
discharge all the duties imposed upon the Administrative Trustees by
this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person
over the age of 21 his or her power for the purpose of executing any
documents contemplated in Section 207(a); and
(b) The Administrative Trustees shall have power to delegate
from time to time to such of their number or to the Depositor the
doing of such things and the execution of such instruments either
in the name of the Trust or the names of the Administrative Trustees
or otherwise as the Administrative Trustees may deem expedient, to the
extent such delegation is not prohibited by applicable law or contrary
to the provisions of the Trust, as set forth herein.
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SECTION 819. VOTING.
Except as otherwise provided in this Trust Agreement, the consent or approval of
the Administrative Trustees shall require consent or approval by not less than a
majority of the Administrative Trustees, unless there are only two, in which
case both must consent.
ARTICLE IX
TERMINATION, LIQUIDATION AND MERGER
SECTION 901. TERMINATION UPON EXPIRATION DATE.
Unless earlier dissolved, the Trust shall automatically dissolve on ___________,
2028 (the "Expiration Date") subject to distribution of the Trust Property in
accordance with Section 904.
SECTION 902. EARLY TERMINATION.
The first to occur of any of the following events is an "Early Termination
Event:"
(a) the occurrence of a Bankruptcy Event in respect of, or
the dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within
the discretion of the Depositor) to dissolve the Trust and distribute
the Debentures to Securityholders in exchange for the Preferred
Securities in accordance with Section 904;
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all of the Debentures; and
(d) an order for dissolution of the Trust shall have been
entered by a court of competent jurisdiction.
SECTION 903. TERMINATION.
The respective obligations and responsibilities of the Trustees and the Trust
created and continued hereby shall terminate upon the latest to occur of the
following: (a) the distribution by the Property Trustee to Securityholders upon
the liquidation of the Trust pursuant to Section 904, or upon the redemption of
all of the Trust Securities pursuant to Section 402, of all amounts required to
be distributed hereunder upon the final payment of the Trust Securities; (b) the
payment of any expenses owed by the Trust; (c) the discharge of all
administrative duties of the Administrative Trustees, including the performance
of any tax reporting obligations with respect to the Trust or the
Securityholders; and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Business Trust Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a),
(b), or (d) of Section 902 occurs or upon the Expiration Date, the
Trust shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors of
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the Trust as provided by applicable law, to each Securityholder a
Like Amount of Debentures, subject to Section 904(d). Notice of
liquidation shall be given by the Property Trustee by first-class
mail, postage prepaid, mailed not later than 30 nor more than 60 days
prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All
notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the
Trust Securities shall no longer be deemed to be Outstanding
and any Trust Securities Certificates not surrendered for
exchange shall be deemed to represent a Like Amount of
Debentures; and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities
Certificates for Debentures, or, if Section 904(d) applies,
receive a Liquidation Distribution, as the Administrative
Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures
to Securityholders, the Property Trustee shall establish a record
date for such distribution (which shall be not more than 45 days prior
to the Liquidation Date) and, either itself acting as exchange agent
or through the appointment of a separate exchange agent, shall
establish such procedures as it shall deem appropriate to effect the
distribution of Debentures in exchange for the Outstanding Trust
Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to
be outstanding; (ii) certificates representing a Like Amount of
Debentures shall be issued to holders of Trust Securities Certificates
upon surrender of such certificates to the Administrative Trustees or
their agent for exchange; (iii) the Depositor shall use its reasonable
efforts to have the Debentures listed on The Nasdaq Stock Market's
National Market or SmallCap Market or on such other securities exchange
or other organization as the Preferred Securities are then listed or
traded; (iv) any Trust Securities Certificates not so surrendered for
exchange shall be deemed to represent a Like Amount of Debentures,
accruing interest at the rate provided for in the Debentures from the
last Distribution Date on which a Distribution was made on such Trust
Securities Certificates until such certificates are so surrendered (and
until such certificates are so surrendered, no payments of interest or
principal shall be made to holders of Trust Securities Certificates
with respect to such Debentures): and (v) all rights of Securityholders
holding Trust Securities shall cease, except the right of such
Securityholders to receive Debentures upon surrender of Trust
Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 904, whether because of an order for dissolution entered
by a court of competent jurisdiction or otherwise, distribution of
the Debentures in the manner provided herein is determined by the
Property Trustees not to be practical, the Trust Property shall be
liquidated, and the Trust shall be dissolved, would-up or terminated,
by the Property Trustee in such manner as the Property Trustee
determines. In such event, on the date of the dissolution, winding-up
or other termination of the Trust, Securityholders shall be entitled
to receive out of the assets of the Trust available for distribution
to Securityholders, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, an accumulated and unpaid
Distributions thereon to the date of payment (such amount being
the
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"Liquidation Distribution"). If, upon any such dissolution,
winding-up or termination, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then, subject to
the next succeeding sentence, the amounts payable by the Trust on the
Trust Securities shall be paid on a pro rata basis (based upon
Liquidation Amounts). The holder of the Common Securities shall be
entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as
aforesaid) with Holders of Preferred Securities, except that, if a
Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE
TRUST.
The Trust may not merge with or into, consolidate, amalgamate, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other Person, except pursuant to this Section
905. At the request of the Depositor, with the consent of the Administrative
Trustees and without the consent of the holders of the Preferred Securities,
the Property Trustee or the Delaware Trustee, the Trust may merge with or into,
consolidate, amalgamate, be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any state; provided, that (i) such successor entity either
(a) expressly assumes all of the obligations of the Trust with respect to the
Preferred Securities; or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise; (ii) the Depositor
expressly appoints a trustee of such successor entity possessing substantially
the same powers and duties as the Property Trustee as the holder of the
Debentures; (iii) the Successor Securities are listed or traded, or any
Successor Securities shall be listed or traded upon notification of issuance,
on any national securities exchange or other organization on which the
Preferred Securities are then listed, if any; (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect; (v)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Depositor has received an Opinion of Counsel to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect: and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor such successor entity shall be required to register as an
"investment company" under the Investment Company Act, and (vi) the Depositor
owns all of the Common Securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in Liquidation Amount of
the Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other Person or permit any other Person to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the Trust or the
successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death or incapacity of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such person or any
Securityholder for such Person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding-up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders,
(i) as provided in Section 811 with respect to acceptance of
appointment by a successor Trustee; (ii) to cure any ambiguity, correct
or supplement any provision herein or therein which may be inconsistent
with any other provision herein or therein, or to make any other
provisions with respect to matters or questions arising under this
Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement; or (iii) to modify, eliminate or
add to any provisions of this Trust Agreement to such extent as shall
be necessary to ensure that the Trust shall be classified for United
States federal income tax purposes as a grantor trust at all times
that any Trust Securities are outstanding or to ensure that the
Trust shall not be required to register as an "investment company"
under the Investment Company Act; provided, however, that in the case
of clause (ii), such action shall not adversely affect in any material
respect the interests of any Securityholder, and any amendments of
this Trust Agreement shall become effective when notice thereof is
given to the Securityholders.
(b) Except as provided in Section 601(c) or Section 1002(c) hereof,
any provision of this Trust Agreement may be amended by the Trustees
and the Depositor (i) with the consent of Trust Securityholders
representing not less than a majority (based upon Liquidation Amounts)
of the Trust Securities then Outstanding; and (ii) upon receipt by the
Trustees of an Opinion of Counsel to the effect that such amendment or
the exercise of any power granted to the Trustees in accordance with
such amendment shall not affect the Trust's status as a grantor trust
for United Status federal income tax purposes or the Trust's exemption
from status of an "investment company" under the Investment Company
Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder
(such consent being obtained in accordance with Section 603 or 606
hereof), this Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to
be made in respect of the Trust Securities as of a specified date; or
(ii) restrict the right of a Securityholder to institute suit for the
enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section
603 or 606 hereof), this paragraph (c) of this Section 1002 may not be
amended.
(d) Notwithstanding any other provisions of this Trust Agreement,
no Trustee shall enter into or consent to any amendment to this
Trust Agreement which would cause the Trust to fail or
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cease to qualify for the exemption from status of an "investment
company" under the Investment Company Act or to fail or cease to be
classified as a grantor trust for United States federal income tax
purposes.
(e) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a
copy of such amendment.
(f) The Property Trustee shall not be required to enter into any
amendment to this Trust Agreement which affects its own rights,
duties or immunities under this Trust Agreement. The Property Trustee
shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in
compliance with this Trust Agreement.
(g) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor and the
Administrative Trustees, this Trust Agreement may not be amended in a
manner which imposes any additional obligation on the Depositor and
the Administrative Trustees.
SECTION 1003. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 1004. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day that is
not a Business Day, then such payment need not be made on such date but may be
made on the next succeeding day which is a Business Day (except as otherwise
provided in Sections 401(a) and 402(d)), with the same force and effect as
though made on the date fixed for such payment, and no distribution shall
accumulate thereon for the period after such date.
SECTION 1006. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the benefit of any
successor to the Depositor, the Trust or the Relevant Trustee(s), including any
successor by operation of law. Except in connection with a consolidation, merger
or sale involving the Depositor that is permitted under Article XII of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Depositor's obligations hereunder, the Depositor shall not assign its
obligations hereunder.
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SECTION 1007. HEADINGS.
The Article and Section headings are for convenience only and shall not affect
the construction of this Trust Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon any
Securityholder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a
Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Republic
Bancshares, Inc., 111 Second Avenue, N.E., Suite 300, St. Petersburg, Florida
33701, Attention: Chief Financial Officer, facsimile no.: (813) 825-0269. Any
notice to Preferred Securityholders shall also be given to such owners as have,
within two years preceding the giving of such notice, filed their names and
addresses with the Property Trustee for that purpose. Such notice, demand or
other communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of this Trust
Agreement is required or permitted to be given or served to or upon the Trust,
the Property Trustee or the Administrative Trustees shall be given in writing
addressed (until another address is published by the Trust) as follows: (a) with
respect to the Property Trustee, Wilmington Trust Company, to
______________________, Wilmington, Delaware ________, Attention:_____________;
(b) with respect to the Delaware Trustee, to Wilmington Trust Company, Rodney
Square North, 1100 Market Street, Wilmington, Delaware 19890-0001, Attention
Corporate Trust administration, and (b) with respect to the Administrative
Trustees, to them at the address above for notices to the Depositor, marked
"Attention: Administrative Trustees of RBI Capital Trust I." Such notice, demand
or other communication to or upon the Trust or the Property Trustee shall be
deemed to have been sufficiently given or made only upon actual receipt of the
writing by the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and 1 day after the Trust has been
terminated in accordance with Article IX, they shall not file, or join in the
filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws") or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 1009, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor (which expense shall be paid prior to the
filing), it shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such petition by the Depositor against the Trust or the
commencement of such action and raise the defense that the Depositor has agreed
in writing not to take such action and should be stopped and precluded
therefrom. The provisions of this Section 1009 shall survive the termination of
this Trust Agreement.
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SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is
a trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this
Trust Agreement by any of the provisions of the Trust Indenture
Act, such required provision shall control. If any provision of this
Trust Agreement modifies or excludes any provision of the Trust
Indenture Act which may be so modified or excluded, the latter
provision shall be deemed to apply to this Trust Agreement as so
modified or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity
securities representing undivided beneficial interests in the
assets of the Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON
BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST
SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT
TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE
INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER
AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE
BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER
AND SUCH OTHERS.
- 44 -
<PAGE> 50
REPUBLIC BANCSHARES, INC.,
as Depositor
By: ________________________________
Name: John W. Sapanski
Title: Chairman of the Board and
Chief Executive
WILMINGTON TRUST COMPANY,
as Property Trustee and
Delaware Trustee
By: ________________________________
Name:
Title:
________________________________
John W. Sapanski, as
Administrative Trustee
________________________________
William R. Falzone, as
Administrative Trustee
__________________________________
Christopher M. Hunter, as
Administrative Trustee
- 45 -
<PAGE> 51
EXHIBIT A
A-1
<PAGE> 52
EXHIBIT B
B-1
<PAGE> 53
EXHIBIT C
C-1
<PAGE> 54
EXHIBIT 4.6
Certificate Number Number of Preferred Securities
P-
CUSIP NO. ___________
Certificate Evidencing Preferred Securities
of RBI Capital Trust I
% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Preferred Security)
RBI CAPITAL TRUST I, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that ______________ (the
"Holder") is the registered owner of ____ preferred securities of the Trust
representing undivided beneficial interests in the assets of the Trust and
designated the ____ % Cumulative Trust Preferred Securities (Liquidation Amount
$25 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer as provided in Section 504 of the Trust
Agreement. The designations, rights, privileges, restrictions, preferences, and
other terms and provisions of the Preferred Securities are set forth in, and
this certificate and the Preferred Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended and
Restated Trust Agreement of the Trust dated as of __________, 1997, as the same
may be amended from time to time (the "Trust Agreement"), including the
designation of the terms of Preferred Securities as set forth therein. The
Holder is entitled to the benefits of the Preferred Securities Guarantee
Agreement entered into by Republic Bancshares, Inc., a Florida corporation, and
Wilmington Trust Company, as guarantee trustee, dated as of ___________, 1997
(the "Guarantee"), to the extent provided herein. The Trust shall furnish a copy
of the Trust Agreement and the Guarantee to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
Upon receipt of this certificate, the Holder is bound by the Trust Agreement and
is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed
this certificate this __ day of _________, 1997.
RBI CAPITAL TRUST I
By:
John W. Sapanski
Trustee
COUNTERSIGNED AND REGISTERED:
<PAGE> 55
WILMINGTON TRUST COMPANY,
as Securities Registrar
By:
Authorized Signatory
<PAGE> 1
EXHIBIT 4.8
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") dated as of April
30, 1997, between REPUBLIC BANCSHARES, INC., a Florida corporation (the
"Company"), and RBI CAPITAL TRUST I, a Delaware business trust (the "Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the "Common
Securities") to, and receive Debentures from, the Company and to issue and sell
its ___% Cumulative Trust Preferred Securities (the "Preferred Securities") with
such powers, preferences and special rights and restrictions as are set forth in
the Amended and Restated Trust Agreement of the Trust dated as of __________,
1997, as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Company shall directly or indirectly own all of the Common
Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the Preferred
Securities, which purchase the Company hereby agrees shall benefit the Company
and which purchase the Company acknowledges shall be made in reliance upon the
execution and delivery of this Agreement, the Company, including in its capacity
as holder of the Common Securities, and the Trust hereby agree as follows:
ARTICLE I
SECTION 1.1 GUARANTEE BY THE COMPANY.
Subject to the terms and conditions hereof, the Company, including in its
capacity as holder of the Common Securities, hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment when
and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust other than obligations of the Trust to pay to holders
of any Preferred Securities, Common Securities or other similar interests in the
Trust the amounts due such holders pursuant to the terms of the Preferred
Securities, Common Securities or such other similar interests, as the case may
be. This Agreement is intended to be for the benefit of, and to be enforceable
by, all such Beneficiaries, whether or not such Beneficiaries have received
notice hereof.
<PAGE> 2
SECTION 1.2 TERM OF AGREEMENT.
This Agreement shall terminate and be of no further force and effect upon the
later of (a) the date on which full payment has been made of all amounts payable
to all holders of all the Preferred Securities (whether upon redemption,
liquidation, exchange or otherwise); and (b) the date on which no Obligations
remain outstanding; provided, however, that this Agreement shall continue to be
effective or shall be reinstated, as the case may be, if at any time any holder
of Preferred Securities or any Beneficiary must restore payment of any sums paid
under the Preferred Securities, under any Obligation, under the Preferred
Securities Guarantee Agreement dated the date hereof between the Company and
Wilmington Trust Company, as guarantee trustee, or under this Agreement for any
reason whatsoever. This Agreement is continuing, irrevocable, unconditional and
absolute.
SECTION 1.3 WAIVER OF NOTICE.
The Company hereby waives notice of acceptance of this Agreement and of any
Obligation to which it applies or may apply, and the Company hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 1.4 NO IMPAIRMENT.
The obligations, covenants, agreements and duties of the Company under this
Agreement shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the extension of time for the payment by the Trust of
all or any portion of the Obligations or for the performance
of any other obligation under, arising out of, or in
connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Beneficiaries with respect to the
Obligations or any action on the part of the Trust granting indulgence
or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Trust or any of the assets of the Trust.
2
<PAGE> 3
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Company with respect to the happening of any of the
foregoing.
SECTION 1.5 ENFORCEMENT.
A Beneficiary may enforce this Agreement directly against the Company, and the
Company waives any right or remedy to require that any action be brought against
the Trust or any other person or entity before proceeding against the Company.
ARTICLE II
SECTION 2.1 BINDING EFFECT.
All guarantees and agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives of the Company and
shall inure to the benefit of the Beneficiaries.
SECTION 2.2 AMENDMENT.
So long as there remains any Beneficiary or any Preferred Securities of any
series are outstanding, this Agreement shall not be modified or amended in any
manner adverse to such Beneficiary or to the holders of the Preferred
Securities.
SECTION 2.3 NOTICES.
Any notice, request or other communication required or permitted to be given
hereunder shall be given in writing by delivering the same by facsimile
transmission (confirmed by mail), telex, or by registered or certified mail,
addressed as follows (and if so given, shall be deemed given when mailed or upon
receipt of an answerback, if sent by telex):
RBI Capital Trust I
c/o Republic Bancshares, Inc.
111 Second Avenue, N.E.
Suite 300
St. Petersburg, Florida 33701
Facsimile No.: (813) 825-0269
Attention: Chief Financial Officer
Republic Bancshares, Inc.
111 Second Avenue, N.E.
Suite 300
St. Petersburg, Florida 33701
Facsimile No.: (813) 825-0269
Attention: Chief Financial Officer
3
<PAGE> 4
SECTION 2.4 This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Florida (without regard
to conflict of laws principles).
THIS AGREEMENT is executed as of the day and year first above written.
REPUBLIC BANCSHARES, INC.
By:
Name: John W. Sapanski
Title: Chairman of the Board
and President
RBI CAPITAL TRUST I
By:
Name:
Title: Administrative Trustee
4
<PAGE> 1
EXHIBIT 23.3
CONSENT TO USE OF REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference and inclusion in this registration statement of our
report dated February 7, 1997 (except with respect to the matter discussed in
Note 18, as to which the date is March 10, 1997), included in Republic
Bancshares, Inc.'s Form 10-K for the year ended December 31, 1996, and to all
references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
----------------------
ARTHUR ANDERSEN LLP
Tampa, Florida
May 28, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our report dated February 11, 1997, except for Note
21, as to which the date if March 11, 1997, relating to the Consolidated
Financial Statements of F.F.O. Financial Group, Inc., as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, and to the use of our review report on the unaudited Consolidated
Financial Statements of F. F. O. Financial Group, Inc. as of March 31, 1997 and
for the three-month periods ended March 31, 1997 and 1996, and to the reference
to our Firm under the caption "Experts" in the Form S-2 Registration Statement
of Republic Bancshares, Inc.
/s/ Hacker, Johnson, Cohen & Grieb
- -----------------------------------
HACKER, JOHNSON, COHEN & GRIEB
Orlando, Florida
May 27, 1997
