<PAGE> 1
As filed with the Securities and Exchange Commission on April 27, 1998
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
FLORIDA BANKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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FLORIDA 6712 58-2364573
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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4110 SOUTHPOINT BOULEVARD
SUITE 212, SOUTHPOINT SQUARE II
JACKSONVILLE, FLORIDA 32216-0925
(904) 296-2329
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
CHARLES E. HUGHES, JR.,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FLORIDA BANKS, INC.
4110 SOUTHPOINT BOULEVARD
SUITE 212, SOUTHPOINT SQUARE II
JACKSONVILLE, FLORIDA 32216-0925
(904) 296-2329
(Name, address, including zip code and telephone number,
including area code, of agent for service)
Copies to:
TERRY FERRARO SCHWARTZ A. GEORGE IGLER
SMITH, GAMBRELL & RUSSELL, LLP IGLER & DOUGHERTY, P.A.
PROMENADE II, SUITE 3100 1501 PARK AVENUE EAST
1230 PEACHTREE STREET, N.E. TALLAHASSEE, FLORIDA 32301
ATLANTA, GEORGIA 30309 (850) 878-2411
(404) 815-3500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: Upon the effective date of the merger of First National Bank of
Tampa with and into a wholly owned subsidiary of the Registrant.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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 the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED(1) SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
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Common Stock, $.01 par value 1,250,000 shares (2) $13,750,000(3) $4,057
=====================================================================================================================
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(1) Based on the estimated maximum number of shares of the Registrant's
Common Stock to be issued in connection with the proposed merger
("Merger") of First National Bank of Tampa ("First National") with and
into a wholly-owned subsidiary of the Registrant. In accordance with
Rule 416 under the Securities Act of 1933, this Registration Statement
shall also register any additional shares of the Registrant's Common
Stock which may become issuable to prevent dilution resulting from
stock splits, stock dividends or similar transactions as provided by
the agreement relating to the Merger.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f)(2) under the Securities Act of
1933, based on the maximum estimated number of securities (2,065,000
shares of common stock of First National) to be received by the
Registrant in exchange for the securities registered hereby.
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.
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FIRST NATIONAL BANK OF TAMPA
100 West Kennedy Boulevard
Tampa, Florida 33602
__________________, 1998
Dear Shareholder:
On behalf of the Board of Directors of First National Bank of Tampa ("First
National"), we cordially invite you to attend a Special Meeting of Shareholders
(the "Special Meeting") to be held at the offices of First National, which are
located at First National Plaza, 100 West Kennedy Boulevard, Tampa, Florida, on
______________, ____, 1998 at 2:30 p.m., local time.
As described in the enclosed Proxy Statement-Prospectus, holders of First
National's Common Stock will be asked to consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger dated as of March 30, 1998
(the "Merger Agreement") between First National and Florida Banks, Inc.
("Florida Banks"), whereby First National will be merged (the "Merger") with and
into Interim Bank No. 1, N.A., a wholly-owned subsidiary of Florida Banks
("Interim"), with Interim being the corporation surviving the Merger.
Immediately upon consummation of the Merger, each issued and outstanding share
of First National Common Stock will be converted into and exchanged for the
right to receive that number of shares of the Florida Banks Common Stock equal
to the quotient obtained by dividing 6.6586 the price of the Florida Banks
Common Stock in the initial public offering of Florida Banks Common Stock that
is being closed immediately following the closing of the Merger. Cash will be
paid in lieu of fractional shares.
PLEASE REVIEW CAREFULLY AND CONSIDER THOUGHTFULLY THE ACCOMPANYING NOTICE
OF SPECIAL MEETING AND PROXY STATEMENT-PROSPECTUS. This document contains a
detailed description of the Merger Agreement, its terms and conditions and the
transactions contemplated by the Merger Agreement.
FIRST NATIONAL'S BOARD OF DIRECTORS BELIEVES THE MERGER IS IN THE BEST
INTERESTS OF FIRST NATIONAL'S SHAREHOLDERS, HAS APPROVED UNANIMOUSLY THE MERGER
AGREEMENT AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
YOUR VOTE IS IMPORTANT! First National's management team would greatly
appreciate your attendance at the Special Meeting. However, since the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of First National Common Stock is necessary to adopt the Merger Agreement and to
approve the Merger, it is important that your shares be represented at the
Special Meeting, whether or not you plan to attend in person. IF YOU DO NOT
VOTE, THE EFFECT OF YOUR FAILURE TO VOTE IS THE SAME AS A VOTE AGAINST APPROVAL
OF THE MERGER AGREEMENT. Accordingly, we urge you to complete, sign and date the
enclosed proxy card and return it in the enclosed prepaid envelope as soon as
possible, even if you currently plan to attend the Special Meeting. Submitting a
proxy will not prevent you from voting in person, but will ensure that your vote
is counted if you should be unable to attend the Special Meeting. If you do
attend the Special Meeting and desire to vote in person, you may do so by
withdrawing your proxy at that time. Your prompt cooperation is greatly
appreciated.
Very truly yours,
W. Andrew Krusen, Jr. John S. McMullen
Chairman of the Board President and Chief Executive Officer
<PAGE> 3
FIRST NATIONAL BANK OF TAMPA
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ___________, 1998
To the Shareholders of
First National Bank of Tampa:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders (the
"Special Meeting") of First National Bank of Tampa ("First National") will be
held at First National's offices, which are located at First National Plaza, 100
West Kennedy Boulevard, Tampa, Florida, on ____________, __________, 1998, at
2:30 p.m., local time, and at any adjournment or postponement thereof, for the
following purposes:
(1) THE MERGER. To consider and vote upon a proposal to approve and
adopt the Agreement and Plan of Merger dated as of March 30, 1998 between
First National and Florida Banks, Inc. ("Florida Banks") (the "Merger
Agreement"), whereby First National will be merged (the "Merger") with and
into a wholly-owned subsidiary of Florida Banks that will be the survivor
of such Merger. Immediately upon consummation of the Merger, each issued
and outstanding share of First National Common Stock (other than shares as
to which dissenters' rights are properly exercised) will be converted into
and exchanged for the right to receive that number of shares of the Florida
Banks Common Stock equal to the quotient obtained by dividing 6.6586 by the
price (the "IPO Price") of the Florida Banks Common Stock in the initial
public offering of Florida Banks Common Stock that is being closed
immediately following the closing of the Merger. Assuming an IPO Price of
$11.00 per share (which represents the mid-point of the estimated range),
each share of First National Common Stock outstanding immediately prior to
the effectiveness of the Merger will be convertible into approximately
0.605 shares of Florida Banks Common Stock. Cash will be paid in lieu of
fractional shares. The Merger Agreement is more completely described in the
accompanying Proxy Statement-Prospectus, and a copy of the Merger Agreement
is attached as Appendix A to the accompanying Proxy Statement-Prospectus.
(2) OTHER BUSINESS. To transact such other business as may properly
come before the Special Meeting or any adjournments or postponements
thereof.
NOTICE OF RIGHT TO DISSENT. First National shareholders have the right
to dissent from the proposed adoption of the Merger Agreement and to demand
payment of the fair value of their shares in the event the Merger Agreement is
adopted and the Merger is consummated. The right of First National shareholders
to receive such payment is contingent upon strict compliance with the
requirements set forth in Title 12, Chapter 2, Section 215a of the United States
Code ("Section 215a"). PERFECTING THE RIGHT TO DISSENT REQUIRES, AMONG OTHER
THINGS, THAT THE SHAREHOLDER EITHER NOTIFY FIRST NATIONAL OF HIS OR HER
INTENTION TO DISSENT NO LATER THAN THE VOTE OF THE SHAREHOLDERS AT THE SPECIAL
MEETING OR TO VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT AND THAT SUCH
SHAREHOLDER THEREAFTER PERFECT HIS OR HER DISSENTERS' RIGHTS BY WRITTEN NOTICE
TO FIRST NATIONAL WITHIN 30 DAYS OF THE DATE OF CONSUMMATION OF THE MERGER. IN
NO EVENT IS ANY SHAREHOLDER ENTITLED TO DISSENTERS' RIGHTS IF HE OR SHE VOTES IN
FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT. The full text of Section 215a is
set forth as Appendix B to the accompanying Proxy Statement-Prospectus. For a
summary of these requirements, see "The Merger--Dissenters' Rights of First
National Shareholders" in the accompanying Proxy Statement-Prospectus.
<PAGE> 4
Only holders of record of First National Common Stock at the close of
business on ___________, 1998 will be entitled to notice of, and to vote at, the
Special Meeting or any adjournments or postponements thereof. PURSUANT TO THE
NATIONAL BANK ACT, THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF
THE SHARES OF FIRST NATIONAL COMMON STOCK OUTSTANDING AND ENTITLED TO VOTE AT
THE SPECIAL MEETING IS REQUIRED IN ORDER TO ADOPT THE MERGER AGREEMENT.
Your vote is important. Whether or not you plan to attend the Special
Meeting in person, please complete, sign and date the enclosed proxy and return
it promptly in the enclosed postage prepaid envelope. While this will assure
your representation at the Special Meeting and will avoid the costs of
additional communications, this will not prevent you from voting in person at
the Special Meeting. You may revoke your proxy at any time before it is voted by
signing and returning a later dated proxy with respect to the same shares, by
filing with the Secretary of First National a written revocation bearing a later
date, or by attending and voting at the Special Meeting.
By Order of the Board of Directors
Beate F. Frank, Secretary
Tampa, Florida
________, 1998
WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD.
<PAGE> 5
FLORIDA BANKS, INC.
PROSPECTUS WITH RESPECT TO UP TO
1,250,000 SHARES OF FLORIDA BANKS COMMON STOCK
FIRST NATIONAL BANK OF TAMPA
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS OF
FIRST NATIONAL BANK OF TAMPA
TO BE HELD ON ____________, 1998
First National Bank of Tampa ("First National") is furnishing its
shareholders this Proxy Statement- Prospectus in connection with the
solicitation of proxies by the Board of Directors of First National for use at
its Special Meeting of Shareholders to be held on ___________, 1998 commencing
at 2:30 p.m., local time, and at any adjournment or postponement thereof (the
"Special Meeting").
At the Special Meeting, First National shareholders will be asked to
consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger dated as of March 30, 1998 between First National and Florida Banks, Inc.
("Florida Banks") (the "Merger Agreement"), whereby First National will be
merged (the "Merger") with and into Interim Bank No. 1, N.A. ("Interim"), a
national bank to be chartered under the laws of the United States, which will be
a wholly-owned subsidiary of Florida Banks. Immediately upon consummation of the
Merger, each share of First National Common Stock that is issued and outstanding
immediately prior to the Merger (other than shares as to which dissenters'
rights are properly exercised) will be converted into and exchanged for the
right to receive that number of shares of the Florida Banks Common Stock equal
to the quotient obtained by dividing 6.6586 by the initial public offering price
(the "IPO Price") of the Florida Banks Common Stock in Florida Banks' initial
public offering (the "Florida Banks IPO"), rounded to the third nearest decimal
point. Assuming an IPO Price of $11.00 per share (which represents the mid-point
of the estimated range), each share of First National Common Stock outstanding
immediately prior to the effectiveness of the Merger will be convertible into
approximately 0.605 shares of Florida Banks Common Stock. Cash will be paid in
lieu of fractional shares. The Florida Banks IPO is being closed immediately
following the closing of the Merger. Immediately upon consummation of the
Merger, Interim will change its name to Florida Bank, N.A. and will become a
wholly-owned subsidiary of Florida Banks. A copy of the Merger Agreement is
attached hereto as Appendix A and is incorporated herein by reference.
---------------
(continued on next page)
THE SHARES OF FLORIDA BANKS COMMON STOCK TO BE ISSUED IN THE MERGER
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 PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF FLORIDA BANKS COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR BANK DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING
OR NONBANKING AFFILIATE OF FLORIDA BANKS, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
---------------
The date of this Proxy Statement-Prospectus is __________, 1998.
<PAGE> 6
Consummation of the Merger is subject to several conditions, including,
among others, the affirmative vote to approve the Merger Agreement by the
holders of at least two-thirds of the issued and outstanding shares of First
National Common Stock as the __________, 1998 record date and the approval of
appropriate regulatory authorities. See "The Merger--Conditions Precedent to the
Merger."
Neither the Florida Banks Common Stock nor the First National Common
Stock is traded on any exchange, and there is no established public trading
market for any of such shares in their respective local areas. See "Price Range
of Common Stock and Dividends."
Mercer Capital Management, Inc. has rendered its preliminary opinion
dated April 19, 1998 to the First National Board that the consideration provided
in the Merger Agreement is fair, from a financial point of view, to the holders
of First National Common Stock (the "First National Shareholders"). See "The
Merger--Opinion of First National's Financial Advisor."
THE FIRST NATIONAL BOARD UNANIMOUSLY RECOMMENDS THAT FIRST NATIONAL
SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT. FAILURE TO VOTE IS EQUIVALENT
TO VOTING AGAINST THE MERGER AGREEMENT.
First National Shareholders should note that certain members of First
National's management and directors have certain interests in and may derive
certain benefits as a result of the consummation of the Merger in addition to
any interests they may have as First National Shareholders generally. See "The
Merger--Interests of Certain Persons in the Merger."
This Proxy Statement-Prospectus also constitutes a prospectus of
Florida Banks with respect to the shares of Florida Banks Common Stock issuable
to First National Shareholders upon consummation of the Merger. Florida Banks
has supplied all information contained in this Proxy Statement-Prospectus
relating to Florida Banks, and First National has supplied all information
contained in this Proxy Statement-Prospectus relating to First National.
This Proxy Statement-Prospectus is included as part of a Registration
Statement on Form S-4 (together with any amendments and exhibits thereto, the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission") by Florida Banks relating to the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of an estimated maximum of
1,250,000 shares of Florida Banks Common Stock to be issued in connection with
the Merger.
This Proxy Statement-Prospectus, Notice of Special Meeting, and the
accompanying form of proxy for the Special Meeting are first being sent to First
National Shareholders on or about ___________, 1998.
ii
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TABLE OF CONTENTS
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AVAILABLE INFORMATION AND REPORTS TO SECURITY HOLDERS ................................ 1
SUMMARY .............................................................................. 3
General ......................................................................... 3
The Parties ..................................................................... 4
Special Meeting and Vote Required to Approve the Merger ......................... 4
The Merger ...................................................................... 4
SELECTED FINANCIAL DATA .............................................................. 10
PRO FORMA FINANCIAL DATA ............................................................. 12
THE SPECIAL MEETING OF FIRST NATIONAL SHAREHOLDERS ................................... 13
General ......................................................................... 13
Voting and Revocation of Proxies ................................................ 13
Solicitation of Proxies ......................................................... 13
Record Date and Voting Rights ................................................... 14
Recommendation of the First National Board ...................................... 14
THE MERGER ........................................................................... 16
Description of the Merger ....................................................... 16
Effective Time and Closing of the Merger ........................................ 17
Exchange of Certificates ........................................................ 17
Background of and Reasons for the Merger......................................... 18
Conditions Precedent to the Merger .............................................. 26
Conduct of Business Prior to the Merger ......................................... 27
Amendment, Waiver and Termination ............................................... 30
Expenses ........................................................................ 32
Certain Federal Income Tax Consequences ......................................... 32
Interests of Certain Persons in the Merger ...................................... 33
Dissenters' Rights of First National Shareholders ............................... 34
Accounting Treatment ............................................................ 35
Bank Regulatory Matters ......................................................... 35
Status of Regulatory Approvals and Other Information ............................ 36
Restrictions on Affiliate Resales ............................................... 37
Recommendation of the First National Board ...................................... 37
PRICE RANGE OF COMMON STOCK AND DIVIDENDS ............................................ 38
Market Prices ................................................................... 38
Dividends ....................................................................... 38
INFORMATION ABOUT FLORIDA BANKS ...................................................... 39
General ......................................................................... 39
Industry and Demographic Overview ............................................... 40
History of Florida Banks ........................................................ 40
Strategy of Florida Banks ....................................................... 41
Management of Florida Banks ..................................................... 52
Security Ownership of Certain Beneficial Owners and Management of Florida Banks . 58
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TABLE OF CONTENTS
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Facilities ...................................................................... 60
Employees ....................................................................... 60
Legal Proceedings ............................................................... 60
Monetary Policies ............................................................... 60
Certain Transactions ............................................................ 60
INFORMATION ABOUT FIRST NATIONAL ..................................................... 62
General ......................................................................... 62
History of First National ....................................................... 62
Asset/Liability Management ...................................................... 63
Competition ..................................................................... 63
Data Processing ................................................................. 64
Security Ownership of Certain Beneficial Owners and Management of First National 64
Facilities ...................................................................... 65
Employees ....................................................................... 66
Legal Proceedings ............................................................... 66
Monetary Policies ............................................................... 66
Certain Transactions ............................................................ 66
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................................. 67
Florida Banks ................................................................... 67
First National .................................................................. 67
Summary ......................................................................... 67
Results of Operations ........................................................... 68
Financial Condition ............................................................. 75
Year 2000 ....................................................................... 93
Accounting Pronouncements ....................................................... 93
Effects of Inflation and Changing Prices ........................................ 93
Monetary Policies ............................................................... 94
DESCRIPTION OF FLORIDA BANKS CAPITAL STOCK AND
FIRST NATIONAL BANK OF TAMPA CAPITAL STOCK ...................................... 95
Florida Banks ................................................................... 95
First National .................................................................. 97
COMPARISON OF SHAREHOLDER RIGHTS ..................................................... 98
Removal of Directors; Filling Vacancies on the Board of Directors ............... 98
Quorum of Shareholders .......................................................... 99
Adjournment and Notice of Shareholder Meetings .................................. 99
Call of Special Shareholder Meetings ............................................ 100
Shareholder Consent in Lieu of Meeting .......................................... 101
Dissenters' Rights .............................................................. 101
Derivative Actions .............................................................. 102
Dividends and Distributions ..................................................... 102
Director Qualifications and Number .............................................. 102
Indemnification of Officers and Directors ....................................... 103
Director Liability .............................................................. 104
Amendment of Articles of Incorporation and By-Laws .............................. 105
Vote Required for Extraordinary Corporate Transactions .......................... 105
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TABLE OF CONTENTS
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Interested Shareholder Transactions ............................................. 106
Fiduciary Duty .................................................................. 106
Provisions with Possible Anti-Takeover Effects .................................. 106
LEGAL OPINIONS........................................................................ 108
EXPERTS ............................................................................. 108
OTHER MATTERS......................................................................... 109
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
APPENDIX A Merger Agreement dated March 30, 1998 by and between
First National Bank of Tampa and Florida Banks, Inc.................... A-1
APPENDIX B Title 12, Chapter 2, Section 215a of the United States Code............ B-1
APPENDIX C Fairness Opinion of Mercer Capital Management, Inc..................... C-1
APPENDIX D Merger of National Banks or State Banks into National Banks............ D-1
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AVAILABLE INFORMATION AND REPORTS TO SECURITY HOLDERS
Florida Banks has filed with the Commission the Registration Statement
on Form S-4 under the Securities Act relating to the shares of Florida Banks
Common Stock to be issued in connection with the Merger. For further information
pertaining to the shares of Florida Banks Common Stock to which this Proxy
Statement-Prospectus relates, reference is made to such Registration Statement,
including the exhibits and schedules filed as a part thereof. For further
information with respect to Florida Banks and the Florida Banks Common Stock,
reference is hereby made to the Registration Statement and such exhibits and
schedules filed as a part thereof, which may be inspected, without charge, at
the public reference facilities of the Commission maintained by the Commission
at its principal office located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, the New York Regional Office located at Seven World
Trade Center, New York, New York 10048 and the Chicago Regional Office located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the Registration Statement may
be obtained from the Public Reference Section of the Commission, upon payment of
prescribed fees. Such material also may be accessed electronically by means of
the Commission's home page on the Internet at http://www.sec.gov. This Proxy
Statement-Prospectus constitutes the Proxy Statement- Prospectus of Florida
Banks filed as part of the Registration Statement and does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission.
Neither First National nor Florida Banks is currently subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon consummation of the Florida Banks IPO, Florida Banks will be subject
to the reporting requirements of the Exchange Act and will thereafter file
annual and quarterly reports with the Commission. First National has
historically furnished its shareholders with annual reports containing financial
statements audited by an independent public accounting firm. Florida Banks,
which was formed in October 1997, is a development stage company. Florida Banks
has provided its shareholders with certain financial information upon such
shareholder's written request to Florida Banks.
Statements made in this Proxy Statement-Prospectus as to the contents
of any contract, agreement or other document referred to are necessarily
summaries of such documents. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED IN OR INCORPORATED INTO THIS PROXY
STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FLORIDA BANKS OR FIRST
NATIONAL.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
EXCHANGE OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, NOR DOES IT CONSTITUTE
THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS SPEAKS AS
OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF FIRST NATIONAL OR FLORIDA BANKS SINCE THE DATE
OF THIS PROXY STATEMENT-PROSPECTUS OR THAT THE INFORMATION IN THIS PROXY
<PAGE> 11
STATEMENT-PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE IS CORRECT AT
ANY TIME SUBSEQUENT TO THAT DATE.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT COVER ANY RESALES OF THE
FLORIDA BANKS COMMON STOCK OFFERED HEREBY TO BE RECEIVED BY FIRST NATIONAL
SHAREHOLDERS DEEMED TO BE "AFFILIATES" OF FIRST NATIONAL OR FLORIDA BANKS UPON
THE CONSUMMATION OF THE MERGER. NO PERSON IS AUTHORIZED TO MAKE USE OF THIS
PROXY STATEMENT-PROSPECTUS IN CONNECTION WITH ANY SUCH RESALES.
2
<PAGE> 12
SUMMARY
The following is a brief summary of certain information set forth
elsewhere in this Proxy Statement- Prospectus and is not intended to be
complete. This summary should be read in conjunction with, and is qualified in
its entirety by reference to, the more detailed information contained elsewhere
in this Proxy Statement-Prospectus and the accompanying Appendices.
Certain statements contained or incorporated by reference in this Proxy
Statement-Prospectus are "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, such as statements relating to
financial results, plans for future business development activities, capital
spending or financing sources, capital structure, and the effects of regulation
and competition, and are thus prospective. Such forward looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by such
forward looking statements. Potential risks and uncertainties include, but are
not limited to, economic conditions, competition and other uncertainties.
GENERAL
This Proxy Statement-Prospectus relates to the proposed adoption of the
Agreement and Plan of Merger dated as of March 30, 1998 between First National
Bank of Tampa ("First National") and Florida Banks, Inc. ("Florida Banks") (the
"Merger Agreement"), whereby First National will be merged (the "Merger") with
and into Interim Bank No. 1, N.A. ("Interim"), a national bank to be chartered
under the laws of the United States as a wholly-owned subsidiary of Florida
Banks Immediately upon consummation of the Merger, each share of First
National's common stock, $1.00 par value per share (the "First National Common
Stock"), issued and outstanding immediately prior to the Merger (other than
shares as to which dissenters' rights are properly exercised), will be converted
into the right to receive that number of shares of Florida Banks' common stock,
$.01 par value per share (the "Florida Banks Common Stock"), equal to the
quotient obtained by dividing 6.6586 by the initial public offering price of the
Florida Banks Common Stock (the "IPO Price") in the initial public offering of
Florida Banks Common Stock that is being closed immediately following the
closing of the Merger (the "Florida Banks IPO"), rounded to the third nearest
decimal place (the "Exchange Ratio"). Cash will be paid in lieu of using any
fractional shares of Florida Banks Common Stock. Assuming an IPO Price of $11.00
per share (which represents the mid-point of the estimated range) and 2,065,000
shares of First National Common Stock outstanding immediately prior to the
Merger, each share of First National Common Stock outstanding immediately before
the effectiveness of the Merger will be convertible into approximately 0.605
shares of Florida Banks Common Stock, and a maximum of 1,250,000 shares of
Florida Banks Common Stock will be issuable.
This Proxy Statement-Prospectus is first being mailed to First National
Shareholders on or about __________, 1998. At the Special Meeting, the First
National Shareholders will consider and vote on whether to approve and adopt the
Merger Agreement and the transactions contemplated thereby. A copy of the Merger
Agreement is attached hereto as Appendix A and is incorporated herein by
reference.
3
<PAGE> 13
THE PARTIES
FLORIDA BANKS. Florida Banks was organized under the laws of the State
of Florida on October 15, 1997. The principal executive offices of Florida Banks
are located at 4110 Southpoint Boulevard, Suite 212, Southpoint Square II,
Jacksonville, Florida 32216-0925, and its telephone number is (904) 296-2329.
Florida Banks is a development stage company with no history of operations as a
holding company. See "The Merger" and "Information About Florida Banks."
FIRST NATIONAL. First National is a national bank chartered under the
laws of the United States. First National provides primarily commercial banking
services through its offices located in Hillsborough County, Florida. On
December 31, 1997, First National had total assets of approximately $60.4
million and total deposits of approximately $45.5 million. First National's
principal executive offices are located at 100 West Kennedy Boulevard, Tampa,
Florida 33602, and its telephone number is (813) 221-7900. See "The Merger" and
"Information About First National."
SPECIAL MEETING AND VOTE REQUIRED TO APPROVE THE MERGER
DATE, TIME AND PLACE OF THE SPECIAL MEETING. The Special Meeting of
First National Shareholders will be held at the offices of First National, which
are located at First National Plaza, 100 West Kennedy Boulevard, Tampa, Florida,
on ____________________, 1998 at 2:30 p.m., local time, (together with any
adjournments or postponements, the "Special Meeting").
PURPOSE OF THE SPECIAL MEETING. The purpose of the Special Meeting is
to consider and vote upon a proposal to approve the Merger Agreement and the
transactions contemplated thereby.
RECORD DATE. Only holders of record of First National Common Stock at
the close of business on ____________, 1998 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting. On the Record Date, [2,065,000]
shares of First National Common Stock were outstanding and entitled to vote.
First National has represented that as of the Effective Time (as defined below),
no more than 2,065,000 shares of First National Common Stock will be
outstanding.
VOTE REQUIRED. The affirmative vote of at least two-thirds of the
outstanding shares of First National Common Stock is required to approve the
Merger Agreement. As of the Record Date, directors and executive officers of
First National and their affiliates beneficially owned an aggregate of [935,875]
shares of First National Common Stock (approximately [45.3]% of the shares then
outstanding). Pursuant to the Merger Agreement, the members of the Board of
Directors of First National (the "First National Board") will vote their shares
in favor of the Merger Agreement at the Special Meeting.
Approval of the Merger Agreement by the shareholders of Florida Banks
is not required.
THE MERGER
GENERAL. Subject to the terms and conditions of the Merger Agreement,
at the Effective Time, First National will merge with and into Interim, a
national bank to be chartered under the laws of the United States. Interim will
be the surviving entity in the Merger and, immediately upon consummation of the
Merger, Interim will change its name to Florida Bank, N.A. and will operate as a
wholly-owned subsidiary of Florida Banks. At the Effective Time, each
outstanding share of First National Common Stock (other than shares
4
<PAGE> 14
held by First National Shareholders who perfect and do not withdraw their
dissenters' rights) will be converted into and exchanged for the right to
receive that number of shares of Florida Banks Common Stock equal to the
quotient obtained by dividing 6.6586 by the IPO Price of the Florida Banks
Common Stock. The Florida Banks IPO will be closed immediately following the
closing of the Merger. Assuming an IPO Price of $11.00 per share (which
represents the mid-point of the estimated range), each share of First National
Common Stock issued and outstanding immediately before the effectiveness of the
Merger will be convertible into approximately 0.605 shares of Florida Banks
Common Stock. Each share of Florida Banks capital stock outstanding prior to the
Merger will continue to be outstanding after the Effective Time. The Exchange
Ratio may be adjusted to prevent dilution if Florida Banks changes the number of
shares of Florida Banks Common Stock issued and outstanding prior to the
Effective Time by effecting a stock split, stock dividend, recapitalization,
reclassification or similar transaction.
FRACTIONAL SHARES. Cash will be issued in lieu of any fractional shares
of Florida Banks Common Stock otherwise issuable to former holders of First
National Common Stock.
EXCHANGE OF CERTIFICATES. Upon the First National Shareholders'
approval of the Merger Agreement, First National Shareholders will receive
transmittal forms and instructions for surrender and exchange of their shares of
First National Common Stock. First National Shareholders should not send in
their share certificates with their proxy cards. See "The Merger--Exchange of
Certificates."
SHARE OWNERSHIP FOLLOWING MERGER. Immediately following the Effective
Time, assuming 2,065,000 shares of First National Common Stock outstanding
immediately prior to the Effective Time, former First National Shareholders
would own 1,250,000 shares of Florida Banks Common Stock. Assuming 377,800
shares of Florida Banks Common Stock outstanding immediately prior to the
Effective Time and excluding shares issuable in the Florida Banks IPO, such
1,250,000 shares would represent approximately 77% of the then-outstanding
Florida Banks Common Stock; if the 4,000,000 shares to be issued in the Florida
Banks IPO (excluding any shares issued upon exercise of the underwriters'
overallotment option) are included, such 1,250,000 shares would represent
approximately 22% of the then-outstanding Florida Banks Stock.
OUTSTANDING OPTIONS. As of the Record Date, there were outstanding
options to purchase 240,000 shares of First National Common Stock (the "First
National Options"). At the Effective Time, each outstanding First National
Option, whether or not vested or exercisable, will be canceled and will no
longer represent the right to receive any payment or consideration. Under the
Merger Agreement, each holder of canceled First National Options will execute a
cancellation agreement pursuant to which he or she will surrender all rights
under his or her First National Options. Florida Banks' receipt of cancellation
agreements from each holder of First National Options is a condition precedent
to Florida Banks' obligation to effect the Merger.
OUTSTANDING WARRANTS. As of the date hereof, there were outstanding
warrants to purchase 225,000 shares of First National Common Stock (the
"Warrants"). These Warrants will expire on June 10, 1998.
CONDITIONS TO MERGER. Consummation of the Merger and the transactions
contemplated thereby is subject to the satisfaction or waiver of certain
conditions. Such conditions include, among others, approval of the Merger
Agreement by the First National Shareholders, the effectiveness under the
Securities Act of the Registration Statement of which this Proxy
Statement-Prospectus is a part, Florida Banks' execution of a definitive
underwriting agreement for the firm commitment underwriting of shares of Florida
Banks Common
5
<PAGE> 15
Stock having an aggregate gross purchase price of at least $30 million, and
approval of appropriate regulatory agencies. The obligation of Florida Banks to
effect the Merger is also subject to, among other things, receipt of an
accountants' opinion dated as of the Effective Time, whose contents must be
acceptable to Florida Banks in its sole discretion, with respect to certain
matters under the Internal Revenue Code of 1986, as amended (the "Code"),
receipt of agreements from affiliates of First National restricting their
ability to transfer shares of First National Common Stock or Florida Banks
Common Stock and receipt of cancellation agreements from each holder of First
National Options. First National's obligation to effect the Merger is also
subject to, among other things, receipt within five days of the date of this
Proxy Statement--Prospectus of a fairness opinion from Mercer Capital
Management, Inc., First National's financial advisor ("Mercer Capital"). See
"The Merger--Conditions Precedent to the Merger."
EFFECTIVE TIME OF THE MERGER. Pursuant to the Merger Agreement, the
Merger and the other transactions contemplated by the Merger Agreement will
become effective on the date and at the time the parties receive certification
of the Merger from the Office of the Comptroller of the Currency (the "OCC")
(the "Effective Time"). Subject to the terms and conditions of the Merger
Agreement, unless the parties to the Merger mutually agree otherwise, the
parties will use their reasonable best efforts to cause the Effective Time to
occur on the date that the Merger and the transactions contemplated thereby are
closed (the "Closing"). If the First National Shareholders and applicable
regulatory authorities approve the Merger, the parties expect that the Effective
Time will occur on or before June __, 1998, although there can be no assurance
as to whether or when the Merger will occur. See "The Merger--Effective Time of
the Merger" and "--Conditions Precedent to the Merger."
RECOMMENDATION OF THE FIRST NATIONAL BOARD. THE FIRST NATIONAL BOARD
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY. THE FIRST NATIONAL BOARD BELIEVES THAT ADOPTION OF THE MERGER AGREEMENT
AND CONSUMMATION OF THE MERGER IS IN THE BEST INTERESTS OF FIRST NATIONAL AND
THE FIRST NATIONAL SHAREHOLDERS AND RECOMMENDS THAT THE FIRST NATIONAL
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT. First National
Shareholders should note that certain members of First National's management and
directors have certain interests in and may derive certain benefits as a result
of the Merger in addition to their interests as First National Shareholders
generally. See "The Merger--Interests of Certain Persons in the Merger."
In reaching its decision to approve the Merger Agreement and the
transactions contemplated thereby, the First National Board consulted with its
legal advisors regarding the legal terms of the Merger Agreement. The First
National Board also consulted with its financial advisor, Mercer Capital, as to
the financial fairness of the consideration First National Shareholders are to
receive in the Merger. For a discussion of the factors the First National Board
considered in reaching its conclusions, see "The Merger--Background of and
Reasons for the Merger."
OPINION OF FIRST NATIONAL'S FINANCIAL ADVISOR. Mercer Capital, in its
capacity as financial advisor to First National, has rendered an opinion to the
First National Board that the consideration provided in the Merger Agreement is
fair, from a financial point of view, to the First National Shareholders. A copy
of Mercer Capital's opinion, dated __________, 1998, is attached hereto as
Appendix C and should be read carefully, with particular attention to the
assumptions made, matters considered and limitations of the review undertaken by
Mercer Capital in rendering such opinion. See "The Merger--Opinion of First
National's Financial Advisor."
6
<PAGE> 16
CERTAIN DIFFERENCES IN SHAREHOLDER RIGHTS. The rights of Florida Banks
shareholders and other corporate matters relating to Florida Banks Common Stock
are controlled by the Amended and Restated Articles of Incorporation of Florida
Banks (the "Florida Banks Charter"), the Florida Banks Bylaws (the "Florida
Banks Bylaws") and the Florida Business Corporation Act (the "FBCA"). The rights
of First National Shareholders and other corporate matters relating to First
National Common Stock are controlled by the First National Articles of
Association, as amended (the "First National Charter"), the First National
Bylaws (the "First National Bylaws") and the National Bank Act. The dissenters'
rights of the First National Shareholders incident to the Merger are governed by
Title 12, Chapter 2, Section 215a of the United States Code ("Section 215a"), a
copy of which is attached hereto as Appendix B. Upon consummation of the Merger,
First National Shareholders will become shareholders of Florida Banks whose
rights will be governed by the Florida Banks Charter, the Florida Banks Bylaws
and the provisions of the FBCA. See "Description of Florida Banks Capital Stock
and First National Capital Stock," "Comparison of Shareholder Rights" and "The
Merger--Dissenters' Rights of First National Shareholders."
AMENDMENT, WAIVER AND TERMINATION. Under its terms, the Merger
Agreement may be amended by a subsequent writing signed by each party upon the
approval of each of the First National Board and the Board of Directors of
Florida Banks (the "Florida Banks Board"). However, after the Special Meeting,
no amendment that materially reduces or modifies the consideration to be
received by First National Shareholders pursuant to the Merger may be made
without the further approval of the First National Shareholders. The Merger
Agreement provides that up to the Effective Time, either party may waive any of
the conditions precedent to its obligations to the extent legally permitted.
The Florida Banks Board and the First National Board may terminate the
Merger Agreement by mutual agreement. In addition, either the Florida Banks
Board or the First National Board may terminate the Merger Agreement if: (i)
there is an inaccuracy of any representation or warranty of the other party that
cannot or has not been cured within 30 days of written notice of such breach,
and the inaccuracy would provide the terminating party the ability to refuse to
consummate the Merger; (ii) there is a material breach by the other party of any
covenant, agreement or obligation contained in the Merger Agreement that cannot
or has not been cured within 30 days of giving written notice of the breach to
the breaching party; (iii) the required approval of the First National
Shareholders or any applicable regulatory authority is not obtained; (iv) the
Merger is not consummated by September 30, 1998 or (v) any of the conditions
precedent to the obligations of the terminating party cannot be fulfilled by
September 30, 1998, and such party is not in breach of any representation or
warranty in the Merger Agreement at the time of each termination.
In addition, the Merger Agreement may be terminated: (i) by the First
National Board if prior to the Effective Time, (a) an entity or group has made a
bona fide Acquisition Proposal (as defined in the Merger Agreement), that the
First National Board determines in good faith is more favorable to the First
National Shareholders than the Merger or (b) Mercer Capital withdraws its
fairness opinion or (ii) by the Florida Banks Board if: (a) First National
Shareholders owning in the aggregate more than 10% of the issued and outstanding
First National Common Stock exercise dissenters' rights or (b) First National
does not receive the tax opinion referred to in "The Merger--Certain Federal
Income Tax Consequences." See "The Merger--Amendment, Waiver and Termination"
and "--Description of the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The Merger is intended to
qualify as a "reorganization" within the meaning of Section 368(a) of the Code.
Smith, Gambrell & Russell, LLP, has delivered an opinion, based upon certain
customary assumptions and representations, to the effect that, for federal
income tax purposes, First National Shareholders will recognize no gain or loss
as a result of the
7
<PAGE> 17
Merger to the extent that they receive Florida Banks Common Stock solely in
exchange for their shares of First National Common Stock. For a more complete
description of the federal income tax consequences of the Merger and the
transactions contemplated thereby, see "The Merger--Certain Federal Income Tax
Consequences."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of First
National's management and of the First National Board may be deemed to have
interests in, and may derive benefits from, the Merger in addition to their
interests, if any, as First National Shareholders. These interests include,
among others, agreements by Florida Banks to indemnify present and former
directors, officers, employees and agents of First National from and after the
Effective Time against certain liabilities arising prior to the Effective Time
to the full extent permitted under Florida law, the First National Charter and
the First National Bylaws. See "The Merger--Interests of Certain Persons in the
Merger."
DISSENTERS' RIGHTS. Each holder of First National Common Stock who
dissents from the adoption of the Merger Agreement is entitled to the rights and
remedies of dissenting shareholders as set forth in Section 215a. To perfect
dissenters' rights, a shareholder must strictly comply with the procedures set
forth in Section 215a, which require, among other things, that the shareholder
either (i) give First National written notice of his or her dissent no later
than the vote of the shareholders at the Special Meeting or (ii) vote against
the adoption of the Merger Agreement at the Special Meeting. Dissenting
shareholders will be entitled to receive an amount of cash equal to the "fair
value" of their shares, as determined by either an independent appraisal
committee or, under certain circumstances, an independent, OCC-selected
appraiser, upon written request made to Florida Banks at any time before 30 days
after the Effective Time, accompanied by the surrender of their stock
certificates. Any First National Shareholder who returns a signed proxy but
fails to provide voting instructions for his or her shares will be deemed to
have voted in favor of the adoption of the Merger Agreement and will not be
entitled to assert dissenters' rights. IN NO EVENT WILL ANY SHAREHOLDER BE
ENTITLED TO DISSENTERS' RIGHTS IF HE OR SHE VOTES IN FAVOR OF THE ADOPTION OF
THE MERGER AGREEMENT. First National Shareholders should note that Florida Banks
has the right to terminate the Merger Agreement if holders of at least 10% of
the issued and outstanding shares of First National Common Stock claim
dissenters' rights with respect to the Merger pursuant to Section 215a. See "The
Merger--Dissenters' Rights of First National Shareholders."
ACCOUNTING TREATMENT. The Merger will be accounted for under the
purchase method of accounting, the financial statements of First National will
become the historical financial statements of Florida Banks and no goodwill will
be recorded on Florida Banks' balance sheet as a result of the Merger. See
"The Merger--Accounting Treatment."
REGULATORY APPROVALS. Consummation of the Merger is subject to the
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the OCC and the Federal Deposit Insurance Corporation ("FDIC").
The Merger may not be consummated until expiration of all applicable waiting
periods. Florida Banks and First National have filed all required applications
for regulatory review and approval or notice with the Federal Reserve Board, the
OCC and the FDIC in connection with the Merger. However, there can be no
assurance that such approvals will be obtained or as to the date of any such
approvals. See "The Merger--Conditions Precedent to the Merger" and "--Bank
Regulatory Matters."
RESALES BY AFFILIATES. First National has agreed to use its reasonable
efforts to obtain from each of those individuals identified by it as an
affiliate an appropriate agreement that such individual will not transfer any
shares of Florida Banks Common Stock it receives as a result of the Merger,
except in compliance with the applicable provisions of the Securities Act. See
"The Merger--Restrictions on Resales by Affiliates."
8
<PAGE> 18
Florida Banks' receipt of agreements restricting affiliate resales is a
condition to Florida Banks' obligation to effect the Merger.
SHARE INFORMATION AND MARKET PRICES. As of April 16, 1998, there were
377,800 shares of Florida Banks Common Stock outstanding held by [28] holders of
record. As of the Record Date, there were [2,065,000] shares of First National
Common Stock outstanding held by [83] holders of record. There currently is no
market for the First National Common Stock, and no assurance can be given as to
the IPO Price of the Florida Banks Common Stock. See "Price Range of Common
Stock and Dividends--Market Prices."
9
<PAGE> 19
SELECTED FINANCIAL DATA
The following tables set forth selected financial data of First
National for the periods indicated. As Florida Banks had no operations during
1997 and had no equity and de minimis assets and liabilities at December 31,
1997, the selected financial data of Florida Banks as of December 31, 1997 and
for the period then ended, is not relevant and therefore is not included herein.
The selected financial data of First National as of December 31, 1997 and 1996
and for the years ended December 31, 1997, 1996 and 1995 are derived from the
financial statements of First National, which have been audited by Deloitte &
Touche LLP, independent auditors. The selected financial data of First National
as of December 31, 1993, 1994 and 1995 and for the years ended December 31, 1993
and 1994 are derived from the financial statements of First National which were
audited by other independent certified public accountants. These selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," Florida Banks'
financial statements and notes thereto, First National's financial statements
and notes thereto and financial and other information included elsewhere herein.
<TABLE>
<CAPTION>
FIRST NATIONAL
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
SUMMARY INCOME STATEMENT: (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest income........................ $4,302 $3,614 $2,937 $2,075 $1,772
Interest expense....................... 2,296 1,872 1,474 1,005 954
----- ----- ----- ----- ---
Net interest income.................... 2,006 1,742 1,463 1,070 818
Provision (benefit) for lo
losses.............................. 60 60 (138) (15) -
------ ------ ------- ------- -------
Net interest income after provision
for loan losses..................... 1,946 1,682 1,602 1,085 818
Noninterest income..................... 504 519 375 385 542
Noninterest expense.................... 1,842 1,601 1,621 1,568 2,684
----- ----- ----- ----- -----
Income (loss) before provision for
income taxes........................ 608 600 356 (99) (1,325)
Provision for income taxes(1).......... 232 216 - - -
----- ----- ------- ------- -------
Net income (loss)...................... $ 376 $ 384 $ 356 $ (99) $ (1,325)
====== ====== ====== ======= ========
Earnings (loss) per common share(2):
Basic............................... $ .21 $ .21 $ .20 $ (.05) $ (2.69)
Diluted............................. .20 .20 .19 (.05) (2.69)
</TABLE>
- --------------------
(1) The provisions for income taxes for 1997 and 1996 are comprised solely of
deferred income taxes. The benefit of the utilization of net operating loss
carry forwards for 1997 and 1996 (periods subsequent to the effective date
of First National's quasi-reorganization) have been reflected as increases
to additional paid-in capital.
(2) The earnings per share amounts are based upon First National's historical
weighted average number of shares outstanding and do not reflect any pro
forma adjustments relating to the exchange of shares upon consummation of
the Merger.
10
<PAGE> 20
<TABLE>
<CAPTION>
FIRST NATIONAL
-------------------------------------------------------------------
AT DECEMBER 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
SUMMARY BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Investment securities .............. $ 10,765 $ 8,551 $ 6,760 $ 7,495 $ 4,590
Loans, net of deferred loan fees ... 33,720 31,627 26,571 20,292 17,041
Earning assets ..................... 54,731 52,588 38,801 32,377 26,481
Total assets ....................... 60,396 55,505 41,748 34,959 29,337
Noninterest-bearings deposits ...... 6,442 8,122 5,719 4,660 3,696
Total deposits ..................... 45,460 45,526 34,633 31,886 26,093
Other borrowed funds ............... 8,317 6,408 4,212 780 628
Total shareholders' equity ......... 6,314 3,269 2,678 2,143 2,421
PERFORMANCE RATIOS:
Net interest margin(1) ............. 3.89% 4.05% 4.13% 3.77% 3.02%
Efficiency ratio(2) ................ 73.39 70.76 88.16 107.84 197.45
Return on average assets ........... .70 .85 .95 (.32) (4.22)
Return on average equity ........... 10.62 13.18 14.85 (4.14) (68.70)
ASSET QUALITY RATIOS:
Allowance for loan losses to total
loans .......................... 1.42% 1.36% 1.28% 2.27% 2.60%
Non-performing loans to total
loans(3) ....................... -- -- -- 0.60 0.90
Net charge-offs (recoveries) to
average loans .................. 0.03 (0.11) (0.07) (0.18) 0.42
CAPITAL AND LIQUIDITY RATIOS:
Total capital (to risk-weighted
assets) ........................ 14.29% 12.26% 12.42% 13.28% 15.41%
Tier 1 capital (to risk-weighted
assets) ........................ 13.00 11.01 11.17 12.03 14.14
Tier 1 capital (to average assets) . 7.42 6.42 6.64 6.30 7.56
Average loans to average
deposits .................... 75.77 75.83 67.26 65.11 60.72
Average equity to average total
assets ......................... 6.54 6.45 6.40 7.75 6.15
</TABLE>
- --------------------
(1) Computed by dividing net interest income by average earning assets.
(2) Computed by dividing noninterest expense by the sum of net interest income
and noninterest income.
(3) First National had no non-performing loans at December 31, 1997, 1996 and
1995.
11
<PAGE> 21
PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data set forth below assume that
Florida Banks was formed on January 1, 1997 and gives effect to the acquisition
of First National as if such acquisition had occurred on January 1, 1997. The
pro forma financial data set forth below does not include the effects of the
Florida Banks IPO. The pro forma financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," Florida Banks' Financial Statements and Notes thereto, First
National's Financial Statements and Notes thereto and financial and other
information included elsewhere herein. The pro forma results are not necessarily
indicative of the results that would have been achieved had the acquisition of
First National occurred on January 1, 1997, or of future operations.
<TABLE>
<CAPTION>
FLORIDA BANKS FIRST NATIONAL FLORIDA BANKS
------------- -------------- -------------
PERIOD FROM
OCTOBER 15, 1997 TO YEAR ENDED PRO FORMA
DECEMBER 31, 1997 DECEMBER 31, 1997 CONSOLIDATED
----------------- ----------------- ------------
(DOLLARS IN THOUSANDS)
SUMMARY INCOME STATEMENT:
<S> <C> <C> <C>
Interest income ...................... $ -- $ 4,302 $ 4,302
Interest expense ..................... -- 2,296 2,296
---- ------- -------
Net interest income .................. -- 2,006 2,006
Provision for loan losses ............ -- 60 60
---- ------- -------
Net interest income after provision
for income taxes .................. 1,946 1,946
Noninterest income ................... -- 504 504
Noninterest expense .................. -- 1,842 1,842
---- ------- -------
Income before provision for income
taxes .............................. -- 608 608
Provision for income taxes ........... -- 232 232
-------
Net income ........................... $ -- $ 376 $ 376
==== ======= =======
Pro forma earnings per share ......... $ .30(1) $ .23(2)
======= =======
SUMMARY BALANCE SHEET DATA:
Investment securities ................ -- $10,765 $10,765
Loans, net of deferred loan fees ..... -- 33,720 33,720
Earning assets ....................... -- 54,731 54,731
Total assets ......................... $ 26 60,396 60,442
Noninterest-bearing deposits ......... -- 6,442 6,442
Total deposits ....................... -- 45,460 45,460
Other borrowed funds ................. -- 8,317 8,317
Total shareholders' equity ........... -- 6,314 6,314
</TABLE>
- ---------------------
(1) Pro forma earnings per share for First National have been computed based on
an estimated 1,250,000 shares of Florida Banks Common Stock to be issued to
the shareholders of First National (assuming all Bank options are exercised
and Bank warrants expire without exercise) in connection with the Merger
based on an assumed IPO Price of $11.00 per share (the mid-point of the
estimated range).
(2) Pro forma earnings per share for Florida Banks have been computed based on
an estimated 1,627,800 shares of Florida Banks Common Stock outstanding,
which includes 1,250,000 shares of Florida Banks Common Stock to be issued
to the
12
<PAGE> 22
shareholders of First National in connection with the Merger and 377,800 shares
of Florida Banks Common Stock issued by Florida Banks in February 1998.
13
<PAGE> 23
THE SPECIAL MEETING OF FIRST NATIONAL SHAREHOLDERS
GENERAL
This Proxy Statement-Prospectus is first being furnished to First
National Shareholders on or about __________, 1998 and is accompanied by the
Notice of Special Meeting and a form of proxy that is solicited by the First
National Board for use at the Special Meeting of Shareholders of First National
to be held at the offices of First National, which are located at First National
Plaza, 100 West Kennedy Boulevard, Tampa, Florida, on _________, ___________,
1998, at 2:30 p.m., local time, and at any adjournments or postponements
thereof. The purpose of the Special Meeting is to take action with respect to
the approval of the Merger Agreement and the transactions contemplated thereby.
VOTING AND REVOCATION OF PROXIES
A First National Shareholder may use the accompanying proxy if he or
she is unable to attend the Special Meeting in person or wishes to have his or
her shares voted by proxy even if he or she does attend the meeting. A First
National Shareholder may revoke any proxy given pursuant to this solicitation by
delivering to the Secretary of First National, no later than the vote of First
National Shareholders at the Special Meeting, a written notice revoking the
proxy or a duly executed proxy relating to the same shares bearing a later date,
or by attending the Special Meeting and voting in person at the Special Meeting.
A First National Shareholder's attendance at the Special Meeting will not, in
and of itself, constitute a revocation of the proxy. All shares represented by
valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted in the manner specified therein. If a proxy is
signed and returned without indicating any voting instructions, it will be voted
"FOR" the proposal to approve the Merger Agreement. The First National Board is
unaware of any other matters that may be presented for action at the Special
Meeting. However, if other matters do properly come before the Special Meeting,
it is intended that shares represented by proxies in the accompanying form will
be voted or not voted by the persons named in the proxies in their discretion.
All written notices of revocation and other communications with respect
to the revocation of First National proxies should be addressed to First
National Bank, 100 West Kennedy Boulevard, Tampa, Florida 33602, Attention:
Secretary. NO NOTICE OF REVOCATION OR LATER PROXY WILL BE ACCEPTED AFTER THE
VOTE OF THE FIRST NATIONAL SHAREHOLDERS AT THE SPECIAL MEETING.
SOLICITATION OF PROXIES
Solicitation of proxies may be made in person or by mail, telephone or
facsimile, or other form of communication by directors, officers and employees
of First National, who will not be specially compensated for such solicitation.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized by First National, Florida Banks or any other person. The
delivery of this Proxy Statement-Prospectus shall not, under any circumstances,
create any implication that there has been no change in the business or affairs
of First National or Florida Banks since the date of the Proxy Statement-
Prospectus.
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First National will bear all costs of solicitation of proxies from
First National Shareholders, except for the costs incurred in printing this
Proxy Statement-Prospectus and related materials, of which Florida Banks and
First National have each agreed to bear and pay one-half of such costs.
RECORD DATE AND VOTING RIGHTS
The First National Board has fixed the close of business on
___________, 1998 as the Record Date for the determination of the holders of
First National Common Stock entitled to receive notice of and to vote at the
Special Meeting. At the close of business on the Record Date, there were
outstanding [2,065,000] shares of First National Common Stock held by [83]
holders of record. Each share of First National Common Stock outstanding on the
Record Date is entitled to one vote as to (i) the approval of the Merger
Agreement and the transactions contemplated thereby and (ii) any other proposal
that may properly come before the Special Meeting.
As of the Record Date, the directors and executive officers of First
National and their affiliates held an aggregate of approximately [935,875]
shares, or [45.3]%, of the outstanding First National Common Stock.
The National Bank Act requires the affirmative vote of at least
two-thirds of the issued and outstanding capital stock entitled to vote to
approve a proposed merger transaction of a national bank with and into a
national bank, unless the merging bank's articles of incorporation or board of
directors require a greater number of votes. Neither the First National Charter
nor the First National Board requires a greater number of votes. Since adoption
of the Merger Agreement requires the affirmative vote of at least two-thirds of
the issued and outstanding shares of First National Common Stock as of the
Record Date, the failure to vote the shares in favor of adopting the Merger
Agreement for any reason whatsoever, whether by withholding the vote or by
abstaining, will have the same effect as casting a vote against Merger
Agreement. However, abstentions will be counted as present for determining the
presence of a quorum.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE
OF AT LEAST TWO-THIRDS OF THE ISSUED AND OUTSTANDING SHARES OF FIRST NATIONAL
COMMON STOCK ENTITLED TO VOTE AT THE SPECIAL MEETING, ABSTENTIONS WILL HAVE THE
SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE FIRST NATIONAL BOARD URGES ALL
FIRST NATIONAL SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
RECOMMENDATION OF THE FIRST NATIONAL BOARD
THE FIRST NATIONAL BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF FIRST NATIONAL AND ITS SHAREHOLDERS AND RECOMMENDS THAT FIRST
NATIONAL SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
In reaching its decision to approve the Merger Agreement and the
transactions contemplated thereby, the First National Board, among other things,
consulted with its legal advisors regarding the legal terms of the Merger
Agreement and with its financial advisor, Mercer Capital, as to the financial
fairness of the consideration First National Shareholders are to receive in the
Merger. For a discussion of the factors considered by the First National Board
in reaching its conclusion, see "The Merger--Background of and Reasons for the
Merger."
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First National Shareholders should note that certain members of First
National's management have certain interests in and may derive certain benefits
as a result of the Merger in addition to their interests as First National
Shareholders generally. See "The Merger--Interests of Certain Persons in the
Merger."
Pursuant to the terms of the Merger Agreement, the members of the First
National Board will vote their shares in favor of the Merger Agreement and the
transactions contemplated thereby at the Special Meeting.
FIRST NATIONAL SHAREHOLDERS SHOULD NOT SEND
ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER
The following summary of certain terms and provisions of the Merger
Agreement is qualified in its entirety by reference to the Merger Agreement,
which is incorporated herein by reference and, with the exception of certain
exhibits thereto, is included as Appendix A to this Proxy Statement-Prospectus.
All shareholders are urged to read carefully the Merger Agreement and the other
Appendices to this Proxy Statement-Prospectus.
DESCRIPTION OF THE MERGER
At the Effective Time, First National will merge with and into Interim,
and First National's separate existence will cease. Interim will be the
surviving entity in the Merger, and its Articles of Association and Bylaws in
effect at the Effective Time will continue to govern until amended or repealed.
Immediately upon consummation of the Merger, Interim will change its name to
Florida Bank, N.A. and will operate as a wholly-owned subsidiary of Florida
Banks. The Merger is subject to the approval of the Federal Reserve Board, the
OCC and the FDIC. See "The Merger--Bank Regulatory Matters."
At the Effective Time, except as otherwise described herein and in the
Merger Agreement, each share of First National Common Stock outstanding
immediately prior to the Effective Time will be converted automatically into the
right to receive that number of shares of Florida Banks Common Stock equal to
the quotient obtained by dividing 6.6586 by the IPO Price of the Florida Banks
Common Stock (the "Exchange Ratio"). The Exchange Ratio may be adjusted to
prevent dilution if Florida Banks changes the number of shares of Florida Banks
Common Stock issued and outstanding prior to the Effective Time by effecting a
stock split, stock dividend, recapitalization, reclassification or similar
transaction. In no event will more than 2,065,000 shares of First National
Common Stock be converted. Assuming that the IPO Price of the Florida Banks
Common Stock is $11.00 per share (which represents the mid-point of the
estimated range) and that the Exchange Ratio remains 6.6586, each share of First
National Common Stock outstanding immediately prior to the Effective Time will
be convertible into approximately 0.605 shares of Florida Banks Common Stock.
Therefore, following the Effective Time and assuming that 2,065,000 shares of
First National Common Stock are outstanding at the Effective Time and that all
shares are converted, former First National Shareholders would own 1,250,000
shares, or approximately 77%, of the-then outstanding Florida Banks Common Stock
(assuming 377,800 shares of Florida Banks Common Stock outstanding immediately
prior to the Effective Time and excluding shares issuable in the Florida Banks
IPO); if the 4,000,000 shares to be issued in the Florida Banks IPO are
included, such 1,250,000 shares would represent approximately 22% of the-then
outstanding Florida Banks Common Stock.
Florida Banks will issue no fractional shares of Florida Banks Common
Stock pursuant to the Merger. Instead, each First National Shareholder who would
otherwise have been entitled to receive a fraction of a share of Florida Banks
Common Stock (after taking into account all certificates delivered by such
holder) will receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Florida Banks Common Stock
multiplied by the IPO Price. No holder will be entitled to dividends, voting
rights or any other rights as a shareholder in respect of any fractional shares.
See "The Merger--Exchange of Certificates."
Shares of Florida Banks capital stock, including the Florida Banks
Common Stock outstanding immediately before the Merger, will continue to be
outstanding after the Effective Time.
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EFFECTIVE TIME AND CLOSING OF THE MERGER
The Effective Time will occur on the date and at the time the parties
receive certification of the Merger from the OCC. Subject to the terms and
conditions of the Merger Agreement, Florida Banks and First National have agreed
to use their best efforts to cause the Effective Time to occur on the date of
the Closing. The parties have further agreed that the Merger's Closing will
occur immediately before the closing of the Florida Banks IPO. The Closing will
take place at a time, place and date specified by the parties as they, acting
through their chief executive officers or chief financial officers, may agree.
EXCHANGE OF CERTIFICATES
Within 15 business days after the Effective Time, Florida Banks will
cause [_________________________] (the "Exchange Agent") to mail to the former
holders of record of First National Common Stock issued and outstanding as of
the Effective Time a letter of transmittal and related forms (the "Letter of
Transmittal") for use in forwarding stock certificates previously representing
shares of First National Common Stock for surrender and exchange for
certificates representing Florida Banks Common Stock. Risk of loss and title to
the certificates theretofore representing shares of First National Common Stock
will pass only upon proper delivery of such certificates to the Exchange Agent.
FIRST NATIONAL SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for
First National Common Stock, together with a properly completed Letter of
Transmittal, such surrendering First National Shareholder will promptly receive
a certificate or certificates representing the aggregate number of whole shares
of Florida Banks Common Stock to which the holder is entitled pursuant to the
Exchange Ratio, together with all declared but unpaid dividends or other
distributions in respect of such shares, and, where applicable, a check for the
cash amount (without interest) representing any fractional share to which such
holder would otherwise be entitled. A certificate for shares of Florida Banks
Common Stock, or any check representing cash in lieu of a fractional share or
declared but unpaid dividends, may be issued in a name other than the name in
which the surrendered certificate is registered only if (i) the certificate
surrendered is properly endorsed, accompanied by a guaranteed signature if
required by the Letter of Transmittal and otherwise in proper form for transfer
and (ii) the person requesting the issuance of such certificate either pays to
the Exchange Agent any transfer or other taxes required by reason of the
issuance of a certificate for such shares in a name other than the registered
holder of the certificate surrendered or establishes to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. The Exchange
Agent will issue stock certificates evidencing Florida Banks Common Stock in
exchange for lost, stolen, mutilated or destroyed certificates of First National
Common Stock only after receiving a lost stock affidavit and a bond indemnifying
Florida Banks against any claim arising out of the allegedly lost, stolen,
mutilated or destroyed certificate. In no event will the Exchange Agent, Florida
Banks or First National be liable to any persons for any Florida Banks Common
Stock or dividends thereon or cash delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat or similar law.
At the Effective Time, First National's stock transfer books will be
closed, and First National Shareholders will no longer be able to transfer their
shares of First National Common Stock. At and after the Effective Time, each
unsurrendered certificate that formerly represented shares of First National
Common
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Stock outstanding immediately prior to the Effective Time will represent only
the right to receive the shares of Florida Banks Common Stock into which such
shares are converted and any cash payment in lieu of fractional shares pursuant
to the Merger Agreement. However, the Merger Agreement obligates Florida Banks
to pay or make any dividend or distribution remaining unpaid on the First
National Common Stock at the Effective Time. In addition, whenever Florida Banks
declares a dividend or other distribution on the Florida Banks Common Stock with
a record date on or after the Effective Time, the declaration must include
dividends or distributions on all shares issuable pursuant to the Merger;
provided that beginning 30 days after the Effective Time, no First National
Shareholder will receive dividends or other distributions payable to the holders
of Florida Banks Common Stock as of any time subsequent to the Effective Time
until the First National Shareholder surrenders for exchange the certificates
representing his or her shares of First National Common Stock. Upon surrender of
First National Common Stock certificates, First National Shareholders will be
paid any dividends or other distributions on Florida Banks Common Stock that are
payable to holders as of any dividend record date on or following the Effective
Time. No interest will be payable with respect to withheld dividends or other
distributions.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger
In the Fall of 1997, T. Stephen Johnson & Associates, Inc., a financial
services consulting firm ("TSJ&A"), began to develop a strategy for the creation
of a statewide community banking system in Florida by entering certain markets
which TSJ&A in its bank consulting business had determined were attractive
locations to begin to implement this community banking strategy. TSJ&A
determined that its strategy could be best implemented by acquiring an existing
bank and expanding that bank's operations into new markets by opening branch
offices funded through capital accessed in a public offering of securities.
TSJ&A had an historical relationship with First National, having assisted the
previous management of First National in 1992 in implementing a compliance
program designed to comply with the formal agreement entered into with the OCC
dated December 18, 1991. TSJ&A had followed the progress of First National and
was aware of the improvement in First National's condition occurring since First
National's reorganization. Accordingly, in September 1997 T. Stephen Johnson,
Chairman of TSJ&A, met with Mr. Andrew Krusen, Chairman of First National, to
discuss a possible merger transaction. Discussions regarding this transaction
continued until January 15, 1998, when Florida Banks and First National signed a
letter of intent regarding a merger transaction. From the date of signing the
letter of intent until the signing of the Merger Agreement, Florida Banks
conducted a due diligence review of the operations of First National.
Florida Banks believed that a merger with First National would provide
it with a platform to implement Florida Banks' business plan. Florida Banks
believes that First National is presently operating in a manner in the Tampa
market that is parallel to Florida Banks' strategy for both the Tampa market and
other markets in that First National has locally responsive management
emphasizing high level of personalized customer service targeting small and
medium sized business customers in its market area.
First National Reasons for the Merger
In reaching its conclusion to approve the Merger, the First National
Board considered its fiduciary duties to act on an informed basis in good faith
without conflict of interest and in a belief that the Merger is in
the best interest of First National and the First National Shareholders. This
consideration included a number
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of factors, and the First National Board did not assign any relative or specific
weight to the factors considered. The material factors considered were:
(i) The financial terms of the Merger. In this regard, the First
National Board was of the view that the Exchange Ratio was fair relative to
First National's book value and the potential earnings per share of the
resulting institution and opportunities available to a larger institution with a
substantially larger capital base.
(ii) The likelihood that the combined entity with its significantly
larger asset and shareholder base will be able to list its shares on the Nasdaq
National Market and thus offer the First National Shareholders an opportunity to
sell all or a part of their shares in the combined entity, although no assurance
can be given regarding any such listing, its timing, or the price at which the
shares may trade.
(iii) The proposed composition of the Florida Banks Board following
consummation of the Merger, which will include two former First National
directors (Messrs. Krusen and McMullen) and the designation of Mr. McMullen as
President of the Tampa market and Mr. T. Edwin Stinson, Jr. as Chief Financial
Officer of Florida Banks and First National.
(iv) The relative prospects of First National's continuing as an
independent entity compared with its combining with Florida Banks, particularly
as to shareholder value.
(v) The belief that the larger combined entity will be able to offer
a broader variety of banking products and services.
(vi) The fact that the exchange of the First National Common Stock for
the Florida Banks Common Stock is anticipated to be generally tax free to First
National Shareholders.
(vii) The likelihood of the Merger being approved by the appropriate
regulatory authorities.
(vii) The opinion of First National's financial advisor as to the
fairness of the Exchange Ratio, from a financial point of view, to First
National Shareholders. See "The Merger--Opinion of First National's Financial
Advisor."
Opinion of First National's Financial Advisor
During February 1998, the First National Board retained Mercer Capital
to serve as financial advisor and to provide the First National Board with an
opinion regarding the fairness of the Merger, from a financial point of view, to
First National Shareholders. First National selected Mercer Capital on the basis
of Mercer Capital's reputation and its experience in evaluating mergers among
financial institutions and in representing the institutions in merger
transactions. Mercer Capital, as part of its financial advisory and business
valuation practice, is regularly engaged to value the securities of banks, issue
fairness opinions and assist in other aspects of structuring mergers among
financial institutions.
As part of its engagement, representatives of Mercer Capital visited
with First National's management in Tampa, Florida and discussed the proposed
transaction by telephone with representatives of Florida Banks' legal counsel
and representatives of the underwriters in the Florida Banks IPO. On __________,
1998, Mercer Capital delivered its written opinion dated ____________, 1998 to
the First
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National Board, stating that the Merger is fair, from a financial point of view,
to the First National Shareholders.
The following summary of Mercer Capital's opinion is entirely qualified
by reference to the full text of the opinion, which is dated as of the date of,
and attached as Appendix C to, this Proxy Statement- Prospectus. First National
Shareholders should read the opinion carefully, directing particular attention
to the sections describing Mercer Capital's review process, including procedures
followed, assumptions made, matters considered and various qualifications and
limitations both to Mercer Capital's review and to the opinion itself. Mercer
Capital's opinion was directed to the First National Board and does not
constitute a recommendation regarding how any First National Shareholder should
vote at the Special Meeting. Furthermore, Mercer Capital expressed no opinion as
to how the prices of any security of First National or Florida Banks might trade
in the future.
The First National Board imposed no limitations upon Mercer Capital's
investigations or the procedures it followed in rendering its opinions. In
addition, Mercer Capital does not have and has not previously had any
relationship with Florida Banks and did not receive any instructions or other
guidance from Florida Banks with respect to the procedures or analysis Mercer
Capital followed or undertook in rendering its opinion.
Preparing a fairness opinion requires various methods of financial
analysis to be applied to particular circumstances after the most appropriate
methods of financial analysis are determined. A fairness opinion does not lend
itself easily to partial analysis or summary description, and the analyses used
in preparing the fairness opinion should be considered in its entirety to avoid
creating an incomplete or inaccurate view of the analyses and processes involved
in preparing the opinion.
In connection with rendering its opinion, Mercer Capital performed a
variety of financial analyses, which are summarized below. Mercer Capital
believes that its analyses must be considered as a whole and that selection of
portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and the process underlying Mercer Capital's opinion.
Mercer Capital neither compiled nor audited the financial statements of
First National or Florida Banks, nor did Mercer Capital independently verify the
information reviewed. Mercer Capital relied upon such information as being
complete and accurate in all material respects. Mercer Capital did not make an
independent valuation of the loan portfolio, adequacy of the loan loss reserve
or other assets or liabilities of either institution.
Mercer Capital's opinion does not constitute a recommendation to any
First National Shareholders as to how the First National Shareholders should
vote on the Merger, nor did Mercer Capital express any opinion as to the prices
at which any security of First National or Florida Banks might trade in the
future.
Factors Mercer Capital considered in rendering its opinion included:
(i) the terms of the Merger Agreement; (ii) the arms' length process by which
the Merger Agreement was negotiated; (iii) a review of First National's
historical financial performance and projected financial performance; (iv) a
comparison of the pricing of the Merger relative to other recent bank change of
control transactions; (v) an analysis of the potential pricing of First National
if merged into established regional bank holding companies presently active in
acquiring banks located in Florida; (vi) an analysis of the potential value to
be realized for First National
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Shareholders were First National to remain independent for the foreseeable
future; (vii) an analysis of the estimated pro-forma changes in book value per
share and earnings per share from the perspective of First National
Shareholders; and (viii) tax consequences of the merger for First National
Shareholders.
As part of its investigation, Mercer Capital reviewed: (i) the Merger
Agreement; (ii) First National's draft audited financial statements for the
fiscal year ended December 31, 1997; (iii) First National's audited financial
statements for the fiscal years ended December 31, 1993 through 1996; (iv) First
National's quarterly Call Reports of Condition and Income filed with the OCC for
the fiscal years ended December 31, 1993 through 1997; (v) First National's 1997
proxy statement; (vi) First National's budget for fiscal year 1998; (vii) First
National's Strategic, Capital, and Profit Plan, last updated April 1997; (viii)
public market pricing data of publicly-held banks that Mercer Capital deemed to
be potential acquirors of First National; and (ix) transaction data involving
other acquired banks.
Valuation Methodology.
Transaction Summary. Mercer Capital noted that consideration
for the First National Common Stock will be based on a fixed aggregate
price and a floating exchange rate. The nominal price at the Closing of
the Merger is to be $6.6586 per share of First National Common Stock,
or $13.75 million for the maximum of 2,065,000 shares of First National
Common Stock to be converted pursuant to the Merger, of which 1,825,000
shares are currently outstanding and 240,000 shares are to be issued
upon the exercise of options with an exercise price of $1.00 per share.
The ratio at which shares of First National Common Stock are to be
exchanged for shares of Florida Banks Common Stock will be determined
by dividing the number 6.6586 by the IPO Price (the "Exchange Ratio").
Under this pricing formula, at any IPO Price, the resulting Exchange
Ratio will provide First National Shareholders with Florida Banks
Common Stock having an aggregate market value at closing of $13.75
million, or $6.6586 per exchanged share of First National Common Stock.
Implied Valuation Ratios. Mercer Capital observed that the
aggregate price of $13.75 million corresponds to 209.8% of First
National's reported shareholders' equity (plus proceeds of the exercise
of the options) of $6.6 million at December 31, 1997 and 36.6x its
reported 1997 net income of $376,000. In accordance with GAAP, at
December 31, 1997, First National eliminated the valuation reserve on
its $7.0 million net operating loss carryforward and recognized a
related deferred tax asset of $2.5 million. Elimination of the
valuation reserve on the deferred tax asset resulted in a dollar for
dollar increase in reported shareholders' equity, from $4.1 million to
$6.3 million (before considering option proceeds). In addition, First
National recorded amortization expense of $232,000 related to the
deferred tax asset during 1997. Absent this amortization expense, 1997
net income would not have differed materially from pre-tax income of
$608,000.
Under GAAP, the tax asset related to a net operating loss
carryforward is calculated, in effect, by multiplying the gross amount
of the carryforward by the subject corporation's income tax rate. The
tax benefits resulting from a large net operating loss carryforward
such as First National's are realized over a number of years and are
contingent upon the subject corporation's generation of sufficient
taxable income to be offset by the carryforward before it expires. In
addition, under Section 382 of the Code, a substantial change in
corporate ownership may trigger significant limits upon the amount of
the carryforward which may be used in any given year. Given that the
expected cash flow benefits of the carryforward are at some risk and
are realized over a number of years (approximately ten years in the
case of First National), the GAAP accounting treatment may tend to
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exaggerate net tangible book value from an economic point of view. At
the same time, the GAAP treatment of carryforwards may tend to present
net income in a manner which understates the corporation's annual
economic earnings or net cash flow during the life of the carryforwards
because net income, reflecting the annual amortization expense
associated with the tax asset, is reported as if the corporation's
earnings were fully taxable when in fact actual cash payments of income
taxes during the period may be minimal.
Given these factors, Mercer Capital chose also to consider an
alternate treatment of First National's large net operating loss
carryforward in calculating comparative valuation ratios. The alternate
treatment is to eliminate the tax asset from reported equity and also
to eliminate the related amortization expense from reported income.
This treatment is not dissimilar to bank regulatory accounting
principles ("RAP") in which net operating loss carryforward benefits
are recognized primarily in the periods in which they are actually
realized.
Under RAP treatment of the net operating loss carryforward,
the Merger price corresponds to 336.5% of adjusted book value
(reflecting the proceeds of the exercise of stock options and the
elimination of the deferred tax asset) of $4.1 million and 22.6x 1997
pre-tax earnings of $608,000 (essentially the same as net income after
eliminating amortization expense related to the deferred tax asset).
Comparable Transaction Analysis. Mercer Capital reviewed the
prices paid for various banks which have been acquired based upon
certain available public information as compiled by SNL Securities.
Mercer Capital noted that the relative pricing of most bank merger
transactions is measured in terms of the price/book value ("P/BV),
price/tangible book value ("P/TBV"), price/earnings ("P/E"),
price/assets ("P/A") and tangible book value premium/core deposit
("TBVP/CD") ratios. The bank acquisition data was divided into the
following three groups: (i) banks based in the Southeast; (ii) banks
based in Florida; and (iii) banks nationwide with assets of $25 million
to $100 million and an equity-to-assets ratio of 6% to 12% ("the
National Guideline Group"). Valuation ratios were calculated based upon
the acquisition price and the acquired institution's most recently
released financial statements as of the announcement date.
For each group, average and median P/E, P/BV, P/TBV, P/A and
TBVP/CD ratios were calculated for the years ended December 31, 1996
and 1997 and the period January 1, 1998 to April 15, 1998. The
1997-1998 median P/E, P/BV, P/TBV, P/A and TBVP/CD ratios were then
multiplied, respectively, by First National's net income for the fiscal
year ended December 31, 1997 and its December 31, 1997 book value,
tangible book value, assets and core deposits (as adjusted for the
proceeds of the exercise of stock options) to develop an overall
indicated range for First National. The values for the common equity of
First National indicated under each valuation multiple are summarized
in the following paragraphs.
Price/Earnings Ratio. The median P/E ratios were,
respectively, 21.3x for Southeastern banks, 20.4x for Florida banks,
and 17.5x for the National Guideline Group. Applying these multiples to
First National's 1997 GAAP net income of $376,000 implies a value
ranging from $6.6 million to $8.0 million. Applying the median ratios
to First National's RAP net income of $608,000 implies a value ranging
between $10.6 million and $13.0 million. The multiples implied by the
aggregate Merger price of $13.75 million offered by Florida Banks are
36.6x First National's 1997 GAAP net income and 22.6x its 1997 RAP net
income.
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Price/Book Value Ratio. The median P/BV ratios were,
respectively, 252.3% for the Southeastern banks, 251.5% for Florida
banks and 210.4% for the National Guideline Group. Applying these
multiples to First National's December 31, 1997 GAAP book value of $6.6
million (including option proceeds) implies a value ranging from $13.8
million to $16.5 million. Applying the median ratios to First
National's RAP equity of $4.1 million implies a value ranging between
$8.6 million and $10.3 million. The ratios implied by the aggregate
merger price of $13.75 million offered by Florida Banks are 209.8% of
First National's year-end 1997 GAAP equity and 336.5% of its year-end
1997 RAP equity.
Price/Tangible Book Value Ratio. Median P/TBV ratios were,
respectively, 250.4% for the Southeastern banks, 255.1% for Florida
banks and 211.5% for the National Guideline Group. Applying these
multiples to First National's December 31, 1997 GAAP book value of $6.6
million (including option proceeds) implies a value ranging from $13.9
million to $16.7 million. Applying the median ratios to First
National's RAP equity of $4.1 million implies a value ranging between
$8.6 million and $10.4 million. The ratios implied by the aggregate
Merger price of $13.75 million offered by FBI are 209.8% of First
National's year-end 1997 GAAP equity and 336.5% of its year-end 1997
RAP equity.
Price/Assets Ratio. Median P/A ratios were, respectively,
24.6% for the Southeastern banks, 23.4% for Florida banks and 18.0% for
the National Guideline Group. Applying these multiples to First
National's December 31, 1997 GAAP total assets of $60.6 million
(including option proceeds) implies a value ranging from $10.9 million
to $14.9 million. Applying the median ratios to First National's RAP
total assets of $58.2 million implies a value ranging between $10.5
million and $14.3 million. The ratios implied by the aggregate Merger
price of $13.75 million offered by FBI are 22.7% of First National's
year-end 1997 GAAP assets and 23.6% of its year-end 1997 RAP assets.
Tangible Book Value Premium/Core Deposits Ratio. The median
TBVP/CD ratios were, respectively, 20.7% for the Southeastern banks,
19.7% for Florida banks and 12.5% for the National Guideline Group.
Applying these multiples to First National's December 31, 1997
estimated core deposits of $35.2 million and its GAAP book value of
$6.6 million (including option proceeds) implies a value ranging from
$11.0 million to $13.9 million. Applying the median ratios to First
National's estimated core deposits and its RAP book value of $4.1
million implies a value ranging between $8.5 million and $11.4 million.
The TBVP/CD ratios implied by the aggregate merger price of $13,750,000
offered by FBI are a 20.4% on a GAAP basis and 27.4% on a RAP basis.
Overall Analysis. Applying the five median ratios for each of
the three groups of acquired institutions to First National on both a
GAAP and a RAP basis provided 30 indications of value, ranging from a
low of $6.6 million to a high of $16.7 million. The average and median
indicated values were, respectively, $11.9 million and $11.2 million.
The Merger price of $13.75 million substantially exceeds the average
and median of the indicated values. The implied price/earnings ratio
for First National exceeds the medians of each of the three groups of
acquired banks when calculated on a RAP basis and substantially exceeds
those medians on a GAAP basis. The indicated values at the higher end
of the range result from capitalizing First National's GAAP equity,
which Mercer Capital considered to be a highly favorable (from the
point of view of First National's present shareholders) representation
of its economic net worth. Based upon the preceding observations,
Mercer Capital concluded that the purchase consideration of offered by
Florida Banks for First National compared favorably with recent bank
acquisition transactions.
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Dilution Analysis. Mercer Capital conducted a dilution
analysis whereby hypothetical non-dilutive prices for First National
were generated under the assumption that various potential
publicly-traded buyers would structure an offer so that the pro-forma
earnings per share on the shares of the acquiror issued to First
National's Shareholders would equal the pro-forma earnings contributed
by First National. The analysis is based upon First National's 1997
earnings (under both the GAAP and RAP definitions) and the consensus
earnings per share estimates of the potential buyers as reported by SNL
Securities.
The valuation analysis was based upon hypothetical
non-dilutive mergers with Union Planters, SouthTrust, Regions
Financial, Republic Bancshares, Republic Banking Corporation, F.N.B.
Corporation of Pennsylvania, Colonial BancGroup, Compass Bancshares,
AmSouth Bancorporation and Alabama National. The analysis calculated a
range of values for each assumed buyer based upon First National's 1997
earnings (presented on both a GAAP basis and a RAP basis), plus
after-tax cost savings that a buyer might realize. Expense savings were
assumed to range from 0% to 35% of First National's non-interest
operating expenses. Due to the likely decline in customer service
implied by the expense savings as well as by the change in ownership,
core deposits were assumed to experience run off as expense savings
were realized, ranging from 0% run-off at 0% overhead savings to 10%
run-off at 35% overhead savings.
Under the GAAP definition of First National's earnings, the
analysis indicated an overall range of $6.3 million (at 0% expense
savings) to $15.7 million (at 35% expense savings). The bulk of the
indicated values fell well below the $13.75 million purchase
consideration offered by Florida Banks, regardless of the assumed level
of overhead savings, and none of the values indicated under the
assumption of expense savings of 25% or less exceeded $13.5 million.
Even under the assumption of 35% expense savings, the hypothetical
merger prices for First National fell below $13.75 million for a
majority of the banks.
Under the higher RAP definition of First National's earnings,
the analysis indicated an overall range of $10.2 million (at 0% expense
savings) to $20.8 million (at 35% expense savings). None of the values
indicated under the assumption of 0% expense savings exceeded $13.3
million. The hypothetical purchase prices for First National only began
to exceed $13.75 million for a majority of the banks under the
assumption of expense savings of 15% or more.
Mercer Capital noted that the pricing of Florida Banks' offer
was near the mid-point of the range, considering both definitions of
earnings. Mercer Capital cautioned, however, that the implicit
assumption in the analysis is that the buyer "pays" the seller for all
expense savings and no revenues are lost in the acquisition, and, in
Mercer Capital's opinion, buyers rarely credit the seller with all
expense savings. It should also be noted that an informed buyer would
be unlikely to pay a price premised on the capitalization of First
National's RAP earnings into perpetuity given that the net operating
loss carryforward will ultimately be exhausted.
Discounted Cash Flow Analysis. Mercer Capital prepared a
discounted cash flow ("DCF") analysis after reviewing First National's
1998 budget and strategic plan and discussing the performance outlook
with management of First National. Mercer Capital did not represent or
warrant that the actual future performance would reflect that which was
projected. The purpose of the DCF analysis is to develop an estimate of
value First National Shareholders might realize assuming a merger was
delayed five years. Indications of value derived using the DCF method
reflect interim
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cash flows (dividends) and a terminal cash flow (the value of First
National at the end of the projection period), both discounted to the
present at an appropriate required rate of return. Mercer Capital's
analysis included generally favorable assumptions regarding balance
sheet growth and improvement of margins. Mercer Capital assumed that
pre-tax income would rise to $1.5 million in 2002 (representing a
pre-tax return on assets of 1.8%, comparable to that of peer sized
metropolitan banks), that the net operating loss carryforward would be
largely exhausted by the end of the period, and that dividends could be
paid beginning in the year 2000. Applying multiples of 20x to 21x to
year 2002 net income of $1.0 million, provides a terminal value of
$20.0 million to $21.0 million. Discounting the terminal value and the
interim dividends to the present at 15% to 16% per annum, implies a
value in the range of $10.3 million to $11.2 million for First
National. Mercer Capital noted that the range of values implied under
the DCF analysis falls below the $13.75 million offered by FBI, even
when favorable assumptions regarding First National's future
performance are employed. Also, it was noted that by delaying a sale in
an effort to realize more value that First National Shareholders would
run the risk of losing value if market and/or economic conditions
changed, if the projected performance was not achieved, the
historically high level of prices offered in bank acquisitions at
present was no longer prevalent at a future sale date or other such
events occurred.
Pro Forma Analysis of Per Share Data. Mercer Capital analyzed
the changes in pro forma net tangible book value per share and possible
pro forma earnings per share from the perspective of First National
Shareholders. Mercer Capital did not represent or warrant that the
actual pro forma data reflected in this Proxy Statement-Prospectus
mailed to First National Shareholders would reflect that which was
developed in its analysis.
Pro Forma Net Tangible Book Value Per Share. Mercer Capital
noted that the proposed terms of the Merger would result in a
substantial increase in net tangible book value per share for First
National Shareholders. Adding (i) First National's GAAP equity of $6.3
million; (ii) proceeds of option exercise of $240,000; (iii) minimum
net proceeds of the Florida Banks IPO of $30.0 million; and subtracting
(iv) the 7% underwriting discount of $2.1 million; (v) the $606,000
cost of redeeming the Series A Preferred Stock, representing the
company's organizational cost; and (vi) the $137,500 finders fee paid
by Florida Banks to TSJ&A indicate an aggregate net tangible book value
of Florida Banks of $33.7 million. Alternate estimates of pro forma net
tangible book value can be derived by substituting in the preceding
equation First National's RAP equity of $3.8 million (before option
proceeds) and the expected maximum gross Florida Banks IPO proceeds of
$55.2 million (including full exercise of the underwriters'
over-allotment option). Pro forma shares of Florida Banks Common Stock
outstanding will include 377,800 shares outstanding prior to
consummation of the Merger and the Florida Banks IPO, new shares to be
sold to the public in the Florida Banks IPO and new shares to be issued
in exchange for shares of First National Common Stock. It was noted
that warrants are outstanding to purchase 80,800 shares of Florida
Banks Common Stock at the Florida Banks IPO Price. The warrants expire
seven years after the date of the Florida Banks IPO. First National's
diluted book value per share on a GAAP basis as of December 31, 1997
was $3.17 per share. At the minimum Florida Banks IPO proceeds and at
the expected IPO Price of $10.00 to $12.00 per share of Florida Banks
Common Stock, pro forma net tangible book value rises to $4.61 to $4.68
per exchanged share of First National Common Stock, representing an
increase of 45% to 47%. At the maximum Florida Banks IPO proceeds, net
tangible book value rises to $5.13 to $5.18 per exchanged share of
First National Common Stock, an increase of 61% to 63%. On a RAP basis,
Mercer Capital estimated the Merger to be accretive of book value per
share basis to First National
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Shareholders on the order of 100% to 150%. The transaction tends to be
more accretive of book value per share to First National Shareholders
as the IPO proceeds increase and less accretive as the IPO Price
increases.
Pro Forma Earnings Per Share. Mercer Capital noted that
Florida Banks has no history of operations and plans to expand through
further bank acquisitions and the opening of new banking offices in
Florida following consummation of the Merger and the IPO.
Implementation of the Company's business plan may imply a period of
negative or meager earnings resulting in a decrease in earnings per
share from their pre-merger level. Although, in the absence of an
operating history for Florida Banks, there is no reliable basis on
which to estimate pro forma earnings per share, Mercer Capital believed
the Merger to be more likely to prove initially dilutive rather than
accretive of pro forma earnings per share for First National
Shareholders
Other Factors. Other factors Mercer Capital considered in rendering its
opinion included: (i) the prospect of First National Shareholders' being able to
liquidate the shares of Florida Banks Common Stock received in the Merger via a
sale in the public market within two to three weeks of the Merger; (ii) the
enhancement in liquidity for First National Shareholders via the exchange of
their closely held stock for publicly traded stock; and (iii) the risks
associated with Florida Banks' expansion plans, its lack of an operating history
and the lack of a trading history for the Florida Banks Common Stock.
Mercer Capital also considered the prospect that First National
Shareholders may benefit from a future acquisition of Florida Banks given the
ongoing industry consolidation. Mercer Capital made no representation or
warranty, however, that such an event would occur, or if it did occur, that it
would occur on favorable terms.
Conclusion. Based upon all factors considered, including the overall
level of purchase consideration implied by the merger price of $6.6586 per share
of First National Common Stock and the accretive nature of the terms of the
Merger with respect to pro forma net tangible book value per share for First
National Shareholders, Mercer Capital concluded that purchase consideration
would be adequate at the date of Closing and that the proposed Merger of First
National Bank into Florida Banks was fair from a financial point of view to
First National Shareholders.
Compensation of Mercer Capital
In February 1998, First National retained Mercer Capital to assist in
effecting a transaction similar to the Merger and to act as its financial
advisor in connection with such proposed transaction. First National paid Mercer
Capital $10,000 for its services pursuant to the terms of the engagement letter.
First National also agreed to reimburse Mercer Capital for its reasonable
out-of-pocket expenses.
CONDITIONS PRECEDENT TO THE MERGER
The Merger will occur only if holders of at least two-thirds of the
First National Common Stock vote in favor of the adoption of the Merger
Agreement. Consummation of the Merger is subject to the satisfaction of certain
other conditions, including (i) the receipt of all required regulatory and
governmental consents, approvals, authorization, clearances, exemptions, waivers
and similar affirmations (including the expiration of all applicable waiting
periods following the receipt of such items), provided that such approvals shall
not have imposed any condition or restriction that, in the reasonable judgment
of either the First National Board or the
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Florida Bank Board, would so materially adversely impact the economic or
business benefits of the transactions contemplated by the Merger Agreement that,
had such condition or requirement been known, such party would not, in its
reasonable judgment, have entered into the Merger Agreement; (ii) the receipt,
with certain exceptions, of all consents required to consummate the Merger and
the preventing of any default under any contract or permit of such party which,
if not obtained or made, is reasonably likely to have, whether individually or
in the aggregate, a material adverse effect on such party; (iii) the absence of
any action by a court or governmental or regulatory authority that prohibits,
restricts or makes illegal the consummation of the transactions contemplated by
the Merger Agreement; (iv) that the Registration Statement of which this Proxy
Statement-Prospectus is a part has been declared effective, and no stop order
suspending such effectiveness, and no SEC action suit, proceeding or
investigation to suspend effectiveness has been initiated and continued, and
that all necessary approvals under state securities laws, the Securities Act or
the Exchange Act relating to the issuance or trading of the shares of Florida
Banks Common Stock issuable pursuant to the Merger have been received; (v) the
receipt of the tax opinion referred to in "The Merger--Certain Federal Income
Tax Consequences" and (vi) Florida Banks executing a definitive underwriting
agreement providing for the firm commitment underwriting of shares of Florida
Banks Common Stock having an aggregate gross purchase price of at least $30
million.
In addition, unless waived, each party's obligation to effect the
Merger is subject to the accuracy of the other party's representations and
warranties at the Effective Time, the other party's performance of its
obligations under the Merger Agreement and the receipt of certain closing
certificates and legal opinions from the other party. Florida Banks' obligation
to effect the Merger is also subject to (i) the receipt of agreements from First
National's affiliates that such affiliates will not transfer their shares of
First National Common Stock prior to consummation of the Merger or, following
consummation of the Merger, Florida Banks Common Stock except in compliance with
applicable provisions of the Securities Act and (ii) the receipt of an opinion
from Deloitte & Touche, LLP, dated as of the Effective Time, a copy of which
shall be provided to Florida Banks and the contents of which shall be acceptable
to Florida Banks in its sole discretion, to the effect that there has not been
an ownership change, as defined in Code Section 382(g), of First National that
occurred during or after any taxable period in which First National incurred a
net operating loss that carries over to any taxable period ending after December
31, 1996. The obligation of First National to effect the Merger is further
subject to (i) First National's receipt from Mercer Capital of a letter stating
that in the opinion of Mercer Capital, the consideration to be paid in the
Merger to First National Shareholders under the Merger Agreement is fair, from a
financial point of view, to the holders of First National Common Stock and (ii)
Florida Banks having delivered to the Exchange Agent the consideration to be
paid to holders of the First National Common Stock. No assurances can be
provided as to when or if all of the conditions precedent to the Merger can or
will be satisfied or waived by the party permitted to do so.
The Merger Agreement provides that, to the extent permitted by law,
either First National or Florida Banks may waive the conditions imposed with
respect to its or their respective obligations to consummate the Merger, except
for requirements that the Merger be approved by the First National Shareholders
and that all required regulatory approvals be received.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
Under the terms of the Merger Agreement, First National has agreed that
unless it obtains prior written consent from Florida Banks and except as
otherwise contemplated by the Merger Agreement, it will: (i) operate its
business only in the usual, regular and ordinary course, (ii) use its reasonable
best efforts to preserve intact its business organization and assets and to
maintain its rights and franchises, (iii) use its
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reasonable best efforts to maintain its current employee relationships and (iv)
take no action which would materially adversely affect any party's ability
either to obtain any consent required for the transactions contemplated by the
Merger Agreement without imposition of a condition or restriction which in the
reasonable judgement of the First National Board or the Florida Banks Board
would so materially adversely impact the economic or business benefits of the
transactions contemplated by the Merger Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgement, have
entered into the Merger Agreement, or to perform its covenants and agreements
under the Merger Agreement.
In addition, First National has covenanted and agreed that, until the
earlier of the Effective Time or termination of the Merger Agreement it will
not, without the prior written consent of the chief executive officer of Florida
Banks, do, or agree or commit to do, any of the following:
(a) amend the First National Charter, the First National Bylaws,
or other governing instruments of First National, except as contemplated by the
Merger Agreement;
(b) incur any additional debt obligation or other obligation for
borrowed money that exceeds $50,000 in the aggregate, except in the ordinary
course of the business of First National consistent with past practices (it
being understood and agreed that the incurrence of indebtedness in the ordinary
course of business shall include, without limitation, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Reserve Bank
or Federal Home Loan Bank, and entry into repurchase agreements fully secured by
U.S. government or agency securities), or impose, or suffer the imposition, with
certain exceptions, of any lien on any asset of First National or permit any
such lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established in
the ordinary course of business, the satisfaction of legal requirements in the
exercise of trust powers, and already existing liens);
(c) directly or indirectly repurchase, redeem, or otherwise
acquire or exchange (other than exchanges in the ordinary course under employee
benefit plans) any shares or securities convertible into any shares of the
capital stock of First National, or declare or pay any dividend or make any
other distribution in respect of its capital stock;
(d) except for the Merger Agreement, or pursuant to the exercise
of stock options outstanding on the date of the Merger Agreement and pursuant to
the terms thereof in existence on the date of the Merger Agreement, or as
disclosed under the Merger Agreement, issue, sell, pledge, encumber, authorize
the issuance of, enter into any contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of First National Common Stock or any stock appreciation
rights, or any option, warrant, conversion, or other right to acquire any such
stock, or any security convertible into any such stock;
(e) adjust, split, combine, reclassify or declare and pay any
dividend or other distribution on any capital stock of First National or issue
or authorize the issuance of any other securities in respect of or in
substitution for shares of First National Common Stock, or sell, lease, mortgage
or otherwise dispose of or otherwise encumber any shares of First National
Common Stock or any asset other than in the ordinary course of business for
reasonable and adequate consideration;
(f) except for purchases of United States Treasury securities or
United States Government agency securities, which in either case have maturities
of five years or less, purchase any
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securities or make any material investment, either by purchase of stock or
securities, contributions to capital, asset transfers, or purchase of any
assets, in any person, or otherwise acquire direct or indirect control over any
person, other than in connection with (i) foreclosures in the ordinary course of
business, (ii) acquisitions of control by First National in its fiduciary
capacity or (iii) the creation of new wholly-owned subsidiaries organized to
conduct or continue activities otherwise permitted by the Merger Agreement;
(g) grant any increase in compensation or benefits to the
officers or directors of First National (except that First National may increase
compensation of non-officer employees by up to 5% of such employee's annual
compensation if such increase is consistent with past practice), pay any
severance or termination pay or any bonus other than pursuant to written
policies or written contracts in effect on the date of the Merger Agreement and
as disclosed, enter into or amend any severance agreements with officers of
First National, or voluntarily accelerate the vesting of any stock options or
other stock-based compensation or employee benefits;
(h) enter into or amend any employment contract between First
National and any person (unless such amendment is required by law) that First
National does not have the unconditional right to terminate without liability
(other than liability for services already rendered), at any time on or after
the Effective Time;
(i) adopt any new employee benefit plan of First National or make
any material change in or to any existing employee benefit plans of First
National other than changes required by law or to maintain a plan's
tax-qualified status;
(j) make any significant change in any tax or accounting methods
or systems of internal accounting controls, except as may be appropriate to
conform to changes in tax laws or regulatory accounting requirements or GAAP;
(k) commence any litigation other than in accordance with past
practice or settle any litigation involving any liability of First National for
material money damages or restrictions upon the operations of First National
without first consulting with Florida Banks;
(l) except in the ordinary course of business, modify, amend or
terminate any material contract, other than renewals without a material adverse
change of terms, or waive, release, compromise or assign any material rights or
claims;
(m) make any investment in excess of $50,000 either by purchase
of stock or securities, contributions to capital, property transfers, or
purchases of any property or assets of any other individual, corporation or
other entity other than a wholly-owned subsidiary of First National; or
(n) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties or assets to any individual, corporation or other
entity other than a direct or indirect wholly-owned subsidiary of First
National, or cancel, release or assign any indebtedness to any such person or
any claims held by any such person, except in the ordinary course of business
consistent with past practice or pursuant to contracts or agreements in force at
the date of the Merger Agreement.
The Merger Agreement also provides that until the Effective Date or
termination of the Merger Agreement, neither First National nor its
representatives will directly or indirectly solicit any tender offer or
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exchange offer or any proposal for a merger, acquisition of all of the stock or
assets of, or other business combination involving First National, or any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the assets of, First National ("Acquisition Proposal"),
except with respect to the Merger Agreement. Additionally, except to the extent
necessary to comply with the fiduciary duties of the First National Board, as
advised by counsel, neither First National nor its affiliates or representatives
will provide any nonpublic information that it is not legally obligated to
furnish or negotiate with respect to any Acquisition Proposal, although First
National may communicate information about such Acquisition Proposal to its
shareholders if and to the extent that it is required to do so in order to
comply with its legal obligations. Finally, First National agreed (i) to notify
Florida Banks orally and in writing if it receives any inquiry or proposal
relating to any such transaction and (ii) immediately to cease and cause to be
terminated any existing activities, discussions or negotiations with any persons
conducted heretofore with respect to any of the foregoing and direct and to use
its reasonable best efforts to cause its representatives not to engage in any of
the foregoing.
In the Merger Agreement, Florida Banks covenanted and agreed that until
the earlier of the Effective Time or termination of the Merger Agreement it will
(i) continue to conduct its business and the business of its subsidiaries in a
manner reasonably designed to enhance the long-term value of the Florida Banks
Common Stock and Florida Banks' business prospects and (ii) take no action that
would materially adversely affect any party's ability to (a) obtain any consents
or approvals required to effect the transactions contemplated by the Merger
Agreement without imposition of a condition or restriction which in the
reasonable judgment of the Florida Banks Board or the First National Board would
so materially adversely impact the economic or business benefits of the
transactions contemplated by the Merger Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into the Merger Agreement or (b) perform its covenants and agreements
under the Merger Agreement; provided that if Florida Banks determines it to be
desirable in the conduct of its business, Florida Banks may discontinue or
dispose of any of its assets or business. Florida Banks further covenanted and
agreed that it will not, without the prior written consent of the chairman and
chief executive officer of First National, which consent will not be
unreasonably withheld, amend the Florida Banks Charter or the Florida Banks
Bylaws in any manner adverse to the First National Shareholders. Florida Banks
also agreed that it will not issue additional shares of Florida Banks Common
Stock or preferred stock until the Effective Time
AMENDMENT, WAIVER AND TERMINATION
To the extent permitted by law, the Merger Agreement may be amended by
a subsequent writing signed by each party upon the approval of each of their
respective Boards of Directors, whether before or after the First National
Shareholders have approved the Merger Agreement. However, after the First
National Shareholders have approved the Merger Agreement, the Merger Agreement
may not be amended in any way that would materially reduce or modify the
consideration to be received by the First National Shareholders without the
further approval of the First National Shareholders entitled to vote thereon.
The Merger Agreement provides that on or before the Effective Time,
either party may, in a writing signed by a duly authorized officer: (i) waive
any default in the performance of any term of the Merger Agreement by the other
party, (ii) waive or extend the time for compliance of fulfillment by the other
party of any and all of its obligations under the Merger Agreement and (iii)
waive any or all of the conditions precedent to its obligations under the Merger
Agreement to the extent legally permitted. However, either party's failure at
any time to require performance of any provision of the Merger Agreement will in
no manner affect that party's right at a later time to enforce such provision or
any other provision of the Merger
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Agreement. No waiver of any condition or breach of any term of the Merger
Agreement will be deemed to be or construed as a further or continuing waiver of
such condition or breach or a waiver of any other condition or of the breach of
any other term of the Merger Agreement.
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time: (i) by mutual written agreement of the Florida
Banks Board and the First National Board; (ii) by either the Florida Banks Board
or the First National Board: (a) in the event of the inaccuracy of any
representation or warranty of the other party contained in the Merger Agreement
which cannot be or has not been cured within 30 days of written notice of such
inaccuracy and which inaccuracy would provide the terminating party the ability
to refuse to consummate the Merger under the applicable standard set forth in
the Merger Agreement; provided that such terminating party is not then in breach
of any representation or warranty contained in the Merger Agreement or in
material breach of any covenant or other agreement contained in the Merger
Agreement; (b) in the event of a material breach by the other party of any
covenant, agreement or obligation in the Merger Agreement which breach cannot be
or has not been cured within 30 days of written notice of such breach; (c) if
the required approval of the First National Shareholders or any applicable
regulatory authority is not obtained; (d) if the Merger is not consummated by
September 30, 1998; provided that the failure to consummate the Merger by such
date is not caused by the terminating party's breach of the Merger Agreement or
(e) if any of the conditions precedent to the obligations of the terminating
party to consummate this Merger cannot be satisfied or fulfilled by September
30, 1998; provided that the terminating party is not then in breach of any
representation or warranty contained in the Merger Agreement or of any covenant
or other agreement contained in the Merger Agreement.
In addition, Florida Banks may terminate the Merger Agreement if: (i)
persons owning in the aggregate more than 10% of the issued and outstanding
shares of First National Common Stock perfect their dissenters' rights or (ii)
First National does not receive the tax opinion referred to in " The
Merger--Certain Federal Income Tax Consequences." In addition, First National
may terminate the Merger Agreement if, prior to the Effective Time: (i) Mercer
Capital withdraws its fairness opinion or (ii) the First National Board receives
a bona fide Acquisition Proposal that the First National Board determines in its
good faith judgment and in the exercise of its fiduciary duties, with respect to
legal matters based on the written opinion of legal counsel and as to financial
matters on the written opinion of an investment banking firm of national
reputation, is more favorable to the First National Shareholders than the Merger
and the transactions contemplated thereby and that the failure to terminate the
Merger Agreement and accept such alternative Acquisition Proposal would be
inconsistent with the proper exercise of such fiduciary duties (each of the
foregoing a "Termination Event"). There can be no assurance that either the
Florida Banks Board or the First National Board would exercise its right to
terminate the Merger Agreement if a Termination Event exists. In making such
decision, both the Florida Banks Board and the First National Board would,
consistent with their respective fiduciary duties, take into account all
relevant facts and circumstances that exist at such time, and would consult with
its financial advisors and legal counsel.
The Merger Agreement will become void and have no effect if terminated
and abandoned, except that the parties will continue to be bound by certain
obligations described below under "The Merger--Expenses." In addition, the
parties will continue to be obligated to provide current information to one
another and will have certain other continuing obligations under the Merger
Agreement. In addition, a termination resulting from the breach of either party
or from the assertion by persons holding more than 10% of the issued and
outstanding First National Common Stock of dissenters' rights, will not relieve
the breaching party from liability for an uncured willful breach of a
representation, warranty, covenant, or
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agreement giving rise to such termination; provided, further, that under certain
circumstances, First National or Florida Banks may be entitled to receive
certain payments. See "The Merger--Expenses."
By approving the Merger Agreement at the Special Meeting, the First
National Shareholders will confer on the First National Board the power,
consistent with its fiduciary duties, to elect to consummate the Merger in the
event of a Termination Event without any further action by, or resolicitation
of, the First National Shareholders.
EXPENSES
Each of the parties to the Merger Agreement has agreed to pay its own
costs and expenses in connection with the Merger and the transactions
contemplated thereby except that Florida Banks and First National have agreed to
each pay one-half of the costs associated with printing this Proxy Statement-
Prospectus and related materials; provided, however, that in the event the
Merger Agreement is terminated following the occurrence of an Initial Triggering
Event (as defined in the Merger Agreement), subject to certain exceptions
enumerated in the Merger Agreement, Florida Banks will be entitled to receive a
cash payment from First National in an amount equal to $1,000,000 upon (i) any
person, other than an existing shareholder, acquiring beneficial ownership of at
least 25% of the-then outstanding First National Common Stock or (ii) the
occurrence within 12 months following the termination date of an Initial
Triggering Event constituting a First National Acquisition Transaction, except
that if the Acquisition Transaction is a purchase of First National securities,
no payment will be due unless the acquired percentage is at least 25%. If the
Merger Agreement is terminated as a result of either party's failure to satisfy
any of its representations, warranties or covenants set forth therein, the
non-terminating party will reimburse the terminating party for its reasonable
out-of-pocket expenses relating to the Merger in an amount not to exceed
$250,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Smith, Gambrell & Russell, LLP has delivered to Florida Banks and First
National its opinion that, based upon certain customary assumptions and
representations, under federal law as currently in effect, (a) the proposed
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code; (b) First National Shareholders will recognize no gain or loss on the
exchange of their First National Common Stock for Florida Banks Common Stock
pursuant to the terms of the Merger to the extent of such exchange, except to
the extent of any cash received; (c) the federal income tax basis of the Florida
Banks Common Stock for which shares of First National Common Stock are exchanged
pursuant to the Merger will be the same as the basis of such First National
Common Stock exchanged therefor (including basis allocable to any fractional
interest in any share of Florida Banks Common Stock); (d) the holding period of
Florida Banks Common Stock for which shares of First National Common Stock are
exchanged will include the period that such shares of First National Common
Stock were held by the holder, provided that such shares were capital assets of
the holder; (e) the receipt of cash in lieu of fractional shares will be treated
as if the fractional shares were distributed as part of the exchange and then
redeemed by Florida Banks, and gain or loss will be recognized in an amount
equal to the difference between the cash received and the basis of the
fractional share of Florida Banks Common Stock surrendered, which gain or loss
will be capital gain or loss if the First National Common Stock was a capital
asset in the hands of the shareholder; and (f) a holder of First National Common
Stock who exercises dissenters' rights will recognize capital gain or loss equal
to the difference between the cash received and such holder's tax basis in the
First National Common Stock exchanged.
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THE FOREGOING IS A SUMMARY OF THE ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED MERGER UNDER THE CODE AND IS FOR GENERAL
INFORMATION ONLY. THE FOREGOING SUMMARY DOES NOT INCLUDE CONSEQUENCES OF STATE,
LOCAL OR OTHER TAX LAWS OR SPECIAL CONSEQUENCES TO PARTICULAR SHAREHOLDERS
HAVING SPECIAL SITUATIONS. FIRST NATIONAL SHAREHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS REGARDING SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE AND LOCAL TAX LAWS AND
TAX CONSEQUENCES OF SUBSEQUENT SALES OF FLORIDA BANKS COMMON STOCK.
IT IS A CONDITION PRECEDENT TO THE MERGER THAT FIRST NATIONAL RECEIVE
FROM DELOITTE & TOUCHE LLP AN OPINION, WITH CONTENTS ACCEPTABLE TO FLORIDA BANKS
IN ITS SOLE DISCRETION, THAT THERE HAS BEEN NO OWNERSHIP CHANGE, AS DEFINED IN
SECTION 382(G) OF THE CODE, OF FIRST NATIONAL THAT OCCURRED DURING OR AFTER ANY
TAXABLE PERIOD IN WHICH FIRST NATIONAL INCURRED A NET OPERATING LOSS THAT
CARRIES OVER TO ANY TAXABLE PERIOD ENDING AFTER DECEMBER 31, 1996.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General
Certain members of First National's management and the First National
Board have interests in the Merger in addition to any interests they may have as
First National Shareholders generally. As hereinafter described, these interests
include, among others, the indemnification of First National directors and
officers, the payment of a directors' termination fee to any member of the First
National Board who will not become an advisory director to First National
following consummation of the Merger, member of the Florida Banks Board or
executive officer of Florida Banks following the Effective Time, and certain
employee benefits.
Indemnification
Under the Merger Agreement, Florida Banks has agreed that it will, and
will cause the Resulting Bank to, indemnify, defend and hold harmless the
current and former directors, officers, employees and agents of First National
against all costs, fees or expenses (including reasonable attorney's fees),
judgments, fines, penalties, losses, claims, damages, liabilities and amounts
paid in settlement of any litigation arising out of actions or omissions
occurring on or before the Effective Time (including the transactions
contemplated by the Merger Agreement) to the fullest extent permitted under
Florida law and by the First National Charter and First National Bylaws as in
effect on the date of the Merger Agreement, including provisions relating to
advances of expenses incurred in defense of any litigation. If Florida Banks'
approval is required to effectuate any indemnification, Florida Banks will
direct, at the indemnified party's election, for independent counsel mutually
agreed upon between Florida Banks and the indemnified party to determine such
approval.
Directors' Termination Fee
At the Effective Time, Florida Banks will pay $25,000 in cash to each
member of the First National Board who will not, upon consummation of the
Merger, become either a local advisory director of First National or a director
or executive officer of Florida Banks; provided, that to receive such cash
payment, the director must execute an agreement with Florida Banks whereby the
director (i) agrees not to compete with Florida Banks or any of its affiliates
for a period of one year after the Effective Time and (ii) releases First
National, Florida Banks and their directors and officers from any claims or
causes of action which may have arisen or occurred at any time before the
Effective Time.
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Matters Relating to First National Employee Benefit Plans
Under the Merger Agreement, Florida Banks has agreed that following the
Effective Time, it will provide generally to continuing officers and employees
of First National employee benefits under employee benefit plans (other than
stock option or other plans involving the potential issuance of Florida Banks
Common Stock), on terms and conditions which when taken as a whole are no less
favorable than those provided by First National or those provided by Florida
Banks to their similarly situated officers and employees as of the date of the
Merger Agreement. For purposes of participation and vesting (but not benefit
accrual under any employee benefit plans of Florida Banks other than the First
National benefit plans) under such employee benefit plans, the service of the
employees of First National prior to the Effective Time will be treated as
service with Florida Banks participating in such employee benefit plans. Florida
Banks will honor according to their terms all employment, severance, consulting,
and other compensation contracts disclosed by First National pursuant to the
Merger Agreement between First National and any current or former director,
officer, or employee thereof, and for all provisions for vested benefits or
other vested amounts earned or accrued through the Effective Time under the
First National benefit plans.
Management Contracts
Florida Banks has agreed to provide written employment contracts to
Messrs. John S. McMullen and T. Edwin Stinson, Jr., which will take effect at
the Effective Time. The employment contracts must be executed within 30 days
following the date of the Merger Agreement. If the parties are unable to execute
the respective employment contracts within that period, Messrs. McMullen and
Stinson will retain and be governed by their respective employment agreements
with First National.
DISSENTERS' RIGHTS OF FIRST NATIONAL SHAREHOLDERS
Pursuant to the National Bank Act, each First National Shareholder
entitled to vote on the adoption of the Merger Agreement who objects to the
Merger will be entitled to the rights and remedies of dissenting shareholders
provided under Section 215a, the text of which is included in Appendix B to this
Proxy Statement-Prospectus and is incorporated herein by reference, and any such
First National Shareholder who follows the procedures specified in Section 215a
will be entitled to receive the value of his or her shares of First National
Common Stock in cash. A FIRST NATIONAL SHAREHOLDER MUST COMPLY STRICTLY WITH THE
PROCEDURES SET FORTH IN SECTION 215A. FAILURE TO FOLLOW ANY OF THOSE PROCEDURES
MAY RESULT IN A TERMINATION OR WAIVER OF HIS OR HER DISSENTERS' RIGHTS.
To perfect dissenters' rights, a holder of shares of First National
Common Stock must (a) vote against the Merger or otherwise notify the Secretary
of First National in writing at or prior to the Special Meeting that he or she
dissents from the Merger and (b) within thirty days after the Closing of the
Merger, deliver to Florida Banks a written request for the cash value of his or
her shares of First National Common Stock, accompanied by the surrender of
certificates representing his or her shares of First National Common Stock. IN
NO EVENT WILL ANY SHAREHOLDER BE ENTITLED TO DISSENTERS' RIGHTS IF HE OR SHE
VOTES "FOR" THE ADOPTION OF THE MERGER AGREEMENT. Before the Closing of the
Merger, dissenting First National Shareholders should send any communications
regarding their rights to First National Bank, 100 West Kennedy Boulevard,
Tampa, Florida 33602, Attention: Secretary. At or after the Closing of the
Merger, dissenting shareholders should send any communications regarding their
rights to Florida Banks, Inc., 4110 Southpoint Boulevard, Suite 212, Southpoint
Square II, Jacksonville, Florida 32216-0925, Attention: Secretary. All
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communications should be signed by or on behalf of the dissenting First
National Shareholder in the form in which his or her shares are registered on
the books of First National.
The value of the shares of First National Common Stock held by a
dissenting shareholder will be determined, as of the Effective Time, by a
committee of three appraisers, of which one is to be selected by the holders of
a majority of the shares of First National Common Stock whose owners have
exercised their dissenters' rights, one is to be selected by the Florida Banks
Board and one is to be selected by the two appraisers so selected. The valuation
agreed upon by any two of the three appraisers will govern. Any dissenting
shareholder who does not find satisfactory the value fixed by the appraisers
may, within five days after being notified of the appraised value of his or her
shares, appeal to the OCC, and the OCC will thereafter cause a reappraisal to be
made that will be final and binding as to the value of the shares of such
shareholder. If for any reason one or more of the appraisers remains unselected
after 90 days from the Closing of the Merger, or the selected appraisers fail to
determine the value of the shares of First National Common Stock within such
90-day period, the OCC will cause a final and binding appraisal of such shares
to be made upon the written request of any interested party. Florida Banks will
pay the expenses of the OCC in making any appraisal or reappraisal described
above.
Florida Banks will promptly pay dissenting shareholders the value of
their shares of First National Common Stock following their appraisal. The
shares of Florida Banks Common Stock that would have been delivered to the
dissenting First National shareholders had they not requested payment in
accordance with Section 215a must be sold at any advertised public auction, and
Florida Banks has the right to purchase any or all of such shares at such
auction if it is the highest bidder, for the purpose of reselling such shares
within thirty days thereafter. Any excess of the public auction price of shares
of Florida Banks Common Stock over the amount paid to the dissenting First
National Shareholders must be paid to the dissenting shareholders.
THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF THE RIGHTS AND
OBLIGATIONS OF A DISSENTING SHAREHOLDER AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PROVISIONS OF THE DISSENTERS' RIGHTS STATUTE, SECTION 215A,
WHICH IS REPRODUCED IN FULL AS APPENDIX B TO THIS PROXY STATEMENT-PROSPECTUS.
Florida Banks has the right to terminate the Merger at any time before
the Effective Time if holders of at least 10% of the outstanding First National
Common Stock legally assert dissenting shareholders' rights. See "The
Merger--Amendment, Waiver and Termination."
ACCOUNTING TREATMENT
Because, upon consummation of the Merger, former First National
Shareholders will own more than 50% of the outstanding Florida Banks Common
Stock (not including shares issued in the Florida Banks IPO), the Merger will be
accounted for as if First National had acquired Florida Banks. The Merger will
be accounted for under the purchase method of accounting, the financial
statements of First National will become Florida Banks' historical financial
statements and no goodwill will be recorded on Florida Banks' balance sheet as a
result of the Merger.
BANK REGULATORY MATTERS
The Merger is subject to prior approval by the Federal Reserve Board
and the OCC. In determining whether to approve a transaction such as the Merger,
the Federal Reserve Board and the OCC consider the financial and managerial
resources (including the competence, experience and integrity of the officers,
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directors and principal shareholders) and future prospects of the existing and
proposed institutions and the convenience and needs of the communities to be
served. In considering financial resources and future prospects, the Federal
Reserve Board and the OCC, among other things, evaluate the adequacy of the
capital levels of the parties to a proposed transaction.
The Bank Holding Company Act ("BHCA") prohibits the Federal Reserve
Board from approving a merger if it would result in a monopoly or would be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or if its
effect in any section of the country would be substantially to lessen
competition or to tend to create a monopoly, or if it would in any other manner
result in a restraint of trade, unless the Federal Reserve Board finds that the
anti-competitive effects of a merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. In addition, the Community
Reinvestment Act of 1977, as amended, obligates the Federal Reserve Board and
the OCC to take into account the record of performance of the existing
institutions in meeting the credit needs of the entire community, including low-
and moderate-income neighborhoods, served by such institutions.
Applicable federal law provides for the publication of notice and
public comment on applications filed with the Federal Reserve Board and the OCC
and authorizes such agencies to permit interested parties to intervene in the
proceedings. If an interested party is permitted to intervene, such intervention
could delay the regulatory approvals required for consummation of the Merger.
The Merger generally may not be consummated until between 15 and 30
days following the date of applicable federal regulatory approval, during which
time the United States Department of Justice (the "DOJ") may challenge the
Merger on antitrust grounds. The commencement of an antitrust action would stay
the effectiveness of the regulatory agency's approval unless a court
specifically ordered otherwise. Florida Banks and First National believe that
the Merger does not raise substantial antitrust or other significant regulatory
concerns.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION
Florida Banks and First National have filed all applications and
notices and have taken (or will take) other appropriate action with respect to
any requisite approvals or other actions of any governmental authority. Florida
Banks has submitted an application to the Federal Reserve Board seeking approval
of the Merger.
The Merger Agreement provides that the obligation of each of Florida
Banks and First National to consummate the Merger is conditioned upon the
receipt of all requisite regulatory approvals. There can be no assurance that
any governmental agency will approve or take any other required action with
respect to the Merger, and, if approvals are received or action is taken, there
can be no assurance as to the date of such approvals or action, that such
approvals or action will not be conditioned upon matters that would cause the
parties to abandon the Merger, or that no action will be brought challenging
such approvals or action, including a challenge by the DOJ or, if such a
challenge is made, the result thereof.
Florida Banks and First National are not aware of any governmental
approvals or actions that may be required for consummation of the Merger other
than as described above. Should any other approval or action be required,
Florida Banks and First National currently contemplate that such approval or
action would be sought.
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THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE DATES OF ANY SUCH APPROVALS. THERE CAN ALSO BE NO
ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION OR REQUIREMENT WHICH
CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET FORTH IN THE MERGER
AGREEMENT. SEE "-- CONDITIONS PRECEDENT TO THE MERGER." THERE LIKEWISE CAN BE NO
ASSURANCE THAT THE DOJ WILL NOT CHALLENGE THE MERGER, OR, IF SUCH A CHALLENGE IS
MADE, AS TO THE RESULT THEREOF.
See "The Merger--Effective Time of the Merger," "--Conditions Precedent
to the Merger" and "--Amendment, Waiver and Termination."
RESTRICTIONS ON AFFILIATE RESALES
Shares of Florida Banks Common Stock to be issued to First National
Shareholders in the Merger have been registered under the Securities Act and may
be traded freely and without restriction by shareholders not deemed to be
"affiliates" of First National or Florida Banks, as that term is defined under
the Securities Act. Any subsequent transfer of such shares, however, by any
person who is an affiliate of First National at the time the Merger is submitted
for vote or consent of the First National Shareholders will, under existing law,
require either (a) the further registration under the Securities Act of the
shares of Florida Banks Common Stock to be transferred, (b) compliance with Rule
145 promulgated under the Securities Act (permitting limited sales under certain
circumstances) or (c) the availability of another exemption from registration.
An "affiliate" of First National, as defined by the rules promulgated pursuant
to the Securities Act, is a person who directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with
First National. The foregoing restrictions are expected to apply to the
directors, executive officers and the beneficial holders of 10% or more of the
First National Common Stock (and to certain relatives or the spouse of any such
person and any trusts, estates, corporations or other entities in which any such
person has a 10% or greater beneficial or equity interest). Florida Banks will
provide stop transfer instructions to the transfer agent with respect to the
Florida Banks Common Stock to be received by persons subject to the restrictions
described above. First National has agreed that, not later than 30 days prior to
the Effective Time, it will use its best efforts to cause each of those persons
identified by First National as affiliates to deliver to Florida Banks
appropriate agreements that each such individual will not transfer or otherwise
dispose of the shares of First National Common Stock held by such person except
in accordance with such agreement or make any further sales or otherwise dispose
of shares of Florida Banks Common Stock received upon consummation of the Merger
except in compliance with the restrictions described in this paragraph.
RECOMMENDATION OF THE FIRST NATIONAL BOARD.
THE FIRST NATIONAL BOARD HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE FIRST NATIONAL SHAREHOLDERS
VOTE TO ADOPT THE MERGER AGREEMENT.
Each member of the First National Board has agreed to vote his shares
of First National Common Stock in favor of the adoption of the Merger Agreement.
See "The Merger -- Interests of Certain Persons in the Merger."
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
There is no established public market for either the Florida Banks or
First National Common Stock. As of the Record Date, there were [2,065,000]
shares of First National Common Stock issued and outstanding held by [83]
holders of record. In view of the extremely limited volume of transfers and the
lack of reliable pricing information (because such information is not required
to be forwarded to First National), management believes that the prices paid for
the First National Common Stock would not provide a reliable or relevant
indication of the value of First National Common Stock.
Florida Banks has filed an application requesting that the Florida
Banks Common Stock be approved for quotation on the Nasdaq National Market.
DIVIDENDS
Florida Banks has not declared or distributed any dividends to the
holders of Florida Bank Common Stock since Florida Banks' organization, and it
is not likely that any cash dividends will be declared for the foreseeable
future. The Florida Banks Board intends, for the foreseeable future, to follow a
policy of retaining any earnings of Florida Banks to provide funds to operate
and expand the business of Florida Banks and First National.
The national banking laws and OCC regulations restrict First National's
ability to pay dividends. Pursuant to 12 U.S.C. ss. 56, a national bank may not
pay dividends from its capital. All dividends must be paid out of net profits
then on hand, after deducting losses and bad debts. Payments of dividends out of
net profits is further limited by 12 U.S.C. ss. 60(a), which prohibits a bank
from declaring a dividend on its shares of common stock until its surplus equals
its stated capital, unless at least one-tenth of the bank's net profits of the
preceding two consecutive half year periods (in the case of an annual dividend)
have been transferred to surplus. Pursuant to 12 U.S.C. ss. 60(b), OCC approval
is required if the total of all dividends declared by the bank in any calendar
year exceeds the total of its net profits for that year combined with its
retained net profits for the preceding two years, less any required transfers to
surplus.
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INFORMATION ABOUT FLORIDA BANKS
GENERAL
Florida Banks, Inc. (the "Company") was incorporated on October 15,
1997 to create a statewide community banking system focusing on the largest and
fastest growing markets in Florida. Immediately prior to the closing of the
Florida Banks IPO, Florida Banks will acquire First National Bank of Tampa
("First National") as its entry into the Tampa/Hillsborough County market area.
Florida Banks intends to open a community banking office in the Jacksonville
market area as soon as practicable following consummation of the Florida Banks
IPO. Future business plans include further expansion in the Tampa/Hillsborough
County and Jacksonville market areas and entry into the markets of
Orlando/Orange County, Ft. Lauderdale/Broward County and the Palm Beaches
(collectively, the "Identified Markets"). As opportunities arise, Florida Banks
also intends to expand into other Florida market areas with demographic
characteristics similar to the Identified Markets. Within each of the Identified
Markets, Florida Banks expects to offer a broad range of traditional banking
products and services, focusing primarily on small and medium-sized businesses.
See "Information About Florida Banks--Strategy of Florida Banks--Market
Expansion" and "--Products and Services."
Florida Banks will have a community banking approach that emphasizes
responsive and personalized service to its customers. Management's expansion
strategy includes attracting strong local management teams who have significant
banking experience, strong community contacts and strong business development
potential in the Identified Markets. Once local management teams are identified,
Florida Banks intends to establish community banking offices in each of the
Identified Markets. Each management team will operate one or more community
banking offices within its particular market area, will have a high degree of
local decision-making authority and will operate in a manner that provides
responsive, personalized services similar to an independent community bank
("Community Banking Office"). Florida Banks will maintain centralized credit
policies and procedures as well as centralized back office functions to support
the Community Banking Offices. Management expects that upon Florida Banks' entry
into a new market area, it will undertake a marketing campaign utilizing an
officer calling program and community-based promotions. In addition, management
will be compensated based on loan production goals, and each market area will be
supported by a local board of advisory directors, which will be provided with
financial incentives to assist in the development of banking relationships
throughout the community. See "Information About Florida Banks--Model 'Local
Community Bank.'"
Management of Florida Banks believes that the significant consolidation
in the banking industry in Florida has disrupted customer relationships as the
larger regional financial institutions increasingly focus on larger corporate
customers, standardized loan and deposit products and other services. Generally,
these products and services are offered through less personalized delivery
systems which has created a need for higher quality services to small and
medium-sized businesses. In addition, consolidation of the Florida banking
market has dislocated experienced and talented management personnel due to the
elimination of redundant functions and the need to achieve cost savings. As a
result of these factors, management believes Florida Banks has a unique
opportunity to attract and maintain its targeted banking customers and
experienced management personnel within the Identified Markets.
The Community Banking Offices within each market area will be supported
by centralized back office operations. From Florida Banks' main offices located
in Jacksonville and First National and its operations center in Tampa, Florida
Banks will provide a variety of support services to each of the
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Community Banking Offices, including back office operations, investment
portfolio management, credit administration and review, human resources,
administration, training and strategic planning. Core processing, check clearing
and other similar functions will be outsourced to major vendors. As a result,
these operating strategies will enable Florida Banks to achieve cost
efficiencies and to maintain consistency in policies and procedures and allow
the local management teams to concentrate on developing and enhancing customer
relationships.
Florida Banks expects to establish Community Banking Offices in each
new market area, primarily through the de novo branching of First National.
Management will also, however, evaluate opportunities for strategic acquisitions
of financial institutions in markets that are consistent with its business plan.
INDUSTRY AND DEMOGRAPHIC OVERVIEW
Management of Florida Banks believes that consolidation within the
banking industry in Florida has created a unique opportunity to build a
successful, locally-oriented banking system. According to the Federal Deposit
Insurance Corporation ("FDIC"), as of December 31, 1987, 560 depository
institutions were located in Florida. By December 31, 1997, there were a total
of 313 depository institutions in Florida, representing a decline of
approximately 44% over the ten-year period. Management attributes this decline
to the liberalization of interstate banking and branching laws allowing the
entry into, and expansion in, Florida by numerous large bank holding companies.
The result of this acquisition activity has been a significant reduction in the
number of community-oriented financial institutions focusing on personalized
service to small and medium-sized business customers. Management of Florida
Banks believes that Florida Banks' strategy, which is based on a community bank
model, is better suited to provide a high level of service to smaller commercial
or individual retail customers than larger financial institutions.
Management of Florida Banks believes that the State of Florida in
general and the Identified Markets in particular have vibrant and growing
economies and represent an attractive opportunity to build a statewide community
banking system. According to the Bureau of Economic and Business Research at the
University of Florida, Florida's current population of approximately 14.4
million makes it the fourth most populated state in the country. From 1990 to
1997, Florida ranked second among the ten most populated states in terms of
percentage population growth. Florida's economy has broadened from a base of
tourism, agriculture and retirement living to become increasingly dependent on
industrial and commercial trade. According to the Bureau of Labor Statistics,
during 1996, nonagricultural employment in Florida increased by 3.1% which was
substantially above the national rate of 2.2%. In 1997, Florida ranked fourth
nationally in terms of total job growth. Management believes that Florida's
major metropolitan areas have benefited the most from this economic and
population expansion. Florida has experienced substantial growth in the amount
of commercial and consumer deposits. As of June 30, 1997, commercial and
consumer deposits in Florida totaled approximately $200 billion, an increase of
$13.9 billion for the period from June 30, 1994 to June 30, 1997.
HISTORY OF FLORIDA BANKS
The concept for Florida Banks was developed in late 1997 by T. Stephen
Johnson & Associates, Inc., a financial services consulting firm ("TSJ&A").
Florida Banks was organized under the laws of the State of Florida on October
15, 1997 to implement this concept. TSJ&A evaluated potential bank acquisition
candidates in various Florida markets and identified First National as an
independent financial institution capable of providing a platform to implement
Florida Banks' business plan. Florida Banks and First National
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commenced preliminary merger negotiations late in 1997, and the parties signed a
letter of intent in January 1998.
Simultaneously with the search for an acquisition candidate, Florida
Banks sought a chief executive officer who possessed the experience, leadership
skills and management ability to accomplish Florida Banks' objectives. In
January 1998, Florida Banks hired Charles E. Hughes, Jr. to be the President and
Chief Executive Officer of Florida Banks. Prior to joining Florida Banks, Mr.
Hughes served as Chairman, President and Chief Executive Officer of SouthTrust
Bank of Florida, N.A. which, as of June 1997, had approximately $5.4 billion in
total deposits. Florida Banks believes that the combination of Mr. Hughes'
experience in the Florida banking industry, his extensive network of contacts
throughout the state and his management skills will provide the leadership
necessary for Florida Banks to implement its business strategy.
On March 30, 1998, Florida Banks executed a definitive merger agreement
with First National, pursuant to which Florida Banks will acquire all of the
outstanding capital stock of First National in exchange for shares of Florida
Banks Common Stock. The aggregate purchase price for First National will be
$13.75 million. The total number of shares of Florida Banks Common Stock to be
issued in the Merger will be based upon the IPO Price of the Florida Banks
Common Stock. The Merger will be accounted for as if First National had acquired
Florida Banks, the financial statements of First National will become the
historical financial statements of Florida Banks and there will be no goodwill
recorded as a result of the Merger. As of December 31, 1997 and for the fiscal
year ended December 31, 1997, First National reported total assets of $60.4
million, total shareholders' equity of $6.3 million and net income of $376,000.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "The Merger."
STRATEGY OF FLORIDA BANKS
General
Florida Banks' business strategy is to create a statewide community
banking system in Florida. The major elements of this strategy are to:
- EXPAND FIRST NATIONAL'S OPERATIONS IN THE TAMPA MARKET AND,
AS SOON AS PRACTICABLE FOLLOWING THE FLORIDA BANKS IPO,
COMMENCE OPERATIONS IN THE JACKSONVILLE MARKET;
- ESTABLISH COMMUNITY BANKING OFFICES IN EACH OF THE THREE
REMAINING IDENTIFIED MARKETS AS SOON AS LOCAL MANAGEMENT
TEAMS ARE IDENTIFIED;
- ESTABLISH COMMUNITY BANKING OFFICES WITH LOCALLY RESPONSIVE
MANAGEMENT TEAMS EMPHASIZING A HIGH LEVEL OF PERSONALIZED
CUSTOMER SERVICE;
- TARGET SMALL AND MEDIUM-SIZED BUSINESS CUSTOMERS THAT
REQUIRE THE ATTENTION AND SERVICE WHICH A COMMUNITY-ORIENTED
BANK IS WELL SUITED TO PROVIDE;
- PROVIDE A BROAD ARRAY OF TRADITIONAL BANKING PRODUCTS AND
SERVICES;
- MAINTAIN CENTRALIZED SUPPORT FUNCTIONS, INCLUDING BACK
OFFICE OPERATIONS, CREDIT POLICIES AND PROCEDURES,
INVESTMENT PORTFOLIO MANAGEMENT, ADMINISTRATION,
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HUMAN RESOURCES AND TRAINING, TO MAXIMIZE OPERATING
EFFICIENCIES AND FACILITATE RESPONSIVENESS TO CUSTOMERS; AND
- OUTSOURCE CORE PROCESSING AND BACK ROOM OPERATIONS TO
INCREASE EFFICIENCIES.
Model "Local Community Bank"
In order to achieve its expansion strategy, Florida Banks initially
intends to establish a Community Banking Office within each Identified Market
through the branching of First National. Florida Banks may, however, accomplish
its expansion strategy by acquiring existing banks within an Identified Market
if an opportunity for such an acquisition becomes available. Although each
Community Banking Office will legally be a branch of First National, Florida
Banks' business strategy envisions that Community Banking Office(s) located
within each market will operate as if it were an independent community bank.
Prior to expanding into a new market area, management of Florida Banks
first will identify an individual who will serve as the president of that
particular market area, as well as those individuals who will serve on the local
advisory board of directors. Florida Banks believes that a management team that
is familiar with the needs of its community can provide higher quality
personalized service to its customers. The local management team will have a
significant amount of decision-making authority and will be accessible to its
customers. As a result of the consolidation trend in Florida, management of
Florida Banks believes there are significant opportunities to attract
experienced bank managers who would like to join an institution promoting a
community banking concept.
Within each market area, the Community Banking Office will have a local
advisory board of directors which will be comprised of prominent members of the
community, including business leaders and professionals, and it is anticipated
that certain members of the local advisory boards may serve as members of the
Florida Banks Board and the First National Board. These directors will act as
ambassadors of First National within the community and will be expected to
promote the business development of each Community Banking Office.
Florida Banks will encourage both the members of its local boards of
directors as well as its lending officers to be active in the civic, charitable
and social organizations located in the local communities. It is anticipated
that members of the local management team will hold leadership positions in a
number of community organizations and continue to volunteer for other positions
in the future.
Management expects that upon Florida Banks' entry into a new market
area, it will undertake a marketing campaign utilizing an officer calling
program and community-based promotions and media advertising. A primary
component of management compensation will be based on loan production goals.
Such campaigns will emphasize each Community Banking Office's local
responsiveness, local management team and special focus on personalized service.
The initial Community Banking Office established in an Identified
Market will have the following banking personnel: a President, a Senior Lender,
an Associate Lending Officer, a Credit Analyst, a Branch/Operations Manager and
an appropriate number of financial service managers and tellers. Additional
Community Banking Offices opened within an Identified Market will be staffed
with appropriate personnel. The number of financial service managers and tellers
necessary will be dependent upon the volume of business. Each Community Banking
Office will also be staffed with enough administrative assistants to assist
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the officers effectively in their duties and to enable them to market products
and services actively outside of the office.
It is further expected that the lending officers will be primarily
responsible for the sales and marketing efforts of the Community Banking
Offices. Management will emphasize relationship banking whereby each customer
will be assigned to a specific officer, with other local officers serving as
backup or in supporting roles. Through its experience in the Florida banking
industry, management believes that the most frequent customer complaints pertain
to a lack of personalized service and turnover in lending personnel, which
limits the customer's ability to develop a relationship with his or her lending
officer. Florida Banks intends to hire an appropriate number of lending officers
necessary to facilitate the development of strong customer relationships.
Management intends to offer salaries to the lending officers that are
competitive with other financial institutions in each market area. The salaries
of the lending officers will be comprised of base compensation plus an incentive
payment structure that will be based upon the achievement of certain loan
production goals. Those goals will be reevaluated on a quarterly basis and paid
as a percentage of base salary. Management of Florida Banks believes that such a
compensation structure will provide greater motivation for participating
officers.
It is anticipated that the Community Banking Offices will be located in
commercial areas in each market where the local management team determines there
is the greatest potential to reach the maximum number of small and medium-sized
businesses. It is expected that these Community Banking Offices will develop in
the areas surrounding office complexes and other commercial areas, but not
necessarily in a market's downtown area. Such determinations will depend upon
the customer demographics of a particular market area and the accessibility of a
particular location to its customers. Management of Florida Banks expects to
lease facilities of approximately 3,000 to 4,000 square feet at market rates for
each Community Banking Office. Leasing facilities will enable Florida Banks to
avoid investing significant amounts of capital in property and facilities.
Market Expansion
Florida Banks intends to expand into the largest and fastest growing
communities in Florida. Once Florida Banks has assembled a local management team
and local advisory board of directors for a particular market area, Florida
Banks intends to establish one or more Community Banking Offices in that market.
Upon the consummation of the Merger, Florida Banks will have an established
Community Banking Office in the Tampa market area. In addition, Florida Banks
has assembled a management team in Jacksonville and, as soon as practicable
following the completion of the Florida Banks IPO, will open a Community Banking
Office in the Jacksonville market area. First National received OCC approval to
establish a branch location in Jacksonville on ______________________. The other
markets into which Florida Banks presently intends to expand are Orlando, Ft.
Lauderdale and Palm Beach. Management has identified these markets as providing
the most favorable opportunities for growth and presently intends to establish
Community Banking Offices within these markets as soon as practicable.
Management is also considering expansion into other selected Florida
metropolitan areas.
Certain demographic information with respect to each of the Identified
Markets is discussed below. The demographic information has been provided by
Demographics On-Call, a demographic data source provider, and deposit
information has been provided by the FDIC.
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Tampa Market. The Tampa market area includes the city of Tampa and
Hillsborough County (the "Tampa Market"). Hillsborough County's population,
which includes the city of Tampa, increased from approximately 834,000 in 1990
to approximately 905,000 in 1997, representing an increase of approximately 8.5%
over that period. The population is projected to increase further to
approximately 954,000 over the next five years. In 1997, the median age in Tampa
was 34.3 years, and the median household income was $35,993. In 1997, the
average unemployment rate for Hillsborough County was 3.3%, as compared to the
national unemployment rate of 4.9% for the same period. As of June 30, 1997,
there were 30 financial institutions (including First National) represented in
the Tampa Market with aggregate deposits of $7.4 billion. Deposits in the Tampa
Market increased $1.3 billion from June 30, 1994 through June 30, 1997, at an
annual growth rate of 6.8% for that period.
Jacksonville Market. The Jacksonville market area includes the cities
of Jacksonville, Orange Park, St. Augustine and surrounding counties, including
Clay, Duval and St. Johns Counties (the "Jacksonville Market"). The Jacksonville
Market's population increased from approximately 863,000 in 1990 to
approximately 969,000 in 1997, representing an increase of approximately 12.3%
over that period. The population is expected to increase to approximately 1.1
million over the next five years. In 1997, the median age in Jacksonville was
34.5 years, and the median household income was $36,413. In 1997, the average
unemployment rates for Clay, Duval and St. Johns Counties were 3.0%, 3.7% and
3.0%, respectively, as compared to the national unemployment rate of 4.9% for
the same period. As of June 30, 1997, there were 19 financial institutions
represented in the Jacksonville Market with aggregate deposits of $7.6 billion.
Deposits in the Jacksonville Market increased $793 million from June 30, 1994
through June 30, 1997, at an average annual growth rate of 3.8% for that period.
Ft. Lauderdale Market. The Ft. Lauderdale market area includes the
cities of Ft. Lauderdale, Hollywood and Pompano Beach, as well as Broward County
(the "Ft. Lauderdale Market"). The Ft. Lauderdale Market's population increased
from approximately 1.3 million in 1990 to approximately 1.5 million in 1997,
representing an increase of approximately 16.3% over that period. The population
is expected to increase further to approximately 1.6 million over the next five
years. In 1997, the median age in Ft. Lauderdale was 39.9 years, and the median
household income was $34,960. In 1997, the average unemployment rate for Broward
County was 4.9%, which was the same as the national unemployment rate for the
same period. As of June 30, 1997, there were 45 financial institutions
represented in the Ft. Lauderdale Market with aggregate deposits of $22.0
billion. Deposits in the Ft. Lauderdale Market increased $5.2 billion from June
30, 1994 through June 30, 1997, at an average annual growth rate of 9.7% for
that period.
Orlando Market. The Orlando market area includes the cities of Orlando,
Winter Park and Maitland, as well as Orange County (the "Orlando Market"). The
Orlando Market's population increased from approximately 677,000 in 1990 to
approximately 767,000 in 1997, representing an increase of approximately 13.3%
over that period. The population is expected to increase to approximately
830,000 over the next five years. In 1997, the median age in Orlando was 33.7
years, and the median household income was $37,089. In 1997, the average
unemployment rate for Orange County was 3.3%, as compared to the national
unemployment rate of 4.9% for the same period. As of June 30, 1997, there were
24 financial institutions represented in the Orlando Market with aggregate
deposits of $7.2 billion. Deposits in the Orlando Market increased $752 million
from June 30, 1994 through June 30, 1997, at an average annual growth rate of
3.9% for that period.
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Palm Beach Market. The Palm Beach market area includes the cities of
Palm Beach, West Palm Beach, Jupiter and Stuart, as well as Palm Beach and
Martin Counties (the "Palm Beach Market"). The Palm Beach Market's population
increased from approximately 964,000 in 1990 to approximately 1.1 million in
1997, representing an increase of approximately 16.3% over that period. The
population is expected to increase to approximately 1.2 million over the next
five years. In 1997, the median age in Palm Beach was 42.0 years, and the median
household income was $41,964. In 1997, the average unemployment rates for Palm
Beach and Martin Counties were 6.3% and 6.9%, respectively, as compared to the
national unemployment rate of 4.9% for the same period. As of June 30, 1997,
there were 53 financial institutions represented in the Palm Beach Market with
aggregate deposits of $20.0 billion. Deposits in the Palm Beach Market increased
$3.6 billion from June 30, 1994 through June 30, 1997, at an average annual
growth rate of 6.9% for that period.
Customers
Management believes that the recent bank consolidation within Florida
provides a community-oriented bank significant opportunities to build a
successful, locally-oriented franchise. Management of Florida Banks further
believes that many of the larger financial institutions do not emphasize a high
level of personalized service to the smaller commercial or individual retail
customers. Florida Banks intends to focus its marketing efforts on attracting
small and medium-sized businesses which include: professionals, such as
physicians and attorneys, service companies, manufacturing companies and
commercial real estate developers. Because Florida Banks intends to focus on
small and medium-sized businesses, management believes that the majority of its
loan portfolio will be in the commercial area with an emphasis placed on
commercial and industrial loans secured by real estate, accounts receivable,
inventory, property, plant and equipment. However, in an effort to maintain a
high level of credit quality, Florida Banks expects that the commercial real
estate loans will be made to borrowers who occupy the real estate securing the
loans or where a creditworthy tenant is involved.
Although Florida Banks expects to concentrate its lending to commercial
businesses, management also anticipates that it will attract a significant
amount of consumer business. Management expects that many of its retail
customers will be the principals of the small and medium-sized businesses for
whom a Community Banking Office will provide banking services. Management
intends to emphasize "relationship banking" in order that each customer will
identify and establish a comfort level with the bank officers within a Community
Banking Office. Management intends to develop its retail business with
individuals who appreciate a higher level of personal service, contact with
their lending officer and responsive decision-making. It is further expected
that most of Florida Banks' business will be developed through its lending
officers and local advisory boards of directors and by pursuing an aggressive
strategy of making calls on customers throughout the market area.
Products and Services
Florida Banks intends to offer and First National currently offers a
broad array of traditional banking products and services to its customers. The
proceeds from the Florida Banks IPO will enable Florida Banks to infuse
additional capital into First National which will enable First National to open
Community Banking Offices in new markets and to expand its existing lines of
products and services. First National currently provides products and services
that are substantially similar to those set forth below. For additional
information with respect to First National's current operations, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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Loans. Florida Banks intends to offer a wide range of short to
long-term commercial and consumer loans.
Commercial. Florida Banks expects that its commercial lending
will consist primarily of commercial and industrial loans for the
financing of accounts receivable, inventory, property, plant and
equipment. Florida Banks also expects to offer Small Business
Administration guaranteed loans ("SBA loans") and factoring
arrangements to certain of its customers. In making these loans,
Florida Banks intends to manage its credit risk by actively monitoring
such measures as advance rate, cash flow, collateral value and other
appropriate credit factors.
Commercial Real Estate. Florida Banks anticipates that it will
also offer commercial real estate loans to developers of both
commercial and residential properties. In making these loans, Florida
Banks intends to manage its credit risk by actively monitoring such
measures as advance rate, cash flow, collateral value and other
appropriate credit factors. See "Information About Florida
Banks--Operations of the Holding Company--Credit Administration."
Residential Mortgage. Florida Banks expects that its real
estate loans will consist of residential first and second mortgage
loans, residential construction loans and home equity lines of credit
and term loans secured by first and second mortgages on the residences
of borrowers for home improvements, education and other personal
expenditures. Management expects that Florida Banks will make mortgage
loans with a variety of terms, including fixed and floating to variable
rates and a variety of maturities. These loans will be made consistent
with Florida Banks' appraisal policy and real estate lending policy
which will detail maximum loan-to-value ratios and maturities.
Management expects that these loan-to-value ratios will be sufficient
to compensate for fluctuations in the real estate market to minimize
the risk of loss. Mortgage loans that do not conform to Florida Banks'
asset/liability mix policies will be sold in the secondary markets.
Consumer Loans. Florida Banks expects that its consumer loans
will consist primarily of installment loans to individuals for
personal, family and household purposes. In evaluating these loans,
Florida Banks will require its lending officers to review the
borrower's level and stability of income, past credit history and the
impact of these factors on the ability of the borrower to repay the
loan in a timely manner. In addition, Florida Banks will require that
its banking officers maintain an appropriate margin between the loan
amount and collateral value. Florida Banks expects that many of its
consumer loans will be made to the principals of the small and
medium-sized businesses for whom the Community Banking Offices provide
banking services.
Credit Card and Other Loans. Florida Banks also expects to
issue credit cards to certain of its customers. In determining to whom
it will issue credit cards, Florida Banks intends to evaluate the
borrower's level and stability of income, past credit history and other
factors. Finally, Florida Banks expects to make additional loans which
may not be classified in one of the above categories. In making such
loans, Florida Banks will attempt to ensure that the borrower meets
Florida Banks' credit quality standards.
Deposits. Management intends to offer a broad range of interest-bearing
and noninterest-bearing deposit accounts, including commercial and retail
checking accounts, money market accounts, individual retirement accounts,
regular interest-bearing savings accounts and certificates of deposit with a
range of maturity date options. Management anticipates that the primary sources
of deposits will be small and
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medium-sized businesses and individuals within an Identified Market. In each
Identified Market, senior management will have the authority to set rates within
specified parameters in order to remain competitive with other financial
institutions located in the Identified Market. All deposits will be insured by
the FDIC up to the maximum amount permitted by law. In addition, Florida Banks
expects to implement a service charge fee schedule, similar to the one currently
in place at First National, which will be competitive with other financial
institutions in a Community Banking Office's market area, covering such matters
as maintenance fees on checking accounts, per item processing fees on checking
accounts, returned check charges and other similar fees.
Specialized Consumer Services. Management intends to offer specialized
products and services to its customers, such as lock boxes, travelers checks and
safe deposit services.
Courier Services. Florida Banks expects to offer courier services to
its customers. Courier services, which Florida Banks may either provide directly
or through a third party, permit Florida Banks to provide the convenience and
personalized service its customers require by scheduling pick-ups of deposits.
Florida Banks intends to offer courier services to its business customers. First
National has received regulatory approval for, and is currently offering courier
services in, the Tampa Market and expects to apply for approval in other market
areas.
Telephone and PC Banking. Florida Banks believes that there is a strong
need within its market niche for telephone banking and on-line banking with
personal computers ("PC Banking"). Both services allow customers to access
detailed account information, execute transactions and pay bills electronically.
Management believes that these services are particularly attractive for its
customers who live part-time outside of Florida as it will enable them to
conduct their banking business and monitor their bank accounts from remote
locations. Management of Florida Banks believes that telephone and PC Banking
will assist their Community Banking Offices in retaining customers and will also
encourage its customers to maintain their total banking relationships with the
Community Banking Offices. Both of these services will be provided through a
third-party provider.
Automatic Teller Machines ("ATMs"). Initially, management does not
expect to establish an ATM network, as it believes its resources can be more
effectively deployed elsewhere. As an alternative, management intends to make
other financial institutions' ATMs available to its customers and to offer
customers a certain number of free ATM transactions per month.
Other Products and Services. Florida Banks intends to evaluate other
services such as trust services, brokerage and investment services, insurance
and other permissible activities. Management expects to introduce these services
as they become economically viable.
Operations of the Holding Company
Florida Banks will remain in the development stage until the
consummation of the Merger and the Florida Banks IPO. Florida Banks' corporate
offices will be relocated to the Jacksonville Community Banking Office, when
opened. Florida Banks presently has four employees, including Mr. Hughes,
Richard B. Kensler, the Chief Credit Officer, Donald Roberts, President of the
Jacksonville Market, and an administrative assistant, all of whom work on a
full-time basis for Florida Banks.
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Florida Banks will provide a variety of support services for each of
the Community Banking Offices. These services will include back office
operations, investment portfolio management, credit administration and review,
human resources, training and strategic planning. By the end of 1998, Florida
Banks expects to hire a Human Resources Officer as well as a Chief Lending
Officer. Until that time, Mr. Hughes will serve as Florida Banks' Chief Lending
Officer, and a human resources officer at First National will provide human
resources support for Florida Banks.
Florida Banks intends to use First National's facilities for its data
processing, operational and back office support activities. The Community
Banking Offices will utilize the operational support provided by First National
to perform account processing, loan accounting, loan support, network
administration and other functions. First National has developed extensive
procedures for many aspects of its operations, including operating procedures
manuals and audit and compliance procedures. Specific operating procedures for
the Community Banking Offices have been developed from the procedures that are
currently utilized by First National. Management believes that First National's
existing operations and support management will be capable of providing
continuing operational support for all of the Community Banking Offices.
Outsourcing. Management of Florida Banks believes that by outsourcing
certain functions of its back room operations, it can realize greater
efficiencies and economies of scale. In addition, various products and services,
especially technology-related services, can be offered through third-party
vendors at a substantially lower cost than the costs of developing these
products internally.
First National is currently utilizing M&I Data Services, Inc. ("M&I")
to provide its core data processing and certain customer products, and Florida
Banks expects to assume this contract upon consummation of the Merger. In
addition to account level processing for loans and deposits, First National also
utilizes M&I for computer network support, proof of deposit processing, on-line
support, telephone and PC banking services, cash management, automated clearing
house services and consulting services. See "Information About Florida
Banks--Data Processing."
Credit Administration. Florida Banks will oversee all credit operations
while still granting local authority to each Community Banking Office. The Chief
Credit Officer of Florida Banks is Richard B. Kensler who, since 1994, has
served as a senior credit officer with Signet Banking Corporation. Mr. Kensler
has experience in the Florida market as he served as a Relationship Manager and
Special Assets Manager for Sun Banks of Florida, Inc. in Orlando from 1972 to
1980. Florida Banks' Chief Credit Officer will be primarily responsible for
maintaining a quality loan portfolio and developing a strong credit culture
throughout the entire organization. The Chief Credit Officer will be responsible
for developing and updating the credit policy and procedures for the
organization. In addition, he will work closely with each lending officer at the
Community Banking Offices to ensure that the business being solicited is of the
quality and structure that fits Florida Banks' desired risk profile. Credit
quality will be controlled through uniform compliance to credit policy. Florida
Banks' risk-decision process will be actively managed in a disciplined fashion
to maintain an acceptable risk profile characterized by soundness, diversity,
quality, prudence, balance and accountability.
Florida Banks' credit approval process will consist of specific
authorities granted to the lending officers. Loans exceeding a particular
lending officer's level of authority will be reviewed and considered for
approval by the next level of authority. The Chief Credit Officer has ultimate
credit decision-making authority, subject to review by the Chief Executive
Officer and the Florida Banks Board. Risk management will require active
involvement with Florida Banks' customers and active management of Florida
Banks' portfolio. The Chief Credit Officer will review Florida Banks' credit
policy with the local management teams at least annually but more frequently if
necessary. The results of these reviews will then be presented to the Florida
Banks Board. The purpose of these reviews will be to attempt to ensure that the
credit policy remains
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compatible with the short and long-term business strategies of Florida Banks.
The Chief Credit Officer will also generally require all individuals charged
with risk management to reaffirm their familiarity with the credit policy
annually.
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MANAGEMENT OF FLORIDA BANKS
Executive Officers and Directors
The following table sets forth information concerning Florida Banks'
executive officers, directors and significant employees upon completion of the
Florida Banks IPO and consummation of the Merger.
<TABLE>
<CAPTION>
NAME POSITION(1)
- ---- -----------
<S> <C>
M.G. Sanchez..................................... Chairman of the Board
Charles E. Hughes, Jr............................ President, Chief Executive Officer and Director
T. Edwin Stinson, Jr............................. Chief Financial Officer(2)
Nancy E. LaFoy................................... Secretary, Treasurer and Director(2)
Richard B. Kensler............................... Chief Credit Officer
John S. McMullen................................. President of the Tampa Market and Director(3)
Donald Roberts................................... President of the Jacksonville Market
T. Stephen Johnson............................... Vice Chairman of the Board
Clay M. Biddinger................................ Director
P. Bruce Culpepper............................... Director
J. Malcolm Jones, Jr............................. Director
W. Andrew Krusen, Jr............................. Director(4)
Wilford C. Lyon, Jr.............................. Director
David McIntosh................................... Director
</TABLE>
- ----------------------
(1) The Florida Banks Board is divided into three classes, designated Class
I, Class II and Class III. See "--Board of Directors."
(2) Upon completion of the Florida Banks IPO and the Merger, Mr. Stinson
will become Chief Financial Officer, Secretary and Treasurer of Florida
Banks. Accordingly, Ms. LaFoy will resign as Secretary and Treasurer of
Florida Banks, but will remain a member of the Florida Banks Board.
(3) Upon completion of the Florida Banks IPO and the Merger, Mr. McMullen
will be the President of the Tampa Market and a Director.
(4) Upon completion of the Florida Banks IPO and the Merger, Mr. Krusen
will be a Director of Florida Banks.
M. G. Sanchez, age 63, has served as Chairman of the Board and a Class II
Director of Florida Banks since February 1998. Prior to his service with Florida
Banks, Mr. Sanchez worked independently as a bank management consultant,
periodically performing contract work with TSJ&A. From 1986 to 1997, Mr. Sanchez
has served as President and Chief Executive Officer of The FBF Management Group,
a provider of management consulting services to banks in Florida. Prior to his
service with The FBF Management Group, from 1979 to 1986, Mr. Sanchez served as
the President and Chief Executive Officer of First Bankers Corporation of
Florida, a bank holding company with nine subsidiary banks in Florida that was
acquired by First Union Corporation in 1986. Mr. Sanchez has also served as a
Member of the Board of Directors for the Miami branch of the Federal Reserve
Bank of Atlanta and a Member of the Governors Advisory Committee on Interstate
Banking. Mr. Sanchez is also a past National President of Robert Morris
Associates, the association of bank loan and credit officers. Mr. Sanchez serves
on the Advisory Board at the College of Business at the University of Florida
and is a former President of Gator Boosters, Inc. at the University of
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Florida. Upon completion of the Florida Banks IPO and the Merger, Mr. Sanchez
will serve as Chairman of the Board of the Directors of First National.
Charles E. Hughes, Jr., age 54, has served as President, Chief Executive
Officer and a Class III Director of Florida Banks since January 1998. Prior to
his appointment as President and Chief Executive Officer and election as
Director, Mr. Hughes served as Chairman of the Board, President and Chief
Executive Officer of SouthTrust Bank of Florida, N.A. ("SouthTrust"). At
SouthTrust, Mr. Hughes was responsible for negotiating bank acquisitions in
Florida and overseeing the entire Florida operations for SouthTrust. Prior to
joining SouthTrust, Mr. Hughes served as Executive Vice President and Chief
Financial Officer of Baptist Health System, Inc., a hospital management
corporation from 1990 to 1992. Prior to Baptist Health System, Inc., Mr. Hughes
served as Executive Vice President of Florida National Banks of Florida, Inc.
and President of Florida National Bank in Jacksonville from 1983 until Florida
National Bank merged with First Union National Bank in 1990. Mr. Hughes is a
past Chairman and a present member of the Board of Trustees of the Jacksonville
Chamber of Commerce. Upon consummation of the Merger, Mr. Hughes will serve as
President and Chief Executive Officer of First National.
T. Edwin Stinson, Jr., age 45, has served as Executive Vice President,
Chief Operating Officer and as a Director of First National since 1993. Prior to
his service with First National, Mr. Stinson served as the President of Florida
State Bank and Emerald Coast State Bank in Northwest Florida. Mr. Stinson has
been involved in the banking industry since 1978. Upon completion of the Florida
Banks IPO and the Merger, Mr. Stinson will serve as the Secretary, Treasurer and
Chief Financial Officer of Florida Banks and Secretary and Chief Financial
Officer of First National.
Nancy E. LaFoy, age 42, has served as a Class I Director of Florida Banks
since its inception and as Secretary and Treasurer of Florida Banks since
January 1998. Ms. LaFoy has served as Senior Vice President of TSJ&A since 1987.
Prior to her service with TSJ&A, Ms. LaFoy served as Assistant Vice President
with Wachovia Corporation in Atlanta, Georgia, formerly First National Bank of
Atlanta, from 1984 to 1987. Ms. LaFoy has been involved in the banking industry
since 1977. Upon the completion of the Florida Banks IPO and the Merger, Ms.
LaFoy will resign from her position as Secretary and Treasurer of Florida Banks,
but will remain a Director of Florida Banks.
Richard B. Kensler, age 48, has served as the Chief Credit Officer of
Florida Banks since April 1998. Prior to his service with Florida Banks, Mr.
Kensler served as a senior credit officer for Signet Banking Corporation, since
1987. Mr. Kensler's banking career began in the Florida market when he served as
an Assistant Vice President and Special Assets Manager for Sun Banks of Florida,
Inc. in Orlando from 1972 to 1980.
John S. McMullen, age 54, has served as President and Chief Executive
Officer of First National since 1992. Prior to First National Bank of Tampa, Mr.
McMullen served as Senior Vice President of Corporate Banking in Tampa from 1990
to 1992 and Area Executive Vice President for Pinellas County of First Florida
Bank, N.A. from 1985 to 1990. Mr. McMullen also held various senior officer
positions with First Florida Bank in Tampa since 1970. Mr. McMullen serves as a
Director of Merchants Association of Florida, Inc. and Tampa Downtown
Partnership. Upon the completion of the Florida Banks IPO and the Merger, Mr.
McMullen will become a Director of Florida Banks and First National and
President of the Tampa Market.
Donald Roberts, age 49, has served as President of the Jacksonville
Market since April 1998. Prior to his service with Florida Banks, Mr. Roberts
served as President and Chief Executive Officer of Barnett Bank, N.A., Lake
County, Florida since 1993. Prior to his service in Lake County, he served as
President and Chief Executive Officer of Barnett Bank of Atlanta from 1990
through 1994. During his 13 year tenure with
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Barnett Banks, he served in several positions, including Executive Vice
President in charge of the Corporate Banking Group.
T. Stephen Johnson, age 48, has served as a Class I Director of Florida
Banks since its inception in October 1997, and as its Vice Chairman since
February 1998. Mr. Johnson has served as the Chairman of the Board of T. Stephen
Johnson & Associates, Inc. ("TSJ&A"), a financial services consulting firm,
since its inception in 1987. TSJ&A specializes in mergers, acquisitions and
regulatory consulting for financial institutions. Mr. Johnson currently serves
as Chairman of the Board of Directors of NetB@nk, Inc. a publicly traded
company. In addition, he is the principal owner of Bank Assets, Inc., a provider
of benefit programs for directors and officers of banks.
Clay M. Biddinger, age 42, has served as a Class II Director of Florida
Banks since April 1998. Mr. Biddinger has also served as President, Chief
Executive Officer and Director of Sun Financial Group, Inc., Tampa, Florida
("Sun") since its founding in 1981. In October 1995, Sun was sold to GATX
Corporation, a publicly traded corporation. Since 1991, Mr. Biddinger has also
served as Chairman of the Board and sole shareholder of CMB Holdings, Inc. In
addition, since 1995 Mr. Biddinger has served as a Director of Centron DPL
Company, a wholly-owned subsidiary of GATX Corporation. Mr. Biddinger is a
member of the Executive Committee of Dominion Financial Group International,
LDC, a merchant banking company which provides investment capital to various
emerging business enterprises. Mr. Biddinger is the past Founding Chairman and a
present member of the Council of Growing Companies. Mr. Biddinger also serves on
the boards of various charitable organizations.
P. Bruce Culpepper, age 56, has served as a Class III Director of
Florida Banks since April 1998. Mr. Culpepper has been an attorney with the
Florida-based law firm of Akerman, Senterfitt & Eidson, P.A. since 1997. Prior
to 1997, Mr. Culpepper was a partner with the law firm of Pennington, Culpepper,
P.A. from 1992 to 1997.
J. Malcolm Jones, Jr., age 45, has served as a Class I Director of
Florida Banks since April 1998. Since 1997, Mr. Jones has been Senior Vice
President of St. Joe Corporation, a publicly traded paper and forestry concern,
and from 1995 to 1997, Mr. Jones served as St. Joe Corporation's Vice President
and Chief Financial Officer. Mr. Jones formerly served as President, Chief
Executive Officer and Vice Chairman of the Board of FloridaBank, a Florida
savings bank from 1990 to 1994. Mr. Jones also serves on the board of directors
of Holmes Lumber Company.
W. Andrew Krusen, Jr., age 50, has served as Chairman of the Board of
First National Bank of Tampa since 1991. Since 1988, Mr. Krusen has served as
Chairman of the Board of Dominion Energy and Minerals Corporation, an oil and
gas concern, and is Chairman of the Executive Committee of Dominion Financial
Group International, LDC, a merchant banking company which provides investment
capital to various emerging business enterprises. He also serves as a Director
of General Group Holdings, Inc., a family controlled business involved in real
estate development, construction, leasing and manufacturing. Mr. Krusen is also
a Director of publicly traded Northstar Energy Inc., Memry Corporation and
Raymond James Trust Company. Mr. Krusen will become a Director of Florida Banks
upon the completion of the Florida Banks IPO and the Merger.
Wilford C. Lyon, Jr., age 62, has served as a Class II Director of
Florida Banks since April 1998. Prior to his service with Florida Banks, Mr.
Lyon served as Chairman of the Board and Chief Executive Officer of the
Independent Insurance Group, Inc., a publicly traded company. Mr. Lyon retired
from that position on February 29, 1996 when the company merged with the
American General Corporation, a publicly traded company. Mr. Lyon has also
served on the Board of Florida National Banks of Florida, Inc. from 1983 to
1990 when it merged with First Union National Bank of Florida; and thereafter he
served on the Board of
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First Union National Bank of Florida until 1991. Mr. Lyon is active in community
affairs, having served as Chairman of the Jacksonville Chamber of Commerce and
Past-District Governor of Rotary International.
David McIntosh, age 51, has served as a Class III Director of Florida
Banks since April 1998. Prior to his service with Florida Banks, Mr. McIntosh
served as the Chief Executive Officer of Gunster, Yoakley, Valdes-Fauli &
Stewart, P.A., a 150 attorney law firm based in West Palm Beach, Florida, since
1984. Effective March 31, 1998, Mr. McIntosh retired from his position as Chief
Executive Officer but will remain as a consultant to the firm through December
1998 to assist in the transition and search for a successor. Over the past two
years, Mr. McIntosh has served as Chairman of the Governor's Task Force on
Telecommunications, Chairman of the Florida Intangible Tax Task Force, Chairman
of Florida TaxWatch and Chairman of the Advisory Board of the College of
Business at Florida Atlantic University. Since 1980, Mr. McIntosh has served as
a member of the Board of Directors of the University of Florida Foundation and
is also a past President of the Foundation.
Florida Banks Board
The number of directors of Florida Banks is currently fixed at nine. The
Articles of Incorporation and the By-Laws provide for the Florida Banks Board to
consist of not less than two, nor more than twenty-five persons, with the
precise number to be determined from time to time by the Florida Banks Board.
The directors are divided into three classes, designated Class I, Class II and
Class III. Each class will consist, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Florida Banks Board.
The term of Florida Banks' initial Class I Directors expires at Florida Banks'
annual meeting of shareholders in 1999; the term of Florida Banks' initial Class
II Directors expires at Florida Banks' annual meeting of shareholders in 2000;
and the term of Florida Banks' initial Class III Directors expires at Florida
Banks' annual meeting of shareholders in 2001. At each annual meeting of
shareholders, successors to the class of directors whose term expires at the
annual meeting will be elected for a three-year term. If the number of directors
is changed, an increase or decrease will be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an increase in such class will hold office for a term that will expire at
the next annual meeting, but in no event will a decrease in the number of
directors shorten the term of any incumbent director. Any director elected to
fill a vacancy due to resignation, removal or death will have the same remaining
term as that of his predecessor. In the case of the removal of a director from
office, the resulting vacancy on the Florida Banks Board be filled by the vote
of at least seventy-five percent (75%) of the outstanding shares of Florida
Banks Common Stock. Any other vacancy on the Florida Banks Board will be filled
by a majority vote of the remaining directors then in office or by action of the
shareholders. Any director may be removed, with or without cause, at any regular
or special meeting of shareholders called for that purpose.
The effect of the classified Florida Banks Board is to make it more
difficult for a person, entity or group to effect a change in control of Florida
Banks through the acquisition of a large block of Florida Banks' voting stock.
The executive officers of Florida Banks serve at the pleasure of the Florida
Banks Board.
The Florida Banks Board has an Executive Committee, an Audit Committee
and a Compensation Committee. The Executive Committee, which is currently
comprised of ________________________, exercises the authority of the Florida
Banks Board in accordance with the By-Laws of Florida Banks between regular
meetings of the Florida Banks Board. The Audit Committee, which is currently
comprised of _______________, reviews and makes recommendations to the Florida
Banks Board on Florida Banks' audit procedures and independent auditors' report
to management and recommends to the Florida Banks Board the appointment of the
independent auditors for Florida Banks. The Compensation Committee, currently
comprised of _____________________, reviews and makes recommendations to the
Florida Banks Board
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with respect to the compensation of officers of Florida Banks and will assist
the Board in the administration of Florida Banks' 1998 Stock Option Plan.
Executive Compensation
For the fiscal year ended December 31, 1997, Florida Banks was in a
development stage and no one served as the Chief Executive Officer of Florida
Banks during that period. Charles E. Hughes, Jr. entered into an employment
agreement with Florida Banks in January 1998, the terms of which are discussed
below. Accordingly, no compensation was paid during the fiscal year ended
December 31, 1997.
Employment Agreements
Florida Banks and Charles E. Hughes, Jr. have entered into an
employment agreement (the "Employment Agreement") which provides that Mr. Hughes
will serve as the President and Chief Executive Officer of Florida Banks and as
President and Chief Executive Officer of First National upon completion of the
Merger and the Florida Banks IPO. Mr. Hughes also serves as a member of the
Florida Banks Board and will serve on First National's board of directors after
the closing of the Florida Banks IPO. The Employment Agreement has a three-year
term and provides for a minimum annual base salary of $220,000 until the closing
of the Florida Banks IPO and an annual base salary of $250,000 subsequent to the
completion of the Merger and the Florida Banks IPO. In addition, the Board will
issue an option to Mr. Hughes to purchase 80,000 shares of Florida Banks Common
Stock at the IPO Price of the Florida Banks Common Stock sold in the Florida
Banks IPO. This option will be exercisable for a period of ten years.
After the closing of the Florida Banks IPO, in the event of a "change
in control" of Florida Banks (as defined in the Employment Agreement), Mr.
Hughes will be entitled to give written notice to Florida Banks of termination
of the Employment Agreement and to receive a cash payment equal to approximately
300% times the compensation received by Mr. Hughes in the one-year period
immediately preceding the change in control. In addition, if Mr. Hughes elects
to terminate the Employment Agreement pursuant to a change in control, Mr.
Hughes will further be entitled, in lieu of shares of Florida Banks Common Stock
issuable upon the exercise of options to which Mr. Hughes is entitled, an amount
in cash or Florida Banks Common Stock equal to the excess of the fair market
value of the Florida Banks Common Stock as of the date of closing of the
transaction effecting the change of control over the per share exercise price of
the options held by Mr. Hughes, times the number of shares of Florida Banks
Common Stock subject to such options.
In the event that the Florida Banks Board determines in its sole
discretion that Florida Banks is unable to close the Florida Banks IPO, then the
Employment Agreement may be terminated by the Florida Banks Board at any time
during the term of the Employment Agreement without notice upon the condition
that Mr. Hughes will be entitled, as liquidated damages, to be paid the sum of
$100,000. The Employment Agreement may be terminated by the Florida Banks Board
without notice and without further obligation than for monies already paid, if
Mr. Hughes is terminated for Cause (as that term is defined in the Employment
Agreement). Upon thirty days' written notice to Mr. Hughes, First National may
terminate the Employment Agreement without Cause upon the condition that Mr.
Hughes will be entitled to the same compensation as he would have been entitled
to receive in the event of a change of control of Florida Banks. Likewise, Mr.
Hughes may upon thirty days' written notice to Florida Banks terminate the
Employment Agreement without Cause. In the event of termination by Mr. Hughes,
Florida Banks will have no further obligation than for monies paid and Florida
Banks shall be entitled to enforcement of the non-compete and non-solicitation
provisions. After the closing of the Florida Banks IPO, in the event of Mr.
Hughes' death, Florida Banks will pay to Mr. Hughes' designated beneficiary an
amount equal to Mr. Hughes' base salary through the end of the month in which
Mr. Hughes' death occurred. The Employment Agreement also provides a non-compete
provision which provides that in the event of termination of employment under
the Employment Agreement
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by Mr. Hughes pursuant to the giving of notice by Mr. Hughes, Mr. Hughes has
agreed that for a period of twelve months after such termination date, Mr.
Hughes shall not, without the prior written consent of Florida Banks, within
Duval County, Florida either directly or indirectly, serve as an executive
officer of any bank, bank holding company or other financial institution. The
Employment Agreement further obligates Mr. Hughes to protect the confidentiality
of Florida Banks' information following termination of his employment.
Florida Banks will enter into employment agreements with John S.
McMullen and T. Edwin Stinson, Jr. The agreements provide for three year terms
commencing upon the closing of the Florida Banks IPO. Mr. McMullen's employment
agreement provides for an annual base salary of $135,000 and the grant of
options to purchase 60,000 shares of Florida Banks Common Stock at the first
Florida Banks Board meeting subsequent to the closing of the Florida Banks IPO.
In addition, Mr. McMullen's employment agreement provides that his title
following the Merger and the Florida Banks IPO will be President of the Tampa
Market. Mr. Stinson's employment agreement provides for an annual base salary of
$117,000 and the grant of options to purchase 39,999 shares of Florida Banks
Common Stock at the first Florida Banks Board meeting subsequent to the closing
of the Florida Banks IPO. Upon the consummation of the Florida Banks IPO, Mr.
Stinson's title will be Chief Financial Officer of Florida Banks. The options to
be granted under both Mr. McMullen's and Mr. Stinson's employment agreements
will be exercisable at the IPO Price. In the event of a "change in control" (as
defined in their respective agreements) of Florida Banks, both agreements
provide that Mr. Stinson and Mr. McMullen may elect to give written notice to
Florida Banks of termination of their respective agreements and to receive a
cash payment equal to approximately 300% times the compensation received by them
in the one year period immediately preceding the change in control. Each of Mr.
McMullen's and Mr. Stinson's employment agreements contain certain non-compete
and non-solicitation provisions which are similar to those described in the
employment agreement of Mr. Hughes discussed above.
Stock Option Plan
In March 1998, the Florida Banks Board adopted the Florida Banks, Inc.
1998 Stock Option Plan (the "1998 Plan") to promote Florida Banks' growth and
financial success. Options may be granted under the 1998 Plan to Florida Banks'
directors, officers and employees, as well as certain consultants and advisors.
The 1998 Plan contemplates the grant of nonqualified stock options and incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The 1998 Plan is not qualified under Section 401(a) of the
Code and is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended. The 1998 Plan provides for option grants to
purchase up to an aggregate of 900,000 shares of Florida Banks Common Stock,
subject to adjustment under certain circumstances (the "Option Shares"). The
1998 Plan will expire upon the earlier to occur of: (i) the date on which all
Option Shares have been issued upon exercise of options under the 1998 Plan; or
(ii) the tenth anniversary of the 1998 Plan's effective date. The 1998 Plan will
be administered by the Florida Banks Board or by a Stock Option Committee
appointed by the Board and consisting of least two non-employee Board members.
The exercise price of options granted under the 1998 Plan will be determined by
the Florida Banks Board, but will in no event be less than 100% of the Market
Price (as defined in the 1998 Plan) of one share of Florida Banks Common Stock
on the option grant date; provided, however, that nonqualified stock options may
be granted at an exercise price of no less than 75% of the Market Price of the
Florida Banks Common Stock on the date of grant. Vested options under the 1998
Plan may be exercised in whole or in part, but in no event later than ten (10)
years from the grant date. If an optionee during his or her lifetime ceases to
be an officer, director, employee, consultant or advisor of Florida Banks or any
subsidiary of Florida Banks for any reason other than his or her death or total
disability, any option or unexercised portion thereof which is exercisable on
the date the optionee ceases employment will expire ninety (90) days following
the date the optionee ceases to be an officer, director or employee of Florida
Banks or of a subsidiary of Florida Banks, but in no event after the term
provided in the optionee's option agreement. If an optionee dies or becomes
totally disabled while he or she is an officer, director or employee of Florida
Banks or of a subsidiary of Florida Banks, the option may be
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exercised by a legatee or legatees of the optionee under his or her last will or
by his or her personal representative or representatives at any time within one
year following his or her death or total disability, but in no event after the
term provided in his or her option agreement. Options granted under the 1998
Plan will only be assignable or transferable by the optionee by will or the laws
of descent and distribution. During the optionee's lifetime, options are only
exercisable by him or her. The Florida Banks Board may at any time terminate,
modify or amend the 1998 Plan in any respect, except that without shareholder
approval the Florida Banks Board may not (i) increase the number of Option
Shares, (ii) extend the period during which options may be granted or exercised,
(iii) change the class of 1998 Plan participants, or (iv) otherwise materially
modify the requirements as to eligibility for participation in the 1998 Plan. In
no event will the termination, modification or amendment of the 1998 Plan,
without the written consent of an optionee, affect his or her rights under an
option or right previously granted to him or her. The 1998 Plan must be approved
by Florida Banks' shareholders within twelve months from the adoption of the
1998 Plan by the Florida Banks Board.
Compensation of Directors
Directors of Florida Banks and First National will not receive any
compensation based on their attendance at board meetings until First National
becomes cumulatively profitable. Upon consummation of the Florida Banks IPO,
directors of Florida Banks will be entitled to receive stock option awards under
the 1998 Plan. In addition, members of the Florida Banks Board will be
reimbursed for out-of-pocket expenses incurred in connection with attendance at
Board meetings. The members of the local advisory boards of directors will
receive compensation in a format to be determined by the First National Board.
Such compensation may be incentive-based and include cash and options to
purchase Florida Banks Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FLORIDA BANKS
The following table sets forth information with respect to the
beneficial ownership of shares of the Florida Banks Common Stock as of April 23,
1998, and as adjusted to reflect the sale of the shares offered in the Florida
Banks IPO and in connection with the Merger, with respect to (i) each director
of Florida Banks; (ii) each person, including any "group" as that term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934, who is known by
Florida Banks to own beneficially more than 5% of the outstanding shares of the
Florida Banks Common Stock; and (iii) all directors and executive officers of
Florida Banks as a group. Unless otherwise indicated, each shareholder has sole
voting and investment power with respect to the indicated shares.
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<TABLE>
<CAPTION>
Beneficial Ownership
Beneficial Ownership After the Merger
Prior to the Florida Banks IPO and the Florida Banks IPO
------------------------------ ---------------------------
Common Common
Name of Beneficial Owner Stock (1) Percent Stock Percent(2)
------------------------ ----------- ------- ------- ----------
<S> <C> <C> <C> <C>
Clay M. Biddinger ............................. -- * -- *
P. Bruce Culpepper ............................ -- * -- *
Charles E. Hughes, Jr ........................ 80,000 21.2% 160,000(3) 2.8%
T. Stephen Johnson ............................ 93,750(4) 24.8 177,250(5) 3.1
J. Malcolm Jones, Jr .......................... -- * -- *
W. Andrew Krusen, Jr .......................... -- * 127,076(6) 2.2
Nancy E. LaFoy ................................ 10,000 2.6 20,000(7) *
Wilford C. Lyon, Jr ........................... -- * -- *
David McIntosh ................................ -- * -- *
John S. McMullen .............................. -- * 242,932(8) 4.3
M.G. Sanchez .................................. 70,000 18.5 140,000(9) 2.5
T. Edwin Stinson, Jr .......................... -- * 94,506(10) 1.7
Robin Kelton .................................. 22,500 6.0 45,000(11) *
All executive officers and directors as a group
(12 persons)................................... 253,750 67.2% 961,765(12) 16.3%
</TABLE>
- --------------------------
*Less than 1%.
(1) Pursuant to the rules of the Commission, the determinations of "beneficial
ownership" of shares are based upon Rule 13d-3 under the Exchange Act,
which provides that shares will be deemed to be "beneficially owned" where
a person has, either solely or in conjunction with others, the power to
vote or to direct the voting of shares and/or the power to dispose, or to
direct the disposition of, shares or where a person has the right to
acquire any such power within 60 days after the date such "beneficial
ownership" is determined. Shares that a beneficial owner has the right to
acquire within 60 days pursuant to the exercise of stock options or
warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of such owner but are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
(2) The percentages are based upon the aggregate number of shares of Florida
Banks Common Stock issued and outstanding as of April 23, 1998, as adjusted
to reflect 4,000,000 shares issuable pursuant to the Florida Banks IPO
(assuming no exercise of the underwriters' overallotment option) and an
estimated 1,250,000 shares issuable pursuant to the Merger (assuming an
$11.00 initial public offering price of the Common Stock in the Florida
Banks IPO, the mid-point of the estimated range) and 2,065,000 shares of
First National's Common Stock outstanding immediately prior to consummation
of the Merger.
(3) Includes 80,000 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Florida Banks IPO.
(4) Includes 13,500 shares which are owned by Mr. Johnson's wife, 10,250 shares
held by Mr. Johnson's wife as a custodian for their children, and 250
shares held by Mr. Johnson as a custodian for his nephew.
(5) Includes 70,000 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Florida Banks IPO and 13,500 shares issuable upon the exercise of
immediately exercisable options to be granted to Mr. Johnson's wife
simultaneous with the closing of the Florida Banks IPO.
(6) Includes 40,000 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Florida Banks IPO and 87,076 shares issuable upon conversion and exchange
of shares of First National Common Stock pursuant to the Merger.
(7) Includes 10,000 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Florida Banks IPO.
(8) Comprised of shares issuable upon conversion and exchange of shares of
First National Common Stock pursuant to the Merger.
(9) Includes 70,000 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Florida Banks IPO.
(10) Comprised of shares issuable upon conversion and exchange of shares of
First National Common Stock pursuant to the Merger.
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(11) Includes 22,500 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Florida Banks IPO.
(12) Includes 283,500 shares upon the exercise of immediately exercisable
options to be granted simultaneously with the closing of the Florida Banks
IPO and 424,514 shares upon conversion and exchange of shares of First
National Common Stock pursuant to the Merger.
FACILITIES
Florida Banks' offices are located at 4110 Southpoint Boulevard, Suite
212, Southpoint Square II, Jacksonville, Florida 32216. Florida Banks' offices
will be relocated to the Jacksonville Community Banking Office, when opened.
Initially, it is expected that the bulk of Florida Banks' operations will be
conducted from First National's offices in Tampa, utilizing First National's
existing personnel.
EMPLOYEES
Florida Banks presently employs four persons on a full-time basis.
Florida Banks will hire additional persons as needed to support its growth.
LEGAL PROCEEDINGS
From time to time Florida Banks may be involved in litigation relating
to claims arising out of its operations in the normal course of business. As of
the date of this Proxy Statement-Prospectus, Florida Banks is not engaged in any
legal proceedings that are expected, individually or in the aggregate, to have a
material effect on Florida Banks.
MONETARY POLICIES
The results of operations of Florida Banks will be affected by credit
policies of monetary authorities, particularly the Federal Reserve Board. The
instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits. In view of changing conditions in the national
economy and in the money markets, as well as the effect of action by monetary
and fiscal authorities, including the Federal Reserve Board, no prediction can
be made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of Florida Banks.
CERTAIN TRANSACTIONS
TSJ&A has provided consulting services during the organization and
formation of Florida Banks. T. Stephen Johnson, Vice-Chairman of Florida Banks,
is the President of TSJ&A and Nancy E. LaFoy, Secretary and Treasurer of Florida
Banks, is the Senior Vice President of TSJ&A. Specific responsibilities
undertaken by TSJ&A include assisting management of Florida Banks in the
formation of Florida Banks' business plan with the concurrence of management,
conducting a feasibility analysis, drafting proposed administrative and
operational procedures, and preparing the necessary regulatory filings for
approval of the formation of Florida Banks and its acquisition of First
National. As compensation for its services, TSJ&A will be paid a monthly fee of
$15,000 for six months. In addition, TSJ&A will receive a finder's fee in
connection with the acquisition of First National of $137,500 (one percent of
the aggregate purchase price), which finder's fee shall be paid from the
proceeds of the Florida Banks IPO. Furthermore, Florida Banks temporarily
operated out of the premises leased by TSJ&A which are located at 9755 Dogwood
Road, Suite 310, Roswell, Georgia 30075.
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Mr. Robin Kelton, who beneficially owns greater than five percent of
the outstanding shares of Florida Banks Common Stock (prior to the issuance of
the shares in connection with the Florida Banks IPO), serves as the Chairman of
the Board of Directors of Kelton International Ltd. Kelton International Ltd.
received a fee of $45,450 for its services as placement agent for Florida Banks'
February 1998 private placement of units consisting of shares of Common Stock,
Preferred Stock and warrants to purchase shares of Common Stock (the "Units") to
certain foreign investors in reliance upon the exemption from the registration
provisions of the Securities Act provided under Rule 506 promulgated thereunder.
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INFORMATION ABOUT FIRST NATIONAL
GENERAL
First National commenced operations in July 1988 under the name
Enterprise National Bank of Tampa, as a full service commercial bank in Tampa,
Florida. In 1993, First National changed its name to First National Bank of
Tampa. First National leases its facilities in the First National Plaza, located
in downtown Tampa.
First National offers a variety of loan products, including commercial
loans, real estate loans, home equity loans, consumer/installment loans, SBA
loans and credit cards. First National also offers a broad range of
interest-bearing and noninterest-bearing deposit accounts, including commercial
and retail checking accounts, money market accounts, individual retirement
accounts, regular interest-bearing savings accounts and certificates of deposit.
In addition, First National provides such consumer services as U.S. Savings
Bonds, travelers checks, cashiers checks, safe deposit boxes, bank-by-mail
services, direct deposit, courier service, telephone banking and PC Banking. See
"Information About Florida Banks--Strategy of Florida Banks--Products and
Services."
HISTORY OF FIRST NATIONAL
First National was incorporated in 1988 under the name Enterprise
National Bank of Tampa. The operating strategies and tactics employed by the
former management of Enterprise National Bank of Tampa were largely
unsuccessful. Loan losses, poor credit quality, low net interest margins and
high overhead expenses resulted in substantial losses during First National's
early years. In 1991, the OCC informed the First National Board and management
of First National that First National's condition had deteriorated
significantly. The OCC observed that First National's loan portfolio evidenced
deterioration in quality, with increasing levels of delinquent and
non-performing loans. Moreover, in the opinion of the OCC, First National's
lending practices evidenced poor underwriting and ineffective loan
administration. In addition, the OCC reported that First National's credit
administration and loan review functions as well as the methodology utilized in
evaluating the adequacy of the allowance for loan losses required improvement.
As a consequence of the foregoing, in December 1991, First National was required
to enter into a Formal Agreement with the OCC dated December 18, 1991, pursuant
to which First National agreed to take certain remedial actions to improve its
condition and operating performance and to address certain identified
deficiencies (the "Formal Agreement"). The Formal Agreement with the OCC was
terminated on July 18, 1994, due to First National's substantially improved
condition.
The provisions of the Formal Agreement were contained in 16 substantive
articles which prescribed the corrective actions and remedial measures deemed
necessary by the OCC to correct deficiencies and regulatory violations in First
National and return it to a safe and sound condition. Among the provisions of
the Formal Agreement were requirements to formalize the compliance process,
implement a strategic plan, formulate certain policies and procedures and
maintain certain capital levels.
In 1992, the First National Board, as a result of First National's
financial difficulties, effected a substantial reorganization of the key
management positions by hiring John S. McMullen as President and Chief Executive
Officer and T. Edwin Stinson, Jr. as acting Chief Financial Officer. Since the
reorganization, First National's management team has remained relatively
unchanged.
First National suffered significant loan problems in the years 1988
through 1992. Net charge-offs due to nonperforming loans exceeded $2.7 million.
Lending policies and procedures were revised in 1992 as part of the
reorganization and the addition of the new management team. First National's
lending activities
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were refocused on the small business sector while avoiding speculative real
estate and other higher risk credits. First National's current portfolio
primarily consists of commercial and commercial real estate loans including SBA
loans. Currently, problem loans represent a negligible part of First National's
total loans.
In 1993, as required by the Formal Agreement, First National raised
$1.6 million in equity capital through an offering of its common stock (the
"1993 Offering"). The 1993 Offering was completed in November 1993.
Notwithstanding this infusion of additional capital, First National's growth
since the 1993 Offering has been limited by its capital, and Bank management has
primarily focused on increasing its capital through the retention of earnings
rather than expansion. On July 18, 1994, after successfully recapitalizing First
National in November 1993, restructuring the First National Board and management
and significantly improving First National's performance and asset quality of
its loan portfolio, the First National Board was notified by the OCC that the
Formal Agreement was terminated.
First National engages in a broad array of lending activities,
including commercial/industrial, SBA guaranteed loans, consumer and real estate
loans. As of December 31, 1997, First National had a legal lending limit for
loans of up to $655,000 to any one person. See "Information About Florida
Banks--Strategy of Florida Banks--Products and Services."
ASSET/LIABILITY MANAGEMENT
The objective of Florida Banks and First National is to manage assets
and liabilities to provide a satisfactory, consistent level of consistent
operating profitability within the framework of established cash, loan,
investment, borrowing and capital policies. The Chief Operating Officer of First
National is primarily responsible for monitoring policies and procedures that
are designed to maintain an acceptable composition of the asset/liability mix,
while adhering to prudent banking practices. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits.
Management intends to continue to invest the largest portion of First National's
earning assets in commercial, industrial and commercial real estate loans.
First National's asset/liability mix is monitored on a daily basis,
with monthly reports presented to the First National Board. The objective of
this policy is to control interest-sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on First
National's earnings. Management of Florida Banks intends to maintain an
asset/liability mix policy similar to First National's current policy. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Interest Rate Sensitivity and Liquidity
Management."
COMPETITION
Competition among financial institutions in Florida and the Identified
Markets is intense. Florida Banks and First National will compete with other
bank holding companies, state and national commercial banks, savings and loan
associations, consumer finance companies, credit unions, securities brokerages,
insurance companies, mortgage banking companies, money market mutual funds,
asset-based non-bank lenders and other financial institutions. Many of these
competitors have substantially greater resources and lending limits, more
diversified and larger branch networks and are able to offer a wider range of
products and services than Florida Banks and First National. Various legislative
actions in recent years have led to increased competition among financial
institutions. As a result of such actions, most barriers to entry to the Florida
market by out-of-state financial institutions have been eliminated. Recent
legislative and regulatory changes and technological advances have enabled
customers to conduct banking activities without regard to geographic barriers
through computer and telephone-based banking and similar services. In addition,
with the enactment of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 and other laws and
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regulations affecting interstate bank expansion, financial institutions located
outside of the State of Florida may now more easily enter the markets currently
and proposed to be served by Florida Banks and First National. There can be no
assurance that the United States Congress or the Florida Legislature or the
applicable bank regulatory agencies will not enact legislation or promulgate
rules that may further increase competitive pressures on Florida Banks. Florida
Banks' failure to compete effectively for deposit, loan and other banking
customers in its market areas could have a material adverse effect on Florida
Banks' business, future prospects, financial condition or results of operations.
See "Information About Florida Banks--Strategy of Florida Banks--Market
Expansion."
DATA PROCESSING
First National currently has an agreement with M&I to provide its core
processing and certain customer products, and Florida Banks expects to assume
this contract upon consummation of the Merger. Florida Banks believes that M&I
will be able to provide state-of-the-art data processing and customer
service-related processing at a competitive price to support Florida Banks'
future growth. Florida Banks believes the M&I contract to be adequate for its
business expansion plans.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FIRST NATIONAL
The following table sets forth, as of April 23, 1998 (a) the name and
address of the persons known by First National to be beneficial owners of more
than 5% of the shares of First National Common Stock and the name of each of
First National's directors; (b) the number and percent of the shares of First
National Common Stock owned by each such person and by all of the directors and
executive officers of First National as a group and (c) the estimated number of
shares of Florida Banks Common Stock each such person or group is expected to
receive as a result of the Merger (assuming that such persons do not exercise
their dissenters' rights), calculated by multiplying the number of shares of
First National Common Stock beneficially owned by such person or group by the
Exchange Ratio.
<TABLE>
<CAPTION>
Beneficial Ownership of
Beneficial Ownership of Florida Banks Common Stock
First National Common Stock After the Merger
--------------------------- ----------------
Name of Beneficial Owner Shares(1) Percent Shares Percent(2)
------------------------ --------- ------- ------ ----------
<S> <C> <C> <C> <C>
W. Andrew Krusen, Jr.......................... 143,850(3) 7.8% 127,076(4) 2.2%
John S. McMullen.............................. 401,325(5) 20.7 242,933(6) 4.3
T. Edwin Stinson, Jr.......................... 156,125(7) 8.2 94,506(6) 1.7
William T. Baynard, Jr........................ 98,000(8) 5.4 59,322(6) 1.1
Robert V. Christiansen........................ 29,500(8) 1.6 17,857(6) *
Beate F. Frank................................ 575 * 348(6) *
Ronald J. Peterson............................ 8,500(8) * 5,145(6) *
John K. Shepard............................... 98,000(8) 5.4 59,322(6) 1.1
All Directors and Executive Officers as a
group (8 persons)............................. 935,875(9) 45.3% 606,509(10) 10.1%
</TABLE>
- --------------------------
*Less than 1%.
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<PAGE> 73
(1) Pursuant to the rules of the Commission, the determinations of "beneficial
ownership" of shares are based upon Rule 13d-3 under the Exchange Act,
which provides that shares will be deemed to be "beneficially owned" where
a person has, either solely or in conjunction with others, the power to
vote or to direct the voting of shares and/or the power to dispose, or to
direct the disposition of, shares or where a person has the right to
acquire any such power within 60 days after the date such "beneficial
ownership" is determined. Shares that a beneficial owner has the right to
acquire within 60 days pursuant to the exercise of stock options or
warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of such owner but are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
(2) The percentages are based upon the aggregate number of shares of Florida
Banks Common Stock issued and outstanding as of April 23, 1998, as adjusted
to reflect an estimated 4,000,000 shares issuable pursuant to the Florida
Banks IPO and the estimated 1,250,000 shares of Florida Banks Common Stock
issuable pursuant to the Merger (assuming an $11.00 IPO price, the
mid-point of the estimated range) and the exchange of 2,065,000 shares of
First National Common Stock outstanding immediately prior to the
consummation of the Merger.
(3) Includes 25,000 shares of First National Common Stock issuable upon the
exercise of immediately exercisable options.
(4) Includes 40,000 shares of Florida Banks Common Stock issuable upon the
exercise of immediately exercisable options to be granted simultaneously
with the closing of the Florida Banks IPO and 87,076 shares of Florida
Banks Common Stock issuable upon conversion and exchange of shares of
First National Common Stock pursuant to the Merger.
(5) Includes 115,000 shares of First National Common Stock issuable upon the
exercise of immediately exercisable options.
(6) Comprised of shares of Florida Banks Common Stock issuable upon conversion
and exchange of shares of First National Common Stock pursuant to the
Merger.
(7) Includes 70,000 shares of First National Common Stock issuable upon the
exercise of immediately exercisable options.
(8) Includes 7,500 shares of First National Common Stock issuable upon the
exercise of immediately exercisable options.
(9) Includes 240,000 shares of First National Common Stock issuable upon the
exercise of immediately exercisable options.
(10) Comprised of 40,000 shares of First Banks Common Stock issuable upon the
exercise of immediately exercisable options to be granted simultaneously
with the closing of the Florida Banks IPO and 566,509 shares of Florida
Banks Common Stock issuable upon conversion and exchange of shares of
First National Common Stock pursuant to the Merger.
FACILITIES
First National's offices are located at 100 West Kennedy Boulevard, Tampa,
Florida 33602. First National occupies approximately 8,400 square feet in the
building. Should First National require additional space for expansion, First
National also has options for additional space at a pre-determined lease rate.
EMPLOYEES
First National presently employs 21 persons on a full-time basis and three
persons on a part-time basis, including ten officers. First National will hire
additional persons as needed, including additional tellers and financial service
representatives.
LEGAL PROCEEDINGS
From time to time, First National may be involved in litigation relating to
claims arising out of operations in the normal course of business. As of the
date of this Proxy Statement Prospectus, First National is not engaged in any
legal proceedings that are expected, individually or in the aggregate, to have a
material effect on First National.
MONETARY POLICIES
The results of operations of First National will be affected by credit
policies of monetary authorities, particularly the Federal Reserve Board. The
instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits. In view of changing conditions in the national
economy and in the money markets, as well as the effect of action by monetary
and fiscal authorities, including the Federal Reserve Board, no prediction can
be made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of First National.
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<PAGE> 74
CERTAIN TRANSACTIONS
As of March 31, 1998, Mr. W. Andrew Krusen, Jr., who serves as Chairman of
the Board of First National, and his related interests are currently indebted to
First National in the aggregate amount of $5,000. This indebtedness includes
credit card loans and other loans made in the ordinary course of business with
available unfunded commitments of $101,000.
Once First National becomes a wholly-owned subsidiary of Florida Banks,
First National may extend loans from time to time to certain of Florida Banks'
directors, their associates and members of the immediate families of the
directors and executive officers of Florida Banks. These loans will be made in
the ordinary course of business on substantially the same terms, including
interest rates, collateral and repayment terms, as those prevailing at the time
for comparable transactions with persons not affiliated with Florida Banks or
First National and will not involve more than the normal risk of collectibility
or present other unfavorable features.
65
<PAGE> 75
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FLORIDA BANKS
Florida Banks was incorporated on October 15, 1997 to acquire or
establish a bank in Florida. Prior to the consummation of the Merger, Florida
Banks will have no operating activities. The Merger will be consummated
immediately before the closing of the Florida Banks IPO. Upon consummation of
the Merger, First National's shareholders will own greater than 50% of the
outstanding Florida Banks Common Stock, excluding the issuance of the shares in
connection with the Florida Banks IPO. Accordingly, the Merger will be accounted
for as if First National had acquired Florida Banks, the financial statements of
First National will become the historical financial statements of Florida Banks
and no goodwill will be recorded as a result of the Merger.
Florida Banks has funded its start-up and organization costs through the
sale of units, consisting of Florida Banks Common Stock, Preferred Stock and
warrants to purchase shares of Florida Banks Common Stock. As Florida Banks had
no operations during 1997 and had no equity and de minimis assets and
liabilities at December 31, 1997, the Management's Discussion and Analysis of
Financial Condition and Results of Operations of Florida Banks as of December
31, 1997 and for the period then ended, is not relevant and therefore is not
included herein.
FIRST NATIONAL
Management believes that the acquisition of First National will enable
Florida Banks to implement its strategy in the Tampa market area and provide a
platform for further expansion into other Identified Markets. The purpose of the
following discussion is to focus on significant changes in the results of
operations and the financial condition of First National during the three years
ended December 31, 1997, 1996 and 1995. This discussion and analysis is intended
to supplement information contained in the accompanying consolidated financial
statements and the selected financial data and other financial information
presented elsewhere in this Proxy Statement-Prospectus.
SUMMARY
First National's net income for 1997 decreased $8,000 or 2.0% to
$376,000 from $384,000 in 1996. Net income for 1996 increased $28,000 or 7.7%
from the 1995 net income of $356,000. Basic earnings per share was $.21 for both
1997 and 1996 and diluted earnings per share, which reflects the dilutive effect
of outstanding options, was $.19 per share for 1997, compared to $.20 for 1996.
These earnings per share amounts are based upon First National's historical
weighted average number of shares outstanding and do not reflect any pro forma
adjustments relating to the Florida Banks IPO or the exchange of shares upon
consummation of the Merger.
The decrease in net income from 1996 to 1997 was primarily attributable
to a decrease in noninterest income and increases in noninterest expense and the
provision for income taxes, all of which were partially offset by an increase in
net interest income. Net interest income increased to $2.0 million in 1997 from
$1.7 million in 1996, an increase of 15.1%. Noninterest income decreased 2.5% to
$504,000 in 1997 from $517,000 in 1996. Noninterest expense increased to $1.8
million in 1997 from $1.6 million in 1996, an increase of 15.2%. The provision
for income taxes increased to $232,000 in 1997 from $217,000 in 1996, an
increase of 7.0%.
As a result of poor operating performance from First National's
inception in 1988 through 1994, First National generated approximately $8.5
million in net operating loss carryforwards. As of December 31, 1997, First
National had $7.0 million in net operating loss carryforwards remaining to be
utilized and net deferred tax assets of $2.4 million. At December 31, 1997,
First National assessed its earnings history and trends over the past three
years, its estimate of future earnings, and the expiration dates of the loss
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<PAGE> 76
carryforwards and determined that it was more likely than not that the deferred
tax assets will be realized. Accordingly, no valuation allowance was required at
December 31, 1997 resulting in net deferred tax assets of $2.4 million and a
corresponding increase to additional paid-in capital. See "--Provision for
Income Taxes."
Total assets at December 31, 1997 were $60.4 million, an increase of
$4.9 million, or 8.8%, over the prior year. Total loans increased 6.6% to $33.8
million at December 31, 1997, from $31.7 million at December 31, 1996. Total
deposits remained relatively constant at $45.5 million. Shareholders' equity
increased to $6.3 million in 1997 from $3.3 million at December 31, 1996. This
increase was attributable to retained net income, the decrease in the deferred
tax asset valuation allowance and an increase in unrealized gains in available
for sale investment securities.
The earnings performance of First National is reflected in the
calculations of net income as a percentage of average total assets ("Return on
Average Assets") and net income as a percentage of average shareholders' equity
("Return on Average Equity"). During 1997, the Return on Average Assets and
Return on Average Equity were .70% and 10.62%, respectively, compared to .85%
and 13.18%, respectively, during 1996. First National's ratio of total equity to
total assets increased to 10.45% at December 31, 1997 from 5.89% at December 31,
1996, primarily as a result of the elimination of the deferred tax asset
valuation allowance.
RESULTS OF OPERATIONS
Net Interest Income
The following table sets forth, for the periods indicated, certain
information related to First National's average balance sheet, its yields on
average earning assets and its average rates on interest-bearing liabilities.
Such yields and rates are derived by dividing income or expense by the average
balance of the corresponding assets or liabilities. Average balances have been
derived from the daily balances throughout the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1997 1996
---------------------------------------- -----------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ----
ASSETS (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans, net of deferred loan fees(1)..... $34,264 $3,353 9.79% $29,519 $2,890 9.79%
Investment securities(2)................ 9,971 583 5.85 7,740 460 5.95
Federal funds sold...................... 7,398 366 4.94 5,778 264 4.56
----- --- ------- -----
Total earning assets................. 51,633 4,302 8.33 43,037 3,614 8.40
Cash and due from banks.................... 2,092 1,684
Premises and equipment, net................ 500 516
Other assets............................... 342 309
Allowance for loan losses.................. (478) (391)
----- -------
Total assets......................... $54,089 $45,155
======= =======
</TABLE>
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<PAGE> 77
<TABLE>
LIABILITIES AND
SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing liabilities:
Interest-bearing demand deposits........ $ 2,894 $ 73 2.52% $ 2,943 $ 74 2.52%
Savings deposits........................ 5,707 273 4.77 3,941 184 4.66
Money market deposits................... 1,511 38 2.51 1,360 34 2.50
Certificates of deposit of $100,000
or more............................... 10,530 585 5.55 8,128 436 5.36
Other time deposits..................... 18,974 1,107 5.84 17,831 1,017 5.70
Repurchase agreements................... 3,957 178 4.50 2,589 108 4.19
Other borrowed funds.................... 949 42 4.44 420 19 4.49
------- ------ ------- ------
Total interest-bearing liabilities... 44,522 2,296 5.16 37,212 1,872 5.03
------ ----- ------ ------
Noninterest-bearing demand deposits........ $5,729 $4,805
Other liabilities.......................... 298 226
Shareholders' equity....................... 3,540 2,912
----- -----
Total liabilities and
shareholders' equity................. $54,089 $45,155
======= =======
Net interest income........................ $2,006 $1,742
====== ======
Net interest spread ....................... 3.17% 3.37%
Net interest margin........................ 3.89% 4.05%
</TABLE>
- --------------------
(1) During 1997 and 1996, all loans were accruing interest. Loan amounts
are net of deferred loan fees which were $94,000 in 1997 and $62,000 in
1996.
(2) The yield on investment securities is computed based upon the average
balance of investment securities at amortized cost and does not reflect
the unrealized gains or losses on such investments.
Net interest income is the principal component of a financial
institution's income stream and represents the difference or spread between
interest and certain fee income generated from earning assets and the interest
expense paid on deposits and other borrowed funds. Fluctuations in interest
rates, as well as volume and mix changes in earning assets and interest-bearing
liabilities, can materially impact net interest income. First National had no
investments in tax-exempt securities during 1997, 1996 and 1995. Accordingly, no
adjustment is necessary to facilitate comparisons on a taxable equivalent basis.
Net interest income increased 15.1% to $2.0 million in 1997 from $1.7
million in 1996. This increase in net interest income can be attributed to the
growth in average earning assets, partially offset by the growth in time
deposits and short-term borrowings and by lower margins. The trend in net
interest income is commonly evaluated using net interest margin and net interest
spread. The net interest margin, or net yield on average earning assets, is
computed by dividing fully taxable equivalent net interest income by average
earning assets. The net interest margin decreased 16 basis points to 3.89% in
1997 on average earning assets of $51.6 million from 4.05% in 1996 on average
earning assets of $43.0 million. This change is primarily due to a seven basis
point decrease in the average yield on earning assets to 8.33% in 1997 from
8.40% in 1996 and a 13 basis point increase in the average rate paid on
interest-bearing liabilities to 5.16% in 1997 from 5.03% in 1996. The decreased
yield on earning assets was primarily the result of lower market rates on
investment securities. The increase in the cost of interest-bearing liabilities
is attributable to an increase in rates on time deposits, savings deposits and
repurchase agreements.
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<PAGE> 78
Net interest income increased $279,000, or 19.1%, to $1.7 million in 1996
from $1.5 million in 1995. This increase in net interest income is attributable
to the growth in average earning assets, partially offset by the growth in
interest-bearing liabilities and by lower margins. Net interest margin decreased
eight basis points to 4.05% in 1996 on average earning assets of $43.0 million
from 4.13% in 1995 on average earning assets of $35.5 million. Management
attributes this decrease in the net interest margin to higher rates on
interest-bearing liabilities, which were partially offset by higher yields on
earning assets, resulting from higher market rates.
The net interest spread decreased 20 basis points to 3.17% in 1997 from
the 1996 net interest spread of 3.37%, as the cost of interest-bearing
liabilities increased 13 basis points and the yield on average earning assets
decreased seven basis points. The net interest spread measures the absolute
difference between the yield on average earning assets and the rate paid on
average interest-bearing sources of funds. The net interest spread eliminates
the impact of noninterest-bearing funds and gives a direct perspective on the
effect of market interest rate movements. This measurement allows management to
evaluate the variance in market rates and adjust rates or terms as needed to
maximize spreads.
The net interest spread decreased 13 basis points to 3.37% in 1996 from a
net interest spread of 3.50% in 1995. The decrease resulted from an increase in
the yield on average earning assets of 12 basis points offset by a 25 basis
point increase in the cost of average interest-bearing liabilities.
During recent years, the net interest margins and net interest spreads
have been under pressure, due in part to intense competition for funds with
non-bank institutions and changing regulatory supervision for some financial
intermediaries. The pressure was not unique to First National and was
experienced by the banking industry nationwide.
To counter potential declines in the net interest margin and the interest
rate risk inherent in the balance sheet, First National adjusts the rates and
terms of its interest-bearing liabilities in response to general market rate
changes and the competitive environment. First National monitors Federal funds
sold levels throughout the year, investing any funds not necessary to maintain
appropriate liquidity in higher yielding investments such as short-term U.S.
government and agency securities. First National will continue to manage its
balance sheet and its interest rate risk based on changing market interest rate
conditions.
Rate/Volume Analysis of Net Interest Income
The table below presents the changes in interest income and interest
expense attributable to volume and rate changes between 1996 and 1997. The
effect of a change in average balance has been determined by applying the
average rate in 1996 to the change in average balance from 1996 to 1997. The
effect of change in rate has been determined by applying the average balance in
1996 to the change in the average rate from 1996 to 1997. The net change
attributable to the combined impact of the volume and rate has been allocated to
both components in proportion to the relationship of the absolute dollar amounts
of the change in each.
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<PAGE> 79
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
COMPARED WITH
DECEMBER 31, 1996
-------------------------------------
INCREASE (DECREASE) DUE TO:
---------------------------
VOLUME YIELD/RATE TOTAL
------ ---------- -----
<S> <C> <C> <C>
Interest Earned On:
Taxable securities ........................ $123,712 $ (443) $123,269
Federal funds sold ........................ 78,715 23,391 102,106
Net loans ................................. 462,537 -- 462,537
-------- -------- --------
Total earning assets ................... 664,964 22,948 687,912
-------- -------- --------
Interest Paid On:
Money market deposits .................... 2,327 391 2,718
Savings deposits ......................... 84,389 4,445 88,834
Time deposits ............................ 202,423 37,047 239,470
Repurchase agreements .................... 61,268 8,575 69,843
Other borrowed funds ..................... 23,434 (213) 23,221
-------- -------- --------
Total interest-bearing liabilities ..... 373,841 50,245 424,086
-------- -------- --------
Net interest income .................... $291,123 $(27,297) $263,826
======== ======== ========
</TABLE>
Provision for Loan Losses
The provision for loan losses is the expense of providing an allowance
or reserve for anticipated future losses on loans. The amount of the provision
for each period is dependent upon many factors, including loan growth, net
charge-offs, changes in the composition of the loan portfolio, delinquencies,
management's assessment of loan portfolio quality, the value of loan collateral
and general business and economic conditions.
The provision for loan losses charged to operations in both 1997 and
1996 was $60,000. Management's analysis of the allowance for loan losses during
1997 and 1996 indicated no material changes in the quality of the loan
portfolio, economic outlook or other factors generally considered by management.
Accordingly, the provision for loan losses for 1997 and 1996 were generally due
to increases in the amount of loans outstanding.
The provision for loan losses charged to operations was $60,000 in 1996
compared to a benefit (a reduction in the allowance for loan losses) of $138,000
in 1995. The benefit in 1995 was a result of the improvement in First National's
loan charge-off experience, the level of problem loans, the current and
anticipated economic conditions and other factors generally considered by
management in determining the adequacy of the allowance for loan losses. For
additional information regarding provision for loan losses, charge-offs and
allowance for loan losses, see "--Financial Condition-Asset Quality."
Noninterest Income
Noninterest income consists of revenues generated from a broad range of
financial services, products and activities, including fee-based services,
service fees on deposit accounts and other activities. In addition, gains
realized from the sale of the guaranteed portion of SBA loans, other real estate
owned and available for sale investments are included in noninterest income.
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<PAGE> 80
Noninterest income decreased 2.5% to $504,000 in 1997 from $517,000 in
1996. This change resulted from a small decrease in the amount of service fees
on deposits and lower gains on the sale of the guaranteed portion of SBA loans.
Service fees on deposits decreased 2.0% to $325,000 in 1997 from $331,000 in
1996 due to a decrease in insufficient funds and returned check fees resulting
from the closure of certain commercial deposit accounts in 1997 that
consistently carried insufficient funds on deposit. Gains on sales of the
guaranteed portion of SBA loans decreased 31.1% to $95,000 in 1997 from $138,000
in 1996 due to a reduction in the principal amount of such loans sold. During
1997, First National sold $1.1 million principal balance of SBA loans of which
$1.0 million were originated in 1997, compared to $1.7 million of loans sold in
1996 of which $1.0 million were originated in 1996. Other income, which includes
various recurring noninterest income items such as travelers checks fees and
safe deposit box fees, increased 53.2% to $76,000 in 1997 from $50,000 in 1996.
Noninterest income increased 37.7% to $517,000 in 1996 from $375,000 in
1995. This increase resulted primarily from higher service fees on deposits and
higher gains on the sales of the guaranteed portion of SBA loans, partially
offset by lower gains on sale of available for sale investments and other real
estate owned. Deposit volume growth increased fees on deposits 34.8% to $331,000
in 1996 from $246,000 in 1995. Gains on sales of the guaranteed portion of SBA
loans increased 229.6% to $138,000 in 1996 from $42,000 in 1995 due to an
increase in the principal amount of loans sold. In 1996, First National sold
$1.7 million principal balance of loans of which $1.0 million were originated in
1996, compared to $529,000 of loans sold in 1995 of which $186,000 were
originated in 1995. In 1996, there was a small loss on sale of available for
sale investments, but in 1995, gain on sale of available for sale investments
and other real estate owned totaled $23,000. Other income decreased 21.9% to
$50,000 in 1996 from $64,000 in 1995.
The following table presents an analysis of the noninterest income for
the periods indicated with respect to each major category of noninterest income:
<TABLE>
<CAPTION>
% CHANGE % CHANGE
1997 1996 1995 1997-1996 1996-1995
---- ---- ---- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Service fees ................................ $ 325 $ 331 $ 246 (2.0)% 34.8%
Gain on sale of loans ....................... 95 138 42 (31.1) 229.6
Gains/(loss) on sale of available for sale
investment securities, net ............... 8 (2) 13 N/A N/A
Gain on sale of other real estate owned ..... -- -- 10 N/A N/A
Other ....................................... 76 50 64 53.2 (21.9)
----- ----- -----
Total ................................... $ 504 $ 517 $ 375 (2.5)% 37.7%
===== ===== =====
</TABLE>
Noninterest Expense
Noninterest expense increased 15.2% to $1.8 million in 1997 from $1.6
million in 1996. Management attributes this increase to an increase in personnel
expense, occupancy expense, data processing expense and other operating
expenses. Salaries and benefits increased 14.5% to $999,000 in 1997 from
$872,000 in 1996. This increase is attributable to an increase of $41,000 due to
an increase in First National's administrative lending staff, additional
incentive awards of $23,000 under an expanded officer incentive program,
increases of $17,000 in the cost of employee's group insurance and normal salary
increases. Occupancy and equipment expense increased 12.9% to $256,000 in 1997
from $227,000 in 1996 primarily as
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a result of the addition of 967 square feet of leased space for First National's
SBA department at an annualized cost of $11,000. Data processing expense
increased 22.9% to $93,000 in 1997 from $75,000 in 1996. This increase in data
processing expense is primarily attributable to the growth in loan and deposit
transactions and the addition of new services. Other operating expenses
increased 16.6% to $494,000 in 1997 from $424,000 in 1996. The increase in other
operational expenses is attributable primarily to an increase of $26,000 in FDIC
insurance premiums associated with deposit growth, an increase of $18,000 in
directors' fees and increases in SBA expenses of $28,000 related to the
liquidation and collection of problem loans.
Noninterest expense remained constant at $1.6 million in 1996 and 1995.
Increases in personnel costs and data processing expense were offset by
decreases in occupancy and equipment expense and other operating expenses.
Salaries and benefits expense increased 11.2% to $872,000 in 1996 from $784,000
in 1995. This increase resulted from the normal salary increases and an increase
in First National's lending staff. Occupancy and equipment expense decreased
23.2% to $227,000 in 1996 from $296,000 in 1995 due to cost savings which were
realized upon First National's relocation of its permanent banking facilities on
July 1, 1995. Data processing expense increased 21.4% to $75,000 in 1996 from
$62,000 in 1995. Other operating expenses decreased 11.5% to $424,000 in 1996
from $479,000 in 1995. The decrease in operating expenses is attributed
primarily to a reduction of $38,000 in FDIC insurance premiums and a loss of
$55,000 during 1995 relating to the write off of leasehold improvements and
disposition of furniture and equipment associated with First National's
relocation, which were partially offset by an increase of $19,000 in data
processing expense and an increase of $23,000 in directors' fees.
The following table presents an analysis of the noninterest expense for
the periods indicated with respect to each major category of noninterest
expense:
<TABLE>
<CAPTION>
% CHANGE % CHANGE
1997 1996 1995 1997-1996 1996-1995
---- ---- ---- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Salaries and benefits ............. $ 999 $ 872 $ 784 14.5% 11.2%
Occupancy and equipment ........... 256 227 296 12.9 (23.2)
Data processing ................... 93 75 62 22.9 21.4
Other ............................. 494 424 479 16.6 (11.5)
------ ------ ------ ---- ----
Total ......................... $1,842 $1,598 $1,621 15.2% (1.4)%
====== ====== ======
</TABLE>
Provision for Income Taxes
The provision for income taxes increased to $232,000 for 1997 from
$217,000 for 1996, reflecting an effective tax rate of 38.2% for 1997, compared
to an effective tax rate of 36.1% for 1996. The increase in the effective tax
rate is due to the effect of a higher level of nondeductible expenses in 1997
over 1996. First National paid no income taxes during 1997 and 1996 due to the
availability of net operating loss carryforwards. The provision for income taxes
for 1997 and 1996 represents deferred income taxes.
Certain income and expense items are recognized in different periods
for financial reporting purposes and for income tax return purposes. Deferred
income tax assets and liabilities reflect the differences between the values of
certain assets and liabilities for financial reporting purposes and for income
tax purposes, computed at the current tax rates. Deferred income tax expense is
computed as the change in First National's deferred tax assets, net of deferred
tax liabilities and the valuation allowance. First National's deferred
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<PAGE> 82
income tax assets consist principally of net operating loss carryforwards. A
deferred tax valuation allowance is established if it is more likely than not
that all or a portion of the deferred tax assets will not be realized.
First National reported losses from operations each year from First
National's inception in 1988 through 1994. These losses primarily resulted from
loan losses and high overhead costs. Management of First National was replaced
during 1992 and additional capital of $1.6 million was raised through a private
placement of common stock during 1993. Largely as a result of these changes,
First National became profitable in 1995. In order to reflect this fresh start,
First National elected to restructure its capital accounts through a
quasi-reorganization. A quasi-reorganization is an accounting procedure that
allows a company to restructure its capital accounts to remove an accumulated
deficit without undergoing a legal reorganization. Accordingly, First National
charged against additional paid-in capital its accumulated deficit of $8.1
million at December 31, 1995. As a result of the quasi-reorganization, the
future benefit from the utilization of the net operating loss carryforwards
generated prior to the date of the quasi-reorganization was required to be
accounted for as an increase to additional paid-in capital. Such benefits are
not considered to have resulted from First National's results of operations
subsequent to the quasi-reorganization.
As of December 31, 1997, First National had $7.0 million in net
operating loss carryforwards available to reduce future taxable earnings, which
resulted in net deferred tax assets of $2.4 million. These net operating loss
carryforwards will expire in varying amounts in the years 2004 through 2009
unless fully utilized by First National.
Prior to 1997, because of the uncertain nature of First National's
earnings, First National recorded a valuation allowance equal to the full amount
of the deferred tax assets. At December 31, 1997, First National assessed its
earnings history and trends over the past three years, its estimate of future
earnings and the expiration dates of the net operating loss carryforwards and
determined that it was more likely than not that the benefit of the deferred tax
assets will be realized. Accordingly, no valuation allowance was required at
December 31, 1997, and the elimination of the valuation allowance of $2.4
million has been reflected as an increase to additional paid-in capital.
The following table presents the components of net deferred tax assets:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets ............... $2,525 $2,729 $2,951
Deferred tax liabilities .......... 105 85 108
Valuation allowance ............... -- 2,644 2,843
------ ------ ------
Net deferred tax assets ........... $2,420 $ -- $ --
====== ====== ======
</TABLE>
No provision for income taxes was recorded in 1995 due to the benefit
of the utilization of net operating loss carryforwards prior to First National's
quasi-reorganization.
The utilization of the net operating loss carryforwards reduces the
amount of the related deferred tax asset by the amount of such utilization at
the current enacted tax rates. Other deferred tax items resulting in
temporary differences in the recognition of income and expenses such as the
allowance for loan losses, loan fees, accumulated depreciation and cash to
accrual adjustments will fluctuate from year-to-year.
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<PAGE> 83
As a result of the elimination of the deferred tax valuation allowance,
First National recognized the full benefit of the deferred tax assets at
December 31, 1997. Accordingly, First National will record a provision for
income taxes in future periods that includes a current and deferred income tax
component. The deferred income tax provision will reflect the benefit of the
utilization of the net operating loss carryforwards.
Subsequent to the completion of the Merger, First National's operating
results will be included in Florida Banks' consolidated income tax returns. As a
result of the Merger, Florida Banks will have the use of First National's net
operating loss carryforwards. However, the portion of First National's net
operating loss carryforwards which will be usable each year by Florida Banks
will be limited under provisions of Section 382 of the Internal Revenue Code
relating to the change in control. The annual limitation is based upon the
purchase price of First National multiplied by the applicable Long-Term
Tax-Exempt Rate (as defined in the Internal Revenue Code) at the date of
acquisition. Based upon the applicable Long-Term Tax-Exempt Rate for March 1998
acquisitions, this annual limitation would be approximately $700,000. Management
believes it is more likely than not that following the Merger, First National
will produce sufficient taxable income to allow Florida Banks to fully utilize
First National's net operating loss carryforwards prior to their expiration.
Net Income
Net income decreased 2.0% to $376,000 in 1997 from $384,000 in 1996.
Net income decreased primarily as a result of a decrease in noninterest income
and increases in noninterest expense and the provision for income taxes, all of
which were partially offset by an increase in net interest income. Basic
earnings per share was $.21 for both 1997 and 1996.
Return on Average Assets decreased 15 basis points to .70% in 1997 from
.85% in 1996. Return on Average Equity decreased 256 basis points to 10.62% in
1997 from 13.18% in 1996.
Net income increased 7.7% to $384,000 in 1996 from $356,000 in 1995.
The increase in net income for the year ended December 31, 1996, was
attributable to an increase in net interest income, an increase in noninterest
income and a decrease in noninterest expense, which were partially offset by an
increase in the provision for income taxes. Basic earnings per share was $.21
for 1996 and $.20 for 1995.
Return on Average Assets decreased ten basis points to .85% in 1996
from .95% in 1995. Return on Average Equity decreased 167 basis points to 13.18%
in 1996 from 14.85% in 1995.
FINANCIAL CONDITION
Earning Assets
Average earning assets increased 20.0% to $51.6 million in 1997 from
$43.0 million in 1996. During 1997, loans, net of deferred loan fees,
represented 66.4%, investment securities comprised 19.3% and Federal funds sold
comprised 14.3% of average earning assets. In 1996, loans, net of deferred loan
fees, comprised 68.6%, investment securities comprised 18.0% and Federal funds
sold comprised 13.4% of average earning assets. The variance in the mix of
earning assets is primarily attributable to an increase in investment securities
needed to pledge against the increase in repurchase agreements. First National
manages its securities portfolio to minimize interest rate fluctuation risk and
to provide liquidity.
In 1997, growth in earning assets was funded primarily through an
increase in time deposits, savings deposits, repurchase agreements, other
borrowed funds and an increase in retained earnings.
74
<PAGE> 84
Loan Portfolio
First National's total loans outstanding increased 6.6% to $33.8
million as of December 31, 1997 from $31.7 million as of December 31, 1996. Loan
growth for 1997 was funded primarily through growth in average deposits. The
growth in the loan portfolio primarily was a result of an increase in commercial
and commercial real estate loans of $2.9 million, or 11.6%, from December 31,
1996 to 1997. Average total loans in 1997 were $34.4 million, $559,000 greater
than the year end balance of $33.8 million due to the maturity and payoff of
certain construction loans prior to year end. First National engages in a full
complement of lending activities, including commercial, real estate
construction, real estate mortgage, home equity, installment loans, SBA
guaranteed loans and credit card loans.
The following table presents various categories of loans contained in
First National's loan portfolio for the periods indicated, the total amount of
all loans for such periods and the percentage of total loans represented by each
category for such periods:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------
1997 1996
----------------------- --------------------
% OF
BALANCE % OF TOTAL BALANCE TOTAL
-------- ---------- ------- -----
(DOLLARS IN THOUSANDS)
TYPE OF LOAN
<S> <C> <C> <C> <C>
Commercial real estate.............................. $15,281 45.2% $13,078 41.2%
Commercial ......................................... 13,158 38.9 12,413 39.2
Residential mortgage................................ 3,269 9.7 3,953 12.5
Consumer............................................ 1,222 3.6 1,423 4.5
Credit cards and other.............................. 869 2.6 838 2.6
------- ---- ------- ---
Total loans................................ 33,799 100% 31,705 100%
==== ===
Net deferred loan fees.............................. (79) (78)
------- -------
Loans, net of deferred loan fees......... 33,720 31,627
Allowance for loan losses........................... (481) (432)
------- -------
Net loans.................................. $33,239 $31,195
======= =======
</TABLE>
Commercial Real Estate. Commercial real estate loans consist of loans
secured by owner-occupied commercial properties, income producing properties and
construction and land development. At December 31, 1997, commercial real estate
loans represented 45.2% of outstanding loan balances, compared to 41.2% at
December 31, 1996. The increase in this category of loans is due to increased
emphasis on these real estate collateralized loans which generally have a higher
yield than residential real estate loans.
Commercial. This category of loans includes loans made to individual,
partnership or corporate borrowers, and obtained for a variety of business
purposes. At December 31, 1997, commercial loans represented 38.9% of
outstanding loan balances, compared to 39.2% at December 31, 1996.
Residential Mortgage. First National's residential mortgage loans
consist of first and second mortgage loans and construction loans. At December
31, 1997, residential mortgage loans represented 9.7% of outstanding loan
balances, compared to 12.5% at December 31, 1996. This decrease is due to the
maturity and repayment of low-income housing construction loans originated
during 1996 under government agency supported programs.
75
<PAGE> 85
Consumer. First National's consumer loans consist primarily of
installment loans to individuals for personal, family and household purposes,
education and other personal expenditures. At December 31, 1997, consumer loans
represented 3.6% of outstanding loan balances, compared to 4.5% at December 31,
1996. The decrease in consumer loans is attributable to increased competition
for those loans principally by non-bank institutions.
Credit Card and Other Loans. This category of loans consist of
borrowings by customers using credit cards, overdrafts and overdraft protection
lines. At December 31, 1997 and 1996, credit card and other loans represented
2.6% of outstanding loan balances.
First National's only area of credit concentration is commercial and
commercial real estate loans. First National has not invested in loans to
finance highly-leveraged transactions, such as leveraged buy-out transactions,
as defined by the Federal Reserve Board and other regulatory agencies. In
addition, First National had no foreign loans or loans to lesser developed
countries as of December 31, 1997. For a more thorough discussion of the types
of loans offered by First National, see "Information About First National."
While risk of loss in First National's loan portfolio is primarily tied
to the credit quality of the borrowers, risk of loss may also increase due to
factors beyond First National's control, such as local, regional and/or national
economic downturns. General conditions in the real estate market may also impact
the relative risk in First National's real estate portfolio. Of First National's
target areas of lending activities, commercial loans are generally considered to
have greater risk than real estate loans or consumer loans.
From time to time, management of First National has originated certain
loans which, because they exceeded First National's legal lending limit, were
sold to other banks. As a result of the Florida Banks IPO, First National
expects to have an increased lending limit. Accordingly, First National may, at
its discretion, repurchase certain loan participation, thereby increasing
earning assets. Loan participation agreements allow First National to repurchase
loans at the outstanding principal balance plus accrued interest, if any, at
First National's discretion.
First National also purchases participation from other banks. When
First National purchases these participation, such loans are subjected to First
National's underwriting standards as if the loan was originated by First
National. Accordingly, management of First National does not believe that loan
participation purchased from other banks pose any greater risk of loss than
loans that First National originates.
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<PAGE> 86
The repayment of loans in the loan portfolio as they mature is a source
of liquidity for First National. The following table sets forth the maturity of
First National's loan portfolio within specified intervals as of December 31,
1997:
<TABLE>
<CAPTION>
DUE IN 1 DUE AFTER 1 TO DUE AFTER
YEAR OR LESS 5 YEARS 5 YEARS TOTAL
------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
TYPE OF LOAN
- ------------
<S> <C> <C> <C> <C>
Commercial real estate ............ $ 3,405 $ 5,319 $ 6,557 $15,281
Commercial ........................ 7,942 4,968 248 13,158
Residential mortgage .............. 1,099 1,293 878 3,270
Consumer .......................... 471 750 -- 1,221
Credit card and other ............. 252 -- 617 869
------- ------- ------- -------
Total ...................... $13,169 $12,330 $ 8,300 $33,799
======= ======= ======= =======
</TABLE>
The following table presents the maturity distribution as of December
31, 1997 for loans with predetermined fixed interest rates and floating interest
rates by various maturity periods:
<TABLE>
<CAPTION>
DUE IN 1 DUE AFTER 1 TO DUE AFTER
YEAR OR LESS 5 YEARS 5 YEARS TOTAL
-------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
INTEREST CATEGORY
- -----------------
<S> <C> <C> <C> <C>
Predetermined fixed interest rate .. $ 7,181 $ 5,440 $ 6,147 $18,768
Floating interest rate ............. 5,988 6,890 2,153 15,031
------- ------- ------- -------
Total ....................... $13,169 $12,330 $ 8,300 $33,799
======= ======= ======= =======
</TABLE>
Asset Quality
During 1997 and 1996, all loans were accruing interest. At December 31,
1997, ten loans totaling $774,000 were contractually past due by 90 days or more
as to principal and interest payments. Of this amount, $624,000 are SBA loans,
of which $526,000 are guaranteed by the SBA, subject to certain conditions. No
loans past due 90 days or more as of December 31, 1996. As of December 31, 1997,
five loans totaling $265,000 (two of which, totaling $219,000, are also included
in the amount of loans past due 90 days or more) were classified as "troubled
debt restructurings" as that term is defined in Statement of Financial
Accounting Standards No. 15. As of December 31, 1996, two loans totaling $42,000
were classified as "troubled debt restructurings." See "--Nonperforming Assets."
First National started an SBA lending program in August 1994. Under
this program, First National originates commercial and commercial real estate
loans to borrowers that qualify for various SBA guaranteed loan products. The
guaranteed portion of such loans generally ranges from 75% to 85% of the
principal balance, the majority of which First National sells in the secondary
market. The majority of First National's SBA loans provide a servicing fee of
1.00% of the outstanding principal balance. Certain SBA loans provide servicing
fees of up to 2.32% of the outstanding principal balance. First National records
the premium received upon the sale of the guaranteed portion of SBA loans as
gain on sale of loans. First National does
77
<PAGE> 87
not defer a portion of the gain on sale of such loans as a yield adjustment on
the portion retained, nor does it record a retained interest, as such amounts
are not considered significant. The principal balance of SBA loans in First
National's loan portfolio at December 31, 1997 totaled $2.9 million, including
the SBA guaranteed portion of $1.6 million, compared to an outstanding balance
of $2.1 million at December 31, 1996, including the SBA guaranteed portion of
$1.2 million. At December 31, 1997, the principal balance of the guaranteed
portion of SBA loans cumulatively sold in the secondary market since the
commencement of the SBA program totaled $2.7 million.
First National generally repurchases the SBA guaranteed portion of
loans in default to fulfill the requirements of the SBA guarantee or in certain
cases, when it is determined to be in First National's best interest, to
facilitate the liquidation of the loans. The guaranteed portion of the SBA loans
are repurchased at the current principal balance plus accrued interest through
the date of repurchase. Upon liquidation, in most cases First National is
entitled to recover up to 120 days of accrued interest from the SBA on the
guaranteed portion of the loan paid. In certain cases, First National has the
option of charging-off the non-SBA guaranteed portion of the loan retained by
First National and requesting payment of the SBA guaranteed portion. In such
cases, First National will have determined that insufficient collateral exists,
or the cost of liquidating the business exceeds the anticipated proceeds to
First National. In all liquidations, First National seeks the advice of the SBA
and submits a liquidation plan for approval prior to the commencement of
liquidation proceedings. The payment of any guarantee by the SBA is dependent
upon First National following the prescribed SBA procedures and maintaining
complete documentation on the loan and any liquidation services. The total
principal balance of the guaranteed portion of SBA loans repurchased during 1997
was $319,000. No loans were repurchased during 1996.
As of December 31, 1997, there were no loans other than those disclosed
above that were classified for regulatory purposes as doubtful, substandard or
special mention which (i) represented or resulted from trends or uncertainties
which management reasonably expects will materially impact future operating
results, liquidity, or capital resources, or (ii) represented material credits
about which management is aware of any information which causes management to
have serious doubts as to the ability of such borrowers to comply with the loan
repayment terms. There are no loans other than those disclosed above where known
information about possible credit problems of borrowers causes management to
have serious doubts as to the ability of such borrowers to comply with loan
repayment terms.
Allowance for Loan Losses and Net Charge-Offs
The allowance for loan losses represents management's estimate of an
amount adequate to provide for potential losses inherent in the loan portfolio.
In its evaluation of the allowance and its adequacy, management considers loan
growth, changes in the composition of the loan portfolio, the loan charge-off
experience, the amount of past due and nonperforming loans, current and
anticipated economic conditions, underlying collateral values securing loans and
other factors. While it is First National's policy to charge-off in the current
period the loans in which a loss is considered probable, there are additional
risks of future losses which cannot be quantified precisely or attributed to
particular loans or classes of loans. Because these risks include the state of
the economy, management's judgment as to the adequacy of the allowance is
necessarily approximate and imprecise.
An analysis of First National's loss experience is furnished in the
following table for the periods indicated, as well as a detail of the allowance
for loan losses:
78
<PAGE> 88
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period......................... $432 $340
Charge-offs:
Commercial real estate............................. (24) --
Commercial......................................... (19) (4)
Residential mortgage............................... -- --
Consumer........................................... -- (3)
Credit card and other.............................. -- --
---- ----
Total charge-offs............................ (43) (7)
---- ----
Recoveries:
Commercial real estate ............................. 32 39
Commercial ......................................... -- --
Residential mortgage................................ -- --
Consumer ........................................... -- --
Credit card and other............................... -- --
---- ----
Total recoveries.............................. 32 39
---- ----
Net (charge-offs)/recoveries........................... (11) 32
Provision for loan losses.............................. 60 60
---- ----
Balance at end of period............................... $481 $432
==== ====
Net (charge-offs)/recoveries as a percentage
of average loans....................................... (.03)% .11%
Allowance for loan losses as a percentage
of total loans......................................... 1.42% 1.36%
</TABLE>
Net charge-offs were $11,000 or .03% of average loans outstanding in
1997 as compared to net recoveries of $32,000 or .11% of average loans
outstanding in 1996. The allowance for loan losses increased 11.4% to $481,000
or 1.42% of loans outstanding at December 31, 1997 from $432,000 or 1.36% at
December 31, 1996. The allowance for loan losses as a multiple of net loans
charged off was 44.8x for the year ended December 31, 1997.
Net recoveries increased to $32,000 in 1996, representing .11% of
average loans outstanding, from $16,000 in 1995 or .07% of average loans
outstanding. The allowance for loan losses increased to $432,000, or 1.36% of
loans outstanding at December 31, 1996, from $340,000, or 1.28% of loans
outstanding at December 31, 1995.
In assessing the adequacy of the allowance, management relies
predominantly on its ongoing review of the loan portfolio, which is undertaken
to ascertain whether there are probable losses which must be charged off and to
assess the risk characteristics of the portfolio in the aggregate. This review
encompasses the judgment of management, utilizing internal loan rating
standards, guidelines provided by the banking regulatory authorities governing
First National, their loan portfolio reviews as part of the bank examination
process and semi-annual independent external loan reviews performed by a
consultant.
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114") was issued in May 1993. SFAS
114 requires that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate or
the fair value of the collateral if the loan is collateral dependent. First
National adopted SFAS 114 on January 1, 1995. At December 31, 1997, First
National held impaired loans as defined by SFAS 114 of $372,000 ($300,000 of
such balance is guaranteed by the SBA) for which specific allocations of $72,000
have been established within the allowance for loan losses which have been
measured based upon the fair value of the collateral. Such reserve is allocated
between commercial and commercial real estate. No loans were impaired as of
December 31, 1996. A portion of these impaired loans have also been classified
by First National as loans
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<PAGE> 89
past due over 90 days ($342,000) and as troubled debt restructurings ($249,000).
Interest income on such impaired loans during 1997 was not significant.
As shown in the table below, management determined that as of December
31, 1997, 22.8% of the allowance for loan losses was related to commercial real
estate loans, 37.0% was related to commercial loans, 7.3% was related to
residential mortgage loans, 1.8% was related to consumer loans, 4.7% to credit
card and other loans and 26.4% was unallocated. There was no significant
fluctuation in the allocation of the allowance for loan losses between 1996 and
1997.
For the periods indicated, the allowance was allocated as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------
1997 1996
---- ----
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial real estate............ $110 22.8% $ 85 19.7%
Commercial........................ 178 37.0 157 36.4
Residential mortgage.............. 35 7.3 44 10.2
Consumer ......................... 9 1.8 15 3.4
Credit card and other loans....... 23 4.7 11 2.6
Unallocated....................... 126 26.4 120 27.7
---- ----- ---- -----
Total.................. $481 100.0% $432 100.0%
==== ===== ==== =====
</TABLE>
In considering the adequacy of First National's allowance for loan
losses, management has focused on the fact that as of December 31, 1997, 38.9%
of outstanding loans are in the category of commercial loans and 45.2% are in
commercial real estate loans. Commercial loans are generally considered by
management to have greater risk than other categories of loans in First
National's loan portfolio. Generally, such loans are secured by accounts
receivable, marketable securities, deposit accounts, equipment and other fixed
assets which reduces the risk of loss inherently present in commercial loans.
Commercial real estate loans inherently have a higher risk due to depreciation
of the facilities, limited purposes of the facilities and the effect of general
economic conditions. First National attempts to limit this risk by generally
lending no more than 75% of the appraised value of the property held as
collateral.
Residential mortgage loans constituted 9.7% of outstanding loans at
December 31, 1997. The majority of the loans in this category represent
residential real estate mortgages where the amount of the original loan
generally does not exceed 80% of the appraised value of the collateral. These
loans are considered by management to be well secured with a low risk of loss.
At December 31, 1997, the majority of First National's consumer loans
were secured by collateral primarily consisting of automobiles, boats and other
personal property. Management believes that these loans involve less risk than
commercial loans.
A credit review of the loan portfolio by an independent firm is
conducted semi-annually. The purpose of this review is to assess the risk in the
loan portfolio and to determine the adequacy of the allowance for loan losses.
The review includes analyses of historical performance, the level of
nonconforming and rated loans, loan volume and activity, review of loan files
and consideration of economic
80
<PAGE> 90
conditions and other pertinent information. Upon completion, the report is
approved by the Board and management of First National. In addition to the above
credit review, First National's primary regulator, the OCC, also conducts a
periodic examination of the loan portfolio. Upon completion, the OCC presents
its report of examination to the Board and management of First National.
Information provided from the above two independent sources, together with
information provided by the management of First National and other information
known to members of the Board, are utilized by the Board to monitor the loan
portfolio and the allowance for loan losses. Specifically, the Board attempts to
identify risks inherent in the loan portfolio (e.g., problem loans, potential
problem loans and loans to be charged off), assess the overall quality and
collectibility of the loan portfolio and determine amounts of the allowance for
loan losses and the provision for loan losses to be reported based on the
results of their review.
Nonperforming Assets
At December 31, 1997 and 1996, no loans were accounted for on a
nonaccrual basis. At December 31, 1997, ten loans totaling $774,000 were
accruing interest and were contractually past due 90 days or more as to
principal and interest payments, compared to no such loans at December 31 1996.
Of this amount, $624,000 are SBA loans, of which $526,000 are guaranteed by the
SBA, subject to certain conditions.
At December 31, 1997, five loans totaling $265,000 (two of which,
totaling $219,000, are also included in the amount of loans past due 90 days or
more) were defined as "troubled debt restructurings," compared to two loans
totaling $42,000 at the prior year end. During 1997, First National restructured
three commercial loans to one borrower that was experiencing financial
difficulties. These loans were temporarily placed on an interest-only basis
where First National was not collecting principal payments. At December 31,
1997, these three loans had an outstanding principal balance of $249,000,
including the SBA guaranteed portion totaling $186,000. These loans have been
classified as impaired loans at December 31, 1997 and First National has
provided a specific reserve of $63,000 representing First National's estimated
exposure on these loans. The borrower has been unable to make the payments under
the loans as restructured and the business is in the process of being
liquidated.
First National has policies, procedures and underwriting guidelines
intended to assist in maintaining the overall quality of its loan portfolio.
First National monitors its delinquency levels for any adverse trends.
Non-performing assets consist of loans on non-accrual status, real estate and
other assets acquired in partial or full satisfaction of loan obligations and
loans that are past due 90 days or more.
First National's policy generally is to place a loan on nonaccrual
status when it is contractually past due 90 days or more as to payment of
principal or interest. A loan may be placed on nonaccrual status at an earlier
date when concerns exist as to the ultimate collections of principal or
interest. At the time a loan is placed on nonaccrual status, interest previously
accrued but not collected is reversed and charged against current earnings.
Recognition of any interest after a loan has been placed on nonaccrual is
accounted for on a cash basis. Loans that are contractually past due 90 days or
more which are well secured or guaranteed by financially responsible third
parties and are in the process of collection generally are not placed on
nonaccrual status.
Investment Portfolio
Total investment securities increased 25.9% to $10.8 million in 1997
from $8.6 million in 1996. At December 31, 1997, investment securities available
for sale totaled $10.5 million, with an unrealized gain of $4,000, net of tax
effect. At December 31, 1996, investment securities available for sale totaled
$8.3 million, with an unrealized loss of $10,000. At December 31, 1997,
investment securities available for sale had net
81
<PAGE> 91
unrealized gains of $6,000, comprised of gross unrealized losses of $25,000 and
gross unrealized gains of $31,000. At December 31, 1996, investment securities
available for sale had net unrealized losses of $10,000, comprised of gross
unrealized losses of $31,000 and gross unrealized gains of $21,000. Average
investment securities as a percentage of average earning assets increased to
19.3% in 1997 from 18.0% in 1996.
First National invests primarily in direct obligations of the United
States, obligations guaranteed as to principal and interest by the United States
and obligations of agencies of the United States. In addition, First National
enters into Federal funds transactions with its principal correspondent banks
and acts as a net seller of such funds. The sale of Federal funds amounts to a
short-term loan from First National to another bank.
Proceeds from sales and maturities of available for sale investment
securities increased 248.7% to $13.5 million in 1997 from $3.9 million in 1996,
with a resulting net gain on sales of $8,000 in 1997. Such proceeds are
generally used to reinvest in additional available for sale investments.
Other investments include Independent Bankers Bank stock, Federal
Reserve Bank stock and Federal Home Loan Bank stock that are required for First
National to be a member of and to conduct business with such institutions.
Dividends on such investments is determined by the institutions and is payable
semi-annually or quarterly. Other investments increased 15.6% to $313,000 at
December 31, 1997 from $271,000 at December 31, 1996. Other investments are
carried at cost as such investments do not have readily determinable fair
values.
During 1997 and 1996, First National did not invest in collateralized
mortgage obligations ("CMOs"). In addition, at December 31, 1997, the investment
portfolio did not include any U.S. government agency investments which are
defined as derivatives or structured notes.
The following table presents, for the periods indicated, the carrying
amount of First National's investment securities, including mortgage-backed
securities.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------
1997 1996
------------------------ -----------------------
BALANCE % OF TOTAL BALANCE % OF TOTAL
--------- ---------- --------- ------------
INVESTMENT CATEGORY (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury and other U.S. agency obligations... $ 3,997 37.1% $2,480 29.0%
Mortgage-backed securities........................ 6,455 60.0 5,800 67.8
------- ---- ------ ----
10,452 97.1 8,280 96.8
Other investments.................................... 313 2.9 271 3.2
------- ---- ------ ----
Total.............................. $10,765 100% $8,551 100%
======= ==== ====== ====
</TABLE>
First National utilizes its available for sale investment securities,
along with cash and Federal funds sold, to meet its liquidity needs. Average
investment securities as a percentage of average earning assets increased to
19.3% in 1997 from 18.0% in 1996.
As of December 31, 1997, $6.5 million or 60.0% of the investment
securities portfolio consisted of mortgage-backed securities compared to $5.8
million or 67.8% of the investment securities portfolio as of December 31, 1996.
During 1998, $1.2 million of all mortgage-backed securities will mature. The
maturities of mortgage-backed securities, of which 49.0% were adjustable, may be
shortened by prepayments which tend to increase in a declining interest rate
environment.
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<PAGE> 92
As a result of the adoption of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"), First National has segregated its investment
securities portfolio into securities held to maturity and those available for
sale. Investments held to maturity are those for which management has both the
ability and intent to hold to maturity and are carried at amortized cost. At
December 31, 1997 and 1996, no investments were classified as held to maturity.
Investments available for sale are securities identified by management as
securities which may be sold prior to maturity in response to various factors
including liquidity needs, capital compliance, changes in interest rates or
portfolio risk management. The available for sale investment securities provides
interest income and serves as a source of liquidity for First National. These
securities are carried at fair market value, with unrealized gains and losses,
net of taxes, reported as a separate component of shareholders' equity.
Investment securities with a carrying value of approximately $9.3
million and $6.5 million at December 31, 1997 and 1996, respectively, were
pledged to secure deposits of public funds, repurchase agreements and certain
other deposits as provided by law.
The maturities and weighted average yields of the investment
securities portfolio at December 31, 1997 are presented in the following table
using primarily the stated maturities, excluding the effects of prepayments.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
AMOUNT YIELD(1)
------ --------
AVAILABLE FOR SALE: (DOLLARS IN THOUSANDS)
<S> <C> <C>
U.S. Treasury and other U.S. agency obligations:
0 - 1 year................................. $ 2,503 5.60%
Over 1 through 5 years..................... 1,494 5.75
Over 5 years .............................. --
--------
Total...................................... 3,997
--------
Mortgage-backed securities:
0 - 1 year................................. 1,247 5.81
Over 1 through 5 years..................... 879 6.56
Over 5 through 10 years.................... 524 7.69
Over 10 years.............................. 3,805 6.49
-------- ----
Total...................................... 6,455
--------
Total available for sale............... $ 10,452 6.16%
======== ====
</TABLE>
- --------------------
(1) Florida Banks has not invested in any tax-exempt obligations.
As of December 31, 1997, except for the U.S. Government and its
agencies, there was not any issuer within the investment portfolio who
represented 10% or more of the shareholders' equity.
Deposits and Short-Term Borrowings
First National's average deposits increased 16.2%, or $6.3 million, to
$45.3 million during 1997 from $39.0 million during 1996. This growth is
attributed to a 19.2% increase in noninterest-bearing demand deposits, an 11.1%
increase in money market deposits, a 44.8% increase in savings deposits, a 29.6%
increase in certificates of deposits of $100,000 or more and a 6.4% increase in
other time deposits.
Average noninterest-bearing demand deposits increased 19.2% to $5.7
million in 1997 from $4.8 million in 1996. As a percentage of average total
deposits, these deposits increased to 12.6% in 1997 from 12.3% in 1996.
Noninterest-bearing demand deposits decreased 20.7% to $6.4 million at December
31, 1997,
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<PAGE> 93
from $8.1 million at December 31, 1996. This decrease is attributable to large
business deposits received in December 1996 which were not retained by First
National during 1997. The increase in average deposit balances more
appropriately reflects the trend of increasing deposits.
Average interest-bearing demand deposits remained relatively constant
from 1996 to 1997. The increase in average savings deposits is primarily
attributable to an increase of $1.7 million in First National's Prime
Investments Account which is a specialized savings account that pays interest at
60.0% of the prime rate as quoted in The Wall Street Journal on accounts with a
balance of greater than $25,000. The increase in money market accounts is
attributable primarily to increases in commercial deposit balances. Certificates
of deposit of $100,000 or more increased 29.6% to $10.5 million for 1997,
compared to $8.1 million for 1996. This increase is primarily due to additional
certificates of deposit obtained from a single commercial customer which are
used as collateral for loans and letters of credit issued by First National. The
6.4% increase in other time deposits is due to a slight increase in rates. The
increase in these deposits was used to fund First National's loan growth.
The following table presents, for the periods indicated, the average
amount of and average rate paid on each of the following deposit categories:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1997 1996
------------------------- -------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
DEPOSIT CATEGORY (DOLLARS IN THOUSANDS)
- ----------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand $ 5,729 -- $ 4,805 --
Interest-bearing demand 2,894 2.52% 2,943 2.52%
Money market 1,511 2.51 1,360 2.50
Savings 5,707 4.77 3,941 4.66
Certificates of deposit of
$100,000 or more 10,530 5.55 8,128 5.36
Other time 18,974 5.84 17,831 5.70
------- ---- ------- ----
Total $45,345 4.58% $39,008 4.47%
======= =======
</TABLE>
Interest-bearing deposits, including certificates of deposit, will
continue to be a major source of funding for First National. However, there is
no specific emphasis placed on time deposits of $100,000 and over. During 1997,
aggregate average balances of time deposits of $100,000 and over comprised 23.2%
of total deposits compared to 20.8% for the prior year. The average rate on
certificates of deposit of $100,000 or more increased to 5.55% in 1997, compared
to 5.36% in 1996. The rates on certificates of deposit of $100,000 or more are
generally lower than the rates on other time deposits as such certificates are
generally shorter in term.
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<PAGE> 94
The following table indicates amounts outstanding of time certificates
of deposit of $100,000 or more and respective maturities:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1996
---------------- ----------------
(DOLLARS IN THOUSANDS)
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
<S> <C> <C> <C> <C>
3 months or less........................ $ 3,520 5.18% $2,451 4.65%
3-6 months.............................. 1,253 5.64 1,023 5.19
6-12 months............................. 3,199 5.41 1,563 5.77
Over 12 months.......................... 2,242 4.89 4,630 5.93
------- ------
Total $10,214 5.25% $9,667 5.50%
======= ======
</TABLE>
Average short-term borrowings increased 63.0% to $4.9 million in 1997
from $3.0 million in 1996. Short-term borrowings consist of treasury tax and
loan deposits and repurchase agreements with certain commercial customers.
Average treasury tax and loan deposits increased 125.7% to $949,000 in 1997 from
$420,000 in 1996. Average repurchase agreements increased 52.9% to $4.0 million
in 1997 from $2.6 million in 1996. The treasury tax and loan deposits provide an
additional liquidity resource to First National as such funds are invested in
Federal funds sold. The repurchase agreements represent an accommodation to
commercial customers that seek to maximize their return on liquid assets. First
National invests these funds in Federal funds sold and earns a contractual
margin of 75 to 100 basis points on such invested funds.
Repurchase agreements increased 9.7% to $5.9 million at December 31,
1997 from $5.4 million at December 31, 1996. Management believes that the
increase in average balances more appropriately reflects the trend of increasing
repurchase agreements.
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<PAGE> 95
The following table presents the components of short-term borrowings and
the average rates on such borrowings for the years ended December 31, 1997 and
1996:
<TABLE>
<CAPTION>
MAXIMUM
AMOUNT AVERAGE
OUTSTANDING AT AVERAGE AVERAGE ENDING RATE AT
YEAR ENDED DECEMBER 31, ANY MONTH END BALANCE RATE BALANCE YEAR END
- ----------------------- ------------- ------- ---- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
- ----
Treasury tax and loan deposits.................. $2,414 $ 949 4.44% $2,406 5.19%
Repurchase agreements........................... 6,257 3,958 4.50 5,912 4.66
------ ------
Total....................................... $4,907 $8,318
====== ======
1996
- ----
Treasury tax and loan deposits.................. $1,019 $ 420 4.49% $1,019 5.09%
Repurchase agreements........................... 5,389 2,589 4.19 5,389 4.21
------ ------
Total....................................... $3,009 $6,408
====== ======
</TABLE>
Capital Resources
Shareholders' equity increased 93.1% to $6.3 million in 1997 from $3.3
million in 1996. Adjustment to First National's deferred tax asset valuation
allowance, retention of earnings and unrealized appreciation on available for
sale investment securities accounted for $2.7 million, $376,000 and $13,000
respectively, of the $3.0 million increase in shareholders' equity during 1997.
The majority of the increase in shareholders' equity relates to a reduction in
the valuation allowance on deferred tax assets of $2.7 million during 1997 which
was recorded as an increase to additional paid-in capital.
Average shareholders' equity as a percentage of total average assets is
one measure used to determine capital strength. The ratio of average
shareholders' equity to average assets increased to 6.54% in 1997 from 6.45% in
1996 and 6.40% in 1995.
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<PAGE> 96
<TABLE>
<CAPTION>
REGULATORY CAPITAL CALCULATION
------------------------------
1997 1996
-------------------- --------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Tier 1 risk based:
Actual................................. $ 4,138 13.00% $ 3,279 11.01%
Minimum required....................... 1,273 4.00 1,191 4.00
------- ----- ------- -----
Excess above minimum................... $ 2,865 9.00% $ 2,088 7.01%
======= ===== ======= =====
Total risk based:
Actual................................ $ 4,546 14.29% $ 3,651 12.26%
Minimum required...................... 2,546 8.00 2,382 8.00
------- ----- ------- -----
Excess above minimum.................. $ 2,000 6.29% $ 1,269 4.26%
======= ===== ======= =====
Leverage:
Actual................................. $ 4,138 7.42% $ 3,279 6.42%
Minimum required....................... 2,231 4.00 2,044 4.00
------- ----- ------- -----
Excess above minimum................... $ 1,907 3.42% $ 1,235 2.42%
======= ===== ======= =====
Total risked based assets.................. $31,819 $29,778
Total average assets....................... $55,769 $51,109
</TABLE>
The various federal bank regulators, including the Federal Reserve and
the FDIC, have risk-based capital requirements for assessing bank capital
adequacy. These standards define capital and establish minimum capital standards
in relation to assets and off-balance sheet exposures, as adjusted for credit
risks. Capital is classified into two tiers. For banks, Tier 1 or "core" capital
consists of common shareholders' equity, qualifying noncumulative perpetual
preferred stock and minority interests in the common equity accounts of
consolidated subsidiaries, reduced by goodwill, other intangible assets and
certain investments in other corporations ("Tier 1 Capital"). Tier 2 Capital
consists of Tier 1 Capital, as well as a limited amount of the allowance for
possible loan losses, certain hybrid capital instruments (such as mandatory
convertible debt), subordinated and perpetual debt and non-qualifying perpetual
preferred stock ("Tier 2 Capital").
At December 31, 1994, a risk-based capital measure and a minimum ratio
standard was fully phased in, with a minimum total capital ratio of 8.00% and
Tier 1 Capital equal to at least 50% of total capital. The Federal Reserve also
has a minimum leverage ratio of Tier 1 Capital to total assets of 3.00%. The
3.00% Tier 1 Capital to total assets ratio constitutes the leverage standard for
bank holding companies and BIF-insured state-chartered non-member banks and will
be used in conjunction with the risk-based ratio in determining the overall
capital adequacy of banking organizations. The FDIC has similar capital
requirements for BIF-insured state-chartered non-member banks.
The Federal Reserve and the FDIC have emphasized that the foregoing
standards are supervisory minimums and that an institution would be permitted to
maintain such minimum levels of capital only if it were rated a composite "one"
under the regulatory rating systems for bank holding companies and banks. All
other bank holding companies are required to maintain a leverage ratio of 3.00%
plus at least 1.00% to 2.00% of additional capital. These rules further provide
that banking organizations experiencing internal growth or making acquisitions
will be expected to maintain capital positions substantially above the minimum
supervisory levels and comparable to peer group averages, without significant
reliance on intangible assets. The Federal Reserve continues to consider a
"tangible Tier 1 leverage ratio" in evaluation proposals for expansion or new
activities. The tangible Tier 1 leverage ratio is the ratio of a banking
organization's Tier 1 Capital less all intangibles, to total average assets less
all intangibles.
87
<PAGE> 97
First National's Tier 1 (to risk-weighted assets) capital ratio
increased to 13.00% in 1997 from 11.01% in 1996. First National's total risk
based capital ratio increased to 14.29% in 1997 from 12.26% in 1996. These
ratios exceed the minimum capital adequacy guidelines imposed by regulatory
authorities on banks and bank-holding companies, which are 4.00% for Tier 1
capital and 8.00% for total risk based capital. The ratios also exceed the
minimum guidelines imposed by the same regulatory authorities to be considered
"well-capitalized," which are 6.00% of Tier 1 capital and 10.00% for total risk
based capital.
First National does not have any commitments which it believes would
reduce its capital to levels inconsistent with the regulatory definition of a
"well capitalized" financial institution. See "Information about First
National."
No new shares of common stock were issued by First National during the
year ended December 31, 1997.
Interest Rate Sensitivity and Liquidity Management
Liquidity is the ability of a company to convert assets into cash or
cash equivalents without significant loss and to raise additional funds by
increasing liabilities. Liquidity management involves maintaining First
National's ability to meet the day-to-day cash flow requirements of its
customers, whether they are depositors wishing to withdraw funds or borrowers
requiring funds to meet their credit needs.
The primary function of asset/liability management is not only to assure
adequate liquidity in order for First National to meet the needs of its customer
base, but to maintain an appropriate balance between interest-sensitive assets
and interest-sensitive liabilities so that First National can profitably deploy
its assets. Both assets and liabilities are considered sources of liquidity
funding and both are, therefore, monitored on a daily basis.
Interest rate sensitivity is a function of the repricing characteristics
of First National's portfolio of assets and liabilities. These repricing
characteristics are the time frames within which the interest-bearing assets and
liabilities are subject to change in interest rates either at replacement,
repricing or maturity during the life of the instruments. Interest rate
sensitivity management focuses on repricing relationships of assets and
liabilities during periods of changes in market interest rates. Interest rate
sensitivity is managed with a view to maintaining a mix of assets and
liabilities that respond to changes in interest rates within an acceptable time
frame, thereby managing the effect of interest rate movements on net interest
income. Interest rate sensitivity is measured as the difference between the
volume of assets and liabilities that are subject to repricing at various time
horizons. The differences are interest sensitivity gaps: less than one month,
one to three months, four to twelve months, one to five years, over five years
and on a cumulative basis. The following table shows interest sensitivity gaps
for these different intervals as of December 31, 1997.
88
<PAGE> 98
<TABLE>
<CAPTION>
ONE ONE- FOUR-
MONTH THREE TWELVE ONE-FIVE OVER FIVE NONINTEREST
OR LESS MONTHS MONTHS YEARS YEARS SENSITIVE TOTAL
------- ------ ------ ----- ----- --------- -----
DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Available for sale investment
securities -- $ 959 $2,790 $ 2,373 $ 4,330 -- $10,452
Other investments -- -- -- -- 313 -- 313
Federal funds sold $10,245 -- -- -- -- -- 10,245
Loans 17,223 520 4,390 5,440 6,226 -- 33,799
------- ------- ------ ------- ------- -------
Total earning assets $27,468 $ 1,479 $7,180 $ 7,813 $10,869 -- $54,809
======= ======= ====== ======= ======= =======
LIABILITIES
Interest-bearing liabilities:
Interest-bearing demand deposits $ 3,073 -- -- -- -- -- $ 3,073
Savings deposits 5,327 -- -- -- -- $ 548 5,875
Money market deposits -- -- -- -- 1,348 1,348
Certificates of deposit of
$100,000 or more 2,649 $ 1,388 $3,935 $ 2,036 $ 206 -- 10,214
Other time deposits 997 2,805 5,322 8,175 1,208 -- 18,507
Repurchase agreements 5,912 -- -- -- -- -- 5,912
Other borrowed funds 2,406 -- -- -- -- -- 2,406
------- ------- ------ ------- ------- ------- -------
Total interest-bearing
liabilities $20,364 $ 4,193 $9,257 $10,211 $ 1,414 $ 1,896 $47,335
======= ======= ====== ======= ======= ======= =======
Noninterest-bearing demand deposits -- -- -- -- -- $ 6,442 $ 6,442
Other noninterest liabilities -- -- -- -- -- 1,032 1,032
------- ------- ------ ------- ------- ------- -------
Noninterest-bearing sources
of funds-net $ -- $ -- $ $ -- $ -- $ 7,474 $ 7,474
------- ------- ------ ------- ------- ------- -------
Interest sensitivity gap:
Amount $ 7,104 $(2,714) $(2,077) $(2,398) $ 9,455 $(9,370) $ --
======= ======= ======= ======= ======= ======= =======
Cumulative amount $ 7,104 $ 4,390 $ 2,313 $ (85) $ 9,370 $ -- $ --
Percent of total earning
assets 12.98% (4.96%) (3.80%) (4.38%) 17.25% (17.10%)
Cumulative percent of total
earning assets 12.98% 8.02% 4.23% (.15%) 17.10%
Ratio of rate sensitive assets to
rate sensitive liabilities 1.35x .35x .78x .77x 7.69x
Cumulative ratio of rate 1.35x 1.18x 1.07x 1.00x 1.21x
sensitive assets to rate
sensitive liabilities
</TABLE>
In the current interest rate environment, the liquidity and maturity
structure of First National's assets and liabilities are important to the
maintenance of acceptable performance levels. A decreasing rate environment
negatively impacts earnings as First National's rate-sensitive assets generally
reprice faster than its rate-sensitive liabilities. Conversely, in an increasing
rate environment, earnings are positively impacted. This asset/liability
mismatch in pricing is referred to as gap ratio and is measured as rate
sensitive assets
89
<PAGE> 99
divided by rate sensitive liabilities for a defined time period. A gap ratio of
1.00 means that assets and liabilities are perfectly matched as to repricing.
Management has specified gap ratio guidelines for a one year time horizon of
between .80 and 1.20. At December 31, 1997, First National had gap ratios of
approximately 1.18 for the next three month time period and 1.07 for the one
year period ending December 31, 1998. Thus, over the next twelve months,
rate-sensitive assets will reprice slightly faster than rate-sensitive
liabilities.
The allocations used for the interest rate sensitivity report above were
based on the maturity schedules for the loans and deposits and the duration
schedules for the investment securities. All interest-bearing demand deposits
were allocated to the one month or less category with the exception of personal
savings deposit accounts which were allocated to the noninterest sensitive
category. Changes in the mix of earning assets or supporting liabilities can
either increase or decrease the net interest margin without affecting interest
rate sensitivity. In addition, the net interest spread between an asset and its
supporting liability can vary significantly while the timing of repricing for
both the asset and the liability remain the same, thus impacting net interest
income. This is referred to as basis risk and, generally, relates to the
possibility that the repricing characteristics of short-term assets tied to
First National's prime lending rate are different from those of short-term
funding sources such as certificates of deposit.
Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
interest sensitivity analysis report. Prepayments may have significant effects
on First National's net interest margin. Because of these factors and in a
static test, interest sensitivity gap reports may not provide a complete
assessment of First National's exposure to changes in interest rates. Management
utilizes computerized interest rate simulation analysis to determine First
National's interest rate sensitivity. The table above indicates First National
is in a asset sensitive gap position for the first year, then moves into a
matched position through the five year period. Overall, due to the factors
cited, current simulations results indicates a relatively low sensitivity to
parallel shifts in interest rates. A liability sensitive bank will generally
benefit from a falling interest rate environment as the cost of interest-bearing
liabilities falls faster than the yields on interest-bearing assets, thus
creating a widening of the net interest margin. Conversely, an asset sensitive
bank will benefit from a rising interest rate environment as the yields on
earning assets rise faster than the costs of interest-bearing liabilities.
Management also evaluates economic conditions, the pattern of market interest
rates and competition to determine the appropriate mix and repricing
characteristics of assets and liabilities required to produce a targeted net
interest margin.
In addition to the gap analysis, management uses rate shock simulation
to measure the rate sensitivity of its balance sheet. Rate shock simulation is a
modeling technique used to estimate the impact of changes in rates on First
National's net interest margin. First National measures its interest rate risk
by estimating the changes in net interest income resulting from instantaneous
and sustained parallel shifts in interest rates of plus or minus 200 basis
points over a period of twelve months. First National's most recent rate shock
simulation analysis which was performed as of December 31, 1997, indicates that
a 200 basis points increase in rates would cause an increase in net interest
income of $22,000 over the next twelve month period. Conversely, a 200 basis
point decrease in rates would cause a decrease in net interest income of $22,000
over a twelve month period.
This simulation is based on management's assumption as to the effect of
interest rate changes on assets and liabilities and assumes a parallel shift of
the yield curve. It also includes certain assumptions about the future pricing
of loans and deposits in response to changes in interest rates. Further, it
assumes that delinquency rates would not change as a result of changes in
interest rates although there can be no assurance that this will be the case.
While this simulation is a useful measure of First National's sensitivity to
changing rates, it is not a forecast of the future results and is based on many
assumptions, that if changed, could cause a different outcome. In addition, a
change in U.S. Treasury rates in the designated amounts accompanied by
90
<PAGE> 100
a change in the shape of the Treasury yield curve would cause significantly
different changes to net interest income than indicated above.
Generally, First National's commercial and commercial real estate loans
are indexed to the prime rate. A portion of First National's investments in
mortgage-backed securities are indexed to U.S. Treasury rates. Accordingly, any
changes in these indices will have a direct impact on First National's interest
income. The majority of First National's savings deposits are indexed to the
prime rate. Certificates of deposit are generally priced based upon current
market conditions which include changes in the overall interest rate environment
and pricing of such deposits by competitors. Other interest-bearing deposits are
not priced against any particular index, but rather, reflect changes in the
overall interest rate environment. Repurchase agreements are indexed to the
average daily Federal funds sold rate and other borrowed funds are indexed to
U.S. Treasury rates. First National adjusts the rates and terms of its loans and
interest-bearing liabilities in response to changes in the interest rate
environment.
First National does not currently engage in trading activities or use
derivative instruments to manage interest rate risk.
At December 31, 1997, available for sale investment securities with a
carrying value of approximately $6.1 million are scheduled to mature within the
next five years. Of this amount, $3.7 million is scheduled to mature within one
year. First National's main source of liquidity is Federal funds sold. Average
Federal funds sold were $7.4 million in 1997, or 14.3% of average earning
assets, compared to $5.8 million in 1996 or 13.4% of average earning assets.
Federal funds sold totaled $10.2 million at December 31, 1997, or 18.7% of
earning assets, compared to $12.4 million at December 31, 1996, or 23.6% of
earning assets.
At December 31, 1997, loans with a carrying value of approximately $27.6
million are scheduled to mature within the next five years. Of this amount,
$22.1 million is scheduled to mature within one year.
At December 31, 1997, time deposits with a carrying value of
approximately $27.3 million are scheduled to mature within the next five years.
Of this amount, $17.1 million is scheduled to mature within one year.
First National's average loan-to-deposit ratio remained constant at
75.8% during 1997 and 1996. First National's total loan-to-deposit ratio
increased 470 basis points to 74.3% at December 31, 1997 from 69.6% at December
31, 1996, due to the receipt of large business deposits in December 1996, which
significantly increased First National's total deposits at December 31, 1996.
Management attempts to manage First National's loan-to-deposit ratio on an
average basis, as opposed to on a daily basis.
First National has short-term funding available through various federal
funds lines of credit with other financial institutions and its membership in
the Federal Home Loan Bank of Atlanta ("FHLBA"). Further, the FHLBA membership
provides the availability of participation in loan programs with varying
maturities and terms. At December 31, 1997, First National had no short-term
borrowings from the FHLBA or any other financial institution.
There are no known trends, demands, commitments, events or uncertainties
that will result in or that are reasonably likely to result in liquidity
increasing or decreasing in any material way.
It is not anticipated that Florida Banks will find it necessary to raise
additional funds to meet expenditures required to operate the business of
Florida Banks and First National over the next twelve months. All anticipated
material expenditures for such period have been identified and provided for out
of the proceeds of the Florida Banks IPO.
91
<PAGE> 101
YEAR 2000
Florida Banks is currently evaluating its computer systems as well as
those of its data processing vendor to determine whether modifications and
expenditures will be necessary to make its systems as well as those of its
vendor compliant with Year 2000 requirements. These requirements have arisen due
to the widespread use of computer programs that rely on two-digit date codes to
perform computations or decision-making functions. Many of these programs may
fail as a result of their inability to properly interpret date codes beginning
January 1, 2000. For example, such programs may misinterpret "00" as the year
1900 rather than 2000. In addition, some equipment, being controlled by
microprocessor chips, may not deal appropriately with the year "00." Florida
Banks believes that its critical systems are currently or will be Year 2000
compliant by December 31, 1998 and does not believe that material expenditures
will be necessary to implement any further modifications. Management of Florida
Banks has also evaluated the potential effect on M&I's data processing systems
resulting from Year 2000 issues. M&I has represented that M&I's core processing
systems will be fully Year 2000 compliant prior to December 31, 1998. However,
there can be no assurance that all necessary modifications will be identified
and corrected or that unforeseen difficulties or costs will not arise. In
addition, there can be no assurance that the systems of M&I or other companies
on which Florida Banks' systems rely will be modified on a timely basis, or that
the failure by another company to properly modify its systems will not
negatively impact Florida Banks' systems or operations.
ACCOUNTING PRONOUNCEMENTS
In June, 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. SFAS 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statements that is
displayed with the same prominence as other financial statements. SFAS 130 does
not require a specific format for that financial statements but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statements. Additionally, SFAS 130 requires that an
enterprise (a) classify items of other comprehensive income by their nature in a
financial statements and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. This
Statement is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. Management has not determined the effect of
this statement on its financial statements disclosure.
EFFECTS OF INFLATION AND CHANGING PRICES
Inflation generally increases the cost of funds and operating overhead,
and to the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates. At the beginning of 1996 the Federal
Reserve decreased interest rates 75 basis points. The prime rate has remained
unchanged since that time. In addition, inflation affects financial
institutions' increased cost of goods and services purchased, the cost of
salaries and benefits, occupancy expense and similar items. Inflation and
related increases in interest rates generally decrease the market value of
investments and loans held and may adversely effect liquidity, earnings and
shareholders' equity. Mortgage originations and refinancings tend to
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slow as interest rates increase and can reduce First Nationals' earnings from
such activities and the income from the sale of residential mortgage loans in
the secondary market.
MONETARY POLICIES
The results of operations of First National will be affected by credit
policies of monetary authorities, particularly the Federal Reserve Board. The
instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits. In view of changing conditions in the national
economy and in the money markets, as well as the effect of action by monetary
and fiscal authorities, including the Federal Reserve Board, no prediction can
be made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of Florida Banks or First National.
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DESCRIPTION OF FLORIDA BANKS CAPITAL STOCK AND
FIRST NATIONAL BANK OF TAMPA CAPITAL STOCK
FLORIDA BANKS
GENERAL
Florida Banks is authorized to issue 9,000,000 shares of Florida Banks
Common Stock, $.01 par value per share, and 1,000,000 shares of preferred stock,
$.01 par value per share (the "Florida Banks Preferred Stock"), of which 600,000
shares of Florida Banks Preferred Stock have been designated as Series A
Preferred Stock. As of the date hereof, 377,800 shares of Florida Banks Common
Stock and 60,600 shares of Series A Preferred Stock are issued and outstanding
and held by 28 shareholders of record.
The following summary of the Florida Banks Common Stock and Florida
Banks Preferred Stock is qualified in its entirety by reference to the Florida
Banks Charter, the Florida Banks Bylaws and the Florida Business Corporation
Act, as amended (the "FBCA").
FLORIDA BANKS COMMON STOCK
Subject to such preferential rights as the Florida Banks Board may grant
in connection with any issuance of Florida Banks Preferred Stock, holders of
shares of Florida Banks Common Stock are entitled to receive such dividends as
the Florida Banks Board may declare in its discretion from funds legally
available therefor. At this time, the Florida Banks Board intends to retain all
earnings to support anticipated growth in the current operations of Florida
Banks and First National and to finance future expansion. Additional
restrictions on the payment of cash dividends may be imposed in connection with
future issuances of Florida Banks Preferred Stock and indebtedness by Florida
Banks. Further declarations and payments of cash dividends, if any, will also be
determined in light of then-current conditions, including Florida Banks'
earnings, operations, capital requirements, liquidity, financial condition,
restrictions in financing agreements and other factors deemed relevant by the
Florida Banks Board. Upon the liquidation, dissolution or winding up of Florida
Banks, after payment of creditors, the remaining net assets of Florida Banks
will be distributed pro rata to the holders of Florida Banks Common Stock,
subject to any liquidation preference of the holders of Florida Banks Preferred
Stock. See "Description of Florida Banks Capital Stock and First National Bank
of Tampa Capital Stock--Florida Banks Preferred Stock." There are no preemptive
rights, conversion rights, or redemption or sinking fund provisions with respect
to the shares of Florida Banks Common Stock. All of the outstanding shares of
Florida Banks Common Stock are, and the shares to be outstanding upon completion
of the Florida Banks IPO will be, duly and validly authorized and issued, fully
paid and nonassessable.
Holders of Florida Banks Common Stock are entitled to one vote per share
of Florida Banks Common Stock held of record on all such matters submitted to a
vote of the shareholders. Holders of Florida Banks Common Stock do not have
cumulative voting rights. As a result, the holders of a majority of the
outstanding shares of Florida Banks Common Stock voting for the election of
directors can elect all the directors, and, in such event, the holders of the
remaining shares of Florida Banks Common Stock will not be able to elect any
persons to the Florida Banks Board.
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FLORIDA BANKS PREFERRED STOCK
The Florida Banks Board may, without shareholder approval, from time to
time authorize the issuance of Florida Banks Preferred Stock in one or more
series for such consideration and, within certain limits, with such relative
rights, preferences and limitations as the Florida Banks Board may determine.
The relative rights, preferences and limitations that the Florida Banks Board
has the authority to determine as to any such series of Florida Banks Preferred
Stock include, among other things, dividend rights, voting rights, conversion
rights, redemption rights and liquidation preferences. Because the Florida Banks
Board has the power to establish the relative rights, preferences and
limitations of each series of Florida Banks Preferred Stock, it may afford to
the holders of any such series, preferences and rights senior to the rights of
the holders of shares of Florida Banks Common Stock. Although the Florida Banks
Board has no intention at the present time of doing so, it could cause the
issuance of Florida Banks Preferred Stock that could discourage an acquisition
attempt or other transactions that some, or majority of, the shareholders might
believe to be in their best interests or in which the shareholders might receive
a premium for their shares of Florida Banks Common Stock over the market price
of such shares.
Florida Banks presently has 60,600 shares of Florida Banks Preferred
Stock outstanding, designated as the Series A Preferred Stock. The terms of the
Series A Preferred Stock provide that no dividends or other distributions shall
be declared or payable on the Series A Preferred Stock. The terms of the Series
A Preferred Stock provide for a liquidation preference in the event of a winding
up, liquidation or dissolution of Florida Banks in the amount of $10.00 per
share for an aggregate liquidation preference of $606,000. Except as may be
required by law, the holders of the Series A Preferred Stock do not have any
voting rights. The terms of the Series A Preferred Stock may be redeemed, at the
option of Florida Banks, at a price of $10.00 per share. Florida Banks intends
to redeem the outstanding shares of Series A Preferred Stock with the proceeds
of the Florida Banks IPO.
CERTAIN PROVISIONS OF THE FLORIDA BANKS CHARTER AND BY-LAWS
The Florida Banks Charter contains provisions requiring supermajority
shareholder approval to effect certain extraordinary corporate transactions
which are not approved by three-quarters of the Florida Banks Board. The Florida
Banks Charter requires, in addition to any other approval or consent required
under the affirmative vote or consent of the holders of at least two-thirds
(66-2/3%) of the shares of each class of stock entitled to vote in elections of
directors to approve any merger or consolidation of Florida Banks or any
subsidiary of Florida Banks with or into any Interested Person (as defined),
regardless of the identity of the surviving corporation, sale, lease or other
disposition of all or any substantial part (assets having an aggregate fair
market value of twenty-five percent (25%) of the total assets of Florida Banks)
of the assets of Florida Banks or any subsidiary of Florida Banks to any
Interested Person for cash, real or personal property, including securities, or
any combination thereof, issuance or delivery of securities of Florida Banks or
a subsidiary of Florida Banks to any Interested Person in consideration for or
in exchange of any securities or other property (including cash), or liquidation
of Florida Banks ("Covered Transaction"), if any person who, as of the record
date for the determination of shareholders entitled to notice of any Covered
Transaction and to vote thereon or consent thereto, as of the date of such vote
or consent, or immediately before consummation of any Covered Transaction owns
beneficially five percent or more of any voting stock of Florida Banks entitled
to vote in elections of directors ("Interested Person") is a party to the
transaction, unless three-fourths (75%) of the entire Florida Banks Board has
approved the transaction, in which case the affirmative vote of a majority of
each class of stock entitled to vote in elections of directors is required. In
addition, the Articles of Incorporation require, in addition to any approval or
consent required under Florida law, any other provision in the Articles of
Incorporation or otherwise, the separate approval by the holders of a majority
of the shares of each class of stock of Florida Banks entitled to vote in
elections of directors which are not beneficially owned, directly or indirectly,
by an Interested Person, of any Covered Transaction other than a liquidation of
Florida Banks ("Business Combination"), if an Interested Person is a party to
such transaction; provided, that such approval is not required if (a) the
consideration to be received by the holders
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of the stock of Florida Banks meets certain minimal levels determined by a
formula under the Articles of Incorporation (generally the highest price paid by
the Interested Person for any shares which he has acquired), (b) there has been
no reduction in the average dividend rate from that which was obtained prior to
the time the Interested Person became such, and (c) the consideration to be
received by shareholders who are not Interested Persons shall be paid in cash or
in the same form as the Interested Person previously paid for shares of such
class of stock. These Articles of the Florida Banks Charter, as well as the
Article classifying the Florida Banks Board, may be amended, altered, or
repealed only by the affirmative vote or consent of the holders of at least 75%
of the shares entitled to vote in elections of directors.
The effect of these provisions is to make it more difficult for a
person, entity or group to effect a change in control of Florida Banks through
the acquisition of a large block of Florida Banks' voting stock.
INDEMNIFICATION
The Articles of Incorporation and By-Laws require Florida Banks to
indemnify the directors and officers of Florida Banks to the fullest extent
permitted by law. In addition, as permitted by the FBCA, the Articles of
Incorporation and By-Laws provide that no director of Florida Banks shall be
personally liable to Florida Banks or its shareholders for monetary damages for
breach of duty of care or other duty as a director if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of Florida Banks and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. This
provision, however, shall not eliminate or limit the liability of a director (i)
for a violation of the criminal law, unless the director had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his conduct
was unlawful, (ii) for any transaction from which the director derived an
improper personal benefit, (iii) for unlawful distributions to shareholders of
Florida Banks in violation of Section 607.06401 of the FBCA, or (iv) for willful
misconduct or a conscious disregard for the best interests of Florida Banks in a
proceeding by or in the right of Florida Banks to procure judgment in its favor
or in a proceeding by or in the right of a shareholder. This provision of the
Articles of Incorporation will limit the remedies available to a shareholder who
is dissatisfied with a decision of the Florida Banks Board protected by this
provision, and such shareholder's only remedy in that circumstance may be to
bring a suit to prevent the action of the Florida Banks Board. In many
situations, this remedy may not be effective, including instances when
shareholders are not aware of a transaction or an event prior to action of the
Florida Banks Board in respect of such transaction or event.
FIRST NATIONAL
First National is authorized to issue five million (5,000,000) shares of
First National Common Stock, $1.00 par value per share, of which [2,065,000]
shares were issued and outstanding as of the Record Date and no more than
2,065,000 shares will be issued and outstanding at the Effective Time. First
National has reserved for issuance under the Option Plans (i) 240,000 shares
issuable pursuant to exercise of the First National Options and (ii) 225,000
shares issuable upon exercise of outstanding Warrants. At the Effective Time,
each outstanding First National Option, whether or not vested or exercisable,
will be canceled, while the Warrants will expire on June 10, 1998. First
National Common Stock is not publicly traded and First National acts as its own
transfer agent and the registrar for the First National Common Stock. First
National has only one class of common stock and is not authorized to issue
preferred stock.
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COMPARISON OF SHAREHOLDER RIGHTS
At the Effective Time, shareholders of First National, a national bank
chartered under the laws of the United States, will become shareholders of
Florida Banks, a Florida corporation, and Florida law will govern shareholder
rights after the Merger. Differences between the National Bank Act (which is the
law regulating national banks and supersedes the FBCA except when the provisions
of the National Bank Act and the FBCA are not in direct conflict) and the FBCA
and between the First National Charter and the First National Bylaws and the
Florida Banks Charter and the Florida Banks Bylaws will result in various
changes in the rights of First National Shareholders.
The following summary illustrates the material differences between the
rights of Florida Banks shareholders under Florida law, the Florida Banks
Charter and the Florida Banks Bylaws, as compared with those of First National
Shareholders under the Florida Laws, the First National Charter and the First
National Bylaws. This summary does not purport to be a complete description of
the provisions discussed and is qualified in its entirety by the FBCA, the First
National Charter, the First National Bylaws, the Florida Banks Charter and the
Florida Banks Bylaws, to which First National Shareholders are referred.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the FBCA, a corporation's shareholders may remove any or all of
the corporation's directors, with or without cause, unless the corporation's
articles of incorporation provide that directors may only be removed for cause.
Directors may be removed at a shareholders meeting provided that the notice of
meeting states that removal of the director(s) is a purpose or the purpose of
the meeting. The FBCA provides that, unless a corporation's articles of
incorporation specify otherwise, vacancies on the board, including vacancies
resulting from an increase in the number of directors, may be filled by a
majority vote of the remaining directors, though less than a quorum of the
board, or by the shareholders. The term of each person elected to fill a vacancy
expires at the next meeting of shareholders at which directors are elected.
Under the National Bank Act, the shareholders may remove a director with
or without cause at a duly convened special meeting of shareholders called for
that purpose when a quorum is present, if votes cast in favor of removal exceed
votes cast opposing removal. A majority of the outstanding shares may also
remove a director by written consent action. The National Bank Act further
provides that vacancies on the board will be filled by appointment of the
remaining directors, and that any director so appointed will hold his place
until the next election.
The Florida Banks Bylaws provide that any vacancy on the Florida Banks
Board may be filled by the affirmative vote of the majority of the directors
then in office, though less than a quorum. If the vacancy is not filled by
action of the directors, the shareholders may fill such vacancy at any meeting
held during the existence of the vacancy. If the vacancy occurs because a
director has been removed from office, the vacancy must be filled by the vote of
at least 75% of the outstanding shares of each class of stock entitled to vote
in elections of directors. Any other vacancy on the Florida Banks Board may be
filled by action of the Florida Banks Board or by action of the shareholders;
provided, however, that a majority of the full board may not increase the number
of directors to a number which (i) exceeds by more than two the number of
directors last elected by shareholders, if the number of directors did not
exceed 15 and (ii) exceeds by four the number of directors last elected by
shareholders where the number of directors was at least 16, but in no event may
the number of directors of First National exceed 25. The Florida Banks Charter
contains no provision supplementing the FBCA provision regarding removal of
directors.
The First National Bylaws permit the First National Shareholders to
remove any director or the entire board of directors, with or without cause, at
a shareholders' meeting called for that purpose by vote of a
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majority of outstanding shares of First National Common Stock. If the entire
First National Board is removed, the shareholders may fill any vacancies created
by the removal, and any director so elected will hold office only until the next
election of directors by the First National Shareholders. However, if less than
the entire First National Board is removed, under no circumstances may the First
National Shareholders remove a director if the votes cast against such
director's removal would be sufficient to elect such director if such votes were
cumulatively voted in such director's favor at an election of the entire First
National Board. Except for vacancies filled by action of the First National
Shareholders at a special meeting, the First National Bylaws provide that the
remaining directors may fill a vacancy on the First National Board at any
regular meeting of the First National Board or at any special meeting called for
that purpose.
QUORUM OF SHAREHOLDERS
Under the FBCA, shares entitled to vote as a separate voting group may
take action at a meeting only if a quorum exists. The FBCA provides that, unless
a corporation's articles of incorporation provide otherwise, a majority of the
votes entitled to be cast on a particular matter constitutes a quorum for a
voting group for action on that matter. The FBCA permits the articles of
incorporation to provide for a greater or lesser quorum; provided that in no
event may a quorum consist of less than one-third of the shares entitled to
vote.
The Florida Bank Bylaws provide that a quorum for shareholder meetings
consists of the presence of shareholders, in person or represented by proxy,
holding at least a majority of the issued and outstanding capital stock of
Florida Banks entitled to vote on the matters to be presented at such
shareholders' meeting.
The First National Bylaws provide that the holders of a majority of the
outstanding capital stock, present in person or represented by proxy, will
constitute a quorum at any meetings of the First National Shareholders, unless
otherwise provided by law. Further, once a quorum has been established at a
shareholders meeting, the First National Bylaws provide that a withdrawal of
shareholders that reduces the number of shareholders entitled to vote at the
meeting below the number required for a quorum will not invalidate any action
taken at or adjournment of the meeting.
ADJOURNMENT AND NOTICE OF SHAREHOLDER MEETINGS
Under the FBCA, once a share is represented for any purpose at a
meeting, it is deemed to be present for quorum purposes for the remainder of the
meeting and for any adjournment of the meeting unless a new record date is or
must be set for the adjourned meeting. Holders of a majority of shares
represented, who would be entitled to vote at a meeting if a quorum were
present, where a quorum is not present, may adjourn such meeting. Under the
FBCA, notice of shareholder meetings must be given at least 10 and no more than
60 days before the meeting date. Unless otherwise required by the FBCA with
respect to meetings at which specified actions (including, but not limited to,
mergers, certain share exchanges, certain asset sales, and dissolution) will be
considered or as required by a corporation's articles of incorporation, notice
of an annual meeting of shareholders need not contain a description of the
purpose or purposes for which the meeting is called. However, notice of a
special meeting must include a description of the purpose or purposes for which
the meeting is called.
The Florida Banks Bylaws provide that, if a quorum is not present or
represented at a shareholder meeting, the shareholders entitled to vote may
adjourn the meeting without notice other than an announcement at the meeting.
The FBCA also provides that whenever a meeting is adjourned to another time or
place, it generally will not be necessary to give any notice of the adjourned
meeting as long as notice of the time and place of the next meeting is given at
the adjourned meeting, unless a new record date for the adjourned meeting is, or
is required by law or the Florida Banks Bylaws, fixed. The Florida Banks Bylaws
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further provide that the determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders will apply to any
adjournment thereof.
The First National Bylaws provide that less than a quorum may adjourn
any shareholders' meeting, and the meeting may be held, as adjourned, without
further notice. A majority of the votes cast will decide every question or
matter submitted to the shareholders at any meeting, unless otherwise provided
by law or by the First National Charter. Neither the National Bank Act nor the
First National Charter or Bylaws contains any such provision. After a quorum has
been established at a shareholders' meeting, a withdrawal of shareholders that
reduces the number of shareholders entitled to vote at the meeting below the
number required for a quorum does not invalidate any action taken at or
adjournment of the meeting. Under the First National Bylaws, notice of
shareholder meetings, specifying the place, day, and time of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
being called, must be delivered to each shareholder entitled to vote at the
meeting at least ten and no more than 60 days before the date set for the
meeting. Such notice must be made either personally, by first-class mail, or at
the direction of the president, the secretary, or the officer or other persons
calling the meeting. If mailed, the notice is effective when deposited in the
United States mail, postage prepaid and addressed to the shareholder at his or
her address as it appears on the records of First National.
CALL OF SPECIAL SHAREHOLDER MEETINGS
Under the FBCA, special shareholders' meetings may be held in or out of
the state at a place stated in or fixed in accordance with a corporation's
bylaws or, when not inconsistent with the bylaws, in the notice of the special
meeting. Special meetings may be called by (i) the board of directors; (ii) the
person or persons authorized under the articles of incorporation or bylaws; or
(iii) holders of at least 10% (unless the articles of incorporation require a
greater percentage not to exceed 50%) of all the votes entitled to be cast on
any issue proposed to be considered at the special meeting, who make written
demand to the corporation's secretary for the meeting and describe the purpose
or purposes for which the special meeting is to be held. Only business within
the purpose or purposes described in the notice of special meeting may be
conducted at a special meeting.
The Florida Banks Bylaws provide that special meetings of the
shareholders, for any purpose or purposes, except to the extent otherwise
required by statute or the Florida Banks Charter, may be called by the Chief
Executive Officer or by any presiding officer of the Florida Banks Board. In
addition, the Chief Executive Officer or Secretary of Florida Banks must call a
special meeting when requested in writing by (i) at least 3 directors; or (ii)
shareholders owning at least 10% of all shares entitled to vote. Any such
written request must be signed and dated and must state the purpose or purposes
of the special meeting.
The First National Charter and Bylaws provide that special meetings of
the shareholders may be called, except as otherwise specifically provided by
statute, for any purpose at any time by the First National Board or by eight or
more shareholders holding, in the aggregate, at least 20% of the First National
Common Stock. Each special meeting, unless otherwise provided by law, must be
called by mailing, postage pre-paid, at least ten days before the date fixed for
the special meeting, to each shareholder at the address appearing on the records
of First National, a notice stating the purpose of the special meeting.
SHAREHOLDER CONSENT IN LIEU OF MEETING
The FBCA permits, unless a corporation's articles of incorporation
provide otherwise, any action required or permitted to be taken at a
shareholders meeting to be taken without a meeting, without prior notice and
without a vote, by action of the shareholders having at least the minimum number
of votes that would be necessary to authorize or take such action at a
shareholders meeting at which shares entitled to vote thereon
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were present and voted. To be effective, the action must be evidenced by at
least one written consent describing the action taken, dated and signed by the
requisite holders and delivered to the corporation. Under the FBCA, no written
consent will be effective to take the corporate action referred to therein
unless, within ten days after obtaining such authorization by written consent,
notice is given to those shareholders who have not consented in writing. The
notice must summarize the material features of the authorized action, and, if
the action voted on was a merger, consolidation, or sale or exchange of assets
for which dissenters' rights are provided under Florida law, the notice must
contain a clear statement of the right of dissenting shareholders to be paid the
fair value of their shares upon compliance with further provisions of Florida
law regarding the rights of dissenting shareholders. The Florida Bank Charter
and Bylaws do not limit application of the FBCA provisions permitting
shareholder consents in lieu of a meeting.
Under the First National Bylaws, whenever any notice is required to be
given to any shareholder of First National, whether pursuant to the First
National Bylaws or Charter or the laws of the United States, a written waiver of
notice signed at any time by the person entitled to that notice will be entitled
to vote at a meeting, in person or by proxy, constitutes a waiver of notice of
the meeting, except when the shareholder attends a meeting for the purpose,
expressed at the beginning of the meeting, of objecting to the transaction of
any business transaction because the meeting is not lawfully called or convened.
DISSENTERS' RIGHTS
Under the FBCA, shareholders may perfect dissenters' rights with regard
to corporate actions involving certain mergers, consolidations, sale, lease or
exchange of substantially all the assets of the corporation (under limited
circumstances), or elimination of cumulative voting. However, the FBCA generally
denies dissenters' rights in the case of a merger or share exchange or a
proposed sale or exchange of property when a corporation's shares are listed on
a national securities exchange or the Nasdaq National Market or held of record
by at least 2,000 persons. A shareholder wishing to assert dissenters' rights
under the FBCA must follow the specified procedures which include: (i)
delivering, before the vote is taken on the matter, written notice of the
holder's intent to demand payment for his shares if the matter is approved; and
(ii) not voting his shares in favor of the matter proposed. Within 10 days after
the shareholders have authorized the matter, the corporation must give written
notice of the authorization to each shareholder who delivered written notice of
his intent to demand payment and who did not vote for the proposed action.
Within 20 days after the corporation has provided this notice, the shareholder
must file with the corporation a notice of his election to dissent and must
simultaneously surrender certificates representing his shares. The notice of
election must be in the form specified under the FBCA.
Under the National Bank Act, shareholders may perfect dissenters' rights
with regard to corporate actions by complying with the procedures set forth in
Section 215a, as set forth in Appendix B to this Proxy Statement-Prospectus. See
"The Merger--Dissenters' Rights of First National Shareholders."
DERIVATIVE ACTIONS
Under the FBCA, a derivative action may be brought only by a person who
was a shareholder of the corporation at the time of the alleged wrongdoing
unless the person became a shareholder through transfer by operation of law from
one who was a shareholder at that time. A complaint brought in a derivative
proceeding must be verified and must allege with particularity the demand to
obtain action by the board of directors and that the demand was refused or
ignored. The court may dismiss a derivative proceeding if it finds, on the
corporation's motion, that any one of a number of specified groups has
determined in good faith, after a reasonable investigation, that maintaining the
derivative suit is not in the corporation's best interest. The corporation will
have the burden of proving the independence and good faith of the group making
the
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determination and the reasonableness of the investigation. A derivative action
commenced under the FBCA may not be discontinued or settled without the court's
approval.
DIVIDENDS AND DISTRIBUTIONS
Under the FBCA, a corporation may not make a distribution if, after
giving effect thereto, the corporation would be unable to satisfy its debts as
they become due in the ordinary course of business or if the corporation's total
assets would be less than its total liabilities plus the amount that would be
needed, if it were to be dissolved at the time of the distribution, to satisfy
preferential rights of shareholders whose preferential rights are superior to
those of the class of shareholders receiving the dividend or other distribution.
The Florida Banks Charter does not supplement or modify application of the FBCA
restrictions on the payment of dividends or the making of shareholder
distributions.
Under the National Bank Act, the directors of a national banking
association may declare quarterly, semi-annual or annual dividends of the bank's
undivided profits; provided that until the bank's surplus fund equals its common
capital, no dividends may be declared unless at least 10% of the bank's net
income for the preceding six months (for quarterly or semi-annual dividends) or
the preceding twelve months (for annual dividends) has been transferred to the
surplus fund. In addition, OCC approval is required if the bank's total declared
dividends for any calendar year exceed its total net income combined with
retained net income of the preceding two years, less any required transfers to
surplus or any preferred stock retirement fund.
DIRECTOR QUALIFICATIONS AND NUMBER
Under the FBCA, directors must be at least 18 years of age but need not
be shareholders of the corporation or Florida residents unless the corporation's
articles of incorporation or bylaws require so. The FBCA provides that a
corporation's articles of incorporation and bylaws may impose additional
qualifications on directors.
The National Bank Act requires that a bank's board must consist of at
least five, but no more than 25 elected directors. Each director must be a U.S.
citizen during his entire term of service, and at least a majority of the
directors must have lived, for at least one year before their election and
during their entire term of service as a director, either within the state in
which the bank is located or within 100 miles of the bank. In addition, each
director must own shares of the bank with an aggregate par value of at least
$1,000.
The Florida Banks Bylaws provide for the Florida Banks Board to consist
of that number of directors as may be determined by the Florida Banks Board,
which number will be not less than two nor more than 25. By resolution, the
Florida Banks Board has set the present size of the Florida Banks Board at [22]
directors. Directors must be at least 18 years old, but need not be shareholder
or residents of Florida unless the Florida Banks Charter provides otherwise. The
Florida Banks Charter provides that the Florida Banks Board be classified into
three classes, as nearly equal as possible, with the initial term of the "Class
I Directors" to expire at the annual meeting of shareholders to be held in 1999,
the initial term of the "Class II Directors" to expire at the annual meeting of
shareholders to be held in 2000 and the initial term of the "Class III
Directors" to expire at the annual meeting of shareholders to be held in 2001.
Pursuant to the First National Bylaws, the First National Board must
consist of at least five and no more than 25 First National Shareholders, with
the exact number of directors to be fixed and determined from time to time by
resolution of a majority of the full board or by resolution of the First
National Shareholders at any meeting thereof. No decrease in the number of
directors may have the effect of shortening the term of an incumbent director
unless the shareholders remove the director. Each director of First National
must be an adult citizen of the United States; in addition, at least two-thirds
of the directors must, during his or her entire
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term of service, have resided in the State of Florida for at least one year
immediately preceding their election and must be Florida residents during their
continuance in office. In addition, each director must directly own shares of
First National's capital stock which have an aggregate value of at least $1,000;
any director who ceases to be the owner of the required aggregate value of First
National's capital stock, or who becomes in any other manner disqualified, will
be deemed to have terminated his or her status as a director of First National.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The FBCA permits a corporation to indemnify any person who was or is a
party to any proceeding (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against liability he incurs in connection
with such proceeding, including any appeal. These indemnification rights apply
if the director, officer, employee or agent acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
proceeding by judgment, order, settlement or conviction or upon a plea of nolo
contendere or its equivalent will not, of itself, create a presumption that the
person did not act in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation or, with respect to
a criminal action or proceeding, had reasonable cause to believe that his action
was unlawful.
Under the FBCA, a corporation must indemnify any officer, director,
agent or employee who is successful (on the merits or otherwise) in defending an
action of the type referred to in the immediately preceding paragraph against
the actual and reasonable expenses of defending any such action. Except with
regard to the costs and expenses of successfully defending an action as may be
ordered by a court, indemnification as described in the previous paragraph is
only required to be made to a director, officer, agent or employee if a
determination is made that indemnification is proper under the circumstances.
Such determination will be made: (i) by the corporation's board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
proceeding; (ii) by a majority vote of a committee duly designated by the board
of directors consisting of two or more directors not at the time parties to the
proceeding; (iii) by independent legal counsel selected by specified groupings
of the board of directors or (iv) by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such proceeding, or,
if no such quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding. The reasonableness of the expenses to be indemnified
is determined in the same manner as the determination of whether the
indemnification is permissible. Florida law further provides that a corporation
may pay expenses incurred in defending any action or proceeding in advance of
the final disposition if the applicable director or officer first gives the
corporation an undertaking to repay the amount if it is ultimately determined
that the director or officer is not entitled to be indemnified by the
corporation.
Under Florida law, the provisions for indemnification and advancement of
expenses are not exclusive. Accordingly, a corporation may make any other or
further indemnification or advancement of expenses of any of its officers,
directors, employees or agents under any bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. Under
the FBCA, indemnification or advancement of expenses, however, will not be made
to or on behalf of any officer, director, employee or agent if a judgment or
other final adjudication establishes that his actions or omissions were material
to the cause of action so adjudicated and constitute: (i) a violation of the
criminal law, unless the officer, director, employee or agent had reasonable
cause to believe that his conduct was lawful or had no reasonable cause to
believe that his conduct was unlawful; (ii) a transaction from which the
officer, director, employee or agent derived an improper personal
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<PAGE> 112
benefit; (iii) in the case of a director, a circumstance under which the
liability provisions of the FBCA Section 607.0834 (relating to unlawful
distributions) apply or (iv) willful misconduct or a conscious disregard for the
best interest of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
Florida law permits a corporation to purchase and maintain insurance on
behalf of any director or officer of the corporation against any liability
asserted against the director or officer and incurred in such capacity, whether
or not the corporation would have the power to indemnify the director or officer
against such liability.
The Florida Banks Charter provides that its directors, officers and any
other person designated by the Florida Banks Board are entitled to be
indemnified to the fullest extent now permitted by law.
DIRECTOR LIABILITY
Under Florida law, a director is not personally liable for monetary
damages for any statement, vote, decision, or failure to act, regarding
corporate management or policy, by a director, unless the director breached or
failed to perform his duties as a director and the director's breach of, or
failure to perform, those duties constitutes a violation of criminal law (unless
the director had reasonable cause to believe his conduct was lawful or no
reasonable cause to believe his conduct was unlawful), self dealing, willful
misconduct, or recklessness.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING FLORIDA BANKS
PURSUANT TO THE FOREGOING PROVISIONS OF THE FLORIDA BANKS CHARTER, FLORIDA BANKS
HAS BEEN INFORMED THAT IN THE OPINION OF THE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND IS THEREFORE
UNENFORCEABLE.
AMENDMENT OF ARTICLES OF INCORPORATION AND BY-LAWS
The FBCA generally requires the affirmative vote of the holders of at
least a majority of the votes actually cast on an amendment to the articles of
incorporation; provided, however, a majority of the votes entitled to be cast on
the amendment is required with respect to an amendment that would create
dissenters' rights. Under Florida corporate law, shareholder approval is not
required for certain non-material amendments. The FBCA provides that a
corporation's bylaws may be amended or repealed by the board of directors or
shareholders; provided, however, that the board may not amend or repeal the
corporation's bylaws if the articles of incorporation reserve such power to the
shareholders, or the shareholders, in amending or repealing the bylaws,
expressly provide that the board of directors may not amend or repeal the bylaws
or a particular bylaw provision.
The National Bank Act provides that, except as otherwise required by law
or in the national bank's articles of association, the articles of association
may be amended in any lawful manner. Any amendment requiring shareholder
approval may be effected at a shareholder meeting by the affirmative vote of the
holders of at least a majority of the voting stock.
The Florida Banks Charter and the Florida Banks By-Laws provide that the
Florida Banks By-Laws may be amended by the affirmative vote of a majority of
the Florida Banks Board then holding office or by the affirmative vote of the
holders of at least 75% of the outstanding Florida Banks Common Stock entitled
to vote thereon. The Florida Banks Bylaws provide that the Florida Banks Board
may not adopt, amend, or repeal any by-law which sets a greater quorum or voting
requirement for shareholders (or shareholder voting
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<PAGE> 113
groups) than the minimum required by the FBCA. In addition, a by-law that fixes
a greater quorum or voting requirement for the Florida Banks Board than the
minimum required by the FBCA may be amended or repealed (i) only by the
shareholders if the shareholders originally adopted such by-law and (ii) either
by the Florida Banks Board or the shareholders if the Florida Banks Board
originally adopted such by-law. A by-law adopted or amended by the shareholders
that fixes a greater quorum or voting requirement for the Florida Banks Board
may be amended or repealed only by a specified vote of either the shareholders
or the Florida Banks Board, if such by-law provision so provides.
Under the First National Charter and Bylaws, unless otherwise required
by law, the First National Charter may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the First National Common Stock. The First National Bylaws may be amended,
altered or repealed, at any regular meeting of the First National Board, by a
vote of the majority of the total number of directors.
VOTE REQUIRED FOR EXTRAORDINARY CORPORATE TRANSACTIONS
Under the FBCA, a merger, consolidation, share exchange, dissolution or
sale of substantially all of a corporation's assets other than in the ordinary
course of business must be generally approved by the affirmative vote of the
holders of a majority of the shares entitled to vote thereon unless the
corporation's articles of incorporation require a higher vote.
The Florida Banks Charter requires the affirmative vote of at least 75%
of the outstanding shares of Florida Banks Common Stock entitled to vote to
approve a merger, consolidation, or sale, lease, exchange or other disposition,
in a single transaction or series of related transactions, of all or
substantially all or a substantial part of the properties or assets of Florida
Banks, unless the Florida Banks Board has approved and recommended the
transaction prior to the consummation thereof.
INTERESTED SHAREHOLDER TRANSACTIONS
Under the FBCA, any merger, consolidation, disposition of all or a
substantial part of the assets of the corporation or a subsidiary of the
corporation, or exchange of securities requiring shareholder approval (a
"Business Combination"), if an Interested Person is a party to such transaction,
will be approved by the affirmative vote of the holders of two-thirds of the
voting shares other than the shares beneficially owned by the Interested Person;
provided, that such approval is not required if (a) the Interested Shareholder
Transaction has been approved by a majority of the disinterested directors; (b)
the corporation has not had more than 300 shareholders of record at any time
during the three years preceding the announcement date; (c) the Interested
Person has been the beneficial owner of at least 80% of the corporation's
outstanding voting shares for at least five years preceding the announcement
date; (d) the Interested Person is the beneficial owner of at least 90% of the
outstanding voting shares of the corporation, exclusive of shares acquired
directly from the corporation in a transaction not approved by a majority of the
disinterested directors; (e) the corporation is an investment company registered
under the Investment Company Act of 1940 or (f) the consideration to be received
by holders of the stock of the corporation meets certain minimum levels
determined by a formula under Section 607.0901(4)(f) of the FBCA (generally, the
highest price paid by the Interested Person for any shares which she or he has
acquired). First National has not opted out of this statutory provision.
FIDUCIARY DUTY
Under Florida law, a director is required to discharge his or her duties
in good faith, with the care an ordinarily prudent person in a like position
would exercise under similar circumstances and in a manner
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<PAGE> 114
reasonably believed to be in the best interest of the corporation. In
discharging his or her duties, a director is entitled to rely on: (i)
information, opinions, reports, or statements, including financial statements
and other financial data, if presented or prepared by officers or employees of
the corporation whom the director reasonably believes to be reliable and
competent in the matters presented; (ii) legal counsel, public accountants or
other persons as to matters the director reasonably believes are within the
person's professional or expert competence or (iii) a committee of the board of
which the director is not a member if the director reasonably believes the
committee merits confidence. In addition, in discharging his or her duties, a
director may consider such factors as the director deems relevant, including the
long-term prospects and interest of the corporation and its shareholders, and
the social, economic, legal, or other effects of any action on the employees,
suppliers, customers of the corporation or its subsidiaries, the communities and
society in which the corporation or its subsidiaries operate, and the economy of
the state and the nation.
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
Section 607.0902 of the FBCA restricts the voting rights of certain
shares of a corporation's stock when those shares are acquired by a party who,
by such acquisition, would control at least one-fifth of all voting rights of
the corporation's issued and outstanding stock. The statute provides that the
acquired shares (the "control shares") will, upon such acquisition, cease to
have any voting rights. The acquiring party may, however, petition the
corporation to have voting rights re-assigned to the control shares by way of an
"acquiring person's statement" submitted to the corporation in compliance with
the requirements of the statute. Upon receipt of such request, the corporation
must submit, for shareholder approval, the acquiring person's request to have
voting rights re-assigned to the control shares. Voting rights may be reassigned
to the control shares by a resolution of a majority of the corporation's
shareholders for each class and series of stock. If such a resolution is
approved, and the voting rights re-assigned to the control shares represent a
majority of all voting rights of the corporation's outstanding voting stock,
then, unless the corporation's articles of incorporation or Bylaws provide
otherwise, all shareholders of the corporation will be able to exercise
dissenter's rights in accordance with Florida law.
A corporation may, by amendment to its articles of incorporation or
bylaws, provide that, if the party acquiring the control shares does not submit
an acquiring person's statement in accordance with the statute, the corporation
may redeem the control shares at any time during the period ending 60 days after
the acquisition of control shares. If the acquiring party files an acquiring
person's statement, the control shares are not subject to redemption by the
corporation unless the shareholders, acting on the acquiring party's request,
deny full voting rights to the control shares.
The statute does not alter the voting rights of any stock of the
corporation acquired in any of the following manners: (i) pursuant to the laws
of intestate succession or pursuant to a gift or testamentary transfer; (ii)
pursuant to the satisfaction of a pledge or other security interest created in
good faith and not for the purpose of circumventing the statute; (iii) pursuant
to either a merger or share exchange if the corporation is a party to the
agreement or plan of merger or share exchange; (iv) pursuant to any savings,
employee stock ownership or other benefit plan of the corporation or (v)
pursuant to an acquisition of shares specifically approved by the board of
directors of the corporation.
The Florida Banks Charter provides that the Florida Banks Board, in
evaluating a proposal for an extraordinary corporate transaction, will consider
all relevant factors, including the economic effect, both immediate and
long-term, upon the Florida Banks shareholders, including shareholders, if any,
who will not participate in the transaction; the social and economic effect on
the employees, depositors and customers of, and others dealing with, Florida
Banks and its subsidiaries and on the communities in which Florida Banks and its
subsidiaries operate or are located; whether the proposal is acceptable based on
the historical and current operating results or financial condition of Florida
Banks; whether a more favorable price could be
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<PAGE> 115
obtained for Florida Banks' securities in the future; the reputation and
business practices of the offeror and its management and affiliates as they
would affect the employees, depositors and customers of Florida Banks and its
subsidiaries; and the future value of Florida Banks' stock; and any antitrust or
other legal and regulatory issues that are raised by the proposal.
The following provisions of the Florida Banks Charter and the Florida
Banks Bylaws may be considered to have anti-takeover implications: (i) the
ability of the Florida Banks Board to fill the vacancies (but only until the
next selection of the class of directors for which such director has been
chosen) resulting from an increase in the number of directors; (ii) the ability
of the Florida Banks Board to issue substantial amounts of Florida Banks Common
Stock without the need for shareholder approval, which Florida Banks Common
Stock, among other things and in certain circumstances, may be used to dilute
the stock ownership of holders of Florida Banks Common Stock seeking to obtain
control of Florida Banks; (iii) the ability of the Florida Banks Board to
establish the rights of, and to issue, substantial amounts of Florida Banks
Preferred Stock without the need for shareholder approval which Florida Banks
Preferred Stock, among other things, may be used to create voting impediments
with respect to changes in control of Florida Banks or, to dilute the stock
ownership of holders of Florida Banks Common Stock seeking to obtain control of
Florida Banks; (iv) the supermajority voting requirements for certain
extraordinary corporate transactions and (v) the broad range of factors that the
Florida Banks Board may consider in evaluating such a proposal, and the broad
range of actions it may take to reject such a proposal, if it so decides. In
addition to the provisions of Section 607.09 of the FBCA, the classification of
the Florida Banks Board may serve as an anti-takeover protection.
LEGAL OPINIONS
The legality of the shares of Florida Banks Common Stock to be issued to
the holders of First National Common Stock pursuant to the Merger will be passed
upon by Smith, Gambrell & Russell, LLP, Atlanta, Georgia. Smith, Gambrell &
Russell, LLP has from time to time acted as counsel in advising Florida Banks
and its affiliates with respect to certain matters and in connection with
various transactions. Certain other legal matters will be passed upon for First
National by Igler & Dougherty, P.A., Tampa, Florida.
The Merger Agreement provides as a condition to each party's obligation
to consummate the Merger that Florida Banks and First National receive the
opinion of Smith, Gambrell & Russell, LLP, Atlanta, Georgia, special counsel to
Florida Banks, substantially to the effect that the Merger will constitute a
"reorganization" under Section 368(a) of the Code.
EXPERTS
The financial statements included in this Proxy Statement-Prospectus and
elsewhere in the Registration Statement have also been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in this Registration Statement and are included in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
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<PAGE> 116
OTHER MATTERS
As of the date of this Proxy Statement-Prospectus, the First National
Board knows of no matters that will be presented for consideration at the
Special Meeting other than as described in this Proxy Statement-Prospectus.
However, if any other matters will properly come before the Special Meeting or
any adjournments or postponements thereof and be voted upon, the enclosed
proxies will be deemed to confer discretionary authority on the individuals
named as proxies therein to vote the shares represented by such proxies as to
any such matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the management of First National.
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<PAGE> 117
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS FOR FLORIDA BANKS, INC.
Independent Auditors' Report.............................. F-2
Balance Sheet as of December 31, 1997..................... F-3
Notes to Financial Statement.............................. F-4
FINANCIAL STATEMENTS FOR FIRST NATIONAL BANK OF TAMPA
Independent Auditors' Report.............................. F-6
Balance Sheets as of December 31, 1997 and 1996........... F-7
Statements of Income for the Years Ended December 31,
1997, 1996 and 1995.................................... F-8
Statements of Shareholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995....................... F-9
Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995.................................... F-10
Notes to Financial Statements............................. F-11
</TABLE>
F-1
<PAGE> 118
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Florida Banks, Inc.:
We have audited the accompanying balance sheet of Florida Banks, Inc. (the
Company) (a development stage corporation) as of December 31, 1997. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the accompanying balance sheet of the Company as of
December 31, 1997 presents fairly in all material respects, the financial
position of the Company in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
March 20, 1998
Jacksonville, Florida
F-2
<PAGE> 119
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997
-------
<S> <C>
ASSETS
ORGANIZATIONAL COSTS........................................ $26,442
-------
TOTAL............................................. $26,442
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCRUED EXPENSES............................................ $26,442
-------
Total liabilities................................. 26,442
-------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 9,000,000 shares authorized;
none issued or outstanding.............................
Preferred stock, $.01 par value; 1,000,000 shares
authorized; none issued or outstanding.................
-------
Total shareholders' equity........................
-------
TOTAL............................................. $26,442
=======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 120
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENT
AS OF DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- Florida Banks, Inc. (the Company) was incorporated on
October 15, 1997 for the purpose of becoming a bank holding company and
acquiring First National Bank of Tampa. The Company is in the development stage
and will remain in the development stage until the consummation of the merger
with First National Bank of Tampa and the proposed initial public offering.
Operations through December 31, 1997, relate primarily to expenditures for
incorporating and organizing the Company.
Organizational Costs -- Incurred organizational costs (consisting
principally of legal, regulatory, consulting and incorporation fees) are
deferred and will be amortized over the Company's initial sixty months of
operations.
2. SUBSEQUENT EVENTS
In January 1998, the Company entered into an employment agreement with its
President and Chief Executive Officer (the "President"). The agreement has a
three-year term and provides for a minimum annual base salary of $220,000 until
the closing of the offering and $250,000 subsequent to the offering. Under the
terms of the agreement, upon closing of the offering the President will be
granted a stock award of 80,000 shares of common stock which will vest in
accordance with the following schedule: 40,000 immediately upon the grant;
20,000 will vest one year from the date of the grant; and 20,000 will vest two
years from the date of the grant. In addition, the Board will issue an option to
the President to purchase 80,000 shares of common stock at the initial public
offering price. This option will be exercisable for a period of ten years. The
agreement provides that if the Company is unable to close on the public offering
or if the President is terminated without cause, the President is entitled to
liquidated damages of $100,000.
On February 3, 1998, the Company sold 101 Units to qualified foreign
investors. Each Unit was comprised of (i) 600 shares of Preferred Stock, (ii)
800 shares of Common Stock, and (iii) Warrants to purchase 800 shares of Common
Stock, at the price of $6,008 per Unit. The net proceeds to the Company from
this private placement was approximately $600,000. The Preferred Stock was
valued at the liquidation value of $10 per share, the Common Stock was valued at
$.01 per share and no value was assigned to the Warrants. The Preferred Stock is
non-voting, and at the option of the Company, the Preferred Stock may be
redeemed at any time in whole or in part at a cash redemption price of $10 per
share. The proceeds from the issuance of such Units provided funding for the
Company's development stage operations.
On February 11, 1998, the Company sold 297,000 shares of Common Stock to 14
investors as Founder Shares at the price of $.01 per share, which was considered
to be the fair market value of such stock on the date of issuance. Such
investors include the President and Chief Executive Officer, certain directors
of the Company, T. Stephen Johnson and other employees of T. Stephen Johnson &
Associates ("TSJ&A").
On March 30, 1998, the Company executed a definitive agreement with First
National Bank of Tampa, pursuant to which the Bank will be merged with and into
Interim Bank No. 1, N.A., a wholly-owned subsidiary of the Company, which will
be renamed "Florida Bank, N.A." Shareholders of First National Bank of Tampa
will receive $13,750,000 payable in common stock of Florida Banks, Inc. The
number of shares to be issued is based upon the price per share in the proposed
initial public offering. The Merger is contingent, among other things, upon the
receipt of approval of the Merger by the Board of Governors of the Federal
Reserve System, the OCC and the FDIC. In addition, the Merger must be approved
by shareholders of First National Bank of Tampa. The Merger is considered a
reverse acquisition for accounting purposes, with the Bank identified as the
accounting acquirer. The Merger will be accounted for as a purchase, but no
goodwill
F-4
<PAGE> 121
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENT -- (CONTINUED)
will be recorded in the Merger and the financial statements of the Bank will
become the historical financial statements of the Company.
As compensation for consulting services during the organization and
formation of the Company and acquisition of the Bank, TSJ&A will be paid a fee
of $15,000 per month for a term of six months. In addition, TSJ&A will receive
finder's fee of $137,500, which represents 1% of the purchase price of First
National Bank of Tampa, to be paid upon consummation of the public offering. T.
Stephen Johnson is Vice-Chairman of the Company and is Chairman of TSJ&A.
Mr. Robin Kelton, a significant shareholder of the Company, serves as the
Chairman of Kelton International Ltd. which received a fee of $45,450 in
connection with the offering of Units to foreign investors.
F-5
<PAGE> 122
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
First National Bank of Tampa
Tampa, Florida
We have audited the accompanying balance sheets of First National Bank of
Tampa (the "Bank") as of December 31, 1996 and 1997, and the related statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Bank'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, such financial statements present fairly, in all material
respects, the financial position of the Bank as of December 31, 1996 and 1997,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
February 27, 1998
Jacksonville, Florida
F-6
<PAGE> 123
FIRST NATIONAL BANK OF TAMPA
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS..................................... $ 2,788,211 $ 2,488,784
FEDERAL FUNDS SOLD.......................................... 10,245,000 12,410,000
----------- -----------
Total cash and cash equivalents................... 13,033,211 14,898,784
INVESTMENT SECURITIES:
Available for sale, at fair value (cost $10,445,885 and
$8,289,420 at December 31, 1997 and 1996).............. 10,452,185 8,279,765
Other investments......................................... 313,050 270,850
LOANS:
Commercial real estate.................................... 15,281,442 13,078,357
Commercial................................................ 13,157,905 12,412,325
Residential mortgage...................................... 3,268,704 3,952,731
Consumer.................................................. 1,222,045 1,423,161
Credit card and other loans............................... 869,031 838,108
----------- -----------
Total loans....................................... 33,799,127 31,704,681
Allowance for loan losses................................. (481,462) (432,238)
Net deferred loan fees.................................... (78,765) (77,621)
----------- -----------
Net loans......................................... 33,238,900 31,194,822
PREMISES AND EQUIPMENT, NET................................. 511,503 488,077
ACCRUED INTEREST RECEIVABLE................................. 332,031 285,420
DEFERRED INCOME TAXES, NET.................................. 2,420,271
OTHER ASSETS................................................ 94,628 87,391
----------- -----------
TOTAL ASSETS................................................ $60,395,779 $55,505,109
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Noninterest-bearing demand................................ $ 6,441,785 $ 8,121,621
Interest-bearing demand................................... 3,073,535 3,917,819
Regular savings........................................... 5,874,911 2,712,877
Money market accounts..................................... 1,348,431 1,386,291
Time $100,000 and over.................................... 10,214,403 9,666,810
Other time................................................ 18,507,107 19,720,653
----------- -----------
Total deposits.................................... 45,460,172 45,526,071
REPURCHASE AGREEMENTS....................................... 5,911,513 5,389,440
OTHER BORROWED FUNDS........................................ 2,405,604 1,018,636
ACCRUED INTEREST PAYABLE.................................... 198,817 178,828
ACCOUNTS PAYABLE AND ACCRUED EXPENSES....................... 106,038 122,692
----------- -----------
Total liabilities................................. 54,082,144 52,235,667
----------- -----------
COMMITMENTS (NOTES 6 and 8)
SHAREHOLDERS' EQUITY:
Common stock, $1 par value; 5,000,000 shares authorized
1,825,000 shares issued and outstanding................ 1,825,000 1,825,000
Additional paid-in capital................................ 3,725,148 1,070,359
Retained earnings......................................... 759,707 383,738
Unrealized gain (loss) on available for sale investment
securities, net of tax................................. 3,780 (9,655)
----------- -----------
Total shareholders' equity........................ 6,313,635 3,269,442
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $60,395,779 $55,505,109
=========== ===========
</TABLE>
See notes to financial statements.
F-7
<PAGE> 124
FIRST NATIONAL BANK OF TAMPA
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees.................................... $3,352,741 $2,890,204 $2,187,558
Investment securities.................................... 583,590 460,321 436,973
Federal funds sold....................................... 365,658 263,552 312,512
---------- ---------- ----------
Total interest income............................ 4,301,989 3,614,077 2,937,043
---------- ---------- ----------
INTEREST EXPENSE:
Deposits................................................. 2,075,429 1,744,407 1,380,650
Repurchase agreements.................................... 178,200 108,357 68,494
Borrowed funds........................................... 42,099 18,878 24,414
---------- ---------- ----------
Total interest expense........................... 2,295,728 1,871,642 1,473,558
---------- ---------- ----------
NET INTEREST INCOME........................................ 2,006,261 1,742,435 1,463,485
PROVISION (BENEFIT) FOR LOAN LOSSES........................ 60,000 60,000 (138,394)
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION (BENEFIT) FOR LOAN
LOSSES................................................... 1,946,261 1,682,435 1,601,879
---------- ---------- ----------
NONINTEREST INCOME:
Service fees............................................. 324,693 331,421 245,942
Gain on sale of loans.................................... 94,805 137,655 41,767
Gain (loss) on sale of available for sale investment
securities............................................ 7,635 (2,446) 12,868
Gain on sale of other real estate owned.................. 10,546
Other noninterest income................................. 76,596 50,005 64,058
---------- ---------- ----------
503,729 516,635 375,181
---------- ---------- ----------
NONINTEREST EXPENSES:
Salaries and benefits.................................... 999,382 872,643 784,517
Occupancy and equipment.................................. 256,160 226,965 295,562
Data processing.......................................... 92,633 75,366 62,068
Other.................................................... 493,848 423,462 478,742
---------- ---------- ----------
1,842,023 1,598,436 1,620,889
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES................... 607,967 600,634 356,171
PROVISION FOR INCOME TAX EXPENSES.......................... 231,998 216,896
---------- ---------- ----------
NET INCOME................................................. $ 375,969 $ 383,738 $ 356,171
========== ========== ==========
EARNINGS PER SHARE:
Basic.................................................... $ 0.21 $ 0.21 $ 0.20
========== ========== ==========
Diluted.................................................. $ 0.19 $ 0.20 $ 0.19
========== ========== ==========
</TABLE>
See notes to financial statements.
F-8
<PAGE> 125
FIRST NATIONAL BANK OF TAMPA
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
(LOSS) GAIN ON
AVAILABLE
FOR SALE
COMMON STOCK ADDITIONAL RETAINED INVESTMENT
---------------------- PAID-IN EARNINGS SECURITIES,
SHARES PAR VALUE CAPITAL (DEFICIT) NET OF TAX TOTAL
--------- ---------- ----------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995........ 1,825,000 $1,825,000 $ 8,987,500 $(8,490,208) $(179,152) $2,143,140
Net income.................... 356,171 356,171
Unrealized loss on available
for sale investment
securities, net............. 179,152 179,152
Quasi-reorganization.......... (8,134,037) 8,134,037
--------- ---------- ----------- ----------- --------- ----------
BALANCE, DECEMBER 31, 1995...... 1,825,000 1,825,000 853,463 2,678,463
Net income.................... 383,738 383,738
Adjustment to deferred tax
asset valuation allowance
subsequent to
quasi-reorganization........ 216,896 216,896
Unrealized loss on available
for sale investment
securities, net............. (9,655) (9,655)
--------- ---------- ----------- ----------- --------- ----------
BALANCE, DECEMBER 31, 1996...... 1,825,000 1,825,000 1,070,359 383,738 (9,655) 3,269,442
Net income.................... 375,969 375,969
Adjustment to deferred tax
asset valuation allowance
subsequent to
quasi-reorganization........ 2,654,789 2,654,789
Unrealized gain on available
for sale investment
securities, net............. 13,435 13,435
--------- ---------- ----------- ----------- --------- ----------
BALANCE, DECEMBER 31, 1997...... 1,825,000 $1,825,000 $ 3,725,148 $ 759,707 $ 3,780 $6,313,635
========= ========== =========== =========== ========= ==========
</TABLE>
See notes to financial statements.
F-9
<PAGE> 126
FIRST NATIONAL BANK OF TAMPA
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income........................................... $ 375,969 $ 383,738 $ 356,171
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 109,595 87,056 111,726
Deferred income taxes............................. 231,998 216,896
Loss on disposition of furniture and equipment.... 57,253
Gain on sale of securities........................ (7,635) (12,868)
Gain on disposal of other real estate owned....... (10,546)
Amortization of premiums on investments, net...... 6,072 4,824
Provision (benefit) for loan losses............... 60,000 60,000 (138,394)
Increase in accrued interest receivable........... (46,611) (60,350) (42,245)
Increase in accrued interest payable.............. 19,989 41,779 17,503
Decrease (increase) in other assets............... (7,237) (42,797) 247,374
Increase (decrease) in other liabilities.......... (16,654) 35,288 57,405
------------ ----------- -----------
Net cash provided by operating activities.... 725,486 721,610 648,203
------------ ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales, paydowns and maturities of
investment securities:
Available for sale................................ 13,543,810 3,884,442 4,415,664
Purchases of investment securities:
Available for sale................................ (15,698,714) (5,683,851) (3,494,601)
Other investments................................. (42,200)
Net increase in loans................................ (2,104,078) (5,023,344) (6,352,596)
Purchases of premises and equipment.................. (133,020) (33,709) (424,905)
Proceeds from sale of other real estate owned........ 45,000 55,546
Proceeds from sale of fixed assets................... 480,024
------------ ----------- -----------
Net cash used in investing activities........ (4,434,202) (6,811,462) (5,320,868)
------------ ----------- -----------
FINANCING ACTIVITIES:
Net increase in demand deposits, money market
accounts and savings accounts..................... 600,054 3,436,405 1,328,694
Net increase (decrease) in time deposits............. (665,952) 7,456,862 1,417,852
Increase in repurchase agreements.................... 522,073 1,780,682 3,608,758
Increase (decrease) in other borrowed funds.......... 1,386,968 415,002 (176,354)
------------ ----------- -----------
Net cash provided by financing activities.... 1,843,143 13,088,951 6,178,950
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... (1,865,573) 6,999,099 1,506,285
CASH AND CASH EQUIVALENTS:
Beginning of year.................................... 14,898,784 7,899,685 6,393,400
------------ ----------- -----------
End of year.......................................... $ 13,033,211 $14,898,784 $ 7,899,685
============ =========== ===========
</TABLE>
See notes to financial statements.
F-10
<PAGE> 127
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
First National Bank of Tampa (the "Bank") is a nationally chartered bank
regulated by the Office of the Comptroller of the Currency. The Bank is a member
of the Federal Reserve System and commenced operations on July 11, 1988.
The accounting and reporting policies of the Bank conform to generally
accepted accounting principles and to general practices within the banking
industry. The following summarizes these policies and practices:
Use of 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.
Investment Securities -- Debt securities for which the Bank has the
positive intent and ability to hold to maturity are classified as held to
maturity and reported at amortized cost. Securities are classified as
trading securities if bought and held principally for the purpose of
selling them in the near future. No investments are held for trading
purposes. Securities not classified as held to maturity are classified as
available for sale, and reported at fair value with unrealized gains and
losses excluded from earnings and reported net of tax as a separate
component of stockholders' equity until realized. Other investments, which
include Federal Reserve Bank stock and Federal Home Loan Bank stock, are
carried at cost as such investments do not have readily determinable fair
values.
Realized gains and losses on sales of investment securities are
recognized in the statements of income upon disposition based upon the
adjusted cost of the specific security. Declines in value of investment
securities judged to be other than temporary are recognized as losses in
the statement of income.
Loans -- Loans are stated at the principal amount outstanding, net of
unearned income and an allowance for loan losses. Interest income on all
loans is accrued based on the outstanding daily balances.
Management has established a policy to discontinue accruing interest
(non-accrual status) on a loan after it has become 90 days delinquent as to
payment of principal or interest unless the loan is considered to be well
collateralized and the Bank is actively in the process of collection. In
addition, a loan will be placed on non-accrual status before it becomes 90
days delinquent if management believes that the borrower's financial
condition is such that collection of interest or principal is doubtful.
Interest previously accrued but uncollected on such loans is reversed and
charged against current income when the receivable is estimated to be
uncollectible. Interest income on non-accrual loans is recognized only as
received.
Nonrefundable fees and certain direct costs associated with
originating or acquiring loans are recognized over the life of related
loans on a method that approximates the interest method.
Allowance for Loan Losses -- The determination of the balance in the
allowance for loan losses is based on an analysis of the loan portfolio and
reflects an amount which, in management's judgment, is adequate to provide
for probable loan losses after giving consideration to the growth and
composition of the loan portfolio, current economic conditions, past loss
experience, evaluation of potential losses in the current loan portfolio
and such other factors that warrant current recognition in estimating loan
losses.
Loans which are considered to be uncollectible are charged-off against
the allowance. Recoveries on loans previously charged-off are added to the
allowance.
F-11
<PAGE> 128
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Impaired loans are loans for which it is probable that the Bank will
be unable to collect all amounts due according to the contractual terms of
the loan agreement. Impairment losses are included in the allowance for
loan losses through a charge to the provision for loan losses. Impairment
losses are measured by the present value of expected future cash flows
discounted at the loan's effective interest rate, or, as a practical
expedient, at either the loan's observable market price or the fair value
of the collateral. Interest income or impaired loans is recognized only as
received.
Large groups of smaller balance homogeneous loans (consumer loans) are
collectively evaluated for impairment. Commercial loans and larger balance
real estate and other loans are individually evaluated for impairment.
Premises and Equipment -- Premises and equipment are stated at cost
less accumulated depreciation computed on the straight-line method over the
estimated useful lives of 3 to 20 years. Leasehold improvements are
amortized on the straight-line method over the shorter of their estimated
useful life or the period the Bank expects to occupy the related leased
space. Maintenance and repairs are charged to operations as incurred.
Income Taxes -- Deferred tax liabilities are recognized for temporary
differences that will result in amounts taxable in the future and deferred
tax assets are recognized for temporary differences and tax benefit
carryforwards that will result in amounts deductible or creditable in the
future. Net deferred tax liabilities or assets are recognized through
charges or credits to the deferred tax provision. A deferred tax valuation
reserve is established if it is more likely than not that all or a portion
of the deferred tax assets will not be realized. Subsequent to the Bank's
quasi-reorganization (see note 11) reductions in the deferred tax valuation
allowance are credited to paid in capital.
Loan Origination Fees and Costs -- Loan fees, net of certain specific
incremental direct loan origination costs, are deferred and accreted into
income over the life of each loan as a yield adjustment.
Repurchase Agreements -- Repurchase agreements consist of agreements
with customers to pay interest daily on funds swept into a repo account
based on a rate of .75% to 1.00% below the Federal funds rate. Such
agreements generally mature within one to four days from the transaction
date. Information concerning repurchase agreements is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Average balance during the year............. $3,957,381 $2,588,850
Average interest rate during the year....... 4.50% 4.19%
Maximum month-end balance during the year... $6,257,096 $5,389,440
</TABLE>
Other Borrowed Funds -- Other borrowed funds consist of treasury tax
and loan deposits and generally are repaid within one to 120 days from the
transaction date.
Stock Options -- The Bank has elected to account for its stock options
under the intrinsic value based method with pro forma disclosures of net
earnings and earnings per share, as if the fair value based method of
accounting defined in SFAS No. 123 "Accounting for Stock Based
Compensation" had been applied. Under the intrinsic value based method,
compensation cost is the excess, if any, of the quoted market price of the
stock at the grant date or other measurement date over the amount an
employee must pay to acquire the stock. Under the fair value based method,
compensation cost is measured at the grant date based on the value of the
award and is recognized over the service period, which is usually the
vesting period.
Earnings Per Share -- In March 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128
establishes standards for computing and presenting earnings per share
F-12
<PAGE> 129
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
("EPS") and applies to all entities with publicly held common stock or
potential common stock. Basic EPS excludes dilution and is computed by
dividing earnings available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilutive securities that could share in the earnings. The
Company adopted the requirements of SFAS No. 128 in the year ended December
31, 1997 (Note 12).
New Accounting Pronoucements -- In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130). This Statement establishes
standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. SFAS 130 does not
require a specific format for the financial statement but requires that an
enterprise display an amount representing total comprehensive income for
the period in the financial statement. Additionally, SFAS 130 requires that
an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
This Statement is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. Management has not determined the
effect of this statement on its financial statements disclosure.
Supplementary Cash Flow Information -- For purposes of reporting cash
flows, cash and cash equivalents include cash and due from banks and
Federal funds sold. Generally, Federal funds are sold for one day periods.
Interest paid on deposits and borrowed funds for the years ended December
31, 1997, 1996 and 1995 was $2,275,739, $1,829,863 and $1,456,055
respectively.
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of available for sale
investment securities as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Treasury securities and other U.S.
agency obligations..................... $ 3,998,153 $ 4,288 $ (4,862) $ 3,997,579
Mortgage-backed securities............... 6,447,732 27,303 (20,429) 6,454,606
----------- ------- -------- -----------
$10,445,885 $31,591 $(25,291) $10,452,185
=========== ======= ======== ===========
DECEMBER 31, 1996
U.S. Treasury securities and other U.S.
agency obligations..................... $ 2,483,771 $ 1,231 $ (5,002) $ 2,480,000
Mortgage-backed securities............... 5,805,649 20,417 (26,301) 5,799,765
----------- ------- -------- -----------
$ 8,289,420 $21,648 $(31,303) $ 8,279,765
=========== ======= ======== ===========
</TABLE>
Expected maturities of debt securities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without prepayment penalties. The amortized cost and estimated
F-13
<PAGE> 130
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
fair value of debt securities available for sale, at December 31, 1997, by
contractual maturity, are shown below:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due within one year......................................... $ 2,502,712 $ 2,502,944
Due after one year through five years....................... 1,495,441 1,494,635
Due after five years through ten years......................
Due after ten years.........................................
----------- -----------
3,998,153 3,997,579
Mortgage-backed securities.................................. 6,447,732 6,454,606
----------- -----------
Total............................................. $10,445,885 $10,452,185
=========== ===========
</TABLE>
Investment securities with a carrying value of $9,303,244 and $6,467,682
were pledged as security for certain borrowed funds and public deposits held by
the Bank at December 31, 1997 and 1996, respectively.
3. LOANS
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Balance, beginning of year.................................. $432,238 $339,837
Provision for loan losses................................... 60,000 60,000
Charge-offs................................................. (43,292) (7,349)
Recoveries.................................................. 32,516 39,750
-------- --------
Balance, end of year........................................ $481,462 $432,238
======== ========
</TABLE>
The Bank's primary lending area is Tampa, Florida and surrounding areas.
Although the Bank's loan portfolio is diversified, a significant portion of its
loans are collateralized by real estate. Therefore the Bank could be susceptible
to economic downturns and natural disasters. It is the Bank's lending policy to
collateralize real estate loans based upon certain loan to appraised value
ratios.
The Bank had no loans on nonaccrual as of December 31, 1997 and 1996.
Loans considered impaired totaled $372,111 at December 31, 1997 of which
$299,611 is guaranteed by the SBA. The total allowance for loan losses related
to these loans was $72,500 at December 31, 1997. There were no impaired loans at
December 31, 1997 that did not have an allowance. The Bank's average investment
in impaired loans was approximately $186,000 in 1997. The amount of interest
income and interest collected on these impaired loans during 1997 was not
significant. No loans were impaired as of December 31, 1996.
The Bank lends to shareholders, directors, officers, and their related
business interests on substantially the same terms as loans to other individuals
and businesses of comparable credit worthiness. Such loans outstanding were
approximately $249,000 and $496,000 at December 31, 1997 and 1996. During the
year ended December 31, 1997, such shareholders, directors, officers and their
related business interest borrowed approximately $15,000 from the Bank and
repaid approximately $262,000.
F-14
<PAGE> 131
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PREMISES AND EQUIPMENT
Major classifications of these assets are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Leasehold improvements...................................... $ 271,456 $ 261,136
Furniture, fixtures and equipment........................... 742,810 620,110
---------- ---------
1,014,266 881,246
Accumulated depreciation and amortization................... (502,763) (393,169)
---------- ---------
$ 511,503 $ 488,077
========== =========
</TABLE>
Depreciation and amortization amounted to $109,595, $87,056 and $111,726
for the years ended December 31, 1997, 1996 and 1995, respectively.
5. INCOME TAXES
The components of the provision for income tax expenses for the years ended
December 31, 1997, 1996 and 1995, all of which are Federal, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Deferred tax expense................................... $231,998 $216,896 $ --
-------- -------- --------
$231,998 $216,896 $ --
======== ======== ========
</TABLE>
Income taxes for the years ended December 31, 1997, 1996 and 1995, differ
from the amount computed by applying the federal statutory corporate rate to
earnings before income taxes as summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Provision based on Federal income tax rate............. $204,216 $206,709 $121,098
Change in deferred tax asset valuation allowance....... (125,151)
Nondeductible items, state income taxes net of federal
benefit and other.................................... 27,782 10,187 4,053
-------- -------- --------
$231,998 $216,896 $ --
======== ======== ========
</TABLE>
At December 31, 1997 and 1996, the Bank had tax operating loss
carryforwards of approximately $7,001,000 and $7,628,000, respectively. During
the years ended December 31, 1997, 1996 and 1995 the Bank utilized net operating
loss carryforwards to reduce current taxes payable by approximately $236,000,
$272,000 and $128,000, respectively. The utilization of net operating losses for
the years ended December 31, 1997 and 1996 (periods subsequent to the date of
the Bank's quasi reorganization) and the complete recognition of all remaining
deferred tax assets at December 31, 1997, totaling approximately $2,423,000,
have been reflected as an increase to additional paid-in capital.
F-15
<PAGE> 132
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of net deferred income taxes at December 31, 1997 and 1996
are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $2,467,698 $2,689,133
Allowance for loan losses................................. 24,478 7,127
Loan fees................................................. 19,733 19,330
Unrealized loss on investment securities.................. -- 3,862
Other..................................................... 13,078 9,627
---------- ----------
2,524,987 2,729,079
---------- ----------
Deferred tax liabilities:
Accumulated depreciation.................................. 53,143 53,143
Cash to accrual adjustment................................ 49,053 31,958
Unrealized gain in investment securities.................. 2,520 --
---------- ----------
104,716 85,101
---------- ----------
Valuation allowance....................................... -- 2,643,978
---------- ----------
Deferred tax assets, net.................................... $2,420,271 $ --
========== ==========
</TABLE>
At December 31, 1997, the Bank had tax net operating loss carryforwards of
approximately $7,001,000. Such carryforwards expire as follows: $611,000 in
2004, $1,588,000 in 2005, $1,171,000 in 2006, $1,919,000 in 2007, $1,620,000 in
2008 and $92,000 in 2009. Future changes in ownership, as defined in section 382
of the Internal Revenue Code, could limit the amount of net operating loss
carryforwards used in any one year.
At December 31, 1997, the Bank assessed its earnings history and trends
over the past three years, its estimate of future earnings, and the expiration
dates of the loss carryforwards and has determined that it is more likely than
not that the deferred tax assets will be realized. Accordingly, no valuation
allowance is recorded at December 31, 1997.
6. COMMITMENTS
The Bank is obligated under certain noncancellable operating leases for
office space and office property. Rental expense for 1997, 1996 and 1995 was
approximately $116,000, $101,000 and $134,000, respectively, and is included in
net occupancy and equipment expense in the accompanying statements of income.
The following is a schedule of future minimum lease payments at December 31,
1997.
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1998........................................................ $ 94,354
1999........................................................ 98,547
2000........................................................ 102,741
2001........................................................ 104,838
2002........................................................ 104,838
Later years................................................. 1,436,274
----------
$1,941,592
==========
</TABLE>
7. STOCK OPTIONS
During 1994, the Bank's Board of Directors approved a Stock Option Plan
(the "Plan") for certain key officers, employees and directors whereby 300,000
shares of the Bank's common stock were made available through qualified
incentive stock options and non-qualified stock options. The Plan specifies that
the exercise price per share of common stock under each option shall not be less
than the fair market value of the common
F-16
<PAGE> 133
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
stock on the date of the grant, except for qualified stock options granted to
individuals who own either directly or indirectly more than 10% of the
outstanding stock of the Bank. For qualified stock options granted to those
individuals owning more than 10% of the Bank's outstanding stock, the exercise
price shall not be less than 110% of the fair market value of the common stock
on the date of grant. Options issued under the Plan expire ten years after the
date of grant, except for qualified stock options granted to more than 10%
shareholders as defined above. For qualified stock options granted to more than
10% shareholders, the expiration date shall be five years from the date of grant
or earlier if specified in the option agreement. During 1994, the Bank granted
stock options to purchase 240,000 shares of the Bank's common stock at an
exercise price of $1.00. No options were granted during 1995, 1996 or 1997.
During July, 1988, the Bank granted stock warrants to purchase 225,000
shares of the Bank's common stock at an exercise price of $10.25. Such warrants
expire June 10, 1998.
8. FINANCIAL INSTRUMENTS
The Bank originates financial instruments with off-balance sheet risk in
the normal course of business, usually for a fee, primarily to meet the
financing needs of its customers. The financial instruments include letters of
credit and unused lines of credit. These commitments involve varying degrees of
credit risk, however, management does not anticipate losses upon the fulfillment
of these commitments.
At December 31, 1997, financial instruments having credit risk in excess of
that reported in the balance sheet totaled approximately $6,507,000.
9. REGULATORY MATTERS
The Bank 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
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
F-17
<PAGE> 134
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1997 and 1996, notifications from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category. The Bank's actual capital amounts and ratios are also
presented in the following table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------ ----------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total capital (to risk-weighted
assets).......................... $4,545,625 14.29% >= $2,545,537 >= 8.0% >= $3,181,922 >= 10.0%
Tier I capital (to risk-weighted
assets).......................... 4,137,864 13.00 >= 1,272,769 >= 4.0 >= 1,909,153 >= 6.0
Tier I capital (to average
assets).......................... 4,137,864 7.42 >= 2,230,741 >= 4.0 >= 2,788,426 >= 5.0
AS OF DECEMBER 31, 1996:
Total capital (to risk-weighted
assets).......................... $3,651,326 12.26% >= $2,382,265 >= 8.0% >= $2,977,832 >= 10.0 $
Tier I capital (to risk-weighted
assets).......................... 3,279,097 11.01 >= 1,191,133 >= 4.0 >= 1,786,699 >= 6.0
Tier I capital (to average
assets).......................... 3,279,097 6.42 >= 2,044,372 >= 4.0 >= 1,488,916 >= 5.0
</TABLE>
The following is a reconciliation of shareholders' equity as reported in
the financial statements to regulatory capital as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
TIER I TOTAL
LEVERAGE RISK BASED RISK BASED
CAPITAL CAPITAL CAPITAL
----------- ----------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1997:
Shareholders' equity.......................... $ 6,313,635 $ 6,313,635 $ 6,313,635
Unrealized gain on available for sale
investment securities...................... (3,780) (3,780) (3,780)
Allowance for loan loss....................... 407,761
Deferred tax asset in excess of projected
benefit for 1998........................... (2,171,991) (2,171,991) (2,171,991)
----------- ----------- -----------
Regulatory capital.............................. $ 4,137,864 $ 4,137,864 $ 4,545,625
=========== =========== ===========
December 31, 1996:
Shareholders' equity.......................... $ 3,269,442 $ 3,269,442 $ 3,269,442
Unrealized loss on available for sale
investment securities...................... 9,655 9,655 9,655
Allowance for loan loss....................... 372,229
----------- ----------- -----------
Regulatory capital.............................. $ 3,279,097 $ 3,279,097 $ 3,651,326
=========== =========== ===========
</TABLE>
10. FAIR VALUE OF FINANCIAL INSTRUMENT
The following methods and assumptions were used by the Bank in estimating
financial instrument fair values:
General Comment -- The financial statements include various estimated fair
value information as required by Statement of Financial Accounting Standards No.
107, Disclosures about Fair Value of Financial Instruments (Statement 107). Such
information, which pertains to the Bank's financial instruments is based on the
requirement set forth in Statement 107 and does not purport to represent the
aggregate net fair value of the Bank. Furthermore, the fair value estimates are
based on various assumptions, methodologies and
F-18
<PAGE> 135
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
subjective considerations, which vary widely among different financial
institutions and which are subject to change.
Cash and Cash Equivalents -- The carrying amount for cash and cash
equivalents approximate the estimated fair values of such assets.
Available for Sale Investment Securities -- Fair values for securities
available for sale are based on quoted market prices, if available. If quoted
market prices are not available, fair values are based on quoted market prices
of comparable instruments.
Other Investment Securities -- Fair value of the Bank's investment in
Federal Reserve Bank stock and Federal Home Loan Bank stock is based on its
redemption value, which is its cost of $100 per share.
Loans -- For variable rate loans that reprice frequently, the carrying
amount is a reasonable estimate of fair value. The fair value of other types of
loans is estimated by discounting the future cash flows using the current rates
at which similar loans would be made to borrowers with similar credit ratings
for the same remaining maturities.
Accrued Interest Receivable and Payable -- The carrying amount of accrued
interest receivable and payable approximates the estimated fair value of such
asset.
Deposits -- The fair value of demand deposits, savings deposits and certain
money market deposits is the amount payable on demand at the reporting date. The
fair value of fixed rate certificates of deposit is estimated using a discounted
cash flow calculation that applies interest rates currently being offered to a
schedule of aggregated expected monthly time deposit maturities.
Repurchase Agreements and Other Borrowed Funds -- The carrying amounts of
repurchase agreements and other borrowed funds approximates the estimated fair
value of such liabilities due to the short maturities of such instruments.
Commitments to Originate Loans -- The fair value of commitments is
estimated using fees currently charged to enter into similar agreements, taking
into account the remaining term of the agreements and the present
creditworthiness of the counterparties. The carrying amount of deferred fees
relating to such commitments approximates the fair value and such amounts are
insignificant.
A comparison of the carrying amount to the fair values of the Bank's
significant financial instruments as of December 31, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents....................... $13,033 $13,033 $14,899 $14,899
Investment available for sale................... 10,452 10,452 8,280 8,280
Other investments............................... 313 313 271 271
Loans........................................... 33,799 33,444 31,705 31,464
Accrued interest receivable..................... 332 332 285 285
Financial liabilities:
Deposits........................................ 45,460 45,460 45,526 45,432
Repurchase agreements........................... 5,912 5,912 5,389 5,389
Other borrowed funds............................ 2,406 2,406 1,019 1,019
Accrued interest payable........................ 199 199 178 178
</TABLE>
F-19
<PAGE> 136
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. QUASI-REORGANIZATION
Effective December 31, 1995, the Bank completed a quasi-reorganization of
its capital accounts. A quasi-reorganization is an accounting procedure provided
for under current banking regulations that allows a bank to restructure its
capital accounts to remove a deficit in undivided profits without undergoing a
legal reorganization. A quasi-reorganization allows a bank that has previously
suffered losses and subsequently corrected its problems to restate its records
as if it had been reorganized. A quasi-reorganization is subject to regulatory
approval and is contingent upon compliance with certain legal and accounting
requirements of the banking regulations. The Bank's quasi-organization was
authorized by the Office of the Comptroller of the Currency upon final approval
of the Bank's shareholders which was granted November 15, 1995.
As a result of the quasi-reorganization, the Bank charged against
additional paid-in capital its accumulated deficit through December 31, 1995 of
$8,134,037.
12. EARNINGS PER SHARE
Following is a reconciliation of the denominator used in the computation of
basic and diluted earnings per common share.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Weighted average number of common shares
outstanding -- Basic...................................... 1,825,000 1,825,000 1,825,000
Incremental shares from the assumed conversion of stock
options................................................... 129,010 82,570 50,919
--------- --------- ---------
Total -- Diluted.................................. 1,954,010 1,907,570 1,875,919
========= ========= =========
</TABLE>
The incremental shares from the assumed conversion of stock options were
determined using the treasury stock method under which the assumed proceeds were
equal to (1) the amount that the Bank would receive upon the exercise of the
options plus (2) the amount of the tax benefit that would be credited to
additional paid-in capital assuming exercise of the options. The assumed
proceeds are used to purchase outstanding common shares at an assumed fair value
equal to the Bank's average book value per common share as the Bank's stock is
not actively traded and limited trades during 1996 through 1997 indicate that
book value is a reasonable estimate of fair value.
13. SUBSEQUENT EVENT (UNAUDITED)
On March 30, 1998, the Bank executed a definitive agreement with Florida
Banks, Inc. (a development stage corporation), pursuant to which the Bank will
be merged with and into Interim Bank No. 1, N.A., a wholly-owned subsidiary of
the Company, which will be renamed "Florida Bank, N.A." Shareholders of the Bank
will receive $13,750,000 payable in common stock of Florida Banks, Inc. The
number of shares to be issued is based upon the price per share in Florida
Banks, Inc.'s proposed initial public offering. The Merger is contingent, among
other things, upon the receipt of approval of the Merger by the Board of
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency and the Federal Deposit Insurance Corporation. In addition, the Merger
must be approved by shareholders of the Bank. The Merger is considered to be a
reverse acquisition for accounting purposes, with the Bank identified as the
accounting acquirer. The Merger will be accounted for as a purchase, but no
goodwill will be recorded in the Merger and the financial statements of the Bank
will become the historical financial statements of Florida Banks, Inc.
F-20
<PAGE> 137
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article X of the Florida Banks Charter provides as follows:
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided, however, that to
the extent required by applicable law, this Article shall not eliminate or limit
the liability of a director (i) for a violation of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (ii) for any transaction
from which the director derived an improper personal benefit, (iii) for unlawful
distributions to shareholders of the Corporation in violation of Section
607.06401 of the Florida Business Corporation Act, or (iv) for willful
misconduct or a conscious disregard for the best interests of the Corporation in
a proceeding by or in the right of the Corporation to procure judgment in its
favor or in a proceeding by or in the right of a shareholder. If applicable law
is amended to authorize corporate action further eliminating or limiting the
liability of directors, then the liability of each director of the Corporation
shall be eliminated or limited to the fullest extent permitted by applicable
law, as amended. Neither the amendment or repeal of this Article, nor the
adoption of any provision of these Articles of Incorporation inconsistent with
this Article, shall eliminate or reduce the effect of this Article in respect of
any acts or omissions occurring prior to such amendment, repeal or adoption of
an inconsistent provision.
Section ____ of the FBCA provides that a corporation shall (subject to the
provisions described in the second succeeding paragraph) have the power to
indemnify any person who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that such person is or was a
representative of the corporation, or is or was serving at the request of the
corporation as a representative of another domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such persons in connection
with the action or proceeding if such person acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action or
proceeding by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption that such
person did not act in good faith and in a manner which he reasonably believed to
be in, or not opposed to, the best interests of the corporation and, with
respect to any criminal proceeding, had reasonable cause to believe that his
conduct was unlawful.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed with or incorporated by reference in this
Registration Statement:
II-1
<PAGE> 138
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- --------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of March 30, 1998 by and
between Florida Banks, Inc. and First National Bank of Tampa
(included as Appendix A to the Proxy Statement- Prospectus)(1)
3.1 Amended and Restated Articles of Incorporation of Florida
Banks, Inc.(1)
3.2 By-Laws of Florida Banks, Inc.(1)
3.3 Articles of Association of First National Bank of Tampa
3.4 By-Laws of First National Bank of Tampa
5.1 Opinion of Igler & Dougherty, P.A.*
5.2 Opinion of Smith, Gambrell & Russell, LLP*
8.1 Tax Opinion of Smith, Gambrell & Russell, LLP*
10.1 Form of Employment Agreement between Florida Banks, Inc. and
Charles E. Hughes, Jr.(1)
10.2 1998 Stock Option Plan of Florida Banks, Inc.(1)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Smith, Gambrell & Russell, LLP (included in
Exhibits 5.2 and 8.1)*
23.3 Consent of Mercer Capital Company, Inc.*
24 Power of Attorney (included in original signature page to
this Registration Statement)
99.1 Form of Proxy for Special Meeting of Shareholders of First
National Bank of Tampa*
99.2 Form of Letter of Transmittal for Holders of First National
Common Stock*
99.3 Opinion of The Mercer Capital Company (included as Appendix C
to the Proxy Statement-Prospectus) *
99.4 Provisions of the United States Code regarding rights of
dissenting Shareholders of First National (included as
Appendix B to the Proxy Statement-Prospectus)
</TABLE>
- ---------------
(1) Incorporated herein by reference to exhibit of same number to the
registrant's Registration Statement on Form S-1 (Reg. No. 333-50867).
* To be filed by amendment
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate
II-2
<PAGE> 139
offering price set forth in the "Calculation of Registration Fee" table
in the effective Registration Statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change in such information in
the Registration Statement:
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each
filing of the Registrant'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.
(c) The undersigned Registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report, to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Exchange Act; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is
not set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(d) (1) The undersigned Registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of
this Registration Statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities
Act and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act, each such post-effective amendment 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.
(e) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the 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 Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant 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 Registrant will,
II-3
<PAGE> 140
unless in the opinion of its 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.
(f) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was
not the subject of and included in the Registration Statement when it
became effective.
II-4
<PAGE> 141
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all the requirements of filing on Form S-4 and has authorized
this Registration Statement to be signed on its behalf by the
undersigned, in the City of Jacksonville, State of Florida, on the 22nd
day of April, 1998.
FLORIDA BANKS, INC.
By: /s/ Charles E. Hughes, Jr.
-------------------------------------
Charles E. Hughes, Jr.
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles E. Hughes, Jr. and Nancy
E. LaFoy and each of them, his true and lawful attorneys-in-fact and
agents, will full power of substitution and resubstitution for him, 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, including a
Registration Statement filed under Rule 462(b) of the Securities Act of
1933, as amended, with the Securities and Exchange Commission, 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 and about the premises as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles E. Hughes, Jr. President and Chief Executive Officer April 22, 1998
---------------------------------- (Principal Executive Officer) and Director
Charles E. Hughes, Jr.
/s/ Nancy E. LaFoy Secretary and Treasurer (Principal Financial April 22, 1998
---------------------------------- and Accounting Officer) and Director
Nancy E. LaFoy
/s/ M.G. Sanchez Chairman of the Board April 22, 1998
---------------------------------- Director
M.G. Sanchez
/s/ T. Stephen Johnson Vice Chairman of the Board April 22, 1998
---------------------------------- Director
T. Stephen Johnson
</TABLE>
<PAGE> 142
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clay M. Biddinger Director April 22, 1998
----------------------------------
Clay M. Biddinger
/s/ P. Bruce Culpepper Director April 22, 1998
----------------------------------
P. Bruce Culpepper
/s/ J. Malcolm Jones, Jr. Director April 22, 1998
----------------------------------
J. Malcolm Jones, Jr.
/s/ W. Andrew Krusen, Jr. Director April 22, 1998
----------------------------------
W. Andrew Krusen, Jr.
/s/ Wilford C. Lyon, Jr. Director April 22, 1998
----------------------------------
Wilford C. Lyon, Jr.
/s/ David McIntosh Director April 22, 1998
----------------------------------
David McIntosh
/s/ John S. McMullen Director April 22, 1998
----------------------------------
John S. McMullen
</TABLE>
<PAGE> 143
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FLORIDA BANKS, INC.
AND
FIRST NATIONAL BANK OF TAMPA
DATED AS OF MARCH 30, 1998
<PAGE> 144
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PREAMBLE ..............................................................................1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER...........................................1
1.1 Merger...............................................................1
1.2 Time and Place of Closing............................................1
1.3 Effective Time.......................................................2
ARTICLE 2 - TERMS OF MERGER............................................................2
2.1 Charter..............................................................2
2.2 Bylaws...............................................................2
ARTICLE 3 - MANNER OF CONVERTING SHARES................................................2
3.1 Conversion of Shares.................................................2
3.2 Anti-Dilution Provisions............................................3
3.3 Fractional Shares....................................................3
3.4 Treatment of Options and Warrants....................................3
ARTICLE 4 - EXCHANGE OF SHARES.........................................................4
4.1 Exchange Procedures..................................................4
4.2 Rights of Former First National Shareholders.........................4
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF FIRST NATIONAL...........................5
5.1 Organization, Standing, and Power....................................5
5.2 Authority; No Breach by Agreement....................................5
5.3 Capital Stock........................................................6
5.4 First National Subsidiaries..........................................6
5.5 Regulatory Filings; Financial Statements.............................6
5.6 Notes and Obligations. ..............................................7
5.7 Absence of Certain Changes or Events.................................7
5.8 Tax Matters..........................................................7
5.9 Assets...............................................................8
5.10 Environmental Matters................................................8
5.11 Compliance With Laws.................................................9
5.12 Labor Relations......................................................9
5.13 Employee Benefit Plans..............................................10
5.14 Material Contracts..................................................11
5.15 Legal Proceedings...................................................12
5.16 Reports.............................................................12
5.17 Statements True and Correct.........................................12
5.18 Accounting, Tax and Regulatory Matters..............................13
5.19 Articles of Association Provisions..................................13
5.20 Derivatives Contracts...............................................13
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF FBI AND INTERIM.........................13
6.1 Organization, Standing, and Power...................................13
6.2 Authority; No Breach By Agreement...................................14
6.3 Capital Stock.......................................................14
6.4 FBI Subsidiaries....................................................15
6.5 Financial Statements................................................15
6.6 Absence of Certain Changes or Events................................15
6.7 Tax Matters.........................................................16
6.8 Compliance With Laws................................................16
</TABLE>
<PAGE> 145
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.9 Assets..............................................................17
6.10 Legal Proceedings...................................................17
6.11 Reports.............................................................17
6.12 Statements True and Correct.........................................17
6.13 Accounting, Tax and Regulatory Matters..............................18
6.14 Environmental Matters...............................................18
6.15 Derivatives Contracts...............................................18
6.16 Outstanding First National Common Stock.............................18
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION..................................19
7.1 Affirmative Covenants of First National.............................19
7.2 Negative Covenants of First National................................19
7.3 Covenants of FBI....................................................21
7.4 Adverse Changes In Condition........................................21
7.5 Reports.............................................................21
ARTICLE 8 - ADDITIONAL AGREEMENTS.....................................................22
8.1 Registration Statement; Proxy Statement; Shareholder Approval.......22
8.2 Applications........................................................22
8.3 Agreement As To Efforts To Consummate...............................22
8.4 Access to Information; Confidentiality..............................22
8.5 Current Information.................................................23
8.6 Other Actions.......................................................24
8.7 Press Releases......................................................24
8.8 No Solicitation.....................................................24
8.9 Accounting and Tax Treatment........................................24
8.10 Articles of Association Provisions.....................................24
8.11 Agreement of Affiliates.............................................24
8.12 Employee Benefits and Contracts........................................25
8.14 Indemnification.......................................................25
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.........................26
9.1 Conditions to Obligations of Each Party.............................26
9.2 Conditions to Obligations of FBI....................................27
9.3 Conditions to Obligations of First National.........................28
ARTICLE 10 - TERMINATION..............................................................29
10.1 Termination.........................................................29
10.2 Effect of Termination...............................................30
10.3 Non-Survival of Representations and Covenants.......................32
ARTICLE 11 - MISCELLANEOUS............................................................32
11.1 Definitions.........................................................32
11.2 Expenses............................................................38
11.3 Brokers and Finders.................................................38
11.4 Entire Agreement....................................................38
11.5 Amendments..........................................................39
11.6 Obligations of FBI..................................................39
11.7 Waivers.............................................................39
11.8 Assignment..........................................................39
11.9 Notices.............................................................39
11.10 Governing Law; Arbitration..........................................40
11.11 Counterparts........................................................40
</TABLE>
<PAGE> 146
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
11.12 Captions............................................................41
11.14 Enforcement of Agreement............................................41
</TABLE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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1. FORM OF AGREEMENT OF AFFILIATES OF FIRST NATIONAL (SECTION 8.12).
2. Form Opinion of Igler & Dougherty, P.A.
3. Form Opinion of Smith, Gambrell & Russell, LLP
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of March 30, 1998, by and between FLORIDA BANKS, INC. ("FBI"), a
Florida corporation having its principal office located in Jacksonville, Florida
to be joined in by Florida Interim Bank No. 1, N.A., a national bank to be
chartered under the laws of the United States and to become a wholly-owned
subsidiary of FBI ("Interim"); and FIRST NATIONAL BANK OF TAMPA ("First
National"), a national bank chartered under the laws of the United States having
its principal office located in Tampa, Florida.
PREAMBLE
The Boards of Directors of First National and FBI are of the opinion
that the acquisition described herein is in the best interests of the parties
and their respective shareholders. This Agreement provides for the acquisition
of First National by FBI pursuant to the merger of First National with and into
Interim (the "Merger"). At the effective time of such Merger, the outstanding
shares of the capital stock of First National shall be converted into the right
to receive shares of the common stock of FBI (except as provided herein). As a
result, shareholders of First National shall become shareholders of FBI. The
transactions described in this Agreement are subject to the approvals of the
shareholders of First National, the Board of Governors of the Federal Reserve
System, the Florida Department of Banking and Finance, the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger (as hereinafter
defined) for federal income tax purposes shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code, and will be a
tax free exchange for the shareholders of First National except for cash
received.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, First National shall be merged with and into Interim in
accordance with the provisions of the National Bank Act. The separate existence
of First National shall thereupon cease, and Interim, which shall be a wholly
owned subsidiary of FBI, shall be the Resulting Association resulting from the
Merger, shall have the name "Florida Bank, N.A.," and shall continue to be
governed by the National Bank Act. The Merger shall have the effects specified
in the National Bank Act. The Merger shall be consummated pursuant to the terms
of this Agreement, which has been approved and adopted by the respective Boards
of Directors of First National, FBI and Interim.
1.2 Time and Place of Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") will be immediately prior to the
closing of FBI's public offering referred to Section 9.1(h) herein. The Closing
will take place at a time, place and date specified by the Parties as they,
acting through their chief executive officers or chief financial officers, may
mutually agree. In no event, however, will the Closing take place on or before
June 10, 1998, the date on which the outstanding Warrants to purchase First
National Common Stock expire.
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1.3 Effective Time. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time
certification of the Merger is received from the Comptroller of the Currency
(the "Effective Time"). Subject to the terms and conditions hereof, unless
otherwise mutually agreed upon in writing by each Party, the Parties shall use
their reasonable best efforts to cause the Effective Time to occur on the date
of Closing.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. Pursuant to the Merger, the Articles of Association
of Interim in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Resulting Association until otherwise amended
or repealed, except that the name of the Resulting Association shall be changed
to "Florida Bank, N.A."
2.2 Bylaws. The Bylaws of Interim in effect immediately prior to
the Effective Time shall be the Bylaws of the Resulting Association until
otherwise amended or repealed.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any action
on the part of FBI, Interim or First National, or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of common stock of the Resulting Association
issued and outstanding immediately prior to the Effective Time shall
remain outstanding and entirely issued to FBI.
(b) Each share of FBI Capital Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(c) Except for First National Common Stock issued and
outstanding immediately prior to the Effective Time as to which
dissenters' rights have been perfected and not withdrawn, and subject
to Section 3.4 relating to fractional shares, each share of First
National Common Stock issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged
for the number of shares of FBI Common Stock equal to the quotient
obtained by dividing 6.6586 by the initial public offering price per
share of FBI Common Stock as determined by FBI's underwriters in the
public offering referred to in Section 9.1(h), below, rounded to the
nearest third decimal point (the "Exchange Ratio"). Notwithstanding the
foregoing, in no event shall more than 2,065,000 shares of Common Stock
of First National be converted to FBI Common Stock.
(d) Notwithstanding Section 3.1(c) of this Agreement, First
National Common Stock issued and outstanding at the Effective Time
which is held by a holder who has not voted in favor of the Merger and
who has demanded payment of the fair cash value of such shares in
accordance with 12 U.S.C. ss. 215a ("Dissenting First National Shares")
shall not be converted into or represent the right to receive the FBI
Common Stock payable thereon pursuant to Section 3.1(c)
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of this Agreement, and shall be entitled only to such rights of
appraisal as are granted by 12 U.S.C. ss. 215a ("Dissent Provisions"),
unless and until such holder fails to perfect or effectively withdraws
or otherwise loses his right to appraisal. If after the Effective Time
any such holder fails to perfect or effectively withdraws or loses his
right to appraisal, such shares of First National Common Stock shall be
treated as if they had been converted at the Effective Time into the
right to receive the FBI Common Stock payable thereon pursuant to
Section 3.1(c) of this Agreement. First National shall give FBI prompt
notice upon receipt by First National of any written objection to the
Merger and such written demands for payment of the fair value of shares
of First National Common Stock, and the withdrawals of such demands,
and any other instruments provided to First National pursuant to the
Dissent Provisions (any shareholder duly making such demand being
hereinafter called a "Dissenting Shareholder"). Each Dissenting
Shareholder that becomes entitled, pursuant to the Dissent Provisions,
to payment for any shares of First National Common Stock held by such
Dissenting Shareholder shall receive such payment from FBI (but only
after the amount thereof shall have been agreed upon or at the times
and in the amounts required by the Dissent Provisions) and all of such
Dissenting Shareholders' shares of First National Common Stock shall be
canceled. First National shall not, except with the prior written
consent of FBI, voluntarily make any payment with respect to, or settle
or offer to settle, any demand for payment by any Dissenting
Shareholder.
3.2 Anti-Dilution Provisions. In the event FBI changes the number
of shares of FBI Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, recapitalization,
reclassification, or similar transaction with respect to such stock and the
record date therefor (in the case of a stock dividend) or the effective date
thereof (in the case of a stock split or similar recapitalization for which a
record date is not established) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.3 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of First National Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of FBI Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of FBI
Common Stock multiplied by the market price of one share of FBI Common Stock at
the Effective Time. The market price of one share of FBI Common Stock at the
Effective Time shall be the initial public offering price of one share of FBI
Common Stock.
3.4 Treatment of Options and Warrants. At the Effective Time of
the Merger, all rights with respect to First National Common Stock issuable
pursuant to the exercise of options to purchase First National Common Stock (the
"First National Options") granted by First National pursuant to stock option
plans or other agreements of First National, which First National Options as of
the date hereof are listed and described in Section 5.3 and which First National
Options are outstanding at the Effective Time of the Merger, whether or not such
First National Options are then exercisable, shall be cancelled without the
holders thereof being entitled to receive any payment or consideration therefor.
Such holder of First National Options so surrendered shall execute a
cancellation agreement pursuant to which the rights held by such holder shall be
surrendered and the First National Options held by such holder shall be
cancelled and shall be of no further force or effect.
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ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. At the Effective Time, FBI shall deposit
or shall cause to be deposited with the exchange agent selected by FBI and
agreed to by First National (the "Exchange Agent") certificates evidencing
shares of FBI Common Stock in such amount necessary to provide all consideration
required to be exchanged by FBI for First National Common Stock pursuant to the
terms of this Agreement. Within 15 business days after the Effective Time, FBI
shall cause the Exchange Agent to mail to the former shareholders of First
National appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of First National Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). After the Effective Time,
each holder of shares of First National Common Stock issued and outstanding at
the Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall upon surrender thereof promptly
receive in exchange therefor the consideration provided in Section 3.1 of this
Agreement, together with all undelivered dividends or distributions in respect
of such shares (without interest thereon) pursuant to Section 4.2 of this
Agreement. To the extent required by Section 3.3 of this Agreement, each holder
of shares of First National Common Stock issued and outstanding at the Effective
Time also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional share of FBI Common
Stock to which such holder may be otherwise entitled (without interest). FBI
shall not be obligated to deliver the consideration to which any former holder
of First National Common Stock is entitled as a result of the Merger until such
holder surrenders such holder's certificate or certificates representing the
shares of First National Common Stock for exchange as provided in this Section
4.1. The certificate or certificates of First National Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Agreement notwithstanding, neither FBI nor the Exchange Agent
shall be liable to a holder of First National Common Stock for any amounts paid
or property delivered in good faith to a public official pursuant to any
applicable abandoned property Law.
4.2 Rights of Former First National Shareholders. At the Effective
Time, the stock transfer books of First National shall be closed as to holders
of First National Common Stock immediately prior to the Effective Time and no
transfer of First National Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Agreement, each certificate theretofore
representing shares of First National Common Stock shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.3 of this Agreement in exchange
therefor, subject, however, to FBI's obligation to pay any dividends or make any
other distributions with a record date prior to the Effective Time which have
been declared or made by First National in respect of such shares of First
National Common Stock in accordance with the terms of this Agreement and which
remain unpaid at the Effective Time. Whenever a dividend or other distribution
is declared by FBI on the FBI Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement, but beginning
30 days after the Effective Time no dividend or other distribution payable to
the holders of record of FBI Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of First National Common Stock issued and outstanding at the Effective
Time until such holder surrenders such certificate for exchange as provided in
Section 4.1 of this Agreement. However, upon surrender of such First National
Common Stock certificate, both the FBI Common Stock certificate (together with
all such undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate. Any portion of the consideration
(including the proceeds
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of any investments thereof) which had been made payable to the Exchange Agent
pursuant to Section 4.1 of this Agreement that remain unclaimed by the
shareholders of First National for six (6) months after the Effective Time shall
be paid to FBI. Any shareholders of First National who have not theretofore
complied with this Article 4 shall thereafter look only to FBI for payment of
their shares of FBI Common Stock and cash in lieu of fractional shares and
unpaid dividends and distributions on the FBI Common Stock deliverable in
respect of each First National share of Common Stock such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FIRST NATIONAL
First National hereby represents and warrants to FBI as follows:
5.1 Organization, Standing, and Power. First National is a
national banking association duly organized, validly existing, and in good
standing under the laws of the United States, and has the corporate power and
authority to carry on its business as now conducted and to own, lease, and
operate its material Assets. First National is duly qualified or licensed to
transact business as a national bank as provided under the National Bank Act, as
amended, and is in good standing in each jurisdiction where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First National.
5.2 Authority; No Breach by Agreement.
(a) First National has the corporate power and authority
necessary to execute and deliver this Agreement and, subject to the
approval and adoption of this Agreement by the shareholders of First
National, to perform its obligations under this Agreement and
consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement by First National and the
consummation by First National of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of First
National, subject to the approval of the OCC and the approval of this
Agreement by its shareholders as contemplated by Section 8.1 of this
Agreement. Subject to such requisite shareholder approval (and assuming
due authorization, execution and delivery by FBI and Interim), this
Agreement represents a legal, valid, and binding obligation of First
National, enforceable against First National in accordance with its
terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the enforcement of creditors' rights generally
and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the
court before which any proceeding may be brought). The First National
Board of Directors will have received from Mercer Capital Management,
Inc. a letter dated on or about the date of the Proxy Statement to the
effect that, in the opinion of such firm, the Exchange Ratio is fair,
from a financial point of view, to the holders of First National Common
Stock.
(b) Neither the execution and delivery of this Agreement by
First National, nor the consummation by First National of the
transactions contemplated hereby, nor compliance by First National with
any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of First National's Articles of Incorporation
or Bylaws, or, (ii) except as disclosed in Schedule 5.2(b), constitute
or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of First National
under, any Contract or Permit
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of First National, where such Default or Lien, or any failure to obtain
such Consent, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First National, or, (iii)
subject to receipt of the requisite Consents referred to in Section
9.1(b) of this Agreement, violate any Law or Order applicable to First
National or material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws,
and rules of the Nasdaq, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation
with respect to any employee benefit plans, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First National, no notice to, filing with, or Consent
of, any public body or authority is necessary for the consummation by
First National of the Merger and the other transactions contemplated in
this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of First National consists of
(i) 5,000,000 shares of First National Common Stock, of which 1,825,000
shares are issued and outstanding as of the date of this Agreement and
not more than 2,065,000 shares will be issued and outstanding at the
Effective Time, and (ii) zero shares of preferred stock will be issued
and outstanding. All of the issued and outstanding shares of capital
stock of First National are duly and validly issued and outstanding and
are fully paid and nonassessable under the National Bank Act (except
for the assessment contemplated by 12 U.S.C. ss. 55). None of the
outstanding shares of capital stock of First National has been issued
in violation of any preemptive rights. First National has reserved
300,000 shares of First National Common Stock for issuance under the
First National Stock Plans, pursuant to which options to purchase not
more than 240,000 shares of First National Common Stock are
outstanding. Warrants to purchase not more than 225,000 shares of First
National Common Stock are outstanding and expire on June 10, 1998.
(b) Except as set forth in Section 5.3(a) of this Agreement, or
as provided pursuant to the Stock Option Agreement, there are no shares
of capital stock or other equity securities of First National
outstanding and no outstanding Rights relating to the capital stock of
First National.
5.4 First National Subsidiaries. First National has no active or
inactive subsidiaries as of the date of this Agreement.
5.5 Regulatory Filings; Financial Statements. First National has
filed and made available to FBI copies of the First National Financial
Statements and all reports of any outside auditors, consultants or advisors to
First National. Each of the First National Financial Statements (including, in
each case, any related notes), including any First National Financial Statements
filed after the date of this Agreement until the Effective Time, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements),
and fairly present the consolidated financial position of First National and its
Subsidiaries at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
and except for the absence of certain footnote information in the unaudited
interim financial statements.
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5.6 Notes and Obligations.
(a) Except as set forth in Schedule 5.6 or as provided in the
loss reserve described in subparagraph (b) below, without conducting
any independent investigation, First National is not aware of any facts
which would cause management of First National to believe that any
notes receivable or any other obligations owned by First National or
due to it, shown on the First National Financial Statements or any such
notes receivable and obligations on the date hereof and as of the
Effective Time have not been and will not be genuine, legal, valid and
collectible obligations of the respective makers thereof and are not
and will not be subject to any offset or counterclaim. Except as set
forth in subparagraph (b) below, all such notes and obligations are
evidenced by written agreements, true and correct copies of which will
be made available to FBI for examination prior to the Effective Time.
All such notes and obligations were entered into by First National in
the ordinary course of its business and in compliance with all
applicable laws and regulations, except as to any non-compliance which
has not and will not have a Material Adverse Effect on First National.
(b) First National has established a loss reserve on the First
National Financial Statements which is adequate to cover anticipated
losses which might result from such items as the insolvency or default
of borrowers or obligors on such loans or obligations, defects in the
notes or evidences of obligation (including losses of original notes or
instruments), offsets or counterclaims properly chargeable to such
reserve, or the availability of legal or equitable defenses which might
preclude or limit the ability of First National to enforce the note or
obligation, and the representations set forth in subparagraph (a) above
are qualified in their entirety by the aggregate of such loss reserves.
As of the Effective Time, the ratio of the loss reserve, as established
on such date in good faith by management of First National, to total
loans outstanding at such time, shall not be below 1.4% (except as
otherwise agreed to by First National and FBI).
5.7 Absence of Certain Changes or Events. Since December 31, 1997,
except as disclosed in Schedule 5.7, (i) there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on First National, and (ii) First
National has not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of First National provided in Article 7 of this
Agreement.
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of
First National have been timely filed for periods ended on or before
December 31, 1996, and all Tax Returns filed are complete and accurate
in all material respects to the Knowledge of First National. All Taxes
shown on filed Tax Returns have been paid. There is no audit
examination, deficiency, or refund Litigation with respect to any Taxes
that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on First
National, except as reserved against in the First National Financial
Statements delivered prior to the date of this Agreement or as
disclosed in Schedule 5.8(a). All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation
have been paid.
(b) First National has not executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax
due that is currently in effect.
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(c) Adequate provision for any Taxes due or to become due for
First National for the period or periods through and including the date
of the First National Financial Statements has been made and is
reflected on the First National Financial Statements.
(d) Deferred Taxes of First National have been adequately
provided for in the First National Financial Statements.
(e) First National is in compliance with, and its records
contain all information and documents (including properly completed
Internal Revenue Service Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under Section
3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First
National.
(f) Except as disclosed in Schedule 5.8(f), First National has
not made any payments, is not obligated to make any payments, or is a
party to any contract, agreement, or other arrangement that could
obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Internal Revenue Code.
(g) There are no Liens with respect to Taxes upon any of the
Assets of First National.
(h) First National has not filed any consent under Section
341(f) of the Internal Revenue Code concerning collapsible corporation.
(i) All material elections with respect to Taxes affecting
First National as of the date of this Agreement have been or will be
timely made as set forth in Schedule 5.8. After the date hereof, other
than as set forth in Schedule 5.8(a) no election with respect to Taxes
will be made without the prior written consent of FBI, which consent
will not be unreasonably withheld.
5.9 Assets. Except as disclosed in Schedule 5.9, First National
has good and marketable title, free and clear of all Liens, to all of its
Assets. All tangible properties used in the business of First National are in
good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with First National's past practices. All
Assets which are material to First National's business that are held under
leases or subleases, are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. First
National currently maintains insurance in amounts, scope, and coverage as
disclosed in Schedule 5.9. First National has not received written notice from
any insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. Except as disclosed
in Schedule 5.9, there are presently no claims pending under such policies of
insurance and no notices have been given by First National under such policies.
The Assets of First National include all required assets, leases and Permits
necessary to operate its business as presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of First National, First National, its
Participation Facilities, and its Loan Properties are, and have been,
in compliance with all Environmental Laws, except for violations
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which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First National.
(b) Except as disclosed in Schedule 5.10(b), to the Knowledge
of First National, there is no Litigation pending or threatened before
any court, governmental agency, or authority or other forum in which
First National or any of its Loan Properties or Participation
Facilities has been or, with respect to threatened Litigation, may be
named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous
Material, whether or not occurring at, on, under, or involving any of
its Loan Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First
National.
(c) To the Knowledge of First National, there is no reasonable
basis for any Litigation of a type described above in subsection (b),
except such as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First National.
(d) To the Knowledge of First National, there have been no
releases of Hazardous Material in, on, under, or affecting any
Participation Facility or Loan Property of First National, except such
as are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on First National.
5.11 Compliance With Laws. First National has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First National, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First National.
(a) To the Knowledge of First National, it is not in violation
of any Laws, Orders, or Permits applicable to its business or employees
conducting its business, except for violations which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse
Effect on First National; and
(b) First National has not received any written notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i)
asserting that First National is not in substantial compliance with any
of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
First National, (ii) threatening to revoke any Permits, the revocation
of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First National , or (iii)
requiring First National to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or
similar undertaking, which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit
or reserve policies, its management, or the payment of dividends.
5.12 Labor Relations. First National is not the subject of any
Litigation asserting that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel it to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving First
National, pending or, to the
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Knowledge of First National, threatened, nor is there any activity involving
First National's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.13 Employee Benefit Plans.
(a) First National has disclosed in Schedule 5.13(a) and has
delivered or made available to FBI prior to the execution of this
Agreement, copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plans,
all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance
plans, and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" (as that term is defined in Section
3(3) of ERISA), currently adopted, maintained by, sponsored in whole or
in part by, or contributed to by First National for the benefit of
employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries are eligible to participate (collectively, the
"First National Benefit Plans"). Any of the First National Benefit
Plans which is an "employee pension benefit plan" (as that term is
defined in Section 3(2) of ERISA), is referred to herein as a "First
National ERISA Plan." No First National Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All First National Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
First National, and each First National ERISA Plan which is intended to
be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue
Service, and First National is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. Except
as disclosed in Schedule 5.13(b), to the Knowledge of First National,
it has not engaged in a transaction with respect to any First National
Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject it to a Tax imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on First National.
(c) Except as disclosed in Schedule 5.13(c), no First National
Pension Plan has any "unfunded current liability" (as that term is
defined in Section 302[d][8][A] of ERISA) and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities,"
as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. Except
as disclosed in Schedule 5.13(c), since the date of the most recent
actuarial valuation, there has been (i) no material change in the
financial position of any First National Pension Plan, (ii) no change
in the actuarial assumptions with respect to any First National Pension
Plan, and (iii) no increase in benefits under any First National
Pension Plan as a result of plan amendments or changes in applicable
Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First National or materially
adversely affect the funding status of any such plan. Neither any First
National Pension Plan nor any "single- employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by First National, or the single-employer plan of any entity
which is considered one employer with First National under Section 4001
of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has
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an "accumulated funding deficiency" within the meaning of Section 412
of the Internal Revenue Code or Section 302 of ERISA, which is
reasonably likely to have a Material Adverse Effect on First National.
First National has not provided, and is not required to provide,
security to an First National Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by First National with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate, which Liability is reasonably likely to have a
Material Adverse Effect on First National. First National has not
incurred any withdrawal Liability with respect to a multiemployer plan
under Subtitle B of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate), which Liability is reasonably
likely to have a Material Adverse Effect on First National. No notice
of a "reportable event," within the meaning of Section 4043 of ERISA
for which the 30- day reporting requirement has not been waived, has
been required to be filed for any First National Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof
(e) Except as disclosed in Schedule 5.13(e), First National has
no Liability for retiree health and life benefits under any of the
First National Benefit Plans and there are no restrictions on the
rights of First National to amend or terminate any such plan without
incurring any Liability thereunder, which Liability is reasonably
likely to have a Material Adverse Effect on First National.
(f) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation,
golden parachute, or otherwise) becoming due to any director or any
employee of any First National under any First National Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any First
National Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit, where such payment,
increase, or acceleration is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on First National.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of
employees and former employees of First National and their respective
beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, have been fully
reflected on the First National Financial Statements to the extent
required by and in accordance with GAAP.
5.14 Material Contracts. Except as disclosed in Schedule 5.14A,
First National is not a party to or subject to the following: (i) any
employment, severance, termination, consulting, or retirement Contract providing
for aggregate payments to any Person in any calendar year in excess of $50,000,
(ii) any Contract relating to the borrowing of money by First National or the
guarantee by First National of any such obligation exceeding $50,000 (other than
Contracts evidencing deposit liabilities, purchases of federal funds,
fully-secured repurchase agreements, and Federal Home Loan Bank advances of
depository institution Subsidiaries, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), and (iii) any
other Contract or amendment thereto as of the date of this Agreement not made in
the ordinary course of business to which First National is a party or by which
it is bound (together with all Contracts referred to in Sections 5.9 and 5.13(a)
of this Agreement, the "First National Contracts"). With respect to each First
National Contract and except as disclosed in Schedule 5.14B: (i) the Contract is
in full force and effect;
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(ii) First National is not in Default thereunder, other than Defaults which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First National; (iii) First National has not repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of First National, in Default in any
respect, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First National,
or has repudiated or waived any material provision thereunder. Except for
Federal Home Loan Bank advances, all of the indebtedness of First National for
money borrowed is prepayable at any time by First National without penalty or
premium.
5.15 Legal Proceedings. Except as disclosed in Schedule 5.15A,
there is no Litigation instituted or pending, or, to the Knowledge of First
National, threatened (or unasserted but considered probable of assertion and
which if asserted would have at least a reasonable probability of an unfavorable
outcome) against First National, or against any Asset, employee benefit plan,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First National,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against First National Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First National. Schedule 5.15B is a summary report of all Litigation
as of the date of this Agreement to which any First National Company is a party
and which names a First National as a defendant or cross-defendant and where the
estimated maximum exposure to be $10,000 or more.
5.16 Reports. For the three years ended December 31, 1997, 1996 and
1995, and since January 1, 1998, or the date of organization if later, First
National has timely filed and to the extent permitted by Law has made available
for FBI to review, all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with any
Regulatory Authorities. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.17 Statements True and Correct. None of the information supplied
or to be supplied by First National for inclusion in the Registration Statement
to be filed by FBI with the SEC will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied by First National for inclusion in the Proxy
Statement to be mailed to First National's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by a First National
with any Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of First National,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that First National is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
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5.18 Accounting, Tax and Regulatory Matters. To the knowledge of
First National, First National has not taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section.
5.19 Articles of Association Provisions. First National has taken
all action so that the entering into of this Agreement and the consummation of
the Merger and the other transactions contemplated by this Agreement do not and
will not result in any super-majority voting requirement or the grant of any
rights to any Person under the Articles of Association, Bylaws, or other
governing instruments of First National.
5.20 Derivatives Contracts. First National is not a party to nor
has it agreed to enter into an exchange-traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial contract, or any other
interest rate or foreign currency protection contract not included on its
balance sheet which is a financial derivative contract (including various
combinations thereof) (each a "Derivatives Contract").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FBI AND INTERIM
FBI hereby represents and warrants to First National, and Interim, when
formed, will represent and warrant to First National, as follows:
6.1 Organization, Standing, and Power.
(a) FBI is a corporation duly organized, validly existing, and
in active status under the Laws of the State of Florida, and has the
corporate power and authority to carry on its business as now conducted
and to own, lease, and operate its material Assets. FBI is in good
standing in the State of Florida which is where the character of its
Assets or the nature or conduct of its business requires it to be so
qualified or licensed except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
FBI.
(b) Interim will be a national bank organized under the
National Bank Act (as a wholly owned subsidiary of FBI), after the
execution of this Agreement and prior to the Effective Time and shall
have the corporate power and authority to carry on the business of
banking. Interim shall become duly qualified or licensed to transact
business as a foreign corporation, and shall maintain its corporate
status in good standing, in the States of the United States and foreign
jurisdictions where the character of the assets or the nature or
conduct of the business, to be purchased, received or operated by
Interim, shall require it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed
is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Interim.
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6.2 Authority; No Breach By Agreement.
(a) FBI has, and upon its formation Interim will have, the
corporate power and authority necessary to execute, deliver, and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the
part of FBI and will be duly and validly authorized by all necessary
corporate action in respect thereof by Interim upon its formation. This
Agreement represents a legal, valid, and binding obligation of FBI, and
shall become such an obligation of Interim upon its formation,
enforceable against FBI, and to become enforceable against Interim upon
its formation, in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
FBI, or, upon its formation, Interim, nor the consummation by FBI or
Interim of the transactions contemplated hereby, nor compliance by FBI
or Interim with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of the Articles of Incorporation or
Bylaws of FBI or, upon its formation, Interim, or (ii) constitute or
result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any FBI Company or
Interim under, any Contract or Permit of any FBI Company or Interim,
where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FBI or Interim, or, (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b) of this Agreement,
violate any Law or Order applicable to any FBI Company or, upon its
formation, Interim or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws,
and rules of Nasdaq, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FBI, Southwest and, upon its formation, Interim, no
notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by FBI, Southwest and Interim of the
Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of FBI consists of
9,000,000 shares of FBI Common Stock, of which 377,800 shares were issued and
outstanding as of the date of this Agreement and (ii) 1,000,000 shares of FBI
Preferred Stock, of which 60,600 shares were issued and outstanding as of the
date of this Agreement. All of the issued and outstanding shares of FBI Capital
Stock are authorized and validly issued, and all of the FBI Common Stock to be
issued in exchange for First National Common Stock upon consummation of the
Merger, will be authorized and reserved for issuance prior to the Effective Time
and, when issued in accordance with the terms of this Agreement, will be, duly
and validly issued and outstanding and fully paid and nonassessable under the
FBCA. None of the outstanding shares of FBI Capital Stock has been, and none of
the shares of FBI Common Stock to be issued in exchange for shares of First
National Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive
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rights of the current or past shareholders of FBI. FBI will issue no additional
Common Stock or Preferred Stock until the Effective Time.
6.4 FBI Subsidiaries. Upon its formation, Interim will become
FBI's only Subsidiary. At the Effective Time First National will be merged with
and into Interim and Interim will be the Resulting Association. Except as
disclosed in Schedule 6.4, FBI owns all of the issued and outstanding shares of
capital stock of each FBI Subsidiary. No equity securities of any FBI Subsidiary
are or may become required to be issued (other than to another FBI Company) by
reason of any Rights, and there are no Contracts by which any FBI Subsidiary is
bound to issue (other than to another FBI Company) additional shares of its
capital stock or Rights or by which any FBI Company is or may be bound to
transfer any shares of the capital stock of any FBI Subsidiary (other than to
another FBI Company). There are no Contracts relating to the rights of any FBI
Company to vote or to dispose of any shares of the capital stock of any FBI
Subsidiary. All of the shares of capital stock of each FBI Subsidiary held by a
FBI Company are fully paid and nonassessable under the applicable corporation
Law of the jurisdiction in which such Subsidiary is incorporated or organized
(except, in the case of Subsidiaries that are national banks, for the assessment
contemplated by 12 U.S.C. ss. 55), and are owned by the FBI Company free and
clear of any Lien. Each FBI Subsidiary is either a bank or a corporation, and is
duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Interim, when
formed, will be a national banking association formed under the laws of the
United States, and, through the Effective Time, shall be a wholly owned direct
subsidiary of FBI. Each FBI Subsidiary is duly qualified or licensed to transact
business as a foreign corporation and is in good standing in each jurisdiction
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FBI. Each
FBI Subsidiary that is a depository institution is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits in which are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund.
6.5 Financial Statements.
FBI has delivered to First National prior to the execution of
this Agreement copies of the FBI Financial Statements as of December 31, 1997.
FBI shall provide First National with its unaudited Financial Statements for the
stub period ending March 31, 1998, as soon as practicable after same become
available.
The FBI Financial Statements (as of the dates thereof): (i) are
in accordance with the books and records of FBI, which are complete and accurate
in all material respects and which have been maintained in accordance with good
business practices, and (ii) present fairly the financial position of FBI as of
December 31, 1997 in accordance with GAAP.
6.6 Absence of Certain Changes or Events. Since January 1, 1998,
except as disclosed in the FBI Financial Statements delivered prior to the date
of this Agreement, (i) there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FBI, and (ii) the FBI Companies have not taken any
action, or failed to take any action, prior to the date of this Agreement, which
action or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of the covenants and agreements
of FBI provided in Articles 7 or 8 of this Agreement.
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6.7 Tax Matters.
(a) As of the date of this Agreement, no federal, state, local
and foreign Tax Returns have been required to be filed by or on behalf
of the Company. There is no audit examination, deficiency, or refund
Litigation with respect to any Taxes that is reasonably likely to
result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on FBI, except as reserved against
in the FBI Financial Statements delivered prior to the date of this
Agreement. All Taxes and other liabilities due with respect to
completed and settled examinations or concluded Litigation have been
paid.
(b) Adequate provision for any Taxes due or to become due for
any of the FBI Companies for the period or periods through and
including the date of the respective FBI Financial Statements has been
made and is reflected on such FBI Financial Statements.
(c) Deferred Taxes of the FBI Companies have been adequately
provided for in the FBI Financial Statements.
(d) To the Knowledge of FBI, each of the FBI Companies is in
compliance with, and its records contain all information and documents
(including properly completed Internal Revenue Service Forms W-9)
necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for
such instances of noncompliance and such omissions as are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FBI.
6.8 Compliance With Laws. Prior to the consummation of the
transactions contemplated by this Agreement FBI will become duly registered as a
bank holding company under the BHC Act. Each FBI Company has in effect all
Permits necessary for it to own, lease, or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FBI. FBI is not presently in Default under or in
violation of any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
FBI. FBI:
(a) is not in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except
for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on FBI; and
(b) has not received any notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that FBI is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FBI, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FBI, or (iii) requiring FBI
to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies,
its management or the payment of dividends.
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6.9 Assets. Except as disclosed in Schedule 6.9A, FBI has good and
marketable title, free and clear of all Liens (except for those Liens which are
not likely to have a Material Adverse Effect on FBI), to all of its respective
material Assets, reflected in FBI Financial Statements as being owned by FBI as
of the date hereof. All material tangible properties used in the business of FBI
are in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with FBI's past practices. All Assets
which are material to FBI's business on a consolidated basis, held under leases
or subleases by FBI, are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. FBI
currently maintains insurance in amounts, scope, and coverage as disclosed in
Schedule 6.9B. FBI has not received written notice from any insurance carrier
that (i) such insurance will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be substantially increased. Except as disclosed in Schedule 6.9C,
to the Knowledge of FBI there are presently no occurrences giving rise to a
claim under such policies of insurance and no notices have been given by FBI
under such policies.
6.10 Legal Proceedings. There is no Litigation instituted or
pending, or, to the Knowledge of FBI, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against FBI, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FBI, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against FBI, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FBI.
6.11 Reports. Since its incorporation, FBI has filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FBI). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
6.12 Statements True and Correct. None of the information supplied
or to be supplied by FBI for inclusion in the Registration Statement to be filed
by FBI with the SEC, will, when the Registration Statement becomes effective, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by FBI for inclusion in the Proxy
Statement to be mailed to First National's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by FBI or with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the shareholders of
First National, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the Shareholders' Meeting, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the
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solicitation of any proxy for the Shareholders' Meeting. All documents that FBI
is responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
6.13 Accounting, Tax and Regulatory Matters. FBI has not taken or
agreed to take any action or has any Knowledge of any fact or circumstance that
is reasonably likely to (i) prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368(a)(2)(D) of the Internal Revenue Code, or (ii) materially impede or
delay receipt of any Consents referred to in Section 9.1(b) of this Agreement or
result in the imposition of a condition or restriction of the type referred to
in the last sentence of such Section.
6.14 Environmental Matters.
(a) To the Knowledge of FBI, except as disclosed in Schedule
6.14(a), FBI, its Participation Facilities, and its Loan Properties
are, and have been, in compliance with all Environmental Laws, except
for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on FBI.
(b) Except as disclosed in Schedule 6.14(b), there is no
Litigation pending, or, to the Knowledge of FBI, threatened before any
court, governmental agency, or authority or other forum in which any
FBI Company or any of its Loan Properties or Participation Facilities
(or any FBI Company in respect of any such Loan Property or
Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on,
under, or involving any of its Loan Properties or Participation
Facilities, except for such Litigation pending or threatened that is
not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FBI.
(c) To the Knowledge of FBI, except as disclosed in Schedule
6.14(c), there is no reasonable basis for any Litigation of a type
described above in Section 6.14(b), except such as is not reasonably
likely to have, individually or in the aggregate, a Material Adverse
Effect on FBI.
(d) To the Knowledge of FBI, except as disclosed in Schedule
6.14(d), during the period of (i) FBI's ownership or operation of any
of their respective properties, (ii) FBI's participation in the
management of any Participation Facility, or (iii) FBI's holding a
security interest in a Loan Property, to the Knowledge of FBI there
have been no releases of Hazardous Material in, on, under, or affecting
any Participation Facility or Loan Property of FBI, except such as are
not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FBI.
6.15 Derivatives Contracts. FBI is not a party to or has agreed to
enter into a Derivatives Contract, except for those Derivatives Contracts.
6.16 Outstanding First National Common Stock. As of the date of
this Agreement, FBI does not beneficially own any shares of First National
Common Stock. During the term of this Agreement, FBI shall not purchase or
otherwise acquire beneficial ownership of any First National Common Stock except
pursuant to the terms of this Agreement.
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6.17 Material Contracts. All material Contracts to which FBI is a
party and which are required to be filed as exhibits to the Registration
Statement will be filed with the SEC in connection with the filing of the
Registration Statement and Proxy Statement.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of First National. Unless the prior
written consent of FBI shall have been obtained, and except as otherwise
expressly contemplated herein, First National shall: (i) operate its business
only in the usual, regular, and ordinary course, (ii) use its reasonable best
efforts to preserve intact its business organization and Assets and maintain its
rights and franchises, (iii) use its reasonable best efforts to maintain its
current employee relationships, and (iv) take no action which would materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 9.1(b) of
this Agreement, or materially adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement.
7.2 Negative Covenants of First National. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, First National covenants and agrees that it will not do or agree or
commit to do, any of the following without the prior written consent of the
chief executive officer of FBI:
(a) amend the Articles of Incorporation, Bylaws, or other
governing instruments of First National or, except as expressly
contemplated by this Agreement; or
(b) incur any additional debt obligation or other obligation
for borrowed money in excess of an aggregate of $50,000 except in the
ordinary course of the business of First National consistent with past
practices (it being understood and agreed that the incurrence of
indebtedness in the ordinary course of business shall include, without
limitation, creation of deposit liabilities, purchases of federal
funds, advances from the Federal Reserve Bank or Federal Home Loan
Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition,
on any Asset of First National of any Lien or permit any such Lien to
exist (other than in connection with deposits, repurchase agreements,
bankers acceptances, "treasury tax and loan" accounts established in
the ordinary course of business, the satisfaction of legal requirements
in the exercise of trust powers, and Liens in effect as of the date
hereof; or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into
any shares, of the capital stock of any First National Company, or
declare or pay any dividend or make any other distribution in respect
of First National's capital stock; or
(d) except for this Agreement, or pursuant to the exercise of
stock options outstanding as of the date hereof and pursuant to the
terms thereof in existence on the date hereof, or as disclosed in
Schedule 7.2(d), issue, sell, pledge, encumber, authorize the issuance
of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding,
any additional shares of First National Common Stock, or any stock
appreciation rights,
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or any option, warrant, conversion, or other right to acquire any such
stock, or any security convertible into any such stock; or
(e) adjust, split, combine, reclassify or declare and pay any
dividend or other distribution on any capital stock of First National
or issue or authorize the issuance of any other securities in respect
of or in substitution for shares of First National Common Stock, or
sell, lease, mortgage, or otherwise dispose of or otherwise encumber
(x) any shares of capital stock of any First National, or (y) any Asset
other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of United States Treasury securities
or United States Government agency securities, which in either case
have maturities of five years or less, purchase any securities or make
any material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets,
in any Person, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary
course of business, (ii) acquisitions of control by First National, in
its fiduciary capacity, or (iii) the creation of new wholly owned
Subsidiaries organized to conduct or continue activities otherwise
permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
officers or directors of First National, (provided, however, that First
National may increase the compensation of non-officer employees by not
more than 5% of such employees' annual compensation if such increase is
consistent with past practice); pay any severance or termination pay or
any bonus other than pursuant to written policies or written Contracts
in effect on the date of this Agreement and as disclosed in Schedule
7.2(g); enter into or amend any severance agreements with officers of
First National; or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between First
National and any Person (unless such amendment is required by Law) that
First National does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered),
at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of First National or
make any material change in or to any existing employee benefit plans
of First National other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice or settle any Litigation involving any Liability of First
National for material money damages or restrictions upon the operations
of First National without first consulting with FBI; or
(l) except in the ordinary course of business, modify, amend,
or terminate any material Contract other than renewals without material
adverse change of terms, or waive, release, compromise, or assign any
material rights or claims; or
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(m) make any investment in excess of $50,000 either by purchase
of stock or securities, contributions to capital, property transfers,
or purchase of any property or assets of any other individual,
corporation or other entity other than a wholly owned Subsidiary
thereof; or
(n) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties or assets to any individual, corporation
or other entity other than a direct or indirect wholly owned
Subsidiary, or cancel, release or assign any indebtedness to any such
Person or any claims held by any such Person, except in the ordinary
course of business consistent with past practice or pursuant to
contracts or agreements in force at the date of this Agreement.
7.3 Covenants of FBI. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, FBI
covenants and agrees that it shall (i) continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment, to
enhance the long-term value of the FBI Common Stock and the business prospects
of FBI, and (ii) take no action which would (a) materially adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this Agreement, or (b)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement; provided, that the foregoing shall not
prevent FBI from discontinuing or disposing of any of its Assets or business if
such action is, in the judgment of FBI, desirable in the conduct of the business
of FBI. FBI further covenants and agrees that it will not, without the prior
written consent of the Chairman and Chief Executive Officer of First National,
which consent shall not be unreasonably withheld, amend the Articles of
Incorporation or Bylaws of FBI, in each case in any manner adverse to the
holders of First National Common Stock.
7.4 Adverse Changes In Condition. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the occurrence
or impending occurrence of any event or circumstance relating to it which (i) is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on it or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable best efforts to prevent or promptly to remedy the same.
7.5 Reports. First National, FBI and Interim shall file all
reports required to be filed by each of them with Regulatory Authorities between
the date of this Agreement and the Effective Time and shall deliver to each
other copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material and
except for the absence of certain footnote information in the unaudited
financial statements). As of their respective dates, such reports filed with the
SEC will comply in all material respects with the Securities Laws and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
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ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval.
As soon as practicable after execution of this Agreement (in no event later than
April 30, 1998), FBI shall file the Registration Statement with the SEC, and
shall use its reasonable best efforts to cause the Registration Statement to
become effective under the 1933 Act and take any action required to be taken
under the applicable state blue sky or securities Laws in connection with the
issuance of the shares of FBI Common Stock upon consummation of the Merger.
First National shall furnish all information concerning it and the holders of
its capital stock as FBI may reasonably request in connection with such action.
First National shall call a Shareholders' Meeting, to be held on a date that is
determined by the Parties to be a mutually desirable date, which date shall be
as soon as practicable after the Registration Statement is declared effective by
the SEC, for the purpose of voting upon approval of this Agreement and such
other related matters as it deems appropriate. In connection with the
Shareholders' Meeting, (i) First National shall prepare a Proxy Statement
relating to the Merger and mail such Proxy Statement to its shareholders, (ii)
the Parties shall furnish to each other all information concerning them that
they may reasonably request in connection with such Proxy Statement, (iii) the
Board of Directors of First National shall recommend (subject to compliance with
their fiduciary duties under applicable law as advised by counsel) to its
shareholders the approval of this Agreement, (iv) each member of the Board of
Directors of First National shall vote all First National Common Stock
beneficially owned by each in favor of the approval of this Agreement, and (v)
the Board of Directors and officers of First National shall (subject to
compliance with their fiduciary duties under applicable law as advised by
counsel) use their reasonable best efforts to obtain such shareholders'
approval.
8.2 Applications. FBI shall promptly prepare and file, and First
National shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement and
thereafter use its reasonable best efforts to cause the Merger to be consummated
as expeditiously as possible.
8.3 Agreement As To Efforts To Consummate. Subject to the terms
and conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including the use of their respective reasonable best efforts to
lift or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. First
National, FBI and Interim shall use their reasonable best efforts to obtain all
Permits and Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
8.4 Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time or termination
pursuant to Article 10 of this Agreement, upon reasonable notice and
subject to applicable Laws, FBI and First National shall afford each
other, and each other's accountants, counsel, and other
representatives, during normal working hours for the period of time
prior to the Effective Time, reasonable access to all of its and its
Subsidiaries' properties, books, contracts, commitments, and records
and, during such period, each
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shall furnish promptly to the other party (i) a copy of each report,
schedule, and other document filed or received by it or any of its
Subsidiaries during such period pursuant to the requirements of the
Securities Laws, (ii) a copy of all filings made with any Regulatory
Authorities or other governmental entities in connection with the
transactions contemplated by this Agreement and all written
communications received from such Regulatory Authorities and
governmental entities related thereto, and (iii) all other information
concerning its or its Subsidiaries' business, properties and personnel
as such other party may reasonably request, including reports of
condition filed with Regulatory Authorities. In this regard, without
limiting the generality of the foregoing, each of the parties hereto
shall notify the other parties hereto promptly upon the receipt by it
of any comments from the SEC, or its staff, and of any requests by the
SEC for amendments or supplements to the Registration Statement or the
Proxy Statement or for additional information and will supply the other
parties hereto with copies of all correspondence between it and its
representatives, on the one hand, and the SEC or the members of its
staff or any other government official, on the other hand, with respect
to the Registration Statement or the Proxy Statement. Each party hereto
shall, and shall cause its advisors and representatives to (x) conduct
its investigation in such a manner which will not unreasonably
interfere with the normal operations, customers or employee relations
of the other and shall be in accordance with procedures established by
the parties having the due regard for the foregoing, and (y) refrain
from using for any purposes other than as set forth in this Agreement,
and shall treat as confidential, all information obtained by each
hereunder or in connection herewith and not otherwise known to them
prior to the Effective Time.
(b) FBI and its Affiliates will hold, and will use their best
efforts to cause their officers, directors, employees, consultants,
advisors, representatives, and agents to hold, in confidence, unless
compelled by judicial or other legal process, all confidential
documents and information concerning First National furnished to FBI
and its Affiliates in connection with the transactions contemplated by
this Agreement, including information provided in accordance with this
Section 8.4, except to the extent that such information can clearly be
demonstrated by FBI to have been (i) previously known on a
nonconfidential basis by FBI, (ii) in the public domain other than as a
result of disclosure by FBI and any of its Affiliates, or (iii) later
lawfully acquired by FBI from sources other than First National;
provided, however, that FBI may disclose such information to its
officers, directors, employees, consultants, advisors, representatives,
and agents in connection with the transactions contemplated by this
Agreement only to the extent that such Persons who, in FBI's reasonable
judgment, need to know such information for the purpose of evaluating
First National (provided that such Persons shall be informed of the
confidential nature of such information and shall agree to be bound by
the terms of this provision) and, in any event, such disclosures shall
be made only to the extent necessary for such purposes. If this
Agreement is terminated in accordance with Article 10 hereof, FBI and
its Affiliates shall maintain the confidence of such information and
will, and will use their best efforts to cause its officers, directors,
employees, consultants, advisors, representatives, and agents to,
return to First National all documents and other materials, and all
copies made thereof, obtained by FBI or any of its Affiliates in
connection with this Agreement that are subject to this Section 8.4.
8.5 Current Information. During the period from the date of this
Agreement until the Effective Time or termination of this Agreement pursuant to
Article 10 hereof, each of First National and FBI shall, and shall cause its
representatives to, confer on a regular and frequent basis with representatives
of the other. Each of First National and FBI shall promptly notify the other of
(i) any material change in its business or operations, (ii) any material
complaints, investigations, or hearings (or communications indicating that the
same may be contemplated) of any Regulatory Authority, (iii) the institution or
threat of material Litigation involving such party, or (iv) the occurrence or
nonoccurrence, of an event or condition, the occurrence, or
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nonoccurrence, of which would be reasonably expected to cause any of such
party's representations or warranties set forth herein to be false or untrue in
any respect as of the Effective Time; and in each case shall keep the other
fully informed with respect thereto.
8.6 Other Actions. No Party shall, or shall permit any of its
Subsidiaries, if any, to, take any action, except in every case as may be
required by applicable Law, that would or is intended to result in (i) any of
its representations and warranties set forth in this Agreement that are
qualified as to materiality being or becoming untrue, (ii) any of such
representations and warranties that are not so qualified become untrue in any
material manner having a Material Adverse Effect, (iii) any of the conditions
set forth in this Agreement not being satisfied or in a violation of any
provision of this Agreement, or (iv) adversely affecting the ability of any of
them to obtain any of the Consents or Permits from Regulatory Authorities
(unless such action is required by sound banking practice).
8.7 Press Releases. Prior to the Effective Time, First National
and FBI shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 No Solicitation. Except with respect to this Agreement and the
transactions contemplated hereby, from the date of this Agreement until the
Effective Time or termination pursuant to Article 10, neither First National nor
any of its Representatives shall directly or indirectly solicit any Acquisition
Proposal by any Person. Except to the extent necessary to comply with the
fiduciary duties of First National's Board of Directors determined after
consultation with counsel neither First National nor any Affiliate or
Representative of First National shall furnish any nonpublic information that it
is not legally obligated to furnish or negotiate with respect to, any
Acquisition Proposal, but First National may communicate information about such
an Acquisition Proposal to its shareholders if and to the extent that it is
required to do so in order to comply with its legal obligations as advised by
counsel. First National shall promptly notify FBI orally and in writing in the
event that it receives any inquiry or proposal relating to any such transaction.
First National shall (i) immediately cease and cause to be terminated any
existing activities, discussions, or negotiations with any Persons conducted
heretofore with respect to any of the foregoing, and (ii) direct and use its
reasonable best efforts to cause of all its Representatives not to engage in any
of the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes
and agrees to use its reasonable best efforts to cause the Merger, and to take
no action which would cause the Merger not, to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes.
8.10 Articles of Association Provisions. First National shall take
all necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby do not
and will not result in any super-majority voting requirements or the grant of
any rights to any Person under the Articles of Association, Bylaws, or other
governing instruments of First National.
8.11 Agreement of Affiliates. First National has disclosed in
Schedule 8.11 all Persons whom it reasonably believes are "affiliates" of First
National for purposes of Rule 145 under the 1933 Act. First National shall use
its reasonable best efforts to cause each such Person to deliver to FBI not
later than 30 days prior to the Effective Time, a written agreement,
substantially in the form of Exhibit 2 attached hereto,
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providing that such Person will not sell, pledge, transfer, or otherwise dispose
of the shares of First National Common Stock held by such Person, except as
contemplated by such agreement or by this Agreement and will not sell, pledge,
transfer, or otherwise dispose of the shares of FBI Common Stock to be received
by such Person upon consummation of the Merger except in compliance with
applicable provisions of the 1933 Act and the rules and regulations thereunder
(and FBI shall be entitled to place restrictive legends upon certificates for
shares of FBI Common Stock issued to affiliates of First National pursuant to
this Agreement to enforce the provisions of this Section 8.11). FBI shall not be
required to maintain the effectiveness of the Registration Statement under the
1933 Act for the purposes of resale of FBI Common Stock by such affiliates.
8.12 Employee Benefits and Contracts. Following the Effective Time,
FBI shall provide generally to continuing officers and employees of First
National employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of FBI Common Stock), on terms
and conditions which when taken as a whole are no less favorable than those
currently provided by First National or those currently provided by FBI to their
similarly situated officers and employees. For purposes of participation and
vesting (but not benefit accrual under any employee benefit plans of FBI other
than the First National Benefit Plans) under such employee benefit plans, the
service of the employees of First National prior to the Effective Time shall be
treated as service with FBI participating in such employee benefit plans. FBI
shall honor in accordance with their terms all employment, severance,
consulting, and other compensation Contracts disclosed in Schedule 8.12 between
First National and any current or former director, officer, or employee thereof,
and all provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under the First National Benefit Plans.
8.13 Management Contracts. FBI has agreed to provide written
employment contracts to John S. McMullen and T. Edwin Stinson, Jr., which shall
take effect at the Effective Time of the Merger. The employment contracts must
be executed within 30 days following the date of this Agreement. If the Parties
are not able to execute the respective employment contracts within that period,
Messrs. McMullen and Stinson shall retain and be governed by their respective
employment agreements with First National.
8.14 Indemnification.
(a) FBI shall, and shall cause the Resulting Association (and
its successors and assigns) to, indemnify, defend, and hold harmless
the present and former directors, officers, employees, and agents of
First National (each, an "Indemnified Party") against all costs, fees
or expenses (including reasonable attorneys' fees), judgments, fines,
penalties, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any Litigation arising out of actions or
omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the full extent
permitted under Florida Law and by First National's Articles of
Association and Bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of
any Litigation. Without limiting the foregoing, in any case in which
approval by FBI is required to effectuate any indemnification, FBI
shall direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel
mutually agreed upon between FBI and the Indemnified Party.
(b) If FBI or the Resulting Association or any of their
successors or assigns shall consolidate with or merge into any other
Person and shall not be the continuing or surviving corporation of such
consolidation or merger or shall transfer all or substantially all of
its assets to any Person, then and in each case, proper provision shall
be made so that the successors and assigns of FBI shall assume the
obligations set forth in this Section 8.14.
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(c) The provisions of this Section 8.14 are intended to be for
the benefit of and shall be enforceable by, each Indemnified Party, his
or her heirs and representatives and shall survive the consummation of
the Merger and be binding on all successors and assigns of FBI and the
Resulting Association.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.7 of this Agreement:
(a) Shareholder Approval. The shareholders of First National
shall have approved this Agreement by the requisite 662/3% vote, and
the consummation of the transactions contemplated hereby, including the
Merger, as and to the extent required by Law.
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or
made and shall be in full force and effect and all waiting periods
required by Law shall have expired. No Consent obtained from any
Regulatory Authority which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital
or the disposition of Assets) which in the reasonable judgment of the
Board of Directors of either Party would so materially adversely impact
the economic or business benefits of the transactions contemplated by
this Agreement that, had such condition or requirement been known, such
Party would not, in its reasonable judgment, have entered into this
Agreement.
(c) Consents and Approvals. Other than filing the Certificate
to Merge and receipt of a certification of the Merger, each Party shall
have obtained any and all Consents required for consummation of the
Merger (other than those referred to in Section 9.1(b) of this
Agreement or listed in Schedule 9.1[c]) or for the preventing of any
Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions
contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall
have been declared effective under the 1933 Act, and no stop orders
suspending the effectiveness of the Registration Statement shall have
been issued, and no action, suit, proceeding, or investigation by the
SEC to suspend the effectiveness thereof shall have been initiated and
be continuing, and all necessary approvals under state securities Laws
or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of FBI Common Stock issuable pursuant to the Merger shall have
been received.
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(g) Tax Matters. Each Party shall have received a written
opinion or opinions from Smith, Gambrell & Russell, LLP, and in a form
reasonably satisfactory to such Parties (the "Tax Opinion"), to the
effect that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and (ii) the
exchange in the Merger of First National Common Stock for FBI Common
Stock will not give rise to gain or loss to the shareholders of First
National with respect to such exchange (except to the extent of any
cash received). In rendering such Tax Opinion, such counsel shall be
entitled to rely upon representations of officers of First National and
FBI reasonably satisfactory in form and substance to such counsel.
(h) Public Offering. FBI shall have executed a definitive
underwriting agreement with The Robinson-Humphrey Company, LLC (or such
other investment banking firm equivalent in stature and reputation as
determined in the sole discretion of the Board of Directors of FBI)
providing for the firm commitment underwriting of shares of FBI Common
Stock having an aggregate gross purchase price of at least $30 million.
9.2 Conditions to Obligations of FBI. The obligations of FBI to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by FBI pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of
First National set forth in this Agreement shall be assessed as of the
date of this Agreement and as of the Effective Time with the same
effect as though all such representations and warranties had been made
on and as of the Effective Time (provided that representations and
warranties which are confined to a specified date shall speak only as
of such date). The representations and warranties of First National set
forth in Section 5.3 of this Agreement shall be true and correct
(except for inaccuracies which are de minimus in amount). The
representations and warranties of First National set forth in Sections
5.17, 5.18, 5.19, and 5.20 of this Agreement shall be true and correct
in all material respects. There shall not exist inaccuracies in the
representations and warranties of First National set forth in this
Agreement (including the representations and warranties set forth in
Sections 5.3, 5.17, 5.18, 5.19, and 5.20) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on First National; provided that, for purposes
of this sentence only, those representations and warranties which are
qualified by references to Immaterial" or "Material Adverse Effect"
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of First National to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly
performed and complied with in all respects.
(c) Certificates. First National shall have delivered to FBI
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer,
to the effect that the conditions of its obligations set forth in
Section 9.2(a) and 9.2(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by First National's
Board of Directors and shareholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the
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consummation of the transactions contemplated hereby, all in such
reasonable detail as FBI and its counsel shall request.
(d) Affiliates Agreements. FBI shall have received from each
affiliate of First National the affiliates letter referred to in
Section 8.12 of this Agreement.
(e) Opinion of Counsel. FBI shall have received a written
opinion of Igler & Dougherty, P.A., Tallahassee, Florida, counsel to
First National, dated as of the Effective Time, with respect to such
matters and in such form as shall be agreed upon between such firm and
FBI in substantially the form that is attached as Exhibit 3.
(f) Options Cancellation Agreements. FBI shall have received
from each holder of First National Options the cancellation agreement
referred to in Section 3.4 of this Agreement.
(g) Opinion of Accountants. First National shall have received
an opinion from Deloitte & Touche, dated as of the Effective Time, a
copy of which shall be provided to FBI and the contents of which shall
be acceptable to FBI in its sole discretion, to the effect that there
has not been an ownership change, as defined in Internal Revenue Code
Section 382(g), of First National that occurred during or after any
Taxable Period in which First National incurred a net operating loss
that carries over to any Taxable Period ending after December 31, 1996.
9.3 Conditions to Obligations of First National. The obligations
of First National to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by First National pursuant to Section 11.7
of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of
FBI set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as
of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such
date). The representations and warranties of FBI set forth in Section
6.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties of FBI set forth in Section 6.11 of this Agreement shall be
true and correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of FBI set forth in
this Agreement (including the representations and warranties set forth
in Sections 6.3 and 6.11) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on FBI; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include
such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of FBI to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. FBI shall have delivered to First National
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer,
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to the effect that the conditions of its obligations set forth in
Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by FBI's Board of
Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement,
and the consummation of the transactions contemplated hereby, all in
such reasonable detail as First National and its counsel shall request.
(d) Fairness Opinion. First National shall have received from
Mercer Capital Management, Inc. a letter, dated not more than five
business days prior to the date of the Proxy Statement, to the effect
that, in the opinion of such firm, the Exchange Ratio is fair, from a
financial point of view, to the holders of First National Common Stock.
(e) Payment of Consideration. FBI shall have delivered to the
Exchange Agent the consideration to be paid to holders of the First
National Common Stock pursuant to Sections 3.1 and 3.3 of this
Agreement.
(f) Opinion of Counsel. First National shall have received a
written opinion of Smith, Gambrell & Russell, LLP, counsel to FBI,
dated as of the Effective Time, with respect to such matters and in
substantially the form that is attached hereto as Exhibit 4.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of First National, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual written consent of the Board of Directors of FBI
and the Board of Directors of First National; or
(b) By the Board of Directors of either FBI or First National
(provided that the terminating Party is not then in breach of any
representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(b) of this Agreement in
the case of First National and Section 9.3(a) in the case of FBI or in
material breach of any covenant or other agreement contained in this
Agreement) in the event of an inaccuracy of any representation or
warranty of the other Party contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice
to the breaching Party of such inaccuracy and which inaccuracy would
provide the terminating Party the ability to refuse to consummate the
Merger under the applicable standard set forth in Section 9.2(b) of
this Agreement in the case of First National and Section 9.3(a) of this
Agreement in the case of FBI; or
(c) By the Board of Directors of either FBI or First National
in the event of a material breach by the other Party of any covenant,
agreement, or obligation contained in this Agreement which breach
cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either FBI or First National
in the event (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions
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contemplated hereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is
not appealed within the time limit for appeal; or (ii) the shareholders
of First National fail to vote their approval of this Agreement and the
transactions contemplated hereby as required by the FBCA at the
Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or
(e) By the Board of Directors of either FBI or First National
in the event that the Merger shall not have been consummated by
September 30, 1998, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach
of this Agreement by the Party electing to terminate pursuant to this
Section 10.1(e); or
(f) By FBI in the event dissenters' rights are claimed,
pursuant to the applicable provisions of the FBCA, by persons owning in
the aggregate more than 10% of the issued and outstanding First
National Common Stock; or
(g) By the Board of Directors of either FBI or First National
(provided that the terminating Party is not then in breach of any
representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(b) of this Agreement in
the case of First National and Section 9.3(a) in the case of FBI or in
material breach of any covenant or other agreement contained in this
Agreement) in the event that any of the conditions precedent to the
obligations of such Party to consummate the Merger cannot be satisfied
or fulfilled by the date specified in Section 10.1(e) of this
Agreement; or
(h) By First National, if at any time prior to the Effective
Time, the fairness opinion of Mercer Capital Management, Inc., is
withdrawn.
(i) By First National if prior to the Effective Time, a
corporation, partnership, person, or other entity or group shall have
made a bona fide Acquisition Proposal that the First National Board
determines in its good faith judgment and in the exercise of its
fiduciary duties, with respect to legal matters on the written opinion
of legal counsel and as to financial matters on the written opinion of
an investment banking firm of national reputation, is more favorable to
the First National shareholders and that the failure to terminate this
Agreement and accept such alternative Acquisition Proposal would be
inconsistent with the proper exercise of such fiduciary duties.
(j) By FBI, if First National has not received the opinion
referenced in Section 9.2(g).
10.2 Effect of Termination. (a) In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Sections 8.5 and 11.1 of this Agreement shall survive
any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b) or 10.1(c) or 10.1 (f), of this Agreement shall not relieve the
breaching Party from liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination; provided, further, that in the event of any termination of this
Agreement following the occurrence of an Initial Triggering Event (as defined
below) other than termination due to: (A) the failure of FBI to satisfy a
condition to closing, (B) determination of FBI pursuant to Section 9.2(a) not to
perform this Agreement, (C) withdrawal of the fairness opinion of Mercer Capital
Management, Inc. (so long as such withdrawal is not due to materially inaccurate
or fraudulent information provided by First National to Mercer Capital
Management, Inc.), or (D) the failure to satisfy the conditions set forth in
Section 9.1 paragraphs (b), (d),
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(e), (f) and (g), FBI shall be entitled to a cash payment from First National in
an amount equal to $1,000,000 upon the occurrence of any Subsequent Triggering
Event (as defined below) within twelve (12) months following the date of such
termination. In the event this Agreement is terminated as a result of FBI's or
First National's failure to satisfy any of its representations, warranties or
covenants set forth herein, the non-terminating party shall reimburse the
terminating party for its reasonable out-of-pocket expenses relating to the
Merger in an amount not to exceed $250,000.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date of this Agreement:
(i) First National, without having received FBI's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any Person (the term
"Person" for purposes of this Section also having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the
"1934 Act"), and the rules and regulations thereunder) other than FBI or any of
its Subsidiaries (each a "FBI Subsidiary") or the Board of Directors of First
National shall have recommended that the shareholders of First National approve
or accept any Acquisition Transaction other than as contemplated by this
Agreement. For purposes of this Agreement, (a) "Acquisition Transaction" shall
mean (x) a merger or consolidation, or any similar transaction, involving First
National, (y) a purchase, lease or other acquisition of all or substantially all
of the assets or deposits of First National, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 15% or more of the voting power of First
National, and (b) "Subsidiary", for purposes of this Section, also shall have
the meaning set forth in Rule 12b-2 under the 1934 Act;
(ii) Any Person (excluding the officers, directors and
existing shareholders of First National), other than FBI or any FBI Subsidiary
acting in a fiduciary capacity, shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of the outstanding First
National Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder) and such Person does not vote such
First National Common Stock in favor of this Agreement at the meeting
contemplated in clause (iii) below or such meeting is not held or is cancelled;
(iii) The meeting of shareholders of First National to be held
for the purpose of approving the transaction contemplated by this Agreement
shall not have been held or shall have been canceled prior to termination of
this Agreement, or First National, without having received FBI's prior written
consent, shall have authorized, recommended, proposed (or publicly announced its
intention to authorize, recommend or propose, or its interest in authorizing,
recommending or proposing) an agreement to engage in an Acquisition Transaction,
with any person other than FBI or a FBI Subsidiary;
(iv) Any Person other than FBI or any FBI Subsidiary shall
have made a bona fide proposal to First National or its shareholders by public
announcement or written communication (a copy of which shall be provided to FBI)
to engage in an Acquisition Transaction, which proposal has an economic value
equivalent to or in excess of that of FBI.
(v) After a proposal is made by a third party to First
National to engage in an Acquisition Transaction, First National shall have
willfully and materially breached any material covenant or obligation
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contained in this Agreement in anticipation of engaging in an Acquisition
Transaction, and such breach would entitle FBI to terminate this Agreement and
such breach is not cured; or
(vi) Any person other than FBI or any FBI Subsidiary, other
than in connection with a transaction to which FBI has given its prior written
consent, shall have filed an application or notice with the Federal Reserve
Board or other federal or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (excluding the officers,
directors and existing shareholders of First National) of beneficial ownership
of 25% or more of the then outstanding First National Common Stock; or
(ii) The closing of the Acquisition Transaction described in
clause (i) of subsection (b) of this Section 10.2, except that the percentage
referred to in clause (z) shall be 25%.
(d) First National shall notify FBI promptly upon the occurrence
of any Initial Triggering Event or Subsequent Triggering Event.
10.3 Non-Survival of Representations and Covenants. The respective
representations and warranties of the Parties shall not survive the Effective
Time. All agreements of the Parties to this Agreement which by their terms are
to be performed following the Effective Time shall survive the Effective Time
until performed in accordance with their terms.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Acquisition Proposal" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger,
acquisition of all of the stock or assets of, or other business
combination involving such Party or any of its Subsidiaries or any
proposal or offer to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets of, such Party or
any of its Subsidiaries (other than the transactions contemplated or
permitted by this Agreement).
"Affiliate" of a Person shall mean: (i) any other Person directly,
or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any
officer, director, partner, employer, or direct or indirect beneficial
owner of any 10% or greater equity
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or voting interest of such Person; or (iii) any other Person for which
a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated
herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character,
and description, whether real, personal, or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
"BHC Act" shall mean the Bank Holding Company Act of 1956, as
amended.
"Certificate of Merger" shall mean the Certificate of Merger filed
with the OCC to consummate the Merger.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"Contract" shall mean any written agreement, commitment, contract,
note, bond, mortgage, indenture, instrument, lease, obligation,
license, or plan of any kind or character, or other document to which
any Person is a party or that is binding on any Person or its capital
stock or Assets.
"Default" shall mean (i) any breach or violation of or default
under any Contract, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, or (iii) any
occurrence of any event that with or without the passage of time or the
giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate,
increase, or impose any liability under, any Contract where, in any
such event, such default is reasonably likely to have a Material
Adverse Effect on a Party.
"Derivatives Contract" shall have the meaning set forth in Section
5.20 of this Agreement.
"Effective Time" shall have the meaning set forth in Section 1.3
of this Agreement.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and
which are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42
U.S.C. 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq., and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material,
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
5.13(c) of this Agreement.
"Exchange Agent" shall have the meaning set forth in Section 4.1
of this Agreement.
"Exchange Ratio" shall have the meaning set forth in Section
3.1(c)of this Agreement.
"Exhibits" 1, 2 and 3 shall mean the Exhibits so marked, copies of
which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or
document without being attached hereto.
"FBCA" shall mean the Florida Business Corporation Act.
"FBI" shall have the meaning set forth in the first paragraph of
this Agreement.
"FBI Capital Stock" shall mean, collectively, the FBI Common
Stock, the FBI Preferred Stock, and any other class or series of
capital stock of FBI.
"FBI Common Stock" shall mean the $.01 par value common stock of
FBI.
"FBI Companies" shall mean, collectively, FBI and all FBI
Subsidiaries.
"FBI Financial Statements" shall mean the unaudited consolidated
balance sheets (including related notes and schedules, if any) of FBI
as of March 31, 1998, and as of December 31, 1997, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months
ended March 31, 1998, and for year ended December 31, 1997.
"FBI Preferred Stock" shall mean the $10.00 par value preferred
stock of FBI.
"First National" shall have the meaning set forth in the first
paragraph of this Agreement.
"First National Benefits Plans" shall have the meaning set forth
in Section 5.13(a) of this Agreement.
"First National Common Stock" shall mean the $1.00 par value
common stock of First National.
"First National Contract" shall have the meaning set forth in
Section 5.14.
"First National Financial Statements" shall mean (i) the
consolidated balance sheets (including related notes and schedules, if
any) of First National as of March 31, 1998, and as of December 31,
1997, 1996 and 1995, and the related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) for the three months ended March 31, 1998, and for
each of the three fiscal years ended December 31, 1997, 1996, and 1995,
as filed by First National with the Comptroller of the Currency and
(ii) the consolidated balance sheets of First National (including
related notes and schedules, if any) and related statements of income,
changes in
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shareholders' equity, and cash flows (including related notes and
schedules, if any) included in First National's Call Reports filed and
published in accordance with applicable federal regulation with respect
to periods ended subsequent to December 31, 1997.
"First National Pension Plan" shall have the meaning set forth in
Section 5.13(a) of this Agreement.
"First National Stock Plans" shall mean the existing stock option
and other stock-based compensation plans and warrant instruments of
First National set forth in Schedule 3.4.
"First National Options" shall have the meaning set forth in
Section 3.4(a) of this Agreement.
"GAAP" shall mean generally accepted accounting principles in the
United States, consistently applied during the periods involved
applicable to banks or bank holding companies, as the case may be.
"Hazardous Material" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic
substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum,
petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal, or encapsulation pursuant to the
requirements of governmental authorities and any polychlorinated
biphenyls).
"Indemnified Party" shall have the meaning set forth in Section
8.14 of this Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person (including references
to such Person being aware of a particular matter) shall mean the
personal knowledge of the chairman, president, chief financial officer,
chief accounting officer, chief credit officer, general counsel, any
assistant or deputy general counsel, or any senior or executive vice
president of such Person and the knowledge of any such persons obtained
or which would have been obtained from a reasonable investigation,
except as otherwise stated in this Agreement.
"Law" shall mean any code, law, ordinance, regulation, reporting
or licensing requirement, rule, or statute applicable to a Person or
its Assets, Liabilities, or business, including those promulgated,
interpreted, or enforced by any Regulatory Authority.
"Lien" with respect to any Asset, shall mean any conditional sale
agreement, default of title, easement, encroachment, encumbrance,
hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention, or other security
arrangement, or any adverse right or interest, charge, or claim of any
nature whatsoever of, on, or with respect to any property or property
interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party,
pledges to secure deposits, and (iii) other Liens incurred in the
ordinary course of the banking business.
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"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice by any Person alleging potential liability.
"Loan Property" shall mean any property owned, leased, or operated
by the Party in question or by any of its Subsidiaries or in which such
Party or its Subsidiary holds a security or other interest (including
an interest in a fiduciary capacity), and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"Material Adverse Effect" on a Party shall mean an event, change,
or occurrence which, individually or together with any other event,
change, or occurrence, (i) would in the aggregate result in an adverse
impact of $200,000 or more on the financial position or results of
operations of such Party, or (ii) would impair the ability of such
Party to perform its obligations under this Agreement or to consummate
the Merger or the other transactions contemplated by this Agreement,
provided that "Material Adverse Effect" shall not be deemed to include
the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental
authorities, (b) changes in GAAP or regulatory accounting principles
generally applicable to banks and their holding companies, (c) actions
and omissions of a Party (or any of its Subsidiaries) taken with the
prior informed consent of the other Party in contemplation of the
transactions contemplated hereby, (d) circumstances affecting regional
bank holding companies generally, and (e) the Merger and compliance
with the provisions of this Agreement on the operating performance of
the Parties.
"Merger" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Nasdaq" shall mean the Nasdaq Stock Market.
"National Bank Act" shall mean 12 U.S.C. ss. 1, et seq.
"OCC" shall mean the Office of the Comptroller of the Currency.
"Order" shall mean any decree, injunction, judgment, order,
decision or award, ruling, or writ of any federal, state, local, or
foreign or other court, arbitrator, mediator, tribunal, administrative
agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in
which the Party in question or any of its Subsidiaries participates in
the management and, where required by the context, said term means the
owner or operator of such facility or property, but only with respect
to such facility or property.
"Party" shall mean either First National or FBI, and "Parties"
shall mean both First National and FBI.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
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liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.
"Proxy Statement" shall mean the proxy statement used by First
National to solicit the approval of its shareholders of the
transactions contemplated by this Agreement, which shall include the
prospectus of FBI relating to the issuance of the FBI Common Stock to
holders of First National Common Stock.
"Registration Statement" shall mean the Registration Statement on
Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
FBI under the 1933 Act with respect to the shares of FBI Common Stock
to be issued to the shareholders of First National in connection with
the transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Office of
the Comptroller of the Currency, the United States Department of
Justice, the Board of the Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the SEC, NASD, Nasdaq and all
state regulatory agencies having jurisdiction over the Parties and
their respective Subsidiaries.
"Resulting Association" shall mean the surviving corporation in
the Merger, First National, which will operate under the new name
"Florida Bank, N.A."
"Rights" shall mean all arrangements, calls, Contracts, options,
rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of
the capital stock of a Person or any Contract, commitments or other
arrangements by which a Person is or may be bound to issue additional
shares of its capital stock or options, warrants, rights to purchase or
acquire any additional shares of its capital stock, or other Rights.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders
of First National to be held pursuant to Section 8.1 of this Agreement,
including any adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations, banks,
associations, or other entities of which the entity in question owns or
controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which
50% or more of the outstanding equity securities is owned directly or
indirectly by its parent; provided, there shall not be included any
such entity acquired through foreclosure or any such entity the equity
securities of which are owned or controlled in a fiduciary capacity.
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"Tax" or "Taxes" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental
fee of any kind whatsoever, imposed or required to be withheld by the
United States or any state, local, foreign government or subdivision or
agency thereof, including any interest, penalties or additions thereto.
"Tax Opinion" shall have the meaning set forth in Section 9.1(g)
of this Agreement.
"Taxable Period" shall mean any period prescribed by any
governmental authority, including the United States or any state,
local, foreign government or subdivision or agency thereof for which a
Tax Return is required to be filed or Tax is required to be paid.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or
combined or unitary group that includes a Party or its Subsidiaries.
(b) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words
"include," "includes," or "including" are used in this Agreement, they
shall be deemed followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of FBI
and First National shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration, and application
fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel, except
that each of FBI and First National shall bear and pay one-half of the
printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach
by a Party of the terms of this Agreement or otherwise limit the rights
of the nonbreaching Party.
11.3 Brokers and Finders. Each of the Parties represents and
warrants that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder in connection with this Agreement
or the transactions contemplated hereby. In the event of a claim by any broker
or finder based upon his or its representing or being retained by or allegedly
representing or being retained by First National or FBI, each of First National
and FBI, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement constitutes the entire agreement between the Parties with
respect to the transactions contemplated hereunder and
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supersedes all prior arrangements or understandings with respect thereto,
written or oral (except for the Confidentiality Agreements).
11.5 Amendments. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of this Agreement has been obtained; provided, that
after any such approval by the holders of First National Common Stock, there
shall be made no amendment that reduces or modifies in any material respect the
consideration to be received by holders of First National Common Stock, without
the further approval of such shareholders.
11.6 Obligations of FBI. Whenever this Agreement requires FBI
(including the Resulting Association) to take any action, such requirement shall
be deemed to include an undertaking by FBI to cause the FBI Subsidiaries to take
such action.
11.7 Waivers.
(a) Prior to or at the Effective Time, FBI, acting through its
Board of Directors, chief executive officer, president or other
authorized officer, shall have the right to waive any default in the
performance of any term of this Agreement by First National, to waive
or extend the time for the compliance or fulfillment by First National
of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of FBI under
this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of FBI.
(b) Prior to or at the Effective Time, First National, acting
through its Board of Directors, chief executive officer, president or
other authorized officer, shall have the right to waive any default in
the performance of any term of this Agreement by FBI, to waive or
extend the time for the compliance or fulfillment by FBI of any and all
of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of First National under this
Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless
in writing signed by a duly authorized officer of First National.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other
provision of this Agreement. No waiver of any condition or of the
breach of any term contained in this Agreement in one or more instances
shall be deemed to be or construed as a further or continuing waiver of
such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
11.8 Assignment. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by the Parties and their respective successors and assigns.
11.9 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such
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<PAGE> 186
other address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
First National: First National Bank of Tampa
100 West Kennedy Boulevard
Tampa, Florida 33602
Telephone Number:(813) 221-7910
Telecopy Number:(813) 221-7912
Attention: W. Andrew Krusen, Jr., Chairman
and John S. McMullen, President
Copy to Counsel: Igler & Dougherty, P.A.
1501 Park Avenue East
Tallahassee, Florida 32301
Telephone Number: (850) 878-2411
Telecopy Number: (850) 878-1230
Attention: A. George Igler, Esq.
FBI and Interim: Charles E. Hughes, Jr.
Florida Banks, Inc.
Suite 212, Southpoint Square II
Jacksonville, Florida 37216-0925
Telephone Number: (904) 296-2329
Telecopy Number: (904) 296-2820
Attention: President and Chief Executive Officer
Copy to Counsel: Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street
Atlanta, Georgia 30309-3592
Telephone Number: (404) 815-3758
Telecopy Number: (404) 685-7058
Attention: Robert C. Schwartz, Esq.
11.10 Governing Law; Arbitration. This Agreement shall be governed
by and construed in accordance with the Laws of the State of Florida, without
regard to any applicable conflicts of Laws, except to the extent that the Laws
of the United States. Any and all disputes arising out of or in connection with
this Agreement shall be submitted to arbitration, and finally settled, under the
Rules of the American Arbitration Association ("AAA") by one arbitrator
appointed in accordance with the said Rules. Any such arbitration shall be
conducted in Hillsborough County, Florida. Each party of this Agreement shall be
bound by the result of such arbitration. Each party shall bear its own expenses
relating to such disputes or disagreements so arbitrated, and the parties hereto
shall share equally the fees and charges of the arbitrators for conducting such
arbitration. Such arbitration shall be governed by the Federal Arbitration Act,
9 U.S.C. ss. 1 et seq; provided however, that the substantive law of the State
of Florida shall govern any and all such disputes. The Parties agree that any
action to confirm an arbitration award shall be brought in any competent court
in Hillsborough County, Florida, and that such court may enforce or compel
compliance with such award.
11.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 187
11.12 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
11.14 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
11.15 Directors' Termination Fee. At the Effective Time, any
director of First National who will not become an advisory director of the
Resulting Association or become a director or executive officer of FBI, shall
receive a cash payment from FBI in the amount of $25,000, provided that such
director of First National execute and deliver to FBI an agreement containing a
representation that such director of First National will not compete with FBI or
any of its Affiliates for a period of one year from the Effective Time and
containing a general release by which such director releases the Resulting
Association, FBI, the directors and officers of the Resulting Association and
FBI and the former directors and officers of First National from any claims or
causes of action (whether known or unknown) which may have arisen or occurred at
any time prior to the Effective Time.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
FLORIDA BANKS, INC.
By: /s/ Charles E. Hughes, Jr.
--------------------------------------
Name: Charles E. Hughes, Jr.
Title: President and Chief Executive Officer
FIRST NATIONAL BANK OF TAMPA
By: /s/ W. Andrew Krusen, Jr.
--------------------------------------
Name: W. Andrew Krusen, Jr.
Title: Chairman of the Board
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<PAGE> 188
Florida Interim Bank No. 1 hereby joins in the foregoing Agreement,
undertakes that it will be bound thereby and that it will duly perform all the
acts and things therein referred to or provided to be done by it.
IN WITNESS WHEREOF, Florida Interim Bank No. 1 has caused this
undertaking to be made in counterparts by its duly authorized officers and its
corporate seal to be hereunto affixed as of this ___ day of ___________, 1998.
FLORIDA INTERIM BANK NO. 1
By:
----------------------------
Name:
Title: President
Attest:
---------------------------------
Secretary
[Corporate Seal]
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<PAGE> 189
APPENDIX B
12 U.S.C. SS.215A
MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS
(A) APPROVAL OF COMPTROLLER, BOARD AND SHAREHOLDERS; MERGER AGREEMENT; NOTICE;
CAPITAL STOCK; LIABILITY OF RECEIVING ASSOCIATION
One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with this
subchapter, may merge into a national banking association located within the
same State, under the charter of the receiving association. The merger agreement
shall --
(1) be agreed upon in writing by a majority of the board of
directors of each association or State bank participating in the plan of
merger;
(2) be ratified and confirmed by the affirmative vote of the
shareholders of each such association or State bank owning at least
two-thirds of its capital stock outstanding, or by a greater proportion of
such capital stock in the case of a State bank if the laws of the State
where it is organized so require, at a meeting to be held on the call of
the directors, after publishing notice of the time, place, and object of
the meeting for four consecutive weeks in a newspaper of general
circulation published in the place where the association or State bank is
located, or, if there is no such newspaper, then in the newspaper of
general circulation published nearest thereto, and after sending such
notice to each shareholder of record by certified or registered mail at
least ten days prior to the meeting, except to those shareholders who
specifically waive notice, but any additional notice shall be given to the
shareholders of such State bank which may be required by the laws of the
State where it is organized. Publication of notice may be waived, in cases
where the Comptroller determines that an emergency exists justifying such
waiver, by unanimous action of the shareholders of the association or State
banks;
(3) specify the amount of the capital stock of the receiving
association, which shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located
and which will be outstanding upon completion of the merger, the amount of
stock (if any) to be allocated, and cash (if any) to be paid, to the
shareholders of the association or State bank being merged into the
receiving association; and
(4) provide that the receiving association shall be liable for all
liabilities of the association or State bank being merged into the
receiving association.
(B) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time
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<PAGE> 190
before thirty days after the date of consummation of the merger, accompanied by
the surrender of his stock certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his shares, appeal to
the Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
(D) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF SHARES;
STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determine in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
(E) STATUS OF RECEIVING ASSOCIATION; PROPERTY RIGHTS AND INTERESTS VESTED AND
HELD AS FIDUCIARY
The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and continued in
the receiving association and such receiving association shall be deemed to be
the same corporation as each bank or banking association participating in the
merger. All rights, franchises, and interests of the individual merging banks or
banking associations in and to every type of property (real, personal, and
mixed) and chosen in action shall be transferred to and vested in the receiving
association by virtue of such merger without any deed or other transfer. The
receiving association, upon the merger and without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights of property,
franchises, and interests, including appointments, designations, and
nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, and committee of estates of lunatics, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by any one of the
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<PAGE> 191
merging banks or banking associations at the time of the merger, subject to the
conditions hereinafter provided.
(F) REMOVAL AS FIDUCIARY; DISCRIMINATION
Where any merging bank or banking association, at the time of the merger,
was acting under appointment of any court as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver, or
committee of estates of lunatics, or in any other fiduciary capacity, the
receiving association shall be subject to removal by a court of competent
jurisdiction in the same manner and to the same extent as was such merging bank
or banking association prior to the merger. Nothing contained in this section
shall be considered to impair in any manner the right of any court to remove the
receiving association and to appoint in lieu thereof a substitute trustee,
executor, or other fiduciary, except that such right shall not be exercised in
such a manner as to discriminate against national banking associations, nor
shall any receiving association be removed solely because of the fact that it is
a national banking association.
(G) ISSUANCE OF STOCK BY RECEIVING ASSOCIATION; PREEMPTIVE RIGHTS
Stock of the receiving association may be issued as provided by the terms
of the merger agreement, free from any preemptive rights of the shareholders of
the respective merging banks.
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<PAGE> 192
APPENDIX C
[TO COME]
C-1
<PAGE> 193
APPENDIX D
[TO COME]
D-1
<PAGE> 194
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ---------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated March 30, 1998 by and between Florida
Banks, Inc. and First National Bank of Tampa (included as Appendix A to the Proxy
Statement-Prospectus)(1)
3.1 Amended and Restated Articles of Incorporation of Florida Banks, Inc.(1)
3.2 By-Laws of Florida Banks, Inc.(1)
3.3 Articles of Association of First National Bank of Tampa
3.4 By-Laws of First National Bank of Tampa
5.2 Opinion of Smith, Gambrell & Russell, LLP*
5.1 Opinion of Igler & Dougherty, P.A.*
8.1 Tax Opinion of Smith, Gambrell & Russell, LLP*
10.1 Form of Employment Agreement between Florida Banks, Inc. and Charles E.
Hughes, Jr.(1)
10.2 1998 Stock Option Plan of Florida Banks, Inc.(1)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Smith, Gambrell & Russell, LLP (included in Exhibit 8.1)*
23.3 Consent of The Mercer Capital Company*
24 Power of Attorney (included in original signature page to this Registration Statement)
99.1 Form of Proxy for Special Meeting of Shareholders of First National*
99.2 Form of Letter of Transmittal for Holders of First National Common Stock*
99.3 Opinion of The Mercer Capital Company (included as Appendix C to the Proxy
Statement-Prospectus)*
99.4 Provisions of the United States Code regarding rights of dissenting Shareholders
of First National (included as Appendix B to the Proxy Statement-Prospectus)
</TABLE>
- ------------------------
*To be filed by amendment.
(1) Incorporated herein by reference to exhibit of same number to the
registrant's Registration Statement on Form S-1 (Reg. No. 333-50867).
<PAGE> 1
EXHIBIT 3.3
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of banking
under the laws of the United States, the undersigned do enter into the following
articles of association:
FIRST. The title of this association shall be "Enterprise National Bank of
Tampa".
SECOND. The main office of the association shall be in Tampa, Hillsborough
County, State of Florida. The general business of the association shall be
conducted at its main office and its branches.
THIRD. The board of directors of this association shall consist of not less than
five nor more than twenty-five shareholders, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of the shareholders at any annual or special meeting
thereof. Each director, during the full term of his or her directorship, shall
own a minimum of $1,000 aggregate par value of stock of this association or a
minimum par market value or equity interest of $1,000 of stock in the bank
holding company, if any, controlling this association.
Any vacancy in the board of directors may be filled by action of the board of
directors; provided, however, that a majority of the full board of directors may
not increase the number of directors to a number which: (1) exceeds by more than
two the number of directors last elected by shareholders, where the number of
directors was 15 or less; and (2) exceeds by more than four the number of
directors last elected by shareholders where the number was 16 or more, but in
no event shall the number of directors exceed 25.
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It shall
be held at the main office or any other convenient place the board of directors
may designate, on the day of
<PAGE> 2
each year specified therefore in the bylaws, but, if no election is held on that
day, it may be held on any subsequent day according to such lawful rules as may
be prescribed by the board of directors.
Nominations for election to the board of directors may be made by the board of
directors or by any stockholder of any outstanding class of capital stock of the
bank entitled to vote for election of directors. Nominations other than those
made by or on behalf of the existing bank management shall be made in writing
and be delivered or mailed to the president of the bank and to the Comptroller
of the Currency, Washington, D. C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of directors;
provided, however, that, if less than 21 days notice of the meeting is given to
shareholders, such nominations shall be mailed or delivered to the president of
the bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder:
- The name and address of each proposed nominee.
- The principal occupation of each proposed nominee.
- The total number of shares of capital stock of the bank that will be
voted for each proposed nominee.
- The name and residence address of the notifying shareholder.
- The number of shares of capital stock of the bank owned by the
notifying shareholder. Nominations not made in accordance herewith
may, in his/her discretion, be disregarded by the chairperson of the
meeting, and upon his/her instructions, the vote tellers may disregard
all votes cast for each such nominee.
2
<PAGE> 3
FIFTH. The authorized amount of capital stock of this association shall be Two
Million/Seven Hundred Thousand (2,700,000) shares of common stock of the par
value of Five Dollars ($5.00) each; but said capital stock may be increased or
decreased from time to time, according to the provisions of the laws of the
United States.
No holder of shares of the capital stock of any class of the association shall
have any preemptive or preferential right to purchase or right of subscription
to any shares of any class of stock of the association, whether now or hereafter
authorized, or any securities or obligations convertible into stock of the
association, issued or sold; nor any other right of subscription to any thereof,
other than such, if any, as the board of directors, in its discretion, may from
time to time determine and at such price as the board of directors may from time
to time fix.
The association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors shall appoint one of its members president of this
association, who shall be chairperson of the board, unless the board appoints
another director to be the chairperson. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a cashier and such
other officers and employees as may be required to transact the business of this
association.
The board of directors shall have the power to:
- Define the duties of the officers and employees of the association.
- Fix the salaries to be paid to the officers and employees.
- Dismiss officers and employees.
3
<PAGE> 4
- Require bonds from officers and employees and to fix the penalty
thereof.
- Regulate the manner in which any increase of the capital of the
association shall be made.
- Manage and administer the business and affairs of the association.
- Make all bylaws that it may be lawful for the board to make.
- Generally to perform all acts that are legal for a board of directors
to perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Tampa,
Hillsborough County, Florida, without the approval of the shareholders, and
shall have the power to establish or change the location of any branch or
branches of the association to any other location, without the approval of the
shareholders.
EIGHTH. The corporate existence of this association shall continue until
terminated according to the laws of the United States.
NINTH. The board of directors of this association, or any eight or more
shareholders owning, in the aggregate, not less than twenty percent ( 20%) of
the stock of this association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place, and purpose of every annual and special meeting of the
shareholders shall be given by first-class mail, postage prepaid, mailed at
least ten days prior to the date of the meeting to each shareholder of record at
his/her address as shown upon the books of this association or pursuant to a
waiver of such notice given by all shareholders entitled to receive notice of
the meeting.
4
<PAGE> 5
TENTH.
(a) The association shall indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the association),
by reason of the fact that he is or was a director, officer, employee, or
agent of the association or is or was serving at the request of the
association as director, officer, employee, or agent of another
association, bank, corporation, partnership, joint venture, trust, or other
enterprise against liability incurred in connection with such proceeding,
including any appeal thereof (other than expenses, penalties, or other
payments incurred in an administrative proceeding or action instituted by
an appropriate bank regulatory agency, which proceeding or action results
in a final order assessing civil money penalties or requiring affirmative
action by an individual or individuals in the form of payments to the
association), if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the association
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any
proceeding by judgment, order, settlement, or conviction or upon a plea of
nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in, or not opposed to, the best interests of
the association or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The association shall indemnify any person, who was or is a party to any
proceeding by or in the right of the association to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the association or is or was serving at the request
of the association as a director, officer, employee, or agent of another
association, bank, corporation, partnership, joint venture, trust, or other
enterprise, against expenses and amounts paid in settlement not exceeding,
in the judgment of the board of directors, the estimated expense of
5
<PAGE> 6
litigating the proceeding to conclusion, actually and reasonably incurred
in connection with the defense or settlement of such proceeding, including
any appeal thereof (other than expenses, penalties, or other payments
incurred in an administrative proceeding or action instituted by an
appropriate bank regulatory agency, which proceeding or action results in a
final order assessing civil money penalties or requiring affirmative action
by an individual or individuals in the form of payments to the
association). Such indemnification shall be authorized if such person acted
in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the association, except that no
indemnification shall be made under this subsection in respect of any
claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall
deem proper.
(c) To the extent that a director, officer, employee, or agent of the
association has been successful on the merits or otherwise in defense of
any proceeding referred to in subparagraph (a) or subparagraph (b), or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses actually and reasonably incurred by him in connection
therewith (other than expenses, penalties, or other payments incurred in an
administrative proceeding or action instituted by an appropriate bank
regulatory agency, which proceeding or action results in a final order
assessing civil money penalties or requiring affirmative action by an
individual or individuals in the form of payments to the association).
(d) Any indemnification under subparagraph (a) or subparagraph (b), unless
pursuant to a determination by a court, shall be made by the association
only as authorized in the specific case upon a
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determination that indemnification of the director, officer, employee, or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in subparagraph (a) or subparagraph (b). Such
determination shall be made:
(1) By the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such proceeding;
(2) If such a quorum is not obtainable or, even if obtainable, by majority
vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of
two or more directors not at the time parties to the proceeding;
(3) By independent legal counsel:
a. Selected by the board of directors prescribed in (1) above or the
committee prescribed in (2) above; or
b. If a quorum of the directors cannot be obtained for (1) above and
the committee cannot be designated under (2) above, selected by
majority vote of the full board of directors (in which directors
who are parties may participate); or
(4) By the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such proceeding or, if no such
quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
(e) Evaluation of the reasonableness of expenses shall be made in the same
manner as the determination that indemnification is authorized. However, if
the determination of authorization is made by independent legal counsel,
persons specified by subparagraph (d)(3) shall evaluate the reasonableness
of expenses.
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(f) Expenses incurred by an officer or director in defending a civil or
criminal proceeding shall be paid by the association in advance of the
final disposition of such proceeding upon receipt of an undertaking by or
on behalf of such director or officer to repay such amount if he is
ultimately found not to be entitled to indemnification by the association
pursuant to this Paragraph. Expenses incurred by other employees and agents
may be paid in advance upon such terms or conditions that the board of
directors deems appropriate.
(g) The indemnification and advancement of expenses provided pursuant to this
Paragraph are not exclusive, and the association may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office. However, indemnification or advancement of expenses shall not
be made to or on behalf of any director, officer, employee, or agent if a
judgment or other final adjudication establishes that his actions, or
omissions to act, were material to the cause of action so adjudicated and
constitute:
(1) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
(2) A transaction from which the director, officer, employee, or agent
derived an improper personal benefit;
(3) In the case of a director, a circumstance under which the liability
provisions of Section 607.144, or any successor provision, of the
Florida General Corporation Act are applicable;
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(4) Willful misconduct or a conscious disregard for the best interests of
the association in a proceeding by or in the right of the association
to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder; or
(5) Behavior which is adjudged in an administrative proceeding or action
instituted by an appropriate bank regulatory agency to be deserving of
a final order assessing civil money penalties or requiring affirmative
action by an individual or individuals in the form of payments to the
association.
(h) Indemnification and advancement of expenses as provided in this Paragraph
shall continue, unless otherwise provided when authorized or ratified, as
to a person who has ceased to be a director, officer, employee, or agent
and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(i) Notwithstanding the failure of the association to provide indemnification,
and despite any contrary determination of the board or of the shareholders
in the specific case, a director, officer, employee, or agent of the
association who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court
conducting the proceeding, to the circuit court, or to another court of
competent jurisdiction. On receipt of an application, the court, after
giving any notice that it considers necessary, may order indemnification
and advancement of expenses, including expenses incurred in seeking
court-ordered indemnification or advancement of expenses, if it determines
that:
(1) The director, officer, employee, or agent is entitled to mandatory
indemnification under subparagraphs (a), (b) or (c), in which case the
court shall also order the association to pay the director reasonable
expenses incurred in obtaining court-ordered indemnification or
advancement of expenses;
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(2) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the association of its power pursuant to subparagraph (g);
or
(3) The director, officer, employee, or agent is fairly and reasonably
entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such
person met the standard of conduct set forth in subparagraph (a),
subparagraph (b), or subparagraph (g).
(j) For purposes of this Paragraph, the term "association" includes, in
addition to the resulting association, any constituent bank (including any
constituent of a constituent) absorbed in a consolidation or merger, so
that any person who is or was a director, officer, employee, or agent of a
constituent bank, or is or was serving at the request of a constituent bank
as a director, officer, employee, or agent of another association, bank,
corporation, partnership, joint venture, trust, or other enterprise, is in
the same position under this section with respect to the resulting or
surviving association as he would have been with respect to such
constituent bank if its separate existence had continued.
(k) For purposes of this Paragraph, the term "other enterprises" includes
employee benefit plans; the term "expenses" includes counsel fees,
including those for appeal; the term "liability" includes obligations to
pay a judgment, settlement, penalty, fine (including an excise tax assessed
with respect to any employee benefit plan), and expenses actually and
reasonably incurred with respect to a proceeding; the term "proceeding"
includes any threatened, pending, or completed action, suit, or other type
of proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal; the term "agent" includes a volunteer; and
the term "serving at the request of the association" includes any service
as a director, officer, employee, or agent of the association that imposes
duties on such persons, including
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duties relating to an employee benefit plan and its participants or
beneficiaries; and the term "not opposed to the best interest of the
association" describes the actions of a person who acts in good faith and
in a manner he reasonably believes to be in the best interests of the
participants and beneficiaries of an employee benefit plan.
(l) The association shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent
of the association or is or was serving at the request of the association
as a director, officer, employee, or agent of another association, bank,
corporation, partnership, joint venture, trust, or other enterprise against
any liability asserted against him and incurred by him in any such capacity
or arising out of his status as such, whether or not the association would
have the power to indemnify him against such liability under the provisions
of this Paragraph; provided, however, such insurance coverage shall
explicitly exclude insurance coverage for a formal order assessing civil
money penalties against a director, officer, employee or agent of the
association.
(m) If any expenses or other amounts are paid by way of indemnification
otherwise than by court order or action by the shareholders or by an
insurance carrier pursuant to insurance maintained by the association, the
association shall, not later than the time of delivery to shareholders of
written notice of the next annual meeting of shareholders, unless such
meeting is held within 3 months from the date of such payment, and, in any
event, within 15 months from the date of such payment, deliver either
personally or by mail to each shareholder of record at the time entitled to
vote for the election of directors a statement specifying the persons paid,
the amounts paid, and the nature and status at the time of such payment of
the litigation or threatened litigation.
(n) The directors of the association shall not be personally liable for
monetary damages to the association or any other person for any statement,
vote, or decision regarding corporate management or
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policy taken as a director at a duly called meeting of the board of
directors, or any failure to take any action at such meeting, unless:
(1) The director breached or failed to perform his duties as a director;
and
(2) The director's breach of, or failure to perform, those duties
constitutes:
a. A violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful. A judgment
or other final adjudication against the director in any criminal
proceeding for a violation of the criminal law estops that
director from contesting the fact that his breach, or failure to
perform, constitutes a violation of the criminal law, but does
not estop the director from establishing that he had reasonable
cause to believe that his conduct was lawful or had no reasonable
cause to believe that his conduct was unlawful;
b. A transaction from which the director derived an improper
personal benefit, either directly or indirectly;
c. A circumstance under which the liability provisions of Section
607.144 of the Florida General Corporation Act are applicable;
d. In a proceeding by or in the right of the association to procure
a judgment in its favor or by or in the right of a shareholder,
conscious disregard for the best interest of the association, or
willful misconduct;
e. In a proceeding by or in the right of someone other than the
association or a shareholder, recklessness or an act or omission
which was committed in bad faith or with
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malicious purpose or in a manner exhibiting wanton and willful
disregard of human rights, safety or property; or
f. Behavior which is adjudged in an administrative proceeding or
action instituted by an appropriate bank regulatory agency to be
deserving of a final order assessing civil money penalties or
requiring affirmative action by an individual or individuals in
the form of payments to the association.
If the Florida General Corporation Act is amended after approval by the
shareholders of this paragraph to authorize action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the association shall be eliminated or limited to the fullest extent
permitted by the Florida General Corporation Act, as so amended. Any repeal or
modification of this subparagraph by the shareholders of the association shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the association existing at the time of such
repeal or modification.
ELEVENTH. These articles of association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount.
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IN WITNESS WHEREOF, we have hereunto set our hands this 18th day of February,
1988.
/s/ Thomas A. Cooper /s/ Julian H. Lifsey, Jr.
- ------------------------------------ ------------------------------------
Thomas A. Cooper Julian H. Lifsey, Jr.
/s/ Jon L. Courson /s/ C. Lee Maynard
- ------------------------------------ ------------------------------------
Jon L. Courson C. Lee Maynard
/s/ James W. Heavener /s/ Edward L. McWilliams
- ------------------------------------ ------------------------------------
James W. Heavener Edward L. McWilliams
/s/ Richard C. Kessler /s/ Donald F. Sink
- ------------------------------------ ------------------------------------
Richard C. Kessler Donald F. Sink
/s/ David D. King /s/ Ann B. Towne
- ------------------------------------ ------------------------------------
David D. King Ann B. Towne
/s/ William A. Krusen, Jr. /s/ Roy M. Wilcox
- ------------------------------------ ------------------------------------
William A. Krusen, Jr. Roy M. Wilcox
14
<PAGE> 1
EXHIBIT 3.4
BYLAWS
FIRST NATIONAL BANK OF TAMPA
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1 ANNUAL MEETING. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held prior to June 30 of each year, at the main office of
the association, 100 West Kennedy Blvd., City of Tampa, State of Florida or such
other places as the board of directors may designate, on a date and at a time to
be specified by the Board of Directors. Notice of the meeting shall be mailed,
postage prepaid, at least 10 days prior to the date thereof, addressed to each
shareholder at his/her address appearing on the books of the association. If,
for any cause, an election of directors is not made on that day, the board of
directors shall order the election to be held on some subsequent day, as soon
thereafter as practical, according to the provisions of law; and notice shall be
given in the manner herein provided for the annual meeting.
SECTION 1.2 SPECIAL MEETINGS. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by the board of directors or by any eight or more shareholders owning,
in the aggregate, not less than twenty percent of the stock of the association.
Every such special meeting, unless otherwise provided by law, shall be called by
mailing, postage prepaid, not less than 10 days prior to the date fixed for the
meeting, to each shareholder at the address appearing on the books of the
association a notice stating the purpose of the meeting.
SECTION 1.3 NOMINATIONS OF DIRECTORS. Nominations for election to the board of
directors may be by the board of directors or by any shareholder of any
outstanding class of capital stock of the association entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the
existing management of the association, shall be made in writing and shall be
delivered or mailed to the president of the bank and to the Comptroller of the
Currency, Washington, DC, not less than fourteen (14) nor more than 50 days
prior to any meeting of shareholders called for the election of directors,
provided however, that if less than 21 days notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the president of
the bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such
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notification shall contain the following information to the extent known to the
notifying shareholder.
The name and address of each proposed nominee.
- -------
The principal occupation of each proposed nominee.
- -------
The total number of shares of capital stock of the bank that will be
voted for each proposed nominee.
- -------
The name and residence address of the notifying shareholder.
- -------
The number of shares of capital stock of the bank owned by the
- ------- notifying shareholder. Nominations not made in accordance herewith
may, in his/her discretion, be disregarded by the chairperson of the
meeting and upon his/her instructions, the vote tellers may disregard
all votes cast for each such nominee.
SECTION 1.4 JUDGES OF ELECTION. Every election of directors shall be managed by
three judges, who shall be appointed from among the shareholders, by the board
of directors. The judges of election shall hold and conduct the election at
which they are appointed to serve. After the election, they shall file with the
cashier a certificate signed by them, certifying the result thereof and the
names of the directors elected. The judges of election, at the request of the
chairperson of the meeting, shall act as tellers of any other vote by ballot
taken at such meeting, and shall certify the result thereof.
SECTION 1.5 PROXIES. Shareholders may vote at any meeting of the shareholders by
proxies duly authorized in writing. Any person or groups of persons, including
directors or attorneys for the bank may be designated to act as proxy for a
shareholder of the bank, but no officer or employee of this association shall
act as such proxy. Proxies shall be valid only for one meeting, to be specified
therein, and any adjournments of such meeting.
Proxies shall be dated and filed with the records of the meeting.
SECTION 1.6 QUORUM. A majority of the outstanding capital stock, represented in
person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law; but less than quorum may adjourn any meeting,
from time to time and the meeting may be held, as adjourned, without further
notice. A majority of the votes cast shall decide every question or matter
submitted to the shareholders at any meeting, unless otherwise provided by law
or by the articles of association. After a quorum has been established at a
shareholders meeting, a withdrawal of shareholders that reduces the number of
shareholders entitled to vote at the meeting below the number required for a
quorum does not affect the validity of any action taken at or adjournment of the
meeting.
SECTION 1.7 NOTICE. A written notice of each meeting of shareholders, stating
the place, day, and time of the meeting and, in the case of a special meeting,
the purpose
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or purposes for which the meeting is called, shall be delivered to each
shareholder of record entitled to vote at the meeting, not less than ten or more
than sixty days before the date set for the meeting, either personally or by
first class mail, by or at the direction of the president, the secretary, or the
officer or other persons calling the meeting. If mailed, the notice is effective
when it is deposited in the United States mail, postage prepaid, addressed to
the shareholder at his address as it appears on the records of the corporation.
[The notice shall be sufficient for that meeting and any adjournment of
the meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken and if after
the adjournment, the board does not fix a new record date for the
adjourned meeting. If any shareholder transfers any of his stock after
notice is given, it shall not be necessary to notify the transferee.]
SECTION 1.8 WAIVERS OF NOTICE. Whenever any notice is required to be given to
any shareholder of the corporation under these bylaws, the articles of
association, or the laws of the United States, a written waiver of notice signed
at any time by the person entitled to that notice shall be entitled to vote at a
meeting, in person or by proxy, constitutes a waiver of notice of the meeting,
except when the shareholder attends a meeting for the purpose, expressed at the
beginning of the meeting, of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 1.9 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose
of determining shareholders entitled to payment of any dividend or to receive
notice of or to vote at any meeting of shareholders or any adjournment of any
meeting or in order to make a determination of shareholders for any other
purpose, the board of directors may provide that the stock transfer books shall
be closed for a period not to exceed sixty days. If the stock transfer books are
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, they shall be closed for at least ten days
immediately preceding that meeting. Instead of closing the stock transfer books,
the board of directors may fix in advance a date as the record date for the
determination of shareholders, but that date shall never be more than sixty days
nor, in case of a meeting of shareholders, less than ten days prior to the date
on which the action requiring the determination of shareholders is to be taken.
If the stock transfer books are not closed and no record date fixed for the
determination of shareholders, the date on which either notice of the meeting is
mailed or the resolution of the board of directors declaring a dividend or
authorizing the action that requires a determination of shareholders is adopted
shall be the record date for the determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, the determination shall
apply to any adjournment of the meeting, unless the board of directors fixes a
new record date for the adjourned meeting.
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SECTION 1.10 VOTING OF SHARES. Except as provided in Section 1.11 of these
bylaws, every shareholder entitled to vote at a meeting of shareholders is
entitled, upon each proposal presented to the meeting, to one vote for each
share of voting stock recorded in his name on the books of the corporation on
the record date fixed as provided in Section 1.9 of these bylaws. A shareholder
may vote either in person or by proxy executed in writing by the shareholder or
his duly authorized attorney-in-fact. Treasury shares, shares if stock of this
corporation owned by another corporation the majority of the voting stock of
which is owned or controlled by this corporation, and shares of stock of this
corporation that it holds in a fiduciary capacity shall not be voted, directly
or indirectly, at any meeting and shall not be counted in determining the total
number of outstanding shares.
The chairman of the board, the president, any vice president, the secretary, and
the treasurer of a corporation, in that order, are presumed to possess authority
to vote shares standing in the name of the corporate shareholder in the absence
of a bylaw or other instrument of the corporate shareholder designating some
office, agent, or proxy to vote the share. Proof of that designation shall be
made by presentation of a certified copy of the bylaws or other instrument of
the corporate shareholder.
Shares held by an administrator, executor, guardian, or conservator may be voted
by him, either in person or by proxy, without a transfer of those shares into
his name. A trustee may vote, either in person or by proxy, shares standing in
his name, but no trustee may vote any shares that are not transferred into his
name. If he is authorized to do so by an appropriate order of the court by which
he was appointed, a receiver may vote shares standing in his name or held by or
under his control without a transfer of those shares into his name. A
shareholder whose shares are pledged may vote those shares until the shares have
been transferred into the name of the pledgee, and thereafter the pledgee or his
nominee shall be entitled to vote the shares transferred, unless the instrument
creating the pledge provides otherwise.
SECTION 1.11 CUMULATIVE VOTING. At an election for directors each shareholder
having the right to vote at the election is entitled to that number of votes
that is equal to the number of shares held by that shareholder multiplied by the
number of directors to be elected, and each shareholder may either cast his
votes for a single candidate or distribute them among any two or more of the
candidates.
ARTICLE II
DIRECTORS
SECTION 2.1 BOARD OF DIRECTORS. The board of directors (board) shall have the
power to manage and administer the business and affairs of the association.
Except as expressly limited by law, all corporate powers of the association
shall be vested in and may be exercised by the board.
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SECTION 2.2 NUMBER. The board shall consist of not less than five nor more than
twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time be resolution of a majority
of the full board or by resolution of the shareholders at any meeting thereof.
No decrease in the number of directors shall have the effect of shortening the
term of an incumbent director unless the shareholders remove the director.
SECTION 2.3 QUALIFICATIONS. Every director must, during such directors whole
term of service, be an adult citizen of the United States. At least two-thirds
(2/3) of the directors must have resided in the State of Florida for at least
one year immediately preceding their election and must be residents of Florida
during their continuance in office.
Every director must directly own shares of the bank's capital stock the
aggregate per value of which is not less than $1,000.00. Any director who ceases
to be the owner of the required number of shares of the bank's capital stock, or
who becomes in any other manner disqualified, shall be deemed to have terminated
such director's status as such.
SECTION 2.4 ORGANIZATION MEETING. The cashier, upon receiving the certificate of
the judges, of the result of any election, shall notify the directors-elect of
their election and of the time at which they are required to meet at the main
office of the association to organize the new board and elect and appoint
officers of the association for the succeeding year. Such meeting shall be held
on the day of the election or as soon thereafter as practicable, and, in any
event, within 30 days thereof. If, at the time fixed for such meeting, there
shall not be a quorum, the directors present may adjourn the meeting, from time
to time, until a quorum is obtained.
SECTION 2.5 REGULAR MEETINGS. The regular meeting of the board of directors
shall be held, without notice, on the third Wednesday of each month unless
otherwise notified at the main office. When any regular meeting of the board
falls upon a holiday, the meeting shall be held on the next banking business day
unless the board shall designate another day.
SECTION 2.6 SPECIAL MEETINGS. Special meetings of the board of directors may be
called by the chairman of the association, or at the request of two or more
directors. Each member of the board of directors shall be given notice as
provided in Section 2.13 of the bylaws.
SECTION 2.7 QUORUM. A majority of the directors shall constitute a quorum at any
meeting, except when otherwise provided by law; but a less number may adjourn
any meeting, from time to time, and the meeting may be held, as adjourned,
without further notice.
SECTION 2.8 VACANCIES. Except as provided in Section 2.12 of these bylaws, when
any vacancy occurs among the directors, the remaining members of the board,
according to the laws of the United States, may appoint a director to fill such
vacancy at any regular
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meeting of the board, or at a special meeting called for that purpose in
conformance with Section 2.6 of this article. A director elected to fill a
vacancy shall hold office only until the next election of directors by the
shareholders.
SECTION 2.9 COMPENSATION. The board of directors has authority to fix the
compensation of the directors as directors and as officers.
SECTION 2.10 DUTIES OF DIRECTORS. A director shall perform the duties of a
director, including duties as a member of any committee of the board upon which
the director serves, in good faith, in a manner the director reasonably believes
to be in the best interests of the corporation, and with such care as an
ordinarily prudent person in a similar portion would use under similar
circumstances.
In performing such duties, a director may rely on information, opinions,
reports, or statements, including financial statements and other financial data,
prepared or presented by the following:
(a) one or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the
matters presented;
(b) counsel, public accountants, or other persons as to matters that
the director reasonably believes to be within that person's
professional or expert competence; or
(c) a committee of the board upon which the director does not serve
and which the director reasonably believes to merit confidence, as to
matters within the authority designated to it by the articles of
association or the bylaws.
A director shall not be considered as acting in good faith if the director has
knowledge concerning the matters in question that would cause the reliance
described above to be unwarranted. A person who performs the duties of a
director in compliance with this section shall have no liability because of
being or having been a director of the corporation.
SECTION 2.11 PRESUMPTION OF ASSENT. A director of the corporation who is present
at a meeting of the board of directors at which action on any corporate matter
is taken is presumed to have assented to the action unless such directors votes
against it or expressly abstains from voting on it. The secretary of the meeting
shall record each abstention in the minutes of the meeting.
SECTION 2.12 REMOVAL OF DIRECTORS. At a meeting of shareholders called for that
purpose, the shareholders, by a vote of the holders of a majority of the shares
may remove any director or the entire board of directors, with or without cause,
and, if the entire board of directors is removed, fill any vacancies created by
the removal. Anything herein contained to the contrary notwithstanding, if less
than the entire board of directors is removed, the shareholders shall not remove
a director if the votes cast
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against such director's removal would be sufficient to elect such director if
they were cumulatively voted in such director's favor at an election of the
entire board of directors
SECTION 2.13 NOTICE OF MEETINGS. Written notice of the time and place of special
meetings of the board of directors shall be given to each director by either
personal delivery or first-class United States mail, telegram, facsimile, or
cablegram at least two days before the meeting.
Notice of a meeting of the board of directors need not to be given to any
director who signs a waiver of notice before, during, or after the meeting.
Attendance of a director at a meeting constitutes a waiver of notice of that
meeting and waiver of all objections to the time and place of the meeting, and
the manner in which it was called or convened, except when the director attends
the meeting solely to object, at the beginning of the meeting, to the
transaction of business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the notice or
waiver of notice of that meeting.
A majority of the directors present, whether or not a quorum exists, may adjourn
any meeting of the board of directors to another time and place. Notice of any
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless the time and place of the adjourned meeting
are announced at the time of the adjournment, to the other directors.
SECTION 2.14 METHOD OF MEETING. Members of the board of directors may
participate in the meeting of the board by means of a conference telephone or
similar communications equipment by which all persons participating in the
meeting can hear each other at the same time. Participation by such means
constitutes presence in person at a meeting.
SECTION 2.15 ACTION WITHOUT A MEETING. Any action required to be taken at a
meeting of the directors, or any action that may be taken at a meeting of the
directors or a committee of the directors, may be taken without a meeting if a
written consent, setting forth the action to be taken and signed by all the
directors or committee members, is filed in the minutes of the proceedings of
the board or the committee before the action is taken. All directors need not
sign the same document. A unanimous, written consent has the same effect as
unanimous vote.
SECTION 2.16 DIRECTOR CONFLICTS OF INTEREST. No contract or other transaction
between this corporation and one of its directors or any other corporation,
firm, association or entity in which one or more of the directors are directors
or officers or are financially interested, shall be either void or voidable
because of that relationship or interest or because the director or directors
are present at the meeting of the board of directors or
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a committee that authorizes, approves, or ratifies the contract or transaction
or because his or their votes are counted for that purpose, if:
(a) The existence of the relationship or interest is disclosed or
known to the board of directors or committee that authorizes,
approves, or ratifies the contract or transaction by a vote or consent
sufficient for the purpose, without counting the votes and consents of
the interested directors; or
(b) The existence of the relationship or interest is disclosed or
known to shareholders entitled to vote and they authorize, approve, or
ratify the contract or transaction by a vote or written consent; or
(c) The contract or transaction is fair and reasonable to the
corporation at the time it is authorized by the board, a committee, or
the shareholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or a committee that authorizes,
approves, or ratifies the contract or transaction.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1 LOAN COMMITTEE. There shall be a loan committee composed of no less
than three (3) directors, appointed by the board annually or more often. The
loan committee shall have power to discount and purchase bills, notes and other
evidences of debit, to buy and sell bills of exchange, to examine and approve
loans and discounts, to exercise authority regarding loans and discounts, and to
exercise, when the board is not session, all other powers of the board that may
lawfully be delegated. The loan committee shall keep minutes of its meetings;
and such minutes shall be submitted at the next regular meeting of the board of
directors at which a quorum is present, and any action taken by the board with
respect thereto shall be entered in the minutes of the board.
The loan committee is responsible for the development and maintenance of the
bank's credit standards. The committee will develop and approve policies to
permit the bank to manage its loans in such a manner as to optimize returns on
risk assets while at the same time minimizing loss of principal. This committee
shares responsibility with the executive committee in the maintenance of
profitability and a reasonable maturity/repricing structure. Will meet weekly or
as needed.
SECTION 3.2 EXECUTIVE COMMITTEE. The executive committee may be formed at the
discretion of the board of directors. The executive committee shall represent
the board of directors in the interim between meetings of the board, and shall
have the full authority to act on behalf of the board, except in such acts as
only the board, by law, is authorized to perform. The specific objective of the
executive committee is to control the
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activities of the bank in such a manner as to assure management's work is
conducted efficiently, adheres to quality standards and is in accordance with
bank policy.
Although the executive and loan committee share certain functions, the loan
committee members will attend the joint committee to perform their related
duties. Upon completion of their agenda, non-directors of the loan committee
will be excused and the executive committee will continue. Separate minutes, by
committee, will be kept even though the meeting will overlap for scheduling and
some decision purposes.
SECTION 3.3 ASSET/LIABILITY MANAGEMENT & INVESTMENT COMMITTEE. There shall be an
asset/liability management & investment committee composed of three (3)
directors, appointed by the board annually or more often. The asset/liabilty
management & investment committee shall have the power to ensure adherence to
the investment policy, to recommend amendments thereto, to purchase and sell
securities, to exercise authority regarding investments and to exercise, when
the board is not in session, all other powers of the board regarding investment
securities that may be lawfully delegated.
The asset/liability management & investment committee shall keep minutes of its
meetings, and such minutes shall be submitted at the next regular meeting of the
board of directors at which a quorum is present, and any action taken by the
board with respect thereto shall be entered in the minutes of the board.
SECTION 3.4 RISK MANAGEMENT COMMITTEE. There shall be a risk management
committee composed of not less than (3) directors, exclusive of any active
officers, appointed by the board annually or more often. The duty of that
committee shall be to examine at least once during each calendar year and within
15 months of the last examination the affairs of the association or cause
suitable examinations to be made by auditors responsible only to the board of
directors and to report the result of such examination in writing to the board
at the next regular meeting thereafter. Such reports shall state whether the
association is in a sound condition, and whether adequate internal controls and
procedures are being maintained and shall recommend to the board such changes in
the manager of conducting the affairs of the association as shall be deemed
advisable.
SECTION 3.4 OTHER COMMITTEES. The board of directors may appoint, from time to
time, from its own members, other committees of one or more persons, for such
purposes and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1 CHAIRPERSON OF THE BOARD. The board of directors shall appoint one
of its members to be the chairperson of the board to serve at its pleasure. Such
person shall
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preside at all meetings of the board of directors. The chairperson of the board
shall supervise the carrying out of the policies adopted or approved by the
board, shall have general executive powers, as well as the specific powers
conferred by these bylaws; and shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned by the
board of directors.
SECTION 4.2 PRESIDENT. The board of directors shall appoint one of its members
to be the president of the association. In the absence of the chairperson, the
president shall preside at any meeting of the board. The president shall have
general executive powers, and shall have and exercise any and all other powers
and duties pertaining by law, regulation, or practice, to the office of the
president, or impose by these bylaws. The president shall also have and may
exercise such further powers and duties as from time to time may be conferred,
or assigned by the board of directors.
SECTION 4.3 VICE PRESIDENT. The board of directors may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned by the board of directors. One vice president shall be designated by
the board of directors, in the absence of the president, to perform all the
duties of the president.
SECTION 4.4 SECRETARY. The board of directors shall appoint a secretary,
cashier, or other designated office who shall be secretary of the board and of
the association, and shall keep accurate minutes of all meetings. The secretary
shall attend to the giving of all notices required by these bylaws; shall be
custodian of the corporate seal, records, documents and papers of the
association; shall provide for the keeping of proper records of all transactions
of the association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the office of cashier, or
imposed by these bylaws; and shall also perform such other duties as may be
assigned from time to time, by the board of directors.
SECTION 4.5 OTHER OFFICERS. The board of directors may appoint one or more
assistant vice presidents, one or more assistant secretaries, one or more
assistant cashiers, one or more managers and assistant managers of branches and
such other officers and attorneys in fact as from time to time may appear to the
board of the directors to be required or desirable to transact the business of
association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to them, by the board of directors, the chairperson of the board, or
the president.
SECTION 4.6 TENURE OF OFFICE. The president and all other officers shall hold
office for the current year for which the board was elected, unless they shall
resign, become disqualified, or be removed as provided in Section 4.7 of these
bylaws; and any vacancy occurring in the office of the president shall be filled
promptly by the board of directors.
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SECTION 4.7 REMOVAL OF OFFICERS. An officer or agent elected or appointed by the
board of directors may be removed by the board whenever in its judgment his
removal would serve the best interest of the corporation. Removal shall be
without prejudice to any contract rights of the person removed. The mere
appointment of any person as an officer, agent, or employee of the corporation
does not create any contract rights. The board of directors may fill a vacancy
in any office.
SECTION 4.8 SALARIES. The board of directors from time to time shall fix the
salaries of the officers, and no officer shall be prevented from receiving a
salary merely because he is also a director of the corporation.
ARTICLE V
STOCK AND STOCK CERTIFICATES
SECTION 5.1 ISSUANCE. Every shareholder of the bank is entitled to have a
certificate evidencing all shares to which such person is entitled. No
certificate shall be issued for any share until the share is fully paid.
SECTION 5.2 TRANSFERS. Shares of stock shall be transferable on the books of the
association, and a transfer book shall be kept in which all transfers of stock
shall be recorded. Every person becoming a shareholder by such transfer shall in
proportion to his shares, succeed to all rights of the prior holder of such
shares. No transfer of shares is valid against the bank until it has been
registered on the bank's stock transfer books and the persons attorney-in-fact
so constituted in writing has surrendered the certificate to the corporation,
appropriately endorsed for transfer.
SECTION 5.3 STOCK CERTIFICATES. Certificates of stock shall bear the signature
of the president (which may be engraved, printed or impressed), and shall be
signed manually or by facsimile process by the secretary, assistant secretary,
cashier, assistant cashier, or any other officer appointed by the board of
directors for that purpose, to be known as an authorized officer, and the seal
of the association shall be engraved thereon. Each certificate shall recite on
its fact that the stock represented thereby is transferable only upon the books
of the association properly endorsed.
SECTION 5.4 LOST, STOLEN, OR DESTROYED CERTIFICATES. The corporation may issue a
new certificate in the place of any certificate previously issued if the holder
of record of the corporation (a) makes proof in affidavit form that it has been
lost, destroyed, or wrongfully taken, (b) requests the issuance of a new
certificate before the corporation has notice that the certificate has been
acquired by a purchaser for value in good the corporation, gives bond in such
form as the corporation directs, to indemnify the corporation, the transfer
agent, and the registrar against any claim that may be made because of the
alleged loss;, destruction, or theft of a certificate, and (c) satisfies any
other reasonable requirements imposed by the corporation.
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ARTICLE VI
CORPORATE SEAL
The president, the cashier, the secretary or any assistant cashier or assistant
secretary, or other officer thereunto designated by the board of directors,
shall have authority to affix the corporate seal to any document requiring such
seal, and to attest the same. Such seal shall be substantially in the following
form:
( impression )
( of )
( seal )
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 FISCAL YEAR. The fiscal year of the association shall be the
calendar year.
SECTION 7.2 EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies, and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the association by the chairperson of the board, or the president, or any vice
president, or the secretary, or the cashier, or, if in connection with the
exercise of fiduciary powers of the association, by any of those officers or by
any trust officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted on behalf of the association in such other
manner and by such other officers as the board of directors may from time to
time direct. The provisions of this section 7.2 are supplementary to any other
provision of these bylaws.
SECTION 7.3 RECORDS. The articles of association, the bylaws and the proceedings
of all meetings of the shareholders, the board of directors, and standing
committee of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the secretary,
cashier or other officer appointed to act as secretary of the meeting.
SECTION 7.4 INDEMNIFICATION. Any person, or such persons heirs, executors, or
administrators, who is made or threatened to be made a party to any threatened,
pending, or completed action or proceeding, whether civil, criminal,
administrative, or investigative, such person or such persons testator is or was
a director, officer,
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employee, or agent of this corporation or serves or served any other corporation
or First National in any capacity at the request of this corporation, shall be
indemnified by this corporation, and this corporation may advance such persons
related expenses, to full extent permitted by law.
The foregoing right of indemnification or reimbursement shall not be exclusive
of other rights to which the person or such persons heirs, executors, or
administrators may be entitled. The corporation may, upon the affirmative vote
of a majority of its board of directors, purchase insurance for the purpose of
indemnifying these persons. The insurance may be for the benefit of all
directors, officers, or employees.
ARTICLE VIII
BYLAWS
SECTION 8. 1 INSPECTION. A copy of the bylaws, with all amendments, shall at all
times be kept in a convenient place at the main office of the association, and
shall be open for inspection to all shareholders during banking hours.
SECTION 8.2 AMENDMENTS. The bylaws may be amended, altered or repealed, at any
regular meeting of the board of directors, by a vote of a majority of the total
number of the directors.
I, Beate F. Frank certify that (1) I am the duty constituted (secretary) or
(cashier) of First National Bank of Tampa and secretary of the board of
directors, and as such officer I am the official custodian of its records; (2)
the foregoing bylaws are the bylaws of the bank, and all of them are now
lawfully in force and effect.
I have hereunto affixed my official signature and the seal of the bank, in the
city of Tampa, on this 16th day of December, 1997.
/s/ Beate F. Frank
- ----------------------
(Secretary or Cashier)
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Florida Banks, Inc. on
Form S-4 of our reports dated March 20, 1998 relating to Florida Banks, Inc.
and February 27, 1998 relating to First National Bank of Tampa, appearing in
the Proxy Statement-Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
April 24, 1998
