<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1998
REGISTRATION NO. 333-50867
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
FLORIDA BANKS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 6712 58-2364573
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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:
<TABLE>
<S> <C>
TERRY FERRARO SCHWARTZ FRANK M. CONNER, III
SMITH, GAMBRELL & RUSSELL, LLP ALSTON & BIRD, LLP
PROMENADE II, SUITE 3100 ONE ATLANTIC CENTER
1230 PEACHTREE STREET, N.E. 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309 ATLANTA, GEORGIA 30309-3424
(404) 815-3731 (404) 881-7992
(404) 685-7031 (FAX) (404) 881-7777 (FAX)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please 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(c)
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. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
4,000,000 SHARES [LOGO]
FLORIDA BANKS, INC.
COMMON STOCK
All of the 4,000,000 shares of Common Stock, $.01 par value per share
("Common Stock"), offered hereby are being sold by Florida Banks, Inc., a
Florida corporation (the "Company"). Prior to the offering (the "Offering"),
there has been no public market for the Common Stock. It is currently estimated
that the initial public offering price will be between $10.00 and $12.00 per
share. See "Underwriting" for information relating to the determination of the
initial public offering price. The Common Stock has been approved for listing on
The Nasdaq National Market under the trading symbol "FLBK."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON
STOCK OFFERED HEREBY.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) THE COMPANY(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
- -----------------------------------------------------------------------------------------------------------
Total(3)........................... $ $ $
===========================================================================================================
</TABLE>
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company estimated to be
$450,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$ , $ , and $ , respectively. See "Underwriting."
The shares of Common Stock are offered severally by the Underwriters named
herein, subject to prior sale, when, as and if received and accepted by them,
subject to their right to reject orders, in whole or in part, and to withdraw,
cancel or modify the offer without notice. It is expected that delivery of the
certificates representing such shares will be made against payment therefor in
immediately available funds at the offices of The Robinson-Humphrey Company, LLC
on or about , 1998.
THE ROBINSON-HUMPHREY COMPANY
INTERSTATE/JOHNSON LANE
CORPORATION
KELTON INTERNATIONAL LTD.
, 1998
<PAGE> 3
[MAP OF STATE OF FLORIDA WITH STARS MARKING THE "IDENTIFIED MARKETS"
AS DEFINED IN THIS PROSPECTUS]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION MAINTAINED BY THE
UNDERWRITERS IN THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
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 Offering,
the Company will acquire First National Bank of Tampa (the "Bank") as its entry
into the Tampa/Hillsborough County market area (the "Merger"). The Company
intends to open a community banking office in the Jacksonville market area as
soon as practicable following consummation of the Offering. 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, the Company also intends to
expand into other Florida market areas with demographic characteristics similar
to the Identified Markets. Within each of the Identified Markets, the Company
expects to offer a broad range of traditional banking products and services,
focusing primarily on small and medium-sized businesses. See
"Business -- Strategy of the Company -- Market Expansion" and "-- Products and
Services."
The Company 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,
the Company 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"). The Company will maintain centralized credit
policies and procedures as well as centralized back office functions to support
the Community Banking Offices. Management expects that upon the Company's 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 "Business -- Strategy of the Company -- Model
'Local Community Bank.' "
Management of the Company 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 the Company has a unique
opportunity to attract and maintain its targeted banking customers and
experienced management personnel within the Identified Markets.
Florida is the fourth most populated state in the country with a current
population of approximately 14.4 million. From 1990 to 1997, Florida ranked
second of 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. Financial institutions in Florida have experienced substantial growth in
recent years in the amount of total deposits. As of June 30, 1997, these
deposits totaled approximately $200 billion. Management believes that the major
metropolitan areas in Florida
1
<PAGE> 5
have benefited the most from this economic and population expansion, and thus
has selected the Identified Markets as the focus of its expansion strategy.
The Company has assembled an initial management team which includes
individuals who have significant experience in the banking industry in Florida.
Charles E. Hughes, Jr. is the President and Chief Executive Officer of the
Company. Prior to joining the Company, Mr. Hughes served as Chairman, President
and Chief Executive Officer of SouthTrust Bank of Florida, which as of June 30,
1997 had approximately $5.4 billion in total deposits. The Company's Chief
Credit Officer is Richard B. Kensler who, since 1987, served as a senior credit
officer with Signet Banking Corporation of Richmond, Virginia. The Company has
also hired Donald Roberts to be President of the Jacksonville Market. Mr.
Roberts previously served as President and Chief Executive Officer of Barnett
Bank, N.A., Lake County, Florida. In addition, the Company will continue to have
the resources of current Bank management, including John S. McMullen who will
serve as a Director and President of the Tampa Market and T. Edwin Stinson, Jr.
who will serve as Chief Financial Officer of the Company.
STRATEGY OF THE COMPANY
The Company's business strategy is to create a statewide community banking
system in Florida. The major elements of this strategy are to:
- EXPAND THE BANK'S OPERATIONS IN THE TAMPA MARKET AND, AS SOON AS
PRACTICABLE FOLLOWING THE OFFERING, 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, HUMAN RESOURCES AND TRAINING, TO MAXIMIZE OPERATING
EFFICIENCIES AND FACILITATE RESPONSIVENESS TO CUSTOMERS; AND
- OUTSOURCE CORE PROCESSING AND BACK ROOM OPERATIONS TO INCREASE
EFFICIENCIES.
The Company expects to establish Community Banking Offices in each new
market area primarily through the de novo branching of the Bank. Management will
also, however, evaluate opportunities for strategic acquisitions of financial
institutions in markets that are consistent with its business plan. Upon
consummation of the Merger, the Bank will be renamed Florida Bank, N.A.
BANK ACQUISITION
On March 30, 1998, the Company executed a definitive merger agreement with
the Bank, pursuant to which the Company will acquire all of the outstanding
capital stock of the Bank in exchange for shares of Common Stock. The aggregate
purchase price for the Bank will be $13.75 million. The total number of shares
of Common Stock to be issued in the Merger will be based upon the initial public
offering price of the Common Stock. The Merger will be accounted for as if the
Bank had acquired the Company, the financial statements of the Bank will become
the historical financial statements of the Company and there will be no goodwill
recorded as a result of the Merger. Consummation of the Merger is subject to
certain regulatory and shareholder approvals. The Merger will be consummated
immediately prior to the Offering. As of December 31, 1997 and for the fiscal
year ended December 31, 1997, the Bank reported total assets of $60.4 million,
total shareholders' equity of $6.3 million and net income of $376,000.
2
<PAGE> 6
CURRENT COMPANY OPERATIONS
The Company will remain in the development stage until the consummation of
the Merger and the completion of the Offering. The Company had no operations for
the year ended December 31, 1997 and had no equity and de minimus assets and
liabilities at December 31, 1997. The Company has funded its start-up and
organization costs through the sale of units in a private placement that was
completed in February 1998. The units, which consist of common stock, preferred
stock and common stock purchase warrants, generated $606,808 in proceeds to the
Company.
The Company's offices are located at 4110 Southpoint Boulevard, Suite 212,
Southpoint Square II, Jacksonville, Florida 32216. The Company's telephone
number is (904) 296-2329. The Company's offices will be relocated upon
consummation of the Merger and the Offering.
THE OFFERING
Common Stock offered by the
Company.................. 4,000,000 shares(1)
Common Stock outstanding
after the Offering and the
Merger................... 5,627,800 shares(2)(3)
Use of Proceeds............ To provide the Bank with additional growth capital,
redeem outstanding Company preferred stock, fund
expansion through branching and the acquisition of
existing banks, and for other general corporate
purposes. See "Use of Proceeds."
- ---------------
(1) Excludes 600,000 shares issuable upon full exercise of the Underwriters'
over-allotment option.
(2) Excludes 900,000 shares of Common Stock reserved for issuance under the
Company's 1998 Stock Option Plan. Upon consummation of the Offering, there
will be outstanding options to purchase 465,000 shares of Common Stock with
an exercise price equal to the initial public offering price and outstanding
warrants to purchase 80,800 shares of Common Stock issued in connection with
the initial capital offering to certain foreign investors with an exercise
price equal to the initial public offering price. See "Management -- Stock
Option Plan."
(3) Includes an estimated 1,250,000 shares of Common Stock to be issued to
shareholders of the Bank (assuming all Bank options are exercised and Bank
warrants expire without exercise) in connection with the Merger based on an
assumed initial public offering price of $11.00 per share (the mid-point of
the estimated range). In addition, includes 377,800 shares of Common Stock
outstanding prior to the Offering. See "Description of Bank Acquisition" for
a discussion of the exchange ratio formula to be used in the Merger.
Nasdaq National Market
Symbol..................... "FLBK"
RISK FACTORS
Prior to making an investment decision, prospective purchasers should
consider all of the information set forth in this Prospectus and should evaluate
the statements set forth in "Risk Factors" beginning on page 6. Such factors
include, without limitation, the lack of operating history of the Company;
expansion and management of growth; competition; the operating history of the
Bank; dependence on management; the broad discretion in the use of proceeds;
credit risk and the allowance for loan losses; interest rate risk; the absence
of a prior public market; the potential for fluctuation in quarterly results and
the volatility of the stock price; certain unpredictable economic conditions;
the limitation on dividends and the reliance on the Bank for receipt of such
dividends; the impact of technological advances and upgrade to the Company's
internal systems; year 2000 compliance; anti-takeover provisions; the issuance
of preferred stock; government regulation; the need for future capital; dilution
to investors; restrictions on certain shares eligible for future sale; the fact
that the Common Stock is not an insured bank deposit; and the indemnification of
directors and officers.
3
<PAGE> 7
SUMMARY SELECTED FINANCIAL DATA
The following tables set forth the summary selected financial data of the
Bank for the periods indicated. As the Company had no operations during 1997 and
had no equity and de minimus assets and liabilities at December 31, 1997, the
selected financial data of the Company 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 the Bank as of December 31, 1997 and 1996 and for
each of the three years ended December 31, 1997, 1996 and 1995 are derived from
the financial statements of the Bank, which have been audited by Deloitte &
Touche LLP, independent auditors. The selected financial data of the Bank as of
December 31, 1995, 1994 and 1993 and for the years ended December 31, 1994 and
1993 are derived from the financial statements of the Bank, which were audited
by other independent certified public accountants. The selected financial data
of the Bank for the three months ended March 31, 1998 and 1997 have been derived
from the Bank's unaudited financial statements. In the opinion of management,
all unaudited financial statements used to derive the information presented have
been prepared on the same basis as the audited financial statements and include
all adjustments consisting only of normal recurring accruals necessary for a
fair presentation of the results for the periods presented. The information for
the three months ended March 31, 1998 is not necessarily indicative of the
operating results to be expected for any future period. These selected financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company's financial
statements and notes thereto and the Bank's financial statements and notes
thereto, and financial and other information included elsewhere herein.
<TABLE>
<CAPTION>
THE BANK
-------------------------------------------------------------
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY INCOME STATEMENT:
Interest income....................... $1,067 $1,037 $4,302 $3,614 $2,937 $2,075 $ 1,772
Interest expense...................... 595 556 2,296 1,872 1,474 1,005 954
------ ------ ------ ------ ------ ------ -------
Net interest income................... 472 481 2,006 1,742 1,463 1,070 818
Provision (benefit) for loan losses... 15 15 60 60 (138) (15) --
------ ------ ------ ------ ------ ------ -------
Net interest income after provision
for loan losses..................... 457 466 1,946 1,682 1,602 1,085 818
Noninterest income.................... 152 168 504 519 375 385 542
Noninterest expense................... 525 455 1,842 1,601 1,621 1,568 2,684
------ ------ ------ ------ ------ ------ -------
Income (loss) before provision for
income taxes........................ 84 180 608 600 356 (99) (1,325)
Provision for income taxes(1)......... 32 69 232 216 -- -- --
------ ------ ------ ------ ------ ------ -------
Net income (loss)..................... $ 52 $ 111 $ 376 $ 384 $ 356 $ (99) $(1,325)
====== ====== ====== ====== ====== ====== =======
Earnings (loss) per common share(2):
Basic............................... $ .03 $ .06 $ .21 $ 21 $ .20 $ (.05) $ (2.69)
Diluted............................. .03 .06 .20 .20 .19 (.05) (2.69)
</TABLE>
- ---------------
(1) The provision for income taxes for 1997 and 1996 is 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 the Bank's quasi-reorganization) has been reflected as increases to
additional paid-in capital.
(2) The earnings per share amounts are based upon the Bank's historical weighted
average number of shares outstanding and do not reflect any pro forma
adjustments relating to the Offering or the exchange of shares upon
consummation of the Merger.
4
<PAGE> 8
<TABLE>
<CAPTION>
THE BANK
-------------------------------------------------
AT DECEMBER 31,
AT MARCH 31, -------------------------------------------------
1998 1997 1996 1995 1994 1993
------------ ------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Investment securities AFS........... $11,525 $10,765 $ 8,551 $ 6,760 $ 7,495 $ 4,590
Loans, net of deferred loan fees.... 36,116 33,720 31,627 26,571 20,292 17,041
Earnings assets..................... 56,731 54,731 52,588 38,801 32,377 26,481
Total assets........................ 62,173 60,396 55,505 41,748 34,959 29,337
Noninterest-bearings deposits....... 6,500 6,442 8,122 5,719 4,660 3,696
Total deposits...................... 45,214 45,460 45,526 34,633 31,886 26,093
Other borrowed funds................ 10,368 8,317 6,408 4,212 780 628
Total shareholders' equity.......... 6,347 6,314 3,269 2,678 2,143 2,421
PERFORMANCE RATIOS(4):
Net interest margin(1).............. 3.51% 3.89% 4.05% 4.13% 3.77% 3.02%
Efficiency ratio(2)................. 84.21 73.39 70.76 88.16 107.84 197.45
Return on average assets............ .35 .70 .85 .95 (.32) (4.22)
Return on average equity............ 3.14 10.62 13.18 14.85 (4.14) (68.70)
ASSET QUALITY RATIOS:
Allowance for loan losses to total
loans............................. 1.40% 1.42% 1.36% 1.28% 2.27% 2.60%
Non-performing loans to total
loans(3).......................... 1.20 -- -- -- .60 .90
Net charge-offs (recoveries) to
average loans..................... (.03) .03 (.11) (.07) (.18) .42
CAPITAL AND LIQUIDITY RATIOS:
Total capital to risk-weighted
assets............................ 14.49% 14.29% 12.26% 12.42% 13.28% 15.41%
Tier 1 capital to risk-weighted
assets............................ 13.24 13.00 11.01 11.17 12.03 14.14
Tier 1 capital to average assets.... 7.88 7.42 6.42 6.64 6.3 7.56
Average loans to average deposits... 75.37 75.77 75.83 67.26 65.11 60.72
Average equity to average total
assets............................ 11.11 6.54 6.45 6.4 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) The Bank had no non-performing loans at December 31, 1997, 1996 and 1995.
(4) Amounts have been annualized.
5
<PAGE> 9
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the shares of Common Stock offered hereby. Certain statements included in this
Prospectus concerning the Company's future financial condition and performance
are forward-looking statements, and the factors discussed below, as well as
those discussed elsewhere in this Prospectus, could cause actual results and
developments to differ materially from those expressed in or implied by such
statements.
NO OPERATING HISTORY OF COMPANY
The Company was incorporated on October 15, 1997 and has not engaged in any
operating activities. Accordingly, the Company has no history of operations as a
bank holding company. The Company's prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stages of development. To address these risks, the Company must, among
other things, consummate the Merger, expand into new markets, build its customer
base, respond to competitive developments, continue to attract, retain and
motivate qualified management and employees and continue to upgrade its
technologies, products and services. There can be no assurance that the Company
will be successful in addressing such risks. As a result of the substantial
start-up expenditures that must be incurred by the Company in connection with
its organization, acquisition of the Bank and expansion into new markets, the
Company may incur operating losses during its initial years of operations.
EXPANSION AND MANAGEMENT OF GROWTH
The Company intends to pursue an aggressive growth strategy for the
foreseeable future, and future results of operations will be affected by its
ability to, among other things, identify suitable markets and sites for new
Community Banking Offices, build its customer base, attract qualified bank
management, negotiate agreements with acceptable terms in connection with the
acquisition of existing banks and maintain adequate working capital. Failure to
manage growth effectively or to attract and retain qualified personnel could
have a material adverse effect on the Company's business, future prospects,
financial condition or results of operations, and could adversely affect the
Company's ability to implement its business strategy successfully.
There can also be no assurance that the Company will be able to expand its
market presence in the Bank's existing Tampa market or successfully enter new
markets or that any such expansion will not adversely affect the Company. In
entering new markets, the Company will encounter competitors with greater
knowledge of such local markets and greater financial and operational resources.
In addition, although the Company intends to expand primarily through selective
de novo Bank branch openings, the Company intends to regularly evaluate
potential acquisition transactions that would complement or expand the Company's
business. In doing so, the Company expects to compete with other potential
bidders, many of which have greater financial resources than the Company. See
"Business -- Competition."
When entering new geographic markets, the Company will need to establish
relationships with additional well-trained local senior management and other
employees. In order to effect the Company's business strategy, the Company will
be substantially reliant upon local management, and accordingly, it will be
necessary for the Company to give significant local decision-making authority to
its senior officers and managers in any new bank office location. There can be
no assurance that the Company will be able to establish such local affiliations
and attract qualified management personnel.
The process of opening new bank locations and evaluating, negotiating and
integrating acquisition transactions may divert management time and resources.
There can be no assurance that the Company will be able to establish any future
de novo branch office or acquire any additional financial institutions.
Moreover, there can be no assurance that the Company will be able to integrate
successfully or operate profitably any newly established branch office or
acquired financial institution. There can be no assurance that the Company will
not incur disruption and unexpected expenses in integrating newly established
operations. The Company's ability to manage growth as it pursues its expansion
strategy will also be dependent upon, among other factors, its ability to (i)
maintain appropriate policies, procedures and systems to ensure that the
Company's loan
6
<PAGE> 10
portfolio maintains an acceptable level of credit risk and loss and (ii) manage
the costs associated with expanding its infrastructure, including systems,
personnel and facilities. The Company's inability to manage growth as it pursues
its expansion strategy could have a material adverse effect on the Company's
business, future prospects, financial condition or results of operations. See
"Business -- Strategy of the Company."
COMPETITION
Competition among financial institutions in Florida and the Identified
Markets is intense. The Company and the Bank 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, larger
branch networks and are able to offer a broader range of products and services
than the Company and the Bank.
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
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 the Company and the Bank. 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 the Company. The Company's failure to
compete effectively for deposit, loan and other banking customers in its market
areas could have a material adverse effect on the Company's business, future
prospects, financial condition or results of operations. See
"Business -- Strategy of the Company -- Market Expansion."
OPERATING HISTORY OF THE BANK
Unsuccessful operating strategies and tactics employed by the former
management of the Bank, which was incorporated in 1988 under the name
"Enterprise National Bank of Tampa," led to loan losses, poor credit quality,
low net interest margins and high overhead expenses, which resulted in
substantial losses in the years 1988 through 1992. In 1991, the Bank was
required to enter into a Formal Agreement with the OCC pursuant to which the
Bank agreed to take certain remedial actions to improve its condition and
operating performance and to address certain specifically identified
deficiencies (the "Formal Agreement"). In July 1994, after successfully
recapitalizing the Bank in November 1993, restructuring the Board and
management, and significantly improving the Bank's operations and asset quality
of the loan portfolio, the OCC terminated the Formal Agreement. See
"Business -- Current Operations of First National Bank of Tampa."
DEPENDENCE ON MANAGEMENT
The Company is, and for the foreseeable future will be, dependent upon the
services of Charles E. Hughes, Jr., the President and Chief Executive Officer of
the Company, as well as other senior officers and managers retained by the
Company and the Bank. The loss of any of these individuals could have a material
adverse effect on the Company's and the Bank's business, future prospects,
financial condition or results of operations. Neither the Company nor the Bank
maintains key person life insurance with respect to any of its officers. The
future success of the Company also depends on its ability to identify, attract
and retain qualified senior management officers and other employees in each of
the Identified Markets. Moreover, the Company's management team has been
recently assembled. Accordingly, it has not been proven that such persons will
be able to work together effectively. See "Management."
7
<PAGE> 11
BROAD DISCRETION IN USE OF PROCEEDS
The Company will have broad discretion in the application of the net
proceeds of the Offering, which are estimated to be $40.5 million (or $46.6
million if the Underwriters' over-allotment is fully exercised). Upon closing of
the Offering, the Company intends to contribute approximately $12.0 million of
the net proceeds to the capital of the Bank to support future growth of the
Bank's business, including the opening of a Community Banking Office in the
Jacksonville market area, and has other specifically identified uses for
approximately $650,000 of the net proceeds. The remainder of the net proceeds
will be applied in the future as needed to implement the Company's expansion
strategy. Such expansion is presently intended to be accomplished primarily
through the opening of additional Community Banking Offices in the Identified
Markets, but could include one or more acquisitions of existing financial
institutions. However, the timing and specific application of the net proceeds
will remain in the discretion of management of the Company, and investors will
not have the opportunity to evaluate the economic, financial and other relevant
information which will be utilized by the Company in determining the application
of such proceeds. See "Use of Proceeds."
CREDIT RISK; ALLOWANCE FOR LOAN LOSSES
There are risks inherent in making any loan, including risks with respect
to the period of time over which the loan may be repaid, risks resulting from
changes in economic and industry conditions including those in the Identified
Markets, risks inherent in dealing with individual borrowers and risks resulting
from uncertainties as to the future value of collateral. The risk of nonpayment
of loans is inherent in commercial banking. Moreover, the Bank expects to focus
on loans to small and medium-sized businesses, which may result in a large
concentration by the Bank of loans to such businesses. Management will attempt
to minimize the Bank's credit exposure by carefully monitoring the concentration
of its loans within specific industries and through prudent loan application
approval procedures, but there can be no assurance that such monitoring and
procedures will reduce such lending risks. Moreover, as the Company expands into
new geographic markets, the Company's credit administration and loan
underwriting policies will be required to adapt to the local lending and
economic environments of these new markets. There is no assurance that the
Company's credit administration personnel, policies and procedures will
adequately adapt to such new geographic markets.
At December 31, 1997, real estate loans, which included residential
mortgages and construction and commercial loans secured by real estate,
comprised 55.0% of the Bank's total loan portfolio, net of deferred loan fees.
The Bank presently generates all of its real estate mortgage loans in Florida.
Therefore, conditions of the Florida real estate market could strongly influence
the level of the Bank's non-performing mortgage loans and the results of
operations and financial condition of the Company and the Bank. Real estate
values and the demand for mortgages and construction loans are affected by,
among other things, changes in general or local economic conditions, changes in
governmental rules or policies, and the availability of loans to potential
purchasers. In addition, Florida historically has been vulnerable to certain
natural disaster risks, such as floods, hurricanes and tornadoes, which are not
typically covered by the standard hazard insurance policies maintained by
borrowers. Uninsured disasters may adversely impact the ability of borrowers to
repay loans made by the Bank. The existence of adverse economic conditions,
declines in real estate values or the occurrence of such natural disasters in
Florida could have a material adverse effect on the Company's business, future
prospects, financial condition or results of operations. In addition, loans
secured by real estate subject the Company to risks associated with
environmental regulation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Strategy of the Company."
The Bank's allowance for loan losses is and will continue to be established
after consideration of a wide variety of factors and will be maintained at a
level considered adequate by management to absorb anticipated loan losses. The
amount of future losses is susceptible to changes in economic, operating and
other conditions, including changes in interest rates, that may be beyond the
Company's control, and such losses may exceed current estimates. Although
management of the Bank believes that the allowance for loan losses is currently
adequate to absorb losses on any existing loans that may become uncollectible,
there can be no assurance that the allowance will prove sufficient to cover
actual loan losses in the future.
8
<PAGE> 12
The failure by the Company to adapt its credit policies and procedures on
an adequate and timely basis to new markets or to provide sufficient oversight
to its lending activities could result in an increase in nonperforming assets,
thereby causing operating losses, impairing liquidity and eroding capital, and
could have a material adverse effect on the Company's business, future
prospects, financial condition or results of operations.
INTEREST RATE RISK
The Company's results of operations are directly affected by levels of and
fluctuations in interest rates. Changes in interest rates may (i) negatively
affect the Company's net interest income by impairing the Company's ability to
earn a spread between the interest received on its loans and other earning
assets and the cost of deposits and other borrowings, (ii) reduce gains from
loan sales, (iii) result in higher loan losses and (iv) reduce loan originations
and corresponding loan servicing income. A substantial and/or sustained increase
in interest rates could adversely affect the Bank's ability to originate or sell
loans with returns consistent with past practices, and adversely impact the
ability of borrowers with variable rate loans to meet scheduled debt service
requirements. From time to time, as a result of an imbalance in the maturities
of assets and liabilities and the mix of adjustable and fixed rate loans, a
rapid increase or decrease in interest rates could have a material adverse
effect on the Company's net interest margin, future prospects, financial
condition or results of operations.
Interest rates are highly sensitive to many factors which are beyond the
Company's control, including general economic conditions and the policies of
various government and regulatory authorities. Increases in the discount rate by
the Federal Reserve Board usually lead to rising interest rates, which affect
the Company's interest income, interest expense and investment portfolio. Also,
governmental policies such as the creation of a tax deduction for individual
retirement accounts can alter the rate of savings and affect the cost of funds.
The nature, timing and effect of any future changes in federal monetary and
fiscal policies on the Company and its results of operations are not
predictable. Such changes could have a material adverse effect on the Company's
business, future prospects, financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition -- Interest Rate Sensitivity and Liquidity
Management."
ABSENCE OF PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Common
Stock. Subject to notice of issuance, the Company has been approved for the
listing of the Common Stock on the Nasdaq National Market. There can be no
assurance, however, that an active trading market will develop or be sustained
for the Common Stock upon completion of the Offering.
POTENTIAL FLUCTUATION IN QUARTERLY RESULTS AND VOLATILITY OF STOCK PRICE
Subsequent to the Offering, prices for the Common Stock will be determined
by the market and may be influenced by a number of factors, including depth and
liquidity of the market for the Common Stock, investor perceptions of the
Company, changes in conditions or trends in the banking industry or in the
industries of the Company's significant customers, publicly traded comparable
companies and general economic, political and other conditions. In addition, the
trading price of the Common Stock could be subject to significant fluctuations
in response to quarterly variations in the Company's actual or anticipated
operating results, changes in general market conditions and other factors. In
particular, the Company's and the Bank's quarterly revenues are difficult to
forecast and the Company's expense levels are based in part on its expansion
plans in anticipation of loan growth and corresponding revenues generated from
new branch locations. If revenue levels are below expectations, the Company may
be unable or unwilling to reduce expenses proportionately and operating results
would likely be adversely affected. As a result, prior to the full
implementation of the Company's business strategy, the Company believes that
period to period comparisons of its results may not necessarily be meaningful
and should not be relied upon as indications of future performance. Due to all
of the foregoing factors, it is possible that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the market price of the Common Stock
9
<PAGE> 13
would likely be materially adversely affected. In recent years, significant
price and volume fluctuations have occurred in the stock prices of companies
that often have been unrelated or disproportionate to their operating
performance. There can be no assurance that the market price of the Common Stock
will not decline below the initial public offering price.
UNPREDICTABLE ECONOMIC CONDITIONS
Commercial banks and other financial institutions are affected by economic
and political conditions, both domestic and international, and by governmental
monetary policies. Conditions such as inflation, recession, unemployment, high
interest rates, restricted money supply, scarce natural resources, international
disorders and other factors beyond the control of the Company and the Bank may
adversely affect their profitability. See "Business -- Monetary Policies."
The Company's success will significantly depend upon general economic
conditions in Florida, the Identified Markets, and the other market areas into
which the Company may expand. A prolonged economic dislocation or recession,
whether in Florida generally or in any or all of the Identified Markets, could
cause the Company's non-performing assets to increase, thereby causing operating
losses, impaired liquidity and the erosion of capital. Such an economic
dislocation or recession could result from a variety of causes, including
natural disasters such as hurricanes, floods or tornadoes, or a prolonged
downturn in various industries upon which the economies of Florida and/or
particular Identified Markets depend. Future adverse changes in the Florida
economy or the local economies of the Identified Markets could have a material
adverse effect on the Company's business, future prospects, financial condition
or results of operations.
LIMITATION ON DIVIDENDS; RELIANCE ON THE BANK
It is not anticipated that the Company will distribute any cash dividends
to its shareholders in the foreseeable future. Earnings of the Bank, if any, are
expected to be retained by the Bank to enhance its capital structure or
distributed to the Company to pay its operating costs. As the Company has no
independent sources of revenue, the Company's principal source of funds to pay
dividends on the Common Stock and its other securities, to service indebtedness
and to fund operations will be cash dividends and other payments that the
Company receives from the Bank. The payment of dividends by the Bank to the
Company is subject to certain restrictions imposed by federal banking laws,
regulations and authorities. See "Dividend Policy" and "Supervision and
Regulation."
IMPACT OF TECHNOLOGICAL ADVANCES; UPGRADE TO COMPANY'S INTERNAL SYSTEMS
The banking industry is undergoing, and management believes will continue
to undergo, technological changes with frequent introductions of new
technology-driven products and services. In addition to improving customer
services, the effective use of technology increases efficiency and enables
financial institutions to reduce costs. The Company's future success will
depend, in part, on its ability to address the needs of its customers by using
technology to provide products and services that will satisfy customer demands
for convenience as well as to enhance efficiencies in the Company's operations.
Management believes that keeping pace with technological advances is important
for the Company, as long as its emphasis on personalized services is not
adversely impacted. Many of the Company's competitors will have substantially
greater resources than the Company to invest in technological and infrastructure
improvements. There can be no assurance that the Bank will be able to implement
new technology-driven products and services effectively or to market
successfully such products and services to its clients. Furthermore, the Company
and the Bank outsource many of their core technology-related systems. The Bank's
failure to acquire, implement or market new technology could have a material
adverse effect on the Company's business, future prospects, financial condition
or results of operations. The Company therefore is dependent upon these outside
vendors to provide many of its technology-related products and services. See
"Use of Proceeds" and "Business -- Strategy of the Company."
10
<PAGE> 14
YEAR 2000 COMPLIANCE
As the year 2000 ("Year 2000") approaches, an important business issue has
emerged regarding existing application software programs and operating systems.
Many existing application software products, including the Bank's, were designed
to accommodate a two-digit year. For example, "98" is stored on the system and
represents 1998 and "00" represents 1900. The Bank primarily utilizes M&I Data
Services, Inc. ("M&I"), a third-party vendor, to provide its primary banking
applications, including core processing systems. In addition, the Bank also uses
M&I's software for certain ancillary computer applications. M&I is in the
process of modifying, upgrading or replacing its computer applications to ensure
timely Year 2000 compliance. In addition, the Company and the Bank have
implemented a Year 2000 compliance program whereby the Bank is reviewing the
Year 2000 issues that may be faced by its other third-party vendors and loan and
deposit customers. Under such program, the Company will examine the need for
modifications or replacement of all non-Year 2000 compliant pieces of software.
The Company does not currently expect that the cost of its and the Bank's Year
2000 compliance program will be material to its financial condition and expects
that it will satisfy such compliance program without material disruption of its
operations. Management of the Company has evaluated the potential effect on
M&I's data processing systems resulting from Year 2000 issues. M&I has
represented to the Bank that M&I's core processing systems will be fully Year
2000 compliant prior to December 31, 1998. In the event that the Company, the
Bank, M&I or its other significant vendors or loan customers do not successfully
and timely achieve Year 2000 compliance, the Bank's business, future prospects,
financial condition or results of operations could be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ANTI-TAKEOVER PROVISIONS
The Company's Second Amended and Restated Articles of Incorporation (the
"Articles of Incorporation") contain provisions requiring supermajority
shareholder approval to effect certain extraordinary corporate transactions with
Interested Persons, which are defined in the Articles of Incorporation as those
persons who own greater than 5% or more of the shares of the Company's stock
entitled to vote in election of directors, unless that transaction is approved
by three quarters of the Board of Directors (the "Board of Directors" or
"Board"). This approval is in addition to any other required approval of the
Board of Directors or shareholders. In addition, the Articles of Incorporation
provide for the Board of Directors to be classified into three classes, as
nearly equal in number as possible. Directors initially classified as "Class I"
Directors were originally elected for a term expiring at the annual meeting of
shareholders to be held in 1999, directors initially classified as "Class II"
Directors were originally elected for a term expiring at the annual meeting of
shareholders to be held in 2000, and Directors initially classified as "Class
III" Directors were originally elected for a term expiring at the annual meeting
of shareholders to be held in 2001. Directors will thereafter be elected to
serve for three year terms. The Company's Amended and Restated By-Laws (the
"By-Laws") also contain provisions which (i) authorize the Board to determine
the precise number of members of the Board and authorize either the Board or the
shareholders to fill vacancies on the Board, (ii) authorize any action required
or permitted to be taken by the Company's shareholders to be effected by consent
in writing; and (iii) establish certain advance notice procedures for nomination
of candidates for election as directors and for shareholder proposals to be
considered at an annual or special meeting of shareholders. The issuance of
preferred stock by the Company could also have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, a controlling interest in the Company and could adversely affect the
voting power or other rights of shareholders of the Common Stock. These
provisions may have the effect of impeding the acquisition of control of the
Company by means of a tender offer, a proxy fight, open-market purchases or
otherwise, without approval of such acquisition by the Board of Directors.
Certain of these provisions also make it more difficult to remove the Company's
current Board of Directors and management. See "Description of Capital Stock."
ISSUANCE OF PREFERRED STOCK
The Company has authorized 1,000,000 shares of preferred stock, $.01 par
value per share (the "Preferred Stock"), of which 600,000 shares have been
designated as the Series A Preferred Stock. Of these
11
<PAGE> 15
600,000 shares designated as Series A Preferred Stock, 60,600 are presently
outstanding. The designation of the Series A Preferred Stock and the issuance of
additional series of Preferred Stock could affect the holders of Common Stock in
a number of respects, including the following: the issuance of additional shares
of Preferred Stock may subordinate the Common Stock in terms of dividend and
liquidation rights, because preferred stock typically entitles its holder to
satisfaction in full of specified dividend and liquidation rights before any
payment of dividends or distribution of assets or liquidation is made on shares
of common stock; if voting or conversion rights are granted to the holders of
Preferred Stock, the voting power of the Common Stock (including stock held by
any persons who may be seeking to obtain control of the Company) will be
diluted; the issuance of Preferred Stock may result in a dilution of earnings
per share of the Common Stock; and certain fundamental matters requiring
shareholder approval (such as mergers, consolidations, sales of assets and
future amendments to the Articles of Incorporation) may require prior approval
by the separate vote of each class, including the Preferred Stock (or in some
cases each series of Preferred Stock), even if holders of such Preferred Stock
may not otherwise be entitled to voting rights. The Series A Preferred Stock
which is currently outstanding provides for a liquidation preference of $10.00
per share but does not provide for any voting rights. The Company intends to
redeem the Series A Preferred Stock at a redemption price of $10.00 per share
upon consummation of the Offering. See "Use of Proceeds." The Board of Directors
may authorize the issuance of additional series of Preferred Stock from time to
time without shareholder action. See "Description of Capital Stock."
FUTURE CAPITAL NEEDS
The Board of Directors may determine from time to time a need to obtain
additional capital through the issuance of additional shares of Common Stock or
other securities. There can be no assurance that such shares can be issued at
prices or on terms better than or equal to the initial public offering price and
terms of the Offering. In addition, such issuance would dilute the ownership
interests in the Company of the investors in the Offering.
GOVERNMENT REGULATION
The Company and the Bank operate in a highly regulated environment and are
subject to supervision and regulation by several governmental regulatory
agencies, including the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), the Office of the Comptroller of the Currency (the
"OCC"), the Federal Deposit Insurance Corporation (the "FDIC"), the Florida
Department of Banking and Finance (the "Florida Banking Department") and the
Securities and Exchange Commission (the "Commission"). These regulations are
generally intended to provide protection for depositors and customers rather
than for the benefit of shareholders. The Company and the Bank are subject to
future legislation and government policy, including bank deregulation and
interstate expansion, which could materially adversely affect the banking
industry as a whole, including the operations of the Company and the Bank. The
establishment of branches or the acquisitions of banks in the Identified Markets
and other market areas is subject to the prior receipt of certain regulatory
approvals. Failure to obtain such regulatory approvals could have a material
adverse effect on the Company's business, future prospects, financial condition
or results of operations. See "Supervision and Regulation."
DETERMINATION OF INITIAL PUBLIC OFFERING PRICE
The initial public offering price of the Common Stock will be determined by
negotiations among the Company and The Robinson-Humphrey Company, LLC,
Interstate/Johnson Lane Corporation and Kelton International Ltd., as
representatives ("Representatives") of the Underwriters. Among the factors to be
considered in determining the initial public offering price of the Common Stock,
in addition to prevailing market conditions, are the history of, and prospects
for, the industry in which the Bank operates, the price to earnings and price to
book value multiples of publicly traded common stock of comparable companies,
the cash flow and earnings of the Bank and comparable companies in recent
periods and the Bank's business potential and cash flow and earnings prospects.
There can be no assurance that the market price at closing will equal or exceed
the initial public offering price.
12
<PAGE> 16
DILUTION
Investors in the Offering will incur an immediate and substantial dilution
in the net tangible book value of the Common Stock from the initial public
offering price. Without taking into account any changes in net tangible book
value after December 31, 1997, other than to give effect to the assumed proceeds
of $240,000 upon the exercise of the Bank's stock options, the issuance of an
estimated 1,250,000 shares in the Merger, the issuance of 377,800 shares of
Common Stock by the Company in February 1998 at $.01 per share and the sale by
the Company of 4,000,000 shares of Common Stock in the Offering, based upon an
assumed initial public offering price of $11.00 per share (the mid-point of the
estimated range) and after deducting the underwriting discounts and commissions
and the estimated offering expenses, the net tangible book value of the Company
at December 31, 1997 would have been approximately $47.0 million or $8.35 per
share. This represents an immediate increase in net tangible book value of $4.34
per share to the existing shareholders and an immediate net tangible book value
dilution of $2.65 per share, or 24.1% to purchasers in the Offering. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and the Merger, the Company will have
5,627,800 shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option), outstanding options to purchase 465,000
shares of Common Stock and outstanding warrants to purchase 80,800 shares of
Common Stock. Of these shares outstanding, the 4,000,000 shares offered hereby
and the 1,250,000 shares estimated to be issued in the Merger (assuming an
initial public offering price of Common Stock of $11.00 per share, the mid-point
of the estimated range), will be eligible for sale in the open market without
restriction (except for any such shares purchased by or issued to "affiliates"
of the Company and the Bank). The remaining 377,800 shares of Common Stock will
be "restricted securities" as that term is defined in Rule 144 ("Rule 144")
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
and will become eligible for sale under Rule 144 after February 3, 1999. The
Company, its officers and directors and certain of its existing shareholders
have agreed, for a period of 180 days from the date of purchase, not to sell or
otherwise dispose, directly or indirectly, of any Common Stock without prior
written consent of The Robinson-Humphrey Company, LLC. Following the expiration
of the 180-day lock-up period, approximately 424,515 additional shares will be
eligible for sale in the public market subject to compliance with certain volume
limitations and other conditions of Rule 144. The market price of the Common
Stock could be materially adversely affected by the sale or availability for
sale of shares now held by the existing shareholders of the Company or of shares
which may be issued under the Company's 1998 Stock Option Plan. See
"Management," "Shares Eligible for Future Sale" and "Underwriting."
COMMON STOCK IS NOT AN INSURED BANK DEPOSIT
The shares of Common Stock offered in the Offering are not deposits,
savings accounts or other obligations of the Company, the Bank or any other
depository institution, are not guaranteed by the Company or any other entity,
will not be insured by the FDIC or any other governmental agency and may not be
used as collateral to secure a loan from the Company, the Bank or any of their
affiliates.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and By-Laws provide for the indemnification
of the Company's officers and directors and insulate such officers and directors
from liability for certain breaches of the duty of care. The Bank's By-Laws
contain similar provisions. It is possible that the indemnification obligations
imposed under these provisions could result in a charge against the Company's
earnings and thereby affect the availability of funds for payment of dividends
to the Company's shareholders. See "Description of Capital Stock -- Certain
Provisions of the Articles of Incorporation and By-Laws" and
"-- Indemnification."
13
<PAGE> 17
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including with
respect to the Company's operations, industry, financial condition and
liquidity. These forward-looking statements are subject to risks and
uncertainties, many of which are beyond the Company's control, which could cause
actual results to differ materially from those contemplated in such
forward-looking statements, including in particular the risks and uncertainties
described under "Risk Factors." Prospective investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to update publicly or revise
any of these forward-looking statements, whether as a result of new information,
future events or circumstances or otherwise. There can be no assurance that the
events described in these forward-looking statements will occur.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered by the Company, at an assumed initial public offering price
of $11.00 per share, are estimated to be approximately $40.5 million (or $46.6
million if the Underwriters' over-allotment option is fully exercised), after
deducting the estimated underwriting discounts and commissions and Offering
expenses payable by the Company.
The Company anticipates that of the net proceeds received by the Company in
the Offering (i) approximately $12 million will be used immediately to provide
the Bank with additional growth capital which will, among other things, enable
the Bank to increase its legal lending limit and expand its operations in Tampa
and other markets; (ii) approximately $606,000 will be used by the Company to
redeem the outstanding 60,600 shares of the Company's Series A Preferred Stock;
and (iii) $137,500 will be paid to an affiliate in connection with the
acquisition of the Bank. The remaining net proceeds will be retained by the
Company to fund its expansion primarily through branching and the acquisition of
existing banks throughout the Florida market and for other general corporate
purposes. Pending such uses, the net proceeds of the Offering will be invested
in short-term, interest-bearing investment grade securities, certificates of
deposits or guaranteed obligations of the United States. See "Certain
Transactions."
The Series A Preferred Stock was issued in February 1998 to investors to
provide capital to the Company primarily to support start-up costs. Directors
and officers of the Company, the Bank and their affiliates do not own any shares
of the Series A Preferred Stock. The Company intends to redeem the Series A
Preferred Stock at a redemption price of $10.00 per share upon the consummation
of the Offering. In addition, the Company intends to pay a $137,500 finder's fee
in connection with the acquisition of the Bank (1.00% of the aggregate purchase
price), which will be paid from the proceeds of the Offering. See "Description
of Capital Stock -- Preferred Stock" and "Certain Transactions."
Other than the acquisition of the Bank, the Company has no understandings
or agreements with respect to any acquisition. See "Description of Bank
Acquisition."
DIVIDEND POLICY
The Company has not declared or distributed any dividends to the holders of
Common Stock since the Company's organization, and it is not likely that any
cash dividends on the Common Stock will be declared for the foreseeable future.
The Board of Directors intends, for the foreseeable future, to follow a policy
of retaining any earnings of the Company to provide funds to operate and expand
the business of the Company and the Bank.
The Bank is restricted in its ability to pay dividends under the national
banking laws and by regulations of the OCC. Pursuant to 12 U.S.C. sec. 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. sec. 60(a),
which prohibits a bank from declaring a dividend on its shares of common stock
until its surplus equals its stated capital, unless there has been transferred
to surplus not less than one-tenth of the bank's net profits of the preceding
two consecutive half year periods (in the case of an annual dividend). Pursuant
to 12 U.S.C. sec. 60(b), the approval of the OCC 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.
14
<PAGE> 18
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of March 31, 1998 and as adjusted to reflect the assumed proceeds of $240,000
upon the exercise of the Bank's stock options, the issuance of an estimated
1,250,000 shares in connection with the Merger, and the sale by the Company of
4,000,000 shares of Common Stock offered hereby (assuming an initial offering
price of the Common Stock of $11.00 per share, the mid-point of the estimated
range) and the application of the estimated net proceeds therefrom as described
under "Use of Proceeds." The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------------
AS ADJUSTED
AS ADJUSTED FOR MERGER
THE COMPANY FOR MERGER AND OFFERING
----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Shareholders' equity:
Preferred Stock, 1,000,000 shares authorized; 60,600,
60,600 and 0 shares issued and outstanding............ $606 $ 606 $ --
Common Stock, $.01 par value per share; 9,000,000 shares
authorized; 377,800, 1,627,800 and 5,627,800 shares
issued and outstanding(1)(2).......................... 4 16 56
Additional paid-in capital............................... -- 5,778 46,208
Warrants to acquire 80,800 shares of Common Stock at the
initial public offering price......................... -- -- --
Retained earnings (accumulated deficit).................. (126) 685 685
Unrealized gain (loss) on available for sale investment
securities, net of tax................................ -- (15) (15)
---- ------ -------
Total capitalization............................. $484 $7,070 $46,934
==== ====== =======
</TABLE>
- ---------------
(1) Excludes 345,000 shares issuable upon the exercise of options to be granted
under the 1998 Plan simultaneously with the closing of the Offering.
(2) Before issuance of 600,000 shares pursuant to the Underwriters'
over-allotment option.
15
<PAGE> 19
DILUTION
The pro forma net tangible book value of the Company at March 31, 1998 was
approximately $7.1 million or $4.34 per share of Common Stock. Pro forma net
tangible book value per share represents the amount of the Company's total
assets less intangible assets and total liabilities, divided by the total number
of shares of Common Stock outstanding. After giving effect to (i) the sale by
the Company of shares of Common Stock offered hereby at an assumed initial
public offering price of $11.00 per share, (ii) the issuance of an estimated
1,250,000 shares in connection with the Merger, (iii) the receipt of proceeds of
$240,000 upon the exercise of the Bank's stock options, and (iv) the application
of the estimated net proceeds therefrom, the pro forma net tangible book value
of the Company at March 31, 1998 would have been $47.5 million or $8.45 per
share of Common Stock. This represents an immediate increase in such pro forma
net tangible book value of $4.10 per share to shareholders and an immediate
dilution in the pro forma net tangible book value of $2.55 per share to
investors purchasing shares of Common Stock in the Offering. The following table
illustrates the resulting per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).......... $11.00
Net tangible book value per share at March 31, 1998....... $4.34
Increase per share attributable to new investors(2)....... 4.10
-----
Pro forma net tangible book value per share after the
Offering.................................................. 8.45
------
Dilution per share to new investors(3)...................... $ 2.55
======
</TABLE>
- ---------------
(1) Before deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company.
(2) After deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company.
(3) Excludes 900,000 shares of Common Stock reserved for issuance under the
Company's 1998 Stock Option Plan.
The following table summarizes, on a pro forma basis as of March 31, 1998,
the number of shares of Common Stock purchased from the Company and the total
consideration paid, and the average per share consideration paid to the Company
by existing shareholders and by new investors purchasing the shares of Common
Stock offered hereby, assuming an initial public offering price of the Common
Stock of $11.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)......... 1,627,800 28.9% $ 7,070,617 13.8% $ 4.34
New investors.................... 4,000,000 71.1 44,000,000 86.2 11.00
--------- ----- ----------- -----
Total.................. 5,627,800 100.0% $51,070,617 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Includes the issuance of an estimated 1,250,000 shares of Common Stock in
connection with the Merger.
16
<PAGE> 20
SELECTED FINANCIAL DATA
The following tables set forth selected financial data of the Bank for the
periods indicated. As the Company had no operations during 1997 and had no
equity and de minimis assets and liabilities at December 31, 1997, the selected
financial data of the Company 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 the Bank as of December 31, 1997 and 1996 and for each of the
three years ended December 31, 1997, 1996 and 1995 are derived from the
financial statements of the Bank, which have been audited by Deloitte & Touche
LLP, independent auditors. The selected financial data of the Bank 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 the Bank which were audited by
other independent certified public accountants. The selected financial data of
the Bank for the three months ended March 31, 1998 and 1997 have been derived
from the Bank's unaudited financial statements. In the opinion of management,
all unaudited financial statements used to derive the information presented have
been prepared on the same basis as the audited financial statements and include
all adjustments consisting of normal recurring accruals necessary for a fair
presentation of the results for the periods presented. The information for the
three months ended March 31, 1998 is not necessarily indicative of the operating
results to be expected for any future period. These selected financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company's financial
statements and notes thereto, the Bank's financial statements and notes thereto,
and financial and other information included elsewhere herein.
<TABLE>
<CAPTION>
THE BANK
-------------------------------------------------------------
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY INCOME STATEMENT:
Interest income..................... $1,067 $1,037 $4,302 $3,614 $2,937 $2,075 $ 1,772
Interest expense.................... 595 556 2,296 1,872 1,474 1,005 954
------ ------ ------ ------ ------ ------ -------
Net interest income................. 472 481 2,006 1,742 1,463 1,070 818
Provision (benefit) for loan
losses........................... 15 15 60 60 (138) (15) --
------ ------ ------ ------ ------ ------ -------
Net interest income after provision
for loan losses.................. 457 466 1,946 1,682 1,602 1,085 818
Noninterest income.................. 152 168 504 519 375 385 542
Noninterest expense................. 525 455 1,842 1,601 1,621 1,568 2,684
------ ------ ------ ------ ------ ------ -------
Income (loss) before provision for
income taxes..................... 84 180 608 600 356 (99) (1,325)
Provision for income taxes(1)....... 32 69 232 216 -- -- --
------ ------ ------ ------ ------ ------ -------
Net income (loss)................... $ 52 $ 111 $ 376 $ 384 $ 356 $ (99) $(1,325)
====== ====== ====== ====== ====== ====== =======
Earnings (loss) per common share(2):
Basic............................ $ .03 $ .06 $ .21 $ .21 $ .20 $ (.05) $ (2.69)
Diluted.......................... .03 .06 .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
carryforwards for 1997 and 1996 (periods subsequent to the effective date of
the Bank's quasi-reorganization) have been reflected as increases to
additional paid-in capital.
(2) The earnings per share amounts are based upon the Bank'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.
17
<PAGE> 21
<TABLE>
<CAPTION>
THE BANK
-------------------------------------------------
AT DECEMBER 31,
AT MARCH 31, -------------------------------------------------
1998 1997 1996 1995 1994 1993
------------ ------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Investment securities............... $11,525 $10,765 $ 8,551 $ 6,760 $ 7,495 $ 4,590
Loans, net of deferred loan fees.... 36,116 33,720 31,627 26,571 20,292 17,041
Earnings assets..................... 56,731 54,731 52,588 38,801 32,377 26,481
Total assets........................ 62,173 60,396 55,505 41,748 34,959 29,337
Noninterest-bearings deposits....... 6,500 6,442 8,122 5,719 4,660 3,696
Total deposits...................... 45,214 45,460 45,526 34,633 31,886 26,093
Other borrowed funds................ 10,368 8,317 6,408 4,212 780 628
Total shareholders' equity.......... 6,347 6,314 3,269 2,678 2,143 2,421
PERFORMANCE RATIOS:
Net interest margin(1).............. 3.51% 3.89% 4.05% 4.13% 3.77% 3.02%
Efficiency ratio(2)................. 84.21 73.39 70.76 88.16 107.84 197.45
Return on average assets............ .35 .70 .85 .95 (.32) (4.22)
Return on average equity............ 3.14 10.62 13.18 14.85 (4.14) (68.70)
ASSET QUALITY RATIOS:
Allowance for loan losses to total
loans............................. 1.40% 1.42% 1.36% 1.28% 2.27% 2.60%
Non-performing loans to total
loans(3).......................... 1.20 -- -- -- .60 .90
Net charge-offs (recoveries) to
average loans..................... (.03) .03 (.11) (.07) (.18) .42
CAPITAL AND LIQUIDITY RATIOS:
Total capital to risk-weighted
assets............................ 14.49% 14.29% 12.26% 12.42% 13.28% 15.41%
Tier 1 capital to risk-weighted
assets............................ 13.24 13.00 11.01 11.17 12.03 14.14
Tier 1 capital to average assets.... 7.88 7.42 6.42 6.64 6.3 7.56
Average loans to average deposits... 75.37 75.77 75.83 67.26 65.11 60.72
Average equity to average total
assets............................ 11.11 6.54 6.45 6.4 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) The Bank had no non-performing loans at December 31, 1997, 1996 and 1995.
18
<PAGE> 22
PRO FORMA FINANCIAL DATA
On March 30, 1998, the Company executed a definitive merger agreement with
the Bank, pursuant to which the Company will acquire all of the outstanding
capital stock of the Bank in exchange for shares of Common Stock. The aggregate
purchase price for the Bank will be $13.75 million. The total number of shares
of Common Stock to be issued in the Merger will be based upon the initial public
offering price of the Common Stock. The Merger will be accounted for as if the
Bank had acquired the Company, the financial statements of the Bank will become
the historical financial statements of the Company and there will be no goodwill
recorded as a result of the Merger.
The unaudited pro forma financial data set forth below assume that the
Company was formed on January 1, 1997 and gives effect to the acquisition of the
Bank 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 Offering. The
pro forma financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's Financial Statements and Notes thereto, the Bank'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 the Bank occurred
on January 1, 1997, or of future operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 THREE MONTHS ENDED MARCH 31, 1998
------------------------------------- -------------------------------------
THE COMPANY THE COMPANY
PRO FORMA PRO FORMA
THE COMPANY THE BANK CONSOLIDATED THE COMPANY THE BANK CONSOLIDATED
----------- -------- ------------ ----------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY INCOME STATEMENT:
Interest income............................... $ -- $4,302 $4,302 $ -- $ 1,067 $ 1,067
Interest expense.............................. -- 2,296 2,296 595 595
---- ------ ------ ----- ------- -------
Net interest income........................... -- 2,006 2,006 -- 472 472
Provision for loan losses..................... -- 60 60 15 15
---- ------ ------ ----- ------- -------
Net interest income after provision for income
taxes....................................... 1,946 1,946 -- 457 457
Noninterest income............................ -- 504 504 152 152
Noninterest expense(3)........................ -- 1,842 1,842 126 526 652
---- ------ ------ ----- ------- -------
Income (loss) before provision for income
taxes....................................... -- 608 608 (126) 83 (43)
Provision for income taxes.................... -- 232 232 32 --
---- ------ ------ ----- ------- -------
Net income (loss)............................. $ -- $ 376 $ 376 $(126) $ 51 $ (43)
==== ====== ====== ===== ======= =======
Pro forma earnings (loss) per share........... $ .30(1) $ .23(2) $ 0.04(1) $ (0.03)(2)
====== ====== =======
SUMMARY BALANCE SHEET DATA: AT MARCH 31, 1998
-------------------------------------
Cash and cash equivalents..................... $ 409 $11,689 $12,098
Investment securities......................... -- 11,525 11,525
Loans, net of deferred loan fees.............. -- 36,116 36,116
Earning assets................................ -- 56,731 56,731
Total assets.................................. 484 62,173 62,657
Noninterest-bearing deposits.................. -- 6,500 6,500
Total deposits................................ -- 45,214 45,214
Other borrowed funds.......................... -- 10,368 10,368
Total shareholders' equity.................... 484 6,347 6,798
</TABLE>
- ---------------
(1) Pro forma earnings per share for the Bank have been computed based on an
estimated 1,250,000 shares of Common Stock to be issued to the shareholders
of the Bank (assuming all Bank options are exercised and Bank warrants
expire without exercise) in connection with the Merger based on an assumed
initial public offering price of $11.00 per share (the mid-point of the
estimated range).
(2) Pro forma earnings per share for the Company have been computed based on an
estimated 1,627,800 shares of Common Stock outstanding, which includes
1,250,000 shares of Common Stock to be issued to the shareholders of the
Bank in connection with the Merger and 377,800 shares of Common Stock
outstanding at March 31, 1998.
(3) The pro forma financial data does not give effect to certain employment
agreements between the Company and Messrs. Hughes, McMullen and Stinson who
will serve as President and Chief Executive Officer, President of the Tampa
Market, and Chief Financial Officer, respectively. On an annual basis such
contracts will increase noninterest expense by $276,000.
19
<PAGE> 23
BUSINESS
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 Offering,
the Company will acquire First National Bank of Tampa (the "Bank") as its entry
into the Tampa/Hillsborough County market area. The Company intends to open a
community banking office in the Jacksonville market area as soon as practicable
following consummation of the Offering. 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, the Company also intends to expand into other Florida market areas with
demographic characteristics similar to the Identified Markets. Within each of
the Identified Markets, the Company expects to offer a broad range of
traditional banking products and services, focusing primarily on small and
medium-sized businesses. See "-- Strategy of the Company -- Market Expansion"
and "-- Products and Services."
The Company 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,
the Company 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"). The Company will maintain centralized credit
policies and procedures as well as centralized back office functions to support
the Community Banking Offices. Management expects that upon the Company's 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 "-- Model 'Local Community Bank."'
Management of the Company 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 the Company 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 the Company's main offices located in
Jacksonville and the Bank and its operations center in Tampa, the Company will
provide a variety of support services to each of the 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 the Company 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.
The Company expects to establish Community Banking Offices in each new
market area, primarily through the de novo branching of the Bank. Management
will also, however, evaluate opportunities for strategic acquisitions of
financial institutions in markets that are consistent with its business plan.
20
<PAGE> 24
There can be no assurances that the Company's objectives will be realized.
See "Risk Factors -- Expansion and Management of Growth; Competition; and
Unpredictable Economic Conditions."
INDUSTRY AND DEMOGRAPHIC OVERVIEW
Management of the Company 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 the Company believes that the Company's
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 the Company 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 THE COMPANY
The concept for the Company was developed in late 1997 by T. Stephen
Johnson & Associates, Inc., a financial services consulting firm ("TSJ&A"). The
Company 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 the Bank as an independent financial
institution capable of providing a platform to implement the Company's business
plan. The Company and the Bank 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, the Company
sought a chief executive officer who possessed the experience, leadership skills
and management ability to accomplish the Company's objectives. In January 1998,
the Company hired Charles E. Hughes, Jr. to be the President and Chief Executive
Officer of the Company. Prior to joining the Company, 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.
The Company 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 the Company
to implement its business strategy.
On March 30, 1998, the Company executed a definitive merger agreement with
the Bank, pursuant to which the Company will acquire all of the outstanding
capital stock of the Bank in exchange for shares of Common Stock. The aggregate
purchase price for the Bank will be $13.75 million. The total number of shares
of Common Stock to be issued in the Merger will be based upon the initial public
offering price of the Common Stock. The Merger will be accounted for as if the
Bank had acquired the Company, the financial statements of the Bank will become
the historical financial statements of the Company and there will be no
21
<PAGE> 25
goodwill recorded as a result of the Merger. As of December 31, 1997 and for the
fiscal year ended December 31, 1997, the Bank 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 "Description of Bank Acquisition."
STRATEGY OF THE COMPANY
General
The Company's business strategy is to create a statewide community banking
system in Florida. The major elements of this strategy are to:
- EXPAND THE BANK'S OPERATIONS IN THE TAMPA MARKET AND, AS SOON AS
PRACTICABLE FOLLOWING THE OFFERING, 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, 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, the Company initially intends
to establish a Community Banking Office within each Identified Market through
the branching of the Bank. The Company 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 the Bank, the Company's 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 the Company 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. The Company 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 the Company 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
Board of Directors of the Bank and of the Company. These directors will act as
ambassadors of the Bank within the community and will be expected to promote the
business development of each Community Banking Office.
The Company 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 the Company's entry into a new market area, it
will undertake a marketing campaign utilizing an officer calling program, and
community-based promotions and media
22
<PAGE> 26
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 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. The Company 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 the Company 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 the Company 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 the Company to avoid
investing significant amounts of capital in property and facilities.
Market Expansion
The Company intends to expand into the largest and fastest growing
communities in Florida. Once the Company has assembled a local management team
and local advisory board of directors for a particular market area, the Company
intends to establish one or more Community Banking Offices in that market. Upon
the consummation of the Merger, the Company will have an established Community
Banking Office in the Tampa market area. In addition, the Company has assembled
a management team in Jacksonville and, as soon as practicable following the
completion of the Offering, will open a Community Banking Office in the
Jacksonville market area. The Bank received OCC approval to establish a branch
location in Jacksonville on . The other markets into which the
Company 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.
23
<PAGE> 27
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 the Bank) 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.
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.
24
<PAGE> 28
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 the Company 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. The Company 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 the Company 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, the Company 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 the Company 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 the Company's 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
The Company intends to offer and the Bank currently offers a broad array of
traditional banking products and services to its customers. The proceeds from
the Offering will enable the Company to infuse additional capital into the Bank
which will enable the Bank to open Community Banking Offices in new markets and
to expand its existing lines of products and services. The Bank currently
provides products and services that are substantially similar to those set forth
below. For additional information with respect to the Bank's current operations,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Loans. The Company intends to offer a wide range of short to long-term
commercial and consumer loans. The allocation of the loans within each category
may change from time to time and will be dependent upon general economic
conditions. The Company does not have any predetermined division of the Bank's
loan portfolio.
Commercial. The Company expects that its commercial lending will
consist primarily of commercial and industrial loans for the financing of
accounts receivable, inventory, property, plant and equipment. The Company
also expects to offer Small Business Administration guaranteed loans ("SBA
loans") and factoring arrangements to certain of its customers. In making
these loans, the Company 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. The Company anticipates that it will also
offer commercial real estate loans to developers of both commercial and
residential properties. In making these loans, the Company intends to
manage its credit risk by actively monitoring such measures as advance
rate, cash flow, collateral value and other appropriate credit factors. See
"-- Operations of the Holding Company -- Credit Administration."
Residential Mortgage. The Company 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 the Company will make mortgage loans with
25
<PAGE> 29
a variety of terms, including fixed and floating to variable rates and a
variety of maturities. These loans will be made consistent with the
Company's 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 the Company's asset/liability mix policies will be sold in
the secondary markets.
Consumer Loans. The Company expects that its consumer loans will
consist primarily of installment loans to individuals for personal, family
and household purposes. In evaluating these loans, the Company 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, the
Company will require that its banking officers maintain an appropriate
margin between the loan amount and collateral value. The Company 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. The Company also expects to issue credit
cards to certain of its customers. In determining to whom it will issue
credit cards, the Company intends to evaluate the borrower's level and
stability of income, past credit history and other factors. Finally, the
Company expects to make additional loans which may not be classified in one
of the above categories. In making such loans, the Company will attempt to
ensure that the borrower meets the Company's credit quality standards.
For more detailed information with respect to those loans currently being
offered by the Bank, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition -- Loan Portfolio;
Allowance for Loan Losses and Net Charge-Offs."
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 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, the Company expects to implement a service charge fee
schedule, similar to the one currently in place at the Bank, 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. The Company expects to offer courier services to its
customers. Courier services, which the Company may either provide directly or
through a third party, permit the Company to provide the convenience and
personalized service its customers require by scheduling pick-ups of deposits.
The Company intends to offer courier services to its business customers. The
Bank 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. The Company 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 the Company believes that telephone and PC Banking will
assist their Community
26
<PAGE> 30
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. The Company 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
The Company will remain in the development stage until the consummation of
the Merger and the Offering. The Company's corporate offices will be relocated
to the Jacksonville Community Banking Office, when opened. The Company 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 the Company.
The Company 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, the Company
expects to hire a Human Resources Officer as well as a Chief Lending Officer.
Until that time, Mr. Hughes will serve as the Company's Chief Lending Officer,
and a human resources officer at the Bank will provide human resources support
for the Company.
The Company intends to use the Bank's facilities for its data processing,
operational and back office support activities. The Community Banking Offices
will utilize the operational support provided by the Bank to perform account
processing, loan accounting, loan support, network administration and other
functions. The Bank 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 the Bank.
Management believes that the Bank's existing operations and support management
will be capable of providing continuing operational support for all of the
Community Banking Offices.
Outsourcing. Management of the Company 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.
The Bank is currently utilizing M&I to provide its core data processing and
certain customer products, and the Company expects to assume this contract upon
consummation of the Merger. In addition to account level processing for loans
and deposits, the Bank 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
"-- Data Processing."
Credit Administration. The Company will oversee all credit operations
while still granting local authority to each Community Banking Office. The Chief
Credit Officer of the Company 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. The Company's 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 the
27
<PAGE> 31
Company's desired risk profile. Credit quality will be controlled through
uniform compliance to credit policy. The Company's 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.
The Company's 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 Board of
Directors. Risk management will require active involvement with the Company's
customers and active management of the Company's portfolio. The Chief Credit
Officer will review the Company's 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 Board of Directors. The purpose of these reviews
will be to attempt to ensure that the credit policy remains compatible with the
short and long-term business strategies of the Company. The Chief Credit Officer
will also generally require all individuals charged with risk management to
reaffirm their familiarity with the credit policy annually.
CURRENT OPERATIONS OF FIRST NATIONAL BANK OF TAMPA
The Bank commenced operations in July 1988 under the name Enterprise
National Bank of Tampa, as a full service commercial bank in Tampa, Florida. In
1993, the Bank changed its name to First National Bank of Tampa. The Bank leases
its facilities in the First National Plaza, located in downtown Tampa.
The Bank offers a variety of loan products, including commercial loans,
real estate loans, home equity loans, consumer/installment loans, SBA loans and
credit cards. The Bank 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, the
Bank 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 "-- Strategy of the
Company -- Products and Services."
History of First National Bank of Tampa
The Bank 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 the Bank's early years. In 1991, the OCC
informed the Board of Directors and management of the Bank that the Bank's
condition had deteriorated significantly. The OCC observed that the Bank's loan
portfolio evidenced deterioration in quality, with increasing levels of
delinquent and non-performing loans. Moreover, in the opinion of the OCC, the
Bank's lending practices evidenced poor underwriting and ineffective loan
administration. In addition, the OCC reported that the Bank'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, the Bank was required to
enter into a Formal Agreement with the OCC dated December 18, 1991, pursuant to
which the Bank 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 the Bank'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 the
Bank 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 Board of Directors of the Bank, as a result of the Bank's
financial difficulties, effected a substantial reorganization of the key
management positions through the hiring of John S. McMullen as President and
Chief Executive Officer and T. Edwin Stinson, Jr. as acting Chief Financial
Officer. Since the reorganization, the Bank's management team has remained
relatively unchanged.
28
<PAGE> 32
The Bank 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. The Bank's lending activities were
refocused on the small business sector while avoiding speculative real estate
and other higher risk credits. The Bank's current portfolio primarily consists
of commercial and commercial real estate loans including SBA loans. Currently,
problem loans represent a negligible portion of the Bank's total loans.
In 1993, as required by the Formal Agreement, the Bank 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. In spite of this infusion of
additional capital, the Bank's growth since the 1993 Offering has been limited
by its capital, and Bank management has primarily focused on increasing its
capital. On July 18, 1994, after successfully recapitalizing the Bank in
November 1993, restructuring the Board and management and significantly
improving the Bank's performance and asset quality of the loan portfolio, the
Board was notified by the OCC that the Formal Agreement was terminated.
The Bank engages in a broad array of lending activities, including
commercial/industrial, SBA guaranteed loans, consumer and real estate loans. As
of December 31, 1997, the Bank had a legal lending limit for loans of up to
$655,000 to any one person. See "Supervision and Regulation"; and "-- Strategy
of the Company -- Products and Services."
ASSET/LIABILITY MANAGEMENT
The objective of the Company and Bank is to manage assets and liabilities
to provide a satisfactory level of consistent operating profitability within the
framework of established liquidity, loan, investment, borrowing and capital
policies. The Chief Operating Officer of the Bank 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. The overall philosophy of management is to support asset growth
primarily through growth of core deposits. Management intends to continue to
invest the largest portion of the Bank's earning assets in commercial,
industrial and commercial real estate loans.
The Bank's asset/liability mix is monitored on a daily basis, with monthly
reports presented to the Bank's Board of Directors. 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 the Bank's earnings.
Management of the Company intends to maintain an asset/liability mix policy
similar to the Bank'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. The Company and the Bank 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, larger
branch networks and are able to offer a broader range of products and services
than the Company and the Bank.
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
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 the Company and the Bank. 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 the Company. The Company's failure
29
<PAGE> 33
to compete effectively for deposit, loan and other banking customers in its
market areas could have a material adverse effect on the Company's business,
future prospects, financial condition or results of operations. See "-- Strategy
of the Company -- Market Expansion."
DATA PROCESSING
The Bank currently has an agreement with M&I to provide its core processing
and certain customer products, and the Company expects to assume this contract
upon consummation of the Merger. The Company 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 the Company's future growth. The Company
believes the M&I contract to be adequate for its business expansion plans. See
"Risk Factors -- Impact of Technological Advances; Upgrade to Company's Internal
Systems," "-- Year 2000" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
FACILITIES
The Company's offices are located at 4110 Southpoint Boulevard, Suite 212,
Southpoint Square II, Jacksonville, Florida 32216. The Company's offices will be
relocated to the Jacksonville Community Banking Office, when opened. Initially,
it is expected that the bulk of the Company's operations will be conducted from
the Bank's offices in Tampa, utilizing the Bank's existing personnel.
The Bank's offices are located at 100 West Kennedy Boulevard, Tampa,
Florida 33602. The Bank occupies approximately 8,400 square feet in the
building. Should the Bank require additional space for expansion, the Bank also
has options for additional space at a pre-determined lease rate.
EMPLOYEES
The Company presently employs four persons on a full-time basis. The
Company will hire additional persons as needed to support its growth.
The Bank presently employs 21 persons on a full-time basis and three
persons on a part-time basis, including ten officers. The Bank will hire
additional persons as needed, including additional tellers and financial service
representatives.
LEGAL PROCEEDINGS
From time to time, the Company and the Bank may be involved in litigation
relating to claims arising out of operations in the normal course of business.
As of the date of this Prospectus, neither the Company nor the Bank is engaged
in any legal proceedings that are expected, individually or in the aggregate, to
have a material effect on the Company or the Bank.
30
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
The Company was incorporated on October 15, 1997 to acquire or establish a
bank in Florida. Prior to the consummation of the Merger, the Company will have
no operating activities. The Merger will be consummated immediately prior to the
closing of the Offering. Upon consummation of the Merger, the Bank's
shareholders will own greater than 50% of the outstanding Common Stock of the
Company, excluding the issuance of the shares in connection with the Offering.
Accordingly, the Merger will be accounted for as if the Bank had acquired the
Company, the financial statements of the Bank will become the historical
financial statements of the Company and no goodwill will be recorded as a result
of the Merger.
The Company has funded its start-up and organization costs through the sale
of units, consisting of Common Stock, Preferred Stock and warrants to purchase
shares of Common Stock. As the Company 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 the Company as of December 31, 1997 and for the period then ended,
is not relevant and therefore is not included herein.
THE BANK
Management believes that the acquisition of the Bank will enable the
Company 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 the Bank 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 Prospectus.
SUMMARY
The Bank'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 the Bank's historical weighted
average number of shares outstanding and do not reflect any pro forma
adjustments relating to the Offering 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 the Bank's inception in 1988
through 1994, the Bank generated approximately $8.5 million in net operating
loss carryforwards. As of December 31, 1997, the Bank 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, 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 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,
31
<PAGE> 35
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 the Bank 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. The Bank'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 the Bank'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
------- -------- ------ ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
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
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
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
------- ------ ------- ------
</TABLE>
32
<PAGE> 36
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996
--------------------------- ---------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- -------- ------ ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
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. The Bank 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.
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.
33
<PAGE> 37
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 the Bank 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, the Bank adjusts the rates and terms of
its interest-bearing liabilities in response to general market rate changes and
the competitive environment. The Bank 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. The Bank 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.
<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
34
<PAGE> 38
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 the Bank'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.
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, the Bank 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, the Bank 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>
35
<PAGE> 39
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 the Bank'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 a result of the addition of 967 square feet of
leased space for the Bank'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 the Bank'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 the Bank'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 the Bank'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.
The Bank 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 the Bank's deferred tax assets, net of deferred tax
liabilities and the valuation allowance. The Bank's deferred income tax assets
consist
36
<PAGE> 40
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.
The Bank reported losses from operations each year from the Bank's
inception in 1988 through 1994. These losses primarily resulted from loan losses
and high overhead costs. Management of the Bank 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, the Bank became
profitable in 1995. In order to reflect this fresh start, the Bank 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, the Bank 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 the Bank's results of operations subsequent to the quasi-reorganization.
As of December 31, 1997, the Bank 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 the Bank.
Prior to 1997, because of the uncertain nature of the Bank's earnings, the
Bank recorded a valuation allowance equal to the full amount of the deferred tax
assets. 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 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 the Bank'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.
As a result of the elimination of the deferred tax valuation allowance, the
Bank recognized the full benefit of the deferred tax assets at December 31,
1997. Accordingly, the Bank 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, the Bank's operating results
will be included in the Company's consolidated income tax returns. As a result
of the Merger, the Company will have the use of the Bank's net operating loss
carryforwards. However, the portion of the Bank's net operating loss
carryforwards which will be usable each year by the Company 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 the
37
<PAGE> 41
Bank 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, the Bank will produce sufficient taxable income to
allow the Company to fully utilize the Bank'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. The decrease in the Return on Average Assets resulted primarily
from an increase in average assets and a decrease in net interest margin.
Average assets increased 19.8%, or $8.9 million to $54.1 million in 1997 from
$45.2 million in 1996. The net interest margin decreased 16 basis points to
3.89% in 1997 from 4.05% in 1996. The growth in average assets from 1996 to 1997
included $3.7 million in investments securities and Federal funds sold and was
partially funded by a $1.9 million growth in repurchase agreements and other
borrowed funds during the same period. The net interest spread between these
assets and liabilities is substantially less than the spread between loans and
deposits.
Return on Average Equity decreased 256 basis points to 10.62% in 1997 from
13.18% in 1996. The decrease in the Return on Average Equity resulted primarily
from a decrease in net income and an increase in average shareholders equity.
Average shareholders' equity increased $600,000, or 21.6% to $3.5 million in
1997 from $2.9 million 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. The decrease in the Return on Average Assets resulted primarily
from an increase in average assets and an increase in the provision for income
taxes. Average assets increased $7.7 million, or 14.4% to $45.2 million in 1996
from $37.5 million in 1995. The provision for income taxes was $217,000 in 1996.
The Bank did not record a provision for income taxes in 1995. See "-- Results of
Operations -- Provision for Income Taxes."
Return on Average Equity decreased 167 basis points to 13.18% in 1996 from
14.85% in 1995. The decrease in Return on Average Equity resulted from an
increase in net income which was offset by an increase in average shareholders'
equity. Average equity increased $500,000, or 21.4% to $2.9 million in 1996 from
$2.4 million 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. The Bank 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.
38
<PAGE> 42
Loan Portfolio
The Bank'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. The Bank 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 the
Bank'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 % OF
BALANCE TOTAL BALANCE TOTAL
------- ----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
TYPE OF LOAN
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. The Bank's underwriting guidelines generally
require a minimum of 20% equity on all commercial real estate transactions.
Loan-to-value ratios are normally supported by a current appraisal performed by
an appraiser which has been pre-approved and engaged by the Bank. These
appraisals are typically updated at the time of the renewal of the credit, if
the terms of the loan are amended, or if the Bank believes that there has been a
substantial negative change in the value or condition of the collateral.
Property insurance, both standard hazard and flood, if applicable, is required
on all transactions where the Bank is relying on the value of the collateral to
support the loan. In the large majority of credits, the Bank requires that the
principals or owners of the borrowing entity guarantee the credit including the
personal guarantees of the corporate officers or partners. It is the Bank's
policy to maintain current financial information, including verification of
income on all borrowers and guarantors. 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. Generally these loans are secured by accounts receivable, marketable
securities, deposit accounts, equipment and other fixed assets. Loan-to-value
ratios range from 50% for loans secured by inventory to 100% for loans secured
by deposit accounts of the Bank. Each category of commercial loans has been
assigned a level of acceptable loan-to-value ratios and specific requirements
for determination of value and monitoring of collateral levels and values.
Property insurance,
39
<PAGE> 43
both standard hazard and flood, if applicable, is required on all transactions
where the Bank is relying on the value of the collateral to support the loan.
The Bank generally requires that the principals or owners of the borrowing
entity guarantee the credit including the personal guarantees of the corporate
officers or partners. The Bank's policy requires that current financial
information, including verification of income, be maintained on all borrowers
and guarantors with the only exception of loans secured by Bank deposit
accounts. At December 31, 1997, commercial loans represented 38.9% of
outstanding loan balances, compared to 39.2% at December 31, 1996.
Residential Mortgage. The Bank's residential mortgage loans consist of
loans secured by first and second mortgages and loans for the construction of
residential properties. Loan-to-value ratios generally do not exceed 80% of the
appraised value of the collateral and are determined by an appraisal performed
by an appraiser approved and engaged by the Bank. The Bank does not engage in
home equity lending where the total debt securing the property exceeds the
current appraised value of the collateral less an acceptable margin. Property
insurance, both standard hazard and flood, if applicable, is required on all
transactions where the Bank is relying on the value of the collateral to support
the loan. The Bank generally requires that all owners of the property guarantee
the debt and provide current financial and income information at the time of
application. 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.
Consumer. The Bank's consumer loans consist primarily of installment loans
to individuals for personal, family and household purposes, education and other
personal expenditures. The Bank offers a full range of consumer loan products,
however, management has not actively solicited consumer loans due to the below
market pricing currently offered by non-bank competitors. The Bank's consumer
loan portfolio primarily consists of loans made to consumers affiliated with a
commercial depositor or borrower. The Bank requires standard property insurance
on collateral securing consumer loans as well as financial information on the
borrowers and guarantors. 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. The
Bank offers Visa Gold and Visa Secured Credit Cards. The Bank's credit card
portfolio primarily consists of extensions of credit to existing bank customers
or persons well known to the Bank's management. The Bank does not solicit credit
card accounts outside of its market area nor does it utilize mass marketing for
its credit card products. Overdraft Protection Lines are offered to both
consumer and commercial accounts as a convenience to the Bank's customers. The
Bank underwrites its credit card and overdraft credit lines using generally the
same standards as other types of credits. At December 31, 1997 and 1996, credit
card and other loans represented 2.6% of outstanding loan balances.
The Bank's only area of credit concentration is commercial and commercial
real estate loans. The Bank 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,
the Bank 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 the Bank, see "Business."
While risk of loss in the Bank's loan portfolio is primarily tied to the
credit quality of the borrowers, risk of loss may also increase due to factors
beyond the Bank'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 the Bank's real estate portfolio. Of the Bank'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 the Bank has originated certain loans
which, because they exceeded the Bank's legal lending limit, were sold to other
banks. As a result of the Offering, the Bank expects to have an increased
lending limit. Accordingly, the Bank may, at its discretion, repurchase certain
loan participations, thereby increasing earning assets. Loan participation
agreements allow the Bank to repurchase loans at the outstanding principal
balance plus accrued interest, if any, at the Bank's discretion.
40
<PAGE> 44
The Bank also purchases participations from other banks. When the Bank
purchases these participations, such loans are subjected to the Bank's
underwriting standards as if the loan was originated by the Bank. Accordingly,
management of the Bank does not believe that loan participations purchased from
other banks pose any greater risk of loss than loans that the Bank originates.
The repayment of loans in the loan portfolio as they mature is a source of
liquidity for the Bank. The following table sets forth the maturity of the
Bank'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)
<S> <C> <C> <C> <C>
TYPE OF LOAN
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)
<S> <C> <C> <C> <C>
INTEREST CATEGORY
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."
The Bank started an SBA lending program in August 1994. Under this program,
the Bank 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 the Bank sells in the secondary market. The majority of the
Bank'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. The Bank records the premium received upon the
sale of the guaranteed portion of SBA loans as gain on sale of loans. The Bank
does 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 the Bank'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.
41
<PAGE> 45
The Bank 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 the Bank'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 the Bank 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, the Bank has the option of
charging-off the non-SBA guaranteed portion of the loan retained by the Bank and
requesting payment of the SBA guaranteed portion. In such cases, the Bank will
have determined that insufficient collateral exists, or the cost of liquidating
the business exceeds the anticipated proceeds to the Bank. In all liquidations,
the Bank 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 the Bank 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 the Bank'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.
42
<PAGE> 46
An analysis of the Bank's loss experience is furnished in the following
table for the periods indicated, as well as a detail of the allowance for loan
losses:
<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 the Bank, 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. The Bank
adopted SFAS 114 on January 1, 1995. At December 31, 1997, the Bank 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.
43
<PAGE> 47
A portion of these impaired loans have also been classified by the Bank as loans
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 the Bank'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 the Bank'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. The Bank 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 the Bank'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 conditions and other pertinent information. Upon
completion, the report is approved by the Board and management of the Bank. In
addition to the above credit review, the Bank'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 the Bank.
Information provided from the above two independent sources, together with
information provided by the management of the Bank 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
44
<PAGE> 48
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, the Bank restructured three
commercial loans to one borrower that was experiencing financial difficulties.
These loans were temporarily placed on an interest-only basis where the Bank 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 the Bank has provided a specific reserve of $63,000
representing the Bank'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.
The Bank has policies, procedures and underwriting guidelines intended to
assist in maintaining the overall quality of its loan portfolio. The Bank
monitors its delinquency levels for any adverse trends. Nonperforming 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.
The Bank'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 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.
The Bank 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, the Bank 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 the Bank 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 the Bank 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
45
<PAGE> 49
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, the Bank 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 the Bank's investment securities, including mortgage-backed
securities.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------
1997 1996
-------------------- --------------------
INVESTMENT CATEGORY BALANCE % OF TOTAL BALANCE % OF TOTAL
- ------------------- ------- ---------- ------- ----------
(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>
The Bank 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.
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"), the Bank 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 the Bank. 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.
46
<PAGE> 50
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)
--------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
AVAILABLE FOR SALE:
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) The Company 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
The Bank'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, 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
the Bank 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 the Bank'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 the Bank. 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 the Bank's loan growth.
47
<PAGE> 51
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
DEPOSIT CATEGORY BALANCE RATE BALANCE RATE
- ---------------- ------- ------- ------- -------
(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 the Bank. 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.
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
----------------- -----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<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 the Bank 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. The Bank 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.
48
<PAGE> 52
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 the Bank'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.
<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
49
<PAGE> 53
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.
The Bank's Tier 1 (to risk-weighted assets) capital ratio increased to
13.00% in 1997 from 11.01% in 1996. The Bank'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.
The Bank 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 "Business" and "Supervision and
Regulation."
No new shares of common stock were issued by the Bank 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 the Bank'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 the Bank to meet the needs of its customer base,
but to maintain an appropriate balance between interest-sensitive assets and
interest-sensitive liabilities so that the Bank 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
the Bank'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
50
<PAGE> 54
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.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------------------------------------------
ONE ONE- FOUR-
MONTH THREE TWELVE ONE-FIVE OVER FIVE NONINTEREST
OR LESS MONTHS MONTHS YEARS YEARS SENSITIVE TOTAL
------- ------- ------- -------- --------- ----------- -------
(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 sensitive assets
to rate sensitive
liabilities.......... 1.35x 1.18x 1.07x 1.00x 1.21x
</TABLE>
51
<PAGE> 55
In the current interest rate environment, the liquidity and maturity
structure of the Bank's assets and liabilities are important to the maintenance
of acceptable performance levels. A decreasing rate environment negatively
impacts earnings as the Bank'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
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, the Bank 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 the
Bank'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 the Bank's net interest margin. Because of these factors and in a static
test, interest sensitivity gap reports may not provide a complete assessment of
the Bank's exposure to changes in interest rates. Management utilizes
computerized interest rate simulation analysis to determine the Bank's interest
rate sensitivity. The table above indicates the Bank 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 the Bank's
net interest margin. The Bank 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. The Bank'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 the Bank'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 a change
in the shape of the Treasury yield curve would cause significantly different
changes to net interest income than indicated above.
52
<PAGE> 56
Generally, the Bank's commercial and commercial real estate loans are
indexed to the prime rate. A portion of the Bank'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 the Bank's interest
income. The majority of the Bank'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. The Bank adjusts the rates and terms of its loans and
interest-bearing liabilities in response to changes in the interest rate
environment.
The Bank 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. The Bank'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.
The Bank's average loan-to-deposit ratio remained constant at 75.8% during
1997 and 1996. The Bank'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 the Bank's total deposits at December 31, 1996. Management attempts to
manage the Bank's loan-to-deposit ratio on an average basis, as opposed to on a
daily basis.
The Bank 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, the Bank 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 the Company will find it necessary to raise
additional funds to meet expenditures required to operate the business of the
Company and the Bank over the next twelve months. All anticipated material
expenditures for such period have been identified and provided for out of the
proceeds of the Offering. See "Use of Proceeds."
FOR THE THREE MONTHS ENDED MARCH 31, 1998
The Company
The Company incurred operating expenses consisting of salaries and
benefits, occupancy and equipment costs and certain other operating costs and
organizational costs, together totaling approximately $126,000 during the three
months ended March 31, 1998. During the quarter ended March 31, 1998, the
Company adopted the provisions of SOP 98-5 "Reporting on the Costs of Start-Up
Activities", which resulted in the write-off of $26,000 of organizational costs
capitalized as of December 31, 1997. During the three months ended March 31,
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) a Warrant to purchase 800
53
<PAGE> 57
shares of Common Stock, at the price of $6,008 per unit. Net proceeds to the
Company from this private placement totaled approximately $600,000.
The Bank
RESULTS OF OPERATIONS
The Bank's net income for the first quarter of 1998 decreased $59,000, or
53% to $52,000 from $111,000 for the corresponding period in 1997. Basic and
diluted earnings per share were $.03 for the first quarter of 1998 compared to
$.06 for the first quarter of 1997. The decrease in net income from the first
quarter of 1997 compared to the first quarter of 1998 was primarily attributable
to a decrease in net interest income of $9,000, a decrease in noninterest income
of $16,000 and an increase in noninterest expense of $71,000, which were
partially offset by a decrease in the provision for income taxes of $37,000.
Net interest income decreased $9,000, or 2.0% for the first quarter of 1998
compared to the first quarter of 1997. Interest income increase $29,000, or 2.8%
while interest expense increased $38,000, or 7.0%. This decrease in net interest
income resulted from increased competition for funds with non-bank institutions.
The provision for loan losses charged to operations in both the first
quarters of 1998 and 1997 totaled $15,000.
Noninterest income decreased $16,000, or 9.6% for the first quarter of 1998
compared to the first quarter of 1997. Increases in services fees and other
noninterest income were offset by a decrease in the gain on sale of loans for
the first quarter of 1998 compared to the corresponding period of 1997. The
decrease in the gain on sale of loans is due to the timing of the sale of such
loans which can fluctuate rather significantly on a quarterly basis.
Noninterest expense increased $71,000, or 15.5% to $526,000 for the first
quarter of 1998, from $455,000 for the first quarter of 1997. The increase in
non interest expenses resulted primarily from increases in salaries and benefits
and occupancy and equipment costs. The increase in salaries and benefits of
$61,000, or 25.6% to $300,000 for the first quarter of 1998, from $239,000 for
the first quarter of 1997, results from normal salary increases and the addition
of lending staff. The increase in occupancy and equipment expense of $15,000, or
25.8% resulted from the additional leased space for the Bank's SBA department
and from additional depreciation and maintenance expense resulting from the
purchase of additional computer equipment.
The effective tax rate for both the first quarter of 1998 and 1997 is 38%,
representing the estimated effective annual tax rates for both periods.
FINANCIAL CONDITION
Total assets at March 31, 1998 were $62.2 million, an increase of $1.8
million, or 3% from $60.4 million at December 31, 1997. Total loans increased
$2.4 million, or 7.1% to $36.2 million at March 31, 1998 from $33.8 million at
December 31, 1997. Investment securities increased $760,000 or 7.1% to $11.5
million at March 31, 1998 from $10.8 million at December 31, 1997. The increases
in total loans and investment securities available for sale were funded by a
reduction in Federal funds sold of $1.1 million or 11.3% from $10.2 million at
December 31, 1997 to $9.1 million at March 31, 1998 and an increase in
repurchase agreements of $2.1 million or 34.7% from $5.9 million at December 31,
1997 to $8.0 million at March 31, 1998. Total deposits and shareholders' equity
remained relatively consistent from December 31, 1997 to March 31, 1998.
Nonaccrual loans increased to $435,000 at March 31, 1998, compared to $0 at
December 31, 1997. These nonaccrual loans represent 6 commercial loans, 5 of
which are SBA loans of which $362,000 are guaranteed by the SBA, subject to
certain conditions. The Bank reflected these loans as nonaccrual as they are
over 120 days past-due and in liquidation at March 31, 1998. These loans were
classified as impaired loans at December 31, 1997 with an allowance for loan
losses for the Bank's estimated exposure on these loans.
54
<PAGE> 58
YEAR 2000
The Company 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." The Company
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 the Company 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
the Company's 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 the Company's 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 slow as
interest rates increase, and can reduce the Banks' earnings from such activities
and the income from the sale of residential mortgage loans in the secondary
market.
55
<PAGE> 59
MONETARY POLICIES
The results of operations of the Bank 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 the Company or the Bank.
SUPERVISION AND REGULATION
GENERAL
The Company and the Bank will operate in a highly regulated environment,
and the business activities of the Company and the Bank will be supervised by a
number of federal regulatory agencies, including the Federal Reserve Board, the
OCC, the Florida Banking Department and the FDIC.
The Company will be regulated by the Federal Reserve Board under the
federal Bank Holding Company Act of 1956, which requires every bank holding
company to obtain the prior approval of the Federal Reserve Board before
acquiring more than 5% of the voting shares of any bank or all or substantially
all of the assets of a bank, or before merging or consolidating with another
bank holding company. The Federal Reserve Board (pursuant to regulation and
published policy statements) has maintained that a bank holding company must
serve as a source of financial strength to its subsidiary banks. In adhering to
the Federal Reserve Board policy, the Company may be required to provide
financial support to its subsidiary bank at a time when, absent such Federal
Reserve Board policy, the Company would not deem it advisable to provide such
assistance.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, which became effective in November 1994, the restrictions on interstate
acquisitions of banks by bank holding companies were repealed as of September
29, 1995, such that the Company and any other bank holding company located in
Florida is able to acquire a bank located in any other state, and a bank holding
company located outside Florida can acquire any Florida-based bank, in either
case subject to certain deposit percentage and other restrictions. Beginning on
June 1, 1997, the legislation provides that unless an individual state has
elected to prohibit out-of-state banks from operating interstate branches within
its territory, adequately capitalized and managed bank holding companies will be
able to consolidate their multi-state bank operations into a single bank
subsidiary and to branch on an interstate basis. De novo branching by an
out-of-state bank would be permitted only if it is expressly permitted by the
laws of the host state. Florida does not permit de novo branching by an
out-of-state bank. Therefore, the only method by which an out-of-state bank or
bank holding company may enter Florida is through an acquisition. The authority
of a bank to establish and operate branches within a state will continue to be
subject to applicable state branching laws.
A bank holding company is generally prohibited from acquiring control of
any company which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies. Effective April 21, 1997, the Federal
Reserve Board revised and expanded the list of permissible non-banking
activities, which now includes the following activities: extending credit and
servicing loans; acting as investment or financial advisor to subsidiaries and
certain outside companies; leasing personal and real property or acting as a
broker with respect thereto; providing management and employee benefits
consulting and career counseling services to nonaffiliated banks and nonbank
depository institutions; operating certain nonbank depository institutions;
performing certain trust company functions; providing certain agency
transactional services, including securities brokerage services, riskless
principal transactions, private placement services, and acting as a futures
commission merchant; providing data processing and data transmission services;
acting as an insurance agent or underwriter with respect to certain limited
types of insurance;
56
<PAGE> 60
performing real estate appraisals; arranging commercial real estate equity
financing; providing check-guaranty, collection agency and credit bureau
services; engaging in asset management, servicing and collection activities;
providing real estate settlement services; acquiring certain debt which is in
default; underwriting and dealing in obligations of the United States, the
states and their political subdivisions; engaging as a principal in foreign
exchange trading and dealing in precious metals; providing other support
services such as courier services and the printing and selling of checks; and
investing in programs designed to promote community welfare.
In determining whether an activity is so closely related to banking as to
be permissible for bank holding companies, the Federal Reserve Board is required
to consider whether the performance of such activities by a bank holding company
or its subsidiaries can reasonably be expected to produce benefits to the public
such as greater convenience, increased competition and gains in efficiency that
outweigh the possible adverse effects such as undue concentration of resources,
decreased or unfair competition, conflicts of interest and unsound banking
practices. Generally, bank holding companies are required to obtain the prior
approval of the Federal Reserve Board to engage in any new activity not
previously approved by the Federal Reserve Board.
The Company is also regulated by the Florida Banking Department under the
Florida Financial Institutions Code, which requires every bank holding company
to obtain the prior approval of the Florida Commissioner of Banking before
acquiring more than 5% of the voting shares of any Florida bank or all or
substantially all of the assets of a Florida bank, or before merging or
consolidating with any Florida bank holding company. A bank holding company is
generally prohibited from acquiring ownership or control of 5% or more of the
voting shares of any Florida bank or Florida bank holding company unless the
Florida bank or all subsidiaries of the Florida bank holding company to be
acquired have been in existence and continuously operating, on the date of such
acquisition, for a period of three years or more. However, approval of the
Florida Banking Department is not required if the bank to be acquired or all
bank subsidiaries of the Florida bank holding company to be acquired are
national banks.
The Bank, as a subsidiary of the Company, is subject to restrictions under
federal law in dealing with the Company and other affiliates, if any. These
restrictions apply to extensions of credit to an affiliate, investments in the
securities of an affiliate and the purchase of assets from an affiliate.
Loans and extensions of credit by national banks are subject to legal
lending limitations. Under federal law, a national bank may grant unsecured
loans and extensions of credit in an amount up to 15% of its unimpaired capital
and surplus to any person if the loans and extensions of credit are not fully
secured by collateral having a market value at least equal to their face amount.
In addition, a national bank may grant loans and extensions of credit to a
single person in an amount up to 10% of its unimpaired capital and surplus,
provided that the transactions are fully secured by readily marketable
collateral having a market value determined by reliable and continuously
available price quotations, at least equal to the amount of funds outstanding.
This 10% limitation is separate from, and in addition to, the 15% limitation for
unsecured loans. Loans and extensions of credit may exceed the general lending
limit if they qualify under one of several exceptions. Such exceptions include
certain loans or extensions of credit arising from the discount of commercial or
business paper, the purchase of bankers' acceptances, loans secured by documents
of title, loans secured by U.S. obligations and loans to or guaranteed by the
federal government.
CAPITAL ADEQUACY REQUIREMENTS
Both the Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the OCC. The Federal
Reserve Board and the OCC have issued risk-based capital guidelines for bank
holding companies and banks which make regulatory capital requirements more
sensitive to differences in risk profiles of various banking organizations. The
capital adequacy guidelines issued by the Federal Reserve Board are applied to
bank holding companies on a consolidated basis. The OCC's risk capital
guidelines apply directly to national banks regardless of whether they are
subsidiaries of a bank holding company. Both agencies' requirements (which are
substantially similar), provide that banking organizations must have capital
equivalent to 8% of weighted risk assets. The risk weights assigned to assets
are based primarily on credit risks. Both the Federal Reserve Board and the OCC
have also implemented new minimum capital leverage ratios to be used in tandem
with the risk-based guidelines in assessing the overall capital
57
<PAGE> 61
adequacy of banks and bank holding companies. Under these rules, banking
institutions are required to maintain a ratio of 3% "Tier 1" capital to total
assets (net of goodwill). Tier 1 capital includes common shareholders equity,
noncumulative perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries, less certain intangible assets.
The OCC's guidelines provide that intangible assets are generally deducted
from Tier 1 capital in calculating a bank's risk-based capital ratio. However,
certain intangible assets which meet specified criteria ("qualifying
intangibles") such as mortgage servicing rights are retained as a part of Tier 1
capital. The OCC currently maintains that only mortgage servicing rights and
purchased credit card relationships meet the criteria to be considered
qualifying intangibles. The OCC's guidelines formerly provided that the amount
of such qualifying intangibles that may be included in Tier 1 capital was
strictly limited to a maximum of 25% of total Tier 1 capital. The OCC has
amended its guidelines to increase the limitation on such qualifying intangibles
from 25% to 50% of Tier 1 capital and further to permit the inclusion of
purchased credit card relationships as a qualifying intangible asset.
In addition, the OCC has adopted rules which clarify treatment of asset
sales with recourse not reported on a bank's balance sheet. Among assets
affected are mortgages sold with recourse under Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation and Federal Farm Credit Bank
programs. The rules clarify that even though those transactions are treated as
asset sales for bank Call Report purposes, those assets will still be subject to
a capital charge under the risk-based capital guidelines.
Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well diversified risk,
high asset quality, high liquidity, good earnings and in general, have to be
considered strong banking organizations rated composite 1 under the CAMEL rating
system for banks. Institutions with lower ratings and institutions with high
levels of risk or experiencing or anticipating significant growth would be
expected to maintain ratios 100 to 200 basis points above the stated minimums.
The OCC, the Federal Reserve Board and the FDIC have adopted regulations
revising their risk-based capital guidelines to ensure that the guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse effect
that changes in market interest rates may have on a bank's financial condition
and is inherent to the business of banking. Under the new regulations, when
evaluating a bank's capital adequacy, the agency's capital standards now
explicitly include a bank's exposure to declines in the economic value of its
capital due to changes in interest rates. The exposure of a bank's economic
value generally represents the change in the present value of its assets, less
the change in the value of its liabilities, plus the change in the value of its
interest rate off-balance sheet contracts. Concurrently, the agencies issued a
joint policy statement, effective June 26, 1996, to provide guidance on sound
practices for managing interest rate risk. In the policy statement, the agencies
emphasize the necessity of adequate oversight by a bank's Board of Directors and
senior management and of a comprehensive risk management process. The policy
statement also describes the critical factors affecting the agencies'
evaluations of a bank's interest rate risk when making a determination of
capital adequacy. The agencies' risk assessment approach used to evaluate a
bank's capital adequacy for interest rate risk relies on a combination of
quantitative and qualitative factors. Banks that are found to have high levels
of exposure and/or weak management practices will be directed by the agencies to
take corrective action. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), enacted on December 19, 1991, provides for the development of a
regulatory monitoring system requiring prompt corrective action on the part of
banking regulators with regard to certain classes of undercapitalized
institutions. While the FDICIA does not change any of the minimum capital
requirements, it directs each of the federal banking agencies to issue
regulations putting the monitoring plan into effect. The FDICIA creates five
"capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in the FDICIA and which will be used to
determine the severity of corrective action the appropriate regulator may take
in the event an institution
58
<PAGE> 62
reaches a given level of undercapitalization. For example, an institution which
becomes "undercapitalized" must submit a capital restoration plan to the
appropriate regulator outlining the steps it will take to become adequately
capitalized. Upon approving the plan, the regulator will monitor the
institution's compliance. Before a capital restoration plan will be approved,
any entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of five percent of the institution's total assets or the
amount which is necessary to bring the institution into compliance with all
capital standards. In addition, "undercapitalized" institutions will be
restricted from paying management fees, dividends and other capital
distributions, will be subject to certain asset growth restrictions and will be
required to obtain prior approval from the appropriate regulator to open new
branches or expand into new lines of business.
As an institution's capital levels decline, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
In order to comply with the FDICIA, the Federal Reserve Board, the OCC and
the FDIC have adopted regulations defining operational and managerial standards
relating to internal controls, loan documentation, credit underwriting criteria,
interest rate exposure, asset growth, and compensation, fees and benefits.
In response to the directive issued under the FDICIA, the regulators have
established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the FDICIA.
The following table reflects the capital thresholds:
<TABLE>
<CAPTION>
TOTAL RISK- TIER 1 RISK- TIER 1
BASED CAPITAL BASED CAPITAL LEVERAGE
RATIO RATIO RATIO
------------- ------------- --------
<S> <C> <C> <C>
Well capitalized(1)................................. > 10% > 6% > 5%
- - -
Adequately Capitalized(1)........................... > 8 > 4 > 4(2)
- - -
Undercapitalized(4)................................. < 8 < 4 < 4(3)
Significantly Undercapitalized(4)................... < 6 < 3 < 3
Critically Undercapitalized......................... -- -- < 2(5)
-
</TABLE>
- ---------------
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) l3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(4) An institution falls into this category if it is below the specified capital
level for any of the three capital measures.
(5) Ratio of tangible equity to total assets.
The scope of regulation and permissible activities of the Company and the
Bank is subject to change by future federal and state legislation. In addition,
regulators sometimes require higher capital levels on a case-by-case basis based
on such factors as the risk characteristics or management of a particular
institution. The Company and the Bank are not aware of any attributes of their
operating plan that would cause regulators to impose higher requirements.
59
<PAGE> 63
DESCRIPTION OF BANK ACQUISITION
GENERAL
On March 30, 1998, the Company and the Bank entered into an agreement (the
"Merger Agreement") whereby the Bank will be merged with and into Florida
Interim Bank No. 1, N.A. ("Interim"), a national bank. Interim will be the
surviving entity in the Merger, and, immediately upon consummation of the
Merger, will change its name to "Florida Bank, N.A."
The closing of the transactions contemplated by the Merger Agreement (the
"Closing") will be immediately prior to the closing of the Offering, at a time,
place and date specified by the parties. The Merger and other transactions
contemplated by the Merger Agreement will become effective on the date and at
the time certification of the Merger is received from the OCC (the "Effective
Time").
The aggregate purchase price for the Bank will be $13.75 million. At the
Effective Time, each outstanding share of the Bank's capital stock ("Bank
Stock")(other than shares held by holders 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 Common Stock equal to the quotient obtained by
dividing 6.6586 by the initial public offering price of the Common Stock offered
hereby, rounded to the nearest third decimal point (the "Exchange Ratio"). The
value of the consideration to be paid to Bank shareholders in the Merger was
arrived at as a result of the Company's due diligence review of the Bank's
financial condition and negotiations between management of the Company and the
Bank. At an assumed initial public offering price of $11.00 for the Common Stock
(the mid-point of the estimated range) and assuming an aggregate of 2,065,000
shares of Bank Stock issued and outstanding as of the Effective Time (assuming
the exercise of all outstanding options), each share of Bank Stock would be
convertible into .605 shares of Common Stock, and an aggregate of 1,250,000
shares of Common Stock would be issuable upon conversion and exchange of all
shares of Bank Stock. Cash will be paid in lieu of fractional shares. If the
Company changes the number of shares of Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend,
recapitalization, reclassification, or similar transaction and the record date
or the effective date thereof will be prior to the Effective Time, the Exchange
Ratio will be proportionately adjusted.
The aggregate purchase price of $13.75 million corresponds to 209.8% of the
Bank's reported shareholders' equity (plus assumed proceeds on the exercise of
the Bank's 240,000 outstanding options) of $6.6 million as of December 31, 1997
and 36.6 times its reported net income for 1997 of $376,000. Shareholders'
equity as of December 31, 1997 includes a one-time, non-recurring increase in
additional paid-in capital of approximately $2.4 million due to the elimination
of the valuation allowance on the Bank's net deferred tax assets.
CONDITIONS TO THE MERGER
Consummation of the Merger, which has been approved by the boards of
directors of both the Company and the Bank, is subject to the satisfaction or
waiver of certain conditions including, among others, (i) approval of the Merger
by the requisite vote of at least two-thirds of the outstanding Bank Stock at a
special meeting of the Bank's shareholders to be held on July 1, 1998, (ii) the
Registration Statement of which this Prospectus is a part being declared
effective under the Securities Act, (iii) receipt of the opinion of Mercer
Capital as to the fairness from a financial point of view of the Merger to Bank
shareholders, (iv) approval of appropriate regulatory agencies and (v) execution
of a definitive underwriting agreement for the purchase and sale of at least $30
million of Company Common Stock. Approval of the Merger Agreement by the
Company's shareholders is not required to effect the Merger.
REPRESENTATIONS AND WARRANTIES; CONDUCT OF BUSINESS PENDING THE CONSUMMATION OF
THE MERGER
The Merger Agreement contains various customary representations and
warranties including, without limitation, representations and warranties by the
Company and the Bank as to their organization, existence and good standing,
capitalization, authority and power to carry out the transactions contemplated
by the Merger Agreement, compliance with all regulatory filing requirements,
compliance with laws, possession of required consents and approvals, absence of
undisclosed liabilities, absence of pending litigation, payment of
60
<PAGE> 64
taxes, possession of good and marketable title with respect to each party's
assets, compliance with environmental laws, compliance with the Employee
Retirement Income Security Act of 1974, as amended, absence of default in
Material Contracts (as defined in the Merger Agreement) and absence of certain
events, changes or occurrences which, individually or in the aggregate would,
with respect to the Company or the Bank: (i) in the aggregate result in an
adverse impact of at least $200,000 on the financial position or results of
operations of either the Company or the Bank or (ii) impair the ability of
either the Company or the Bank to perform its respective obligations under the
Merger Agreement or to consummate the Merger or the other transactions
contemplated by the Merger Agreement (collectively, a "Material Adverse
Effect"), provided that a Material Adverse Effect will 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 principals generally applicable to banks and their
holding companies, (c) actions and omissions of any of the Company, the Bank or
any of their respective subsidiaries taken with the prior informed consent of
the other party in contemplation of the transactions contemplated by the Merger
Agreement, (d) circumstances affecting regional bank holding companies generally
and (e) the Merger and compliance with the provisions of the Merger Agreement on
the operating performance of the Company and the Bank.
The Bank has agreed, during the period from the date of the Merger
Agreement to the earlier of the Effective Time or termination of the Merger
Agreement, to (a) operate its business only in the usual, regular, and ordinary
course, (b) use its reasonable best efforts to preserve its business
organization and assets and maintain its rights and franchises, (c) use its
reasonable best efforts to maintain its current employee relationships, and (d)
take no action which would materially adversely affect the ability of any party
to obtain any consents of regulatory authorities required for the transactions
contemplated by the Merger Agreement. In addition, the Company has agreed during
such time period to (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 its Common Stock and the business prospects of its companies
and (ii) take no action which would (x) materially adversely affect the ability
of any party to obtain any consents required for the transactions contemplated
by the Merger Agreement or (y) materially adversely affect the ability of any
party to perform its covenants and agreements under the Merger Agreement. In
addition, the Company and the Bank have agreed that they will not, without the
other party's prior approval, and unless otherwise expressly permitted by the
Merger Agreement, take certain specified actions that would have the effect of
changing such party's capital or ownership structure, loan portfolio, or balance
sheet.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time; (a) by mutual written consent of the boards of
directors of the Company and the Bank; (b) by the board of directors of either
the Bank or the Company: (i) in the event of the inaccuracy of any
representation or warranty of the other party contained in the Merger Agreement
which cannot or has not been cured within 30 days after providing written notice
of such inaccuracy and which inaccuracy would provide the terminating party the
ability to refuse to consummate the Merger, provided that the terminating party
is not then in breach of any representation or warranty, or in material breach
of any covenant or agreement, contained in the Merger Agreement; (ii) if the
other party has materially breached any covenant, agreement or obligation under
the Merger Agreement, and such breach cannot or will not be cured within 30 days
after giving written notice to the breaching party of the breach; (iii) if any
application for necessary regulatory approval consent is denied by final
nonappealable action; (iv) if the Bank's shareholders fail to approve the Merger
Agreement; (v) the Merger has not been consummated by September 30, 1998; or
(vi) any of the conditions precedent to the party's obligations to consummate
the Merger cannot be satisfied, or cannot be satisfied or fulfilled by September
30, 1998; (c) by the Company if (i) dissenters' rights are claimed by persons
owning in the aggregate more than 10% of the issued and outstanding Bank Stock
or (ii) the Bank does not receive an opinion from Deloitte & Touche LLP, dated
as of the Effective Time and with contents acceptable to the Company in its sole
discretion, to the effect that no ownership change (as defined in Section 382(g)
of the Code), of the Bank has occurred during or after any taxable period in
which the Bank incurred a net operating loss that carries over to any taxable
period ending after December 31, 1996 or (d) by the Bank, if any time
61
<PAGE> 65
prior to the Effective Time, (i) Mercer Capital withdraws its fairness opinion
or (ii) a third-party makes a bona fide Acquisition Proposal that the Bank's
Board of Directors determines in its good faith and in the exercise of its
fiduciary duties, is more favorable to the Bank's shareholders than the Merger
Agreement and that the failure to terminate the Merger Agreement and accept such
alternative would be inconsistent with the proper exercise of such fiduciary
duties.
62
<PAGE> 66
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the Company's
executive officers, directors and significant employees upon completion of the
Offering 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 D. 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 Board of Directors of the Company is divided into three classes,
designated Class I, Class II and Class III. See "-- Board of Directors."
(2) Upon completion of the Offering and the Merger, Mr. Stinson will become
Chief Financial Officer, Secretary and Treasurer of the Company.
Accordingly, Ms. LaFoy will resign as Secretary and Treasurer of the
Company, but will remain a member of the Board of Directors.
(3) Upon completion of the Offering and the Merger, Mr. McMullen will be the
President of the Tampa Market and a Director.
(4) Upon completion of the Offering and the Merger, Mr. Krusen will be a
Director of the Company.
M. G. Sanchez, age 63, has served as Chairman of the Board and a Class II
Director of the Company since February 1998. Prior to his service with the
Company, 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 Florida.
Upon completion of the Offering and the Merger, Mr. Sanchez will serve as
Chairman of the Board of the Directors of the Bank.
Charles E. Hughes, Jr., age 54, has served as President, Chief Executive
Officer and a Class III Director of the Company 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,
63
<PAGE> 67
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 the Bank.
T. Edwin Stinson, Jr., age 45, has served as Executive Vice President,
Chief Operating Officer and as a Director of the Bank since 1993. Prior to his
service with the Bank, 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 Offering and the
Merger, Mr. Stinson will serve as the Secretary, Treasurer, and Chief Financial
Officer of the Company and Secretary and Chief Financial Officer of the Bank.
Nancy E. LaFoy, age 42, has served as a Class I Director of the Company
since its inception and as Secretary and Treasurer of the Company 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 Offering and the Merger, Ms. LaFoy will
resign from her position as Secretary and Treasurer of the Company, but will
remain a Director of the Company.
Richard B. Kensler, age 48, has served as the Chief Credit Officer of the
Company since April 1998. Prior to his service with the Company, 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 the Bank 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 Offering and the Merger, Mr. McMullen
will become a Director of the Company and the Bank and President of the Tampa
Market.
Donald D. Roberts, age 49, has served as President of the Jacksonville
Market since April 1998. Prior to his service with the Company, 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 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 the Company
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 the Company
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
64
<PAGE> 68
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 the
Company 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 the
Company 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 the Company
upon the completion of the Offering and the Merger.
Wilford C. Lyon, Jr., age 62, has served as a Class II Director of the
Company since April 1998. Prior to his service with the Company, 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
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 the Company
since April 1998. Prior to his service with the Company, 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.
BOARD OF DIRECTORS
The number of directors of the Company is currently fixed at nine. The
Articles of Incorporation and the By-Laws provide for the Board of Directors 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 Board of Directors. 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 Board of Directors. The term
of the Company's initial Class I Directors expires at the Company's annual
meeting of shareholders in 1999; the term of the Company's initial Class II
Directors expires at the Company's annual meeting of shareholders in 2000; and
the term of the Company's initial Class III Directors expires at the Company's
annual meeting of
65
<PAGE> 69
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. Any director elected to
fill a vacancy 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
Board of Directors be filled by the vote of at least seventy-five percent (75%)
of the outstanding shares of Common Stock. Any other vacancy on the Board of
Directors 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 Board of Directors is to make it more
difficult for a person, entity or group to effect a change in control of the
Company through the acquisition of a large block of the Company's voting stock.
The executive officers of the Company serve at the pleasure of the Board of
Directors.
The Board of Directors has an Executive Committee, an Audit Committee and a
Compensation Committee. The Executive Committee, which is currently comprised of
, exercises the authority of the Board of Directors in accordance with
the By-Laws of the Company between regular meetings of the Board of Directors.
The Audit Committee, which is currently comprised of P. Bruce Culpepper, Wilford
C. Lyon, Jr. and David McIntosh, reviews and makes recommendations to the Board
of Directors on the Company's audit procedures and independent auditors' report
to management and recommends to the Board of Directors the appointment of the
independent auditors for the Company. The Compensation Committee, currently
comprised of , reviews and makes recommendations to the Board of
Directors with respect to the compensation of officers of the Company and will
assist the Board in the administration of the Company's 1998 Stock Option Plan.
EXECUTIVE COMPENSATION
For the fiscal year ended December 31, 1997, the Company was in a
development stage and no one served as the Chief Executive Officer of the
Company during that period. Charles E. Hughes, Jr. entered into an employment
agreement with the Company 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
The Company 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 the Company and as President and
Chief Executive Officer of the Bank upon completion of the Merger and the
Offering. Mr. Hughes also serves as a member of the Board of Directors and will
serve on the Bank's board of directors after the closing of the Offering. The
Employment Agreement has a three-year term and provides for a minimum annual
base salary of $220,000 until the closing of the Offering and an annual base
salary of $250,000 subsequent to the completion of the Merger and the Offering.
In addition, the Board will issue an option to Mr. Hughes to purchase 80,000
shares of Common Stock at the initial public offering price of the Common Stock
sold in the Offering. This option will be exercisable for a period of ten years.
After the closing of the Offering, in the event of a "change in control" of
the Company (as defined in the Employment Agreement), Mr. Hughes will be
entitled to give written notice to the Company 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 Common Stock issuable upon the exercise of
options to which Mr. Hughes is entitled, an amount in cash or Common Stock equal
to the excess of the fair market value of the 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
Common Stock subject to such options.
66
<PAGE> 70
In the event that the Board of Directors determines in its sole discretion
that the Company is unable to close the Offering, then the Employment Agreement
may be terminated by the Board of Directors 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 Board of Directors 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, the Bank 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 the Company. Likewise, Mr. Hughes may upon thirty days' written
notice to the Company terminate the Employment Agreement without Cause. In the
event of termination by Mr. Hughes, the Company will have no further obligation
than for monies paid and the Company shall be entitled to enforcement of the
non-compete and non-solicitation provisions. After the closing of the Offering,
in the event of Mr. Hughes' death, the Company 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 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 the Company, 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 the Company's information
following termination of his employment.
The Company 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 Offering. 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 Common Stock at the first Board of Directors meeting subsequent
to the closing of the Offering. In addition, Mr. McMullen's employment agreement
provides that his title following the Merger and the Offering 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
Common Stock at the first Board of Directors meeting subsequent to the closing
of the Offering. Upon the consummation of the Offering, Mr. Stinson's title will
be Chief Financial Officer of the Company. The options to be granted under both
Mr. McMullen's and Mr. Stinson's employment agreements will be exercisable at
the initial public offering price. In the event of a "change in control" (as
defined in their respective agreements) of the Company, both agreements provide
that Mr. Stinson and Mr. McMullen may elect to give written notice to the
Company 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.
The Company has also entered into employment agreements with Donald D.
Roberts and Richard B. Kensler. Mr. Roberts' employment agreement provides that
he will serve as the President of the Jacksonville Market for a three year term.
Mr. Roberts' employment agreement further provides for an annual base salary of
$130,000 and the grant of options to purchase 20,000 shares of Common Stock at
the first Board of Directors meeting subsequent to the completion of the
Offering. Mr. Kensler's employment agreement provides that he will serve as the
Chief Credit Officer of the Company for a three year term. Mr. Kensler's
employment agreement further provides for an annual base salary of $110,000 and
the grant of options to purchase 20,000 shares of Common Stock at the first
Board of Directors meeting subsequent to the completion of the Offering. Both
Mr. Roberts' and Mr. Kensler's employment agreements contain "change in
control," termination, non-solicitation and non-compete provisions similar to
those discussed above.
67
<PAGE> 71
STOCK OPTION PLAN
In March 1998, the Board of Directors adopted the Florida Banks, Inc. 1998
Stock Option Plan (the "1998 Plan") to promote the Company's growth and
financial success. Options may be granted under the 1998 Plan to the Company's
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 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 Board of Directors 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
Board of Directors, but will in no event be less than 100% of the Market Price
(as defined in the 1998 Plan) of one share of 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 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 the Company or any subsidiary of the Company 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 the Company or of a subsidiary of the
Company, 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 the Company or of a subsidiary of the Company,
the option may be 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 Board of Directors may at any
time terminate, modify or amend the 1998 Plan in any respect, except that
without shareholder approval the Board of Directors 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
was approved by the Company's shareholders on June 4, 1998.
COMPENSATION OF DIRECTORS
Directors of the Company and the Bank will not receive any compensation
based on their attendance at board meetings until the Bank becomes cumulatively
profitable. Upon consummation of the Offering, directors of the Company will be
entitled to receive stock option awards under the 1998 Plan. In addition,
members of the Board of Directors 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 Board of Directors of the Bank. Such compensation may be
incentive-based and include cash and options to purchase Common Stock.
CERTAIN TRANSACTIONS
TSJ&A has provided consulting services during the organization and
formation of the Company. T. Stephen Johnson, Vice-Chairman of the Company, is
the President of TSJ&A and Nancy E. LaFoy, Secretary and Treasurer of the
Company, is the Senior Vice President of TSJ&A. In addition, from time to time,
M. G. Sanchez has performed consulting work for TSJ&A. Specific responsibilities
undertaken by
68
<PAGE> 72
TSJ&A include assisting management of the Company in formulating the Company's
business plan, conducting a feasibility analysis, drafting proposed
administrative and operational procedures, and preparing the necessary
regulatory filings for approval of the formation of the Company and the
acquisition of the Bank. As compensation for its services, TSJ&A has been paid a
monthly fee of $15,000 for the six month period commencing in January 1998 and
ending in June 1998. In addition, TSJ&A will receive a finder's fee in
connection with the acquisition of the Bank of $137,500 (one percent of the
aggregate purchase price), which finder's fee shall be paid from the proceeds of
the Offering. Furthermore, the Company temporarily operated from the corporate
offices of TSJ&A which are located at 9755 Dogwood Road, Suite 310, Roswell,
Georgia 30075. There was no consideration paid to TSJ&A by the Company for the
use of its offices.
Mr. Robin Kelton, who beneficially owns greater than five percent of the
outstanding shares of Common Stock (prior to the issuance of the shares in
connection with the Offering), serves as 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 the issuance of units consisting of
shares of Common Stock, Preferred Stock and warrants to purchase shares of
Common Stock (the "Units") to certain foreign investors. The Units were issued
in a private placement in reliance upon the exemption from the registration
provisions of the Securities Act, pursuant to the provisions of Rule 506
promulgated thereunder.
The Bank has extended loans from time to time to certain of its directors,
their associates and members of the immediate families of the directors and
executive officers of the Bank. These loans have been 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 the Bank, and did not involve more
than the normal risk of collectibility or present other unfavorable features.
Once the Bank becomes a wholly-owned subsidiary of the Company, the Bank may
extend similar loans from time to time to certain of the Company's directors and
executive officers, their associates and members of the immediate families of
the directors and executive officers of the Company.
69
<PAGE> 73
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of shares of the Common Stock as of June 4, 1998, and as adjusted to
reflect the sale of the shares offered hereby and the shares offered in
connection with the Merger, with respect to (i) each director of the Company;
(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 the Company to own
beneficially more than 5.0% of the outstanding shares of the Common Stock and
(iii) all directors and executive officers of the Company as a group. Unless
otherwise indicated, each shareholder has sole voting and investment power with
respect to the indicated shares.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNERSHIP AFTER THE MERGER
PRIOR TO THE OFFERING AND THE OFFERING
--------------------- ------------------------
COMMON COMMON
NAME OF BENEFICIAL OWNER STOCK(1) PERCENT STOCK(1) 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.................................... -- * 224,773(8) 4.0
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) *
Bank Julius Baer & Co., Ltd......................... 24,000 6.4% 48,000(12) *
All executive officers and directors as a group
(12 persons)...................................... 253,750 67.2% 943,605(13) 16.0%
</TABLE>
- ---------------
* Less than 1%.
(1) Pursuant to the rules of the Commission, the determinations of "beneficial
ownership" of Common Stock 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 of Common Stock 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 Common
Stock issued and outstanding as of June 4, 1998, as adjusted to reflect the
4,000,000 shares issuable pursuant to the Offering (assuming no exercise of
the Underwriters' overallotment option) and the 1,250,000 shares issuable
pursuant to the Merger (assuming an $11.00 initial public offering price of
the Common Stock in the Offering, the mid-point of the estimated range, and
the exchange of 2,065,000 shares of the Bank'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
Offering.
(4) Includes 13,500 shares which are owned by Mr. Johnson's wife, 10,000 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
Offering and 13,500 shares issuable upon the exercise of
70
<PAGE> 74
immediately exercisable options to be granted to Mr. Johnson's wife
simultaneously with the closing of the Offering.
(6) Includes 40,000 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Offering and 87,076 shares issuable upon conversion and exchange of shares
of the Bank's 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
Offering.
(8) Comprised of shares issuable upon conversion and exchange of shares of the
Bank's 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
Offering.
(10) Comprised of shares issuable upon conversion and exchange of shares of the
Bank's common stock pursuant to the Merger.
(11) Includes 22,500 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
Offering.
(12) Includes immediately exercisable warrants to purchase 24,000 shares of
Common Stock at the initial public offering price.
(13) Includes 283,500 shares upon the exercise of immediately exercisable
options to be granted simultaneously with the Closing of the Offering and
424,514 shares upon conversion and exchange of shares of the Bank's common
stock pursuant to the Merger.
71
<PAGE> 75
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 30,000,000 shares of Common Stock, $.01
par value per share, and 1,000,000 shares of Preferred Stock, $.01 par value per
share, of which 600,000 shares of Preferred Stock have been designated as the
Series A Preferred Stock. As of the date hereof, 377,800 shares of Common Stock
and 60,600 shares of Series A Preferred Stock are issued and outstanding, held
by 28 shareholders of record.
The following summary of the Common Stock and Preferred Stock is qualified
in its entirety by reference to the Articles of Incorporation, the By-Laws, and
the Florida Business Corporation Act, as amended (the "FBCA").
COMMON STOCK
Subject to such preferential rights as may be granted by the Board of
Directors in connection with any issuances of Preferred Stock, holders of shares
of Common Stock are entitled to receive such dividends as may be declared by the
Board of Directors in its discretion from funds legally available therefor. At
this time, the Board of Directors intends to retain all earnings to support
anticipated growth in the current operations of the Company and the Bank and to
finance future expansion. Additional restrictions on the payment of cash
dividends may be imposed in connection with future issuances of Preferred Stock
and indebtedness by the Company. Further declarations and payments of cash
dividends, if any, will also be determined in light of then-current conditions,
including the Company's earnings, operations, capital requirements, liquidity,
financial condition, restrictions in financing agreements and other factors
deemed relevant by the Board of Directors. Upon the liquidation, dissolution or
winding up of the Company, after payment of creditors, the remaining net assets
of the Company will be distributed pro rata to the holders of Common Stock,
subject to any liquidation preference of the holders of Preferred Stock. See
"-- Preferred Stock." There are no preemptive rights, conversion rights, or
redemption or sinking fund provisions with respect to the shares of Common
Stock. All of the outstanding shares of Common Stock are, and the shares to be
outstanding upon completion of the Offering will be, duly and validly authorized
and issued, fully paid and nonassessable.
Holders of Common Stock are entitled to one vote per share of Common Stock
held of record on all such matters submitted to a vote of the shareholders.
Holders of Common Stock do not have cumulative voting rights. As a result, the
holders of a majority of the outstanding shares of Common Stock voting for the
election of directors can elect all the directors, and, in such event, the
holders of the remaining shares of Common Stock will not be able to elect any
persons to the Board of Directors.
PREFERRED STOCK
The Board of Directors may, without approval of the Company's shareholders,
from time to time authorize the issuance of Preferred Stock in one or more
series for such consideration and, within certain limits, with such relative
rights, preferences and limitations as the Board of Directors may determine. The
relative rights, preferences and limitations that the Board of Directors has the
authority to determine as to any such series of Preferred Stock include, among
other things, dividend rights, voting rights, conversion rights, redemption
rights and liquidation preferences. Because the Board of Directors has the power
to establish the relative rights, preferences and limitations of each series of
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 Common Stock.
Although the Board of Directors has no intention at the present time of doing
so, it could cause the issuance of 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 Common Stock over the
market price of such shares.
The Company presently has 60,600 shares of 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 the Company in
72
<PAGE> 76
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 the Company, at a price of
$10.00 per share. The Company intends to redeem the outstanding shares of Series
A Preferred Stock with the proceeds of the Offering. See "Use of Proceeds."
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS
The Company's Articles of Incorporation contain provisions requiring
supermajority shareholder approval to effect certain extraordinary corporate
transactions which are not approved by three-quarters of the Board of Directors.
The Articles of Incorporation require, 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 the Company
or any subsidiary of the Company 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 the
Company) of the assets of the Company or any subsidiary of the Company to any
Interested Person for cash, real or personal property, including securities, or
any combination thereof, issuance or delivery of securities of the Company or a
subsidiary of the Company to any Interested Person in consideration for or in
exchange of any securities or other property (including cash), or liquidation of
the Company ("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 the Company entitled to
vote in elections of directors ("Interested Person") is a party to the
transaction, unless three-fourths (75%) of the entire Board of Directors 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 the Company 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
the Company ("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 of the stock of the Company 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 Company's Articles of Incorporation, as well as the Article
establishing a classified Board of Directors, 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 the Company through the
acquisition of a large block of the Company's voting stock.
INDEMNIFICATION
The Articles of Incorporation and By-Laws require the Company to indemnify
the directors and officers of the Company 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 the Company shall be personally liable to
the Company 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
Company 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
73
<PAGE> 77
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 Company in violation of
Section 607.06401 of the FBCA, or (iv) for willful misconduct or a conscious
disregard for the best interests of the Company in a proceeding by or in the
right of the Company 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 Board of Directors 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 Board of Directors. 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 Board of Directors in respect of such
transaction or event.
TRANSFER AGENT AND REGISTRAR
SunTrust Bank, Atlanta will be the Transfer Agent and Registrar for the
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and the Merger, the Company will have
5,627,800 shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option), outstanding options to purchase 465,000
shares of Common Stock and outstanding warrants to purchase 80,800 shares of
Common Stock. Of these shares, the 4,000,000 shares offered hereby and the
1,250,000 shares estimated to be issued in the Merger (assuming an initial
public offering price of Common Stock of $11.00 per share, the mid-point of the
estimated range), will be eligible for sale in the open market without
restriction (except for any such shares purchased by or issued to "affiliates"
of the Company and the Bank). The remaining 377,800 shares of Common Stock will
be "restricted securities" as that term is defined in Rule 144 ("Rule 144")
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
and will become eligible for sale under Rule 144 after February 3, 1999. Such
shares must be held for one year from the date of acquisition before they may be
resold pursuant to Rule 144, unless the resale of such shares is made pursuant
to an effective registration statement under the Securities Act or another
exemption from registration is available.
Generally, Rule 144 provides that beginning 90 days after the date of this
Prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned "restricted" securities for a least one year, including a
person who may be deemed an "affiliate" of the Company, as the term "affiliate"
is defined under the Securities Act, is entitled to sell in "broker's
transactions" or in transactions directly with a "market marker," within any
three-month period, a number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock or the average weekly
trading volume of the Common Stock on any national securities exchange and/or
over-the-counter market during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain notice requirements and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed an "affiliate" of the
Company would be entitled to sell such shares under Rule 144 without regard to
the volume, public information, manner of sale or notice provisions and
limitations described above, once a period of at least two years had elapsed
since the later of the date the shares were acquired from the Company or from an
"affiliate" of the Company.
Upon completion of the Offering, options to purchase 465,000 shares of
Common Stock will be granted to certain officers and directors of the Company
pursuant to the Company's 1998 Plan. After the Offering, the Company intends to
file a registration statement on Form S-8 under the Securities Act to register
the shares of Common Stock issuable upon exercise of such options. Accordingly,
such shares will be freely tradeable by holders who are not affiliates of the
Company and, subject to the volume and manner of sale limitations of Rule 144,
by holders who are affiliates of the Company.
The Company, its officers and directors and certain of its existing
shareholders have agreed, for a period of 180 days from the date of this
Prospectus, not to sell or otherwise dispose, directly or indirectly, of any
shares without prior written consent of the Representatives. Upon consummation
of the Merger and the Offering, the Company's officers and directors and certain
of its shareholders of the Company will beneficially
74
<PAGE> 78
own an aggregate of 1,006,765 shares. The restricted 377,800 shares of Common
Stock will be eligible for sale pursuant to Rule 144 in the public market 365
days from the date of their purchase from the Company and upon expiration of the
180-day lockup period, approximately 424,515 additional shares will be eligible
for sale in the public market subject to compliance with certain volume
limitations and other conditions of Rule 144.
Warrants to purchase 80,800 shares of Common Stock were granted to certain
foreign investors in February 1998. The exercise price for such warrants will be
the initial public offering price of the Common Stock, and the warrants will be
exercisable for a seven-year period commencing on the date of the Offering is
completed. The shares underlying the warrants will be "restricted securities,"
within the meaning of Rule 144 and must therefore be held for one year following
the date of acquisition before they may be resold pursuant to Rule 144, unless
the resale of such shares is made pursuant to an effective registration
statement under the Securities Act or another exemption from registration is
available.
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
future sales of shares or the availability of shares for sale will have on the
market price for Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock in the public market, or the perception of the
availability of shares for sale, could adversely affect the prevailing market of
the Common Stock and could impair the Company's ability to raise capital through
the sale of its equity securities. See "Risk Factors -- Shares Eligible for
Future Sale" and "-- Absence of Prior Public Market and; Potential Fluctuation
in Quarterly Results and Volatility of Stock Price."
75
<PAGE> 79
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among the
Company and the Underwriters named below (the "Underwriting Agreement"), the
Underwriters for whom The Robinson-Humphrey Company, LLC, Interstate/Johnson
Lane Corporation and Kelton International Ltd. are acting as representatives
(the "Representatives"), have severally agreed to purchase from the Company and
the Company has agreed to sell to the Underwriters, the number of shares of
Common Stock set forth opposite their respective names.
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
- ----------- -------
<S> <C>
The Robinson-Humphrey Company, LLC..........................
Interstate/Johnson Lane Corporation.........................
Kelton International Ltd....................................
-------
Total.............................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and certain other conditions. The
Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The Underwriters propose to offer part of the shares of the Common Stock
directly to the public at the public offering price set forth on the cover page
of this Prospectus and part of the shares to certain dealers at such price less
a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
in sales to certain other dealers. After the initial public offering of the
shares to the public, the public offering price, such concessions and other
selling terms may be changed by the Underwriters.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of any shares of Common Stock to any accounts over which
they exercise discretionary authority.
In connection with the Offering, the Underwriters may purchase and sell
shares of Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock, and syndicate
short positions involve the sale by the Underwriters of a greater number of
shares of Common Stock than they are required to purchase from the Company in
the Offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the shares sold in the Offering may be reclaimed by the syndicate if such shares
of Common Stock are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise prevail in
the open market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
in the Nasdaq National Market, in the over-the-counter market or otherwise. The
Representatives intend to make a market in the Common Stock after completion of
the Offering.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 600,000 additional
shares of Common Stock at the price to the public set forth on the cover page of
this Prospectus less the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, incurred in connection with the sale of the shares of
Common Stock offered hereby. To the extent such option is exercised, the
Underwriters will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares of Common Stock set forth opposite such Underwriter's name in the
preceding table bears to the total number of shares of Common Stock listed in
such table.
76
<PAGE> 80
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the shares of Common
Stock has been determined by negotiations among the Company and the
Representatives and was not based upon any independent appraisal or valuation of
the Company. Among the factors considered in determining such price were the
history of, and the prospects for, the Company's business and the industry in
which it competes, an assessment of the Company's management and the present
state of the Company's development, the past and present revenues and earnings
of the Company, the prospects for growth of the Company's revenues and earnings,
the current state of the economy in the United States and the current level of
economic activity in the industry in which the Company competes and in related
or comparable industries, currently prevailing conditions in the securities
markets, including current market valuations of publicly trade companies which
are comparable to the Company and other factors deemed relevant.
Upon consummation of the Merger and the Offering (assuming no exercise of
the Underwriter's over-allotment option), the Company, the Company's officers
and directors, and certain shareholders of the Company, who will beneficially
own in the aggregate approximately 1,006,765 shares of Common Stock
(approximately 17.9% of the outstanding Common Stock), will enter into lock-up
agreements with the Representatives pursuant to which they will agree not to,
directly or indirectly, sell, offer to sell, contract to sell, solicit an offer
to buy, grant any option for the purchase or sale of, assign, pledge, distribute
or otherwise transfer, dispose of or encumber(or make any announcement with
respect to any of the foregoing) any shares of Common Stock or any options,
rights, warrants or other securities convertible into or exercisable or
exchangeable for Common Stock or evidencing any right to purchase or subscribe
for shares of Common Stock for a period of 180 days from the date of this
Prospectus without the prior written consent of The Robinson-Humphrey Company,
LLC.
From time to time in the ordinary course of their respective businesses,
The Robinson-Humphrey Company, LLC may in the future provide investment banking
or other services to the Company.
The Company has been approved for listing of the Common Stock on the Nasdaq
National Market.
The Company has agreed to indemnify the Underwriters against and to
contribute to losses arising out of, certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Offering are being passed upon
for the Company by Smith, Gambrell & Russell, LLP, Suite 3100, 1230 Peachtree
Street, N.E., Atlanta, Georgia 30309, counsel to the Company. Certain legal
matters in connection with the Offering are being passed upon for the
Underwriters by Alston & Bird LLP, One Atlantic Center, 1201 West Peachtree
Street, Atlanta, Georgia 30309.
EXPERTS
The financial statements of the Company and the Bank included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, which is part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain items of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the 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
77
<PAGE> 81
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.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are necessarily summaries of such
documents. All material elements of the contracts and documents referenced
herein are disclosed in the Prospectus. 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.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by independent accountants and with
quarterly reports containing unaudited financial information for each of the
first three quarters of each fiscal year.
78
<PAGE> 82
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS FOR FLORIDA BANKS, INC.
Independent Auditors' Report.............................. F-2
Balance Sheets as of as of March 31, 1998 (unaudited) and
December 31, 1997...................................... F-3
Statement of Operations for the Three Months Ended March
31, 1998 (unaudited)................................... F-4
Statement of Shareholders' Equity for the Three Months
Ended March 31, 1998 (unaudited)....................... F-5
Statement of Cash Flows for the Three Months Ended March
31, 1998 (unaudited)................................... F-6
Notes to Financial Statement.............................. F-7
FINANCIAL STATEMENTS FOR FIRST NATIONAL BANK OF TAMPA
Independent Auditors' Report.............................. F-9
Balance Sheets as of as of March 31, 1998 (unaudited) and
December 31, 1997 and 1996............................. F-10
Statements of Income for the Three Months Ended March 31,
1998 and 1997 (unaudited) and for the Years Ended
December 31, 1997, 1996 and 1995....................... F-11
Statements of Shareholders' Equity for the Three Months
Ended March 31, 1998 (unaudited) and for the Years
Ended December 31, 1997, 1996 and 1995................. F-12
Statements of Cash Flows for the Three Months Ended March
31, 1998 and 1997 (unaudited) and for the Years Ended
December 31, 1997, 1996 and 1995....................... F-13
Notes to Financial Statements............................. F-15
</TABLE>
F-1
<PAGE> 83
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> 84
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH........................................................ $ 409,218
DEFERRED PUBLIC OFFERING COSTS.............................. 74,645
ORGANIZATIONAL COSTS........................................ $26,442
--------- -------
TOTAL ASSETS...................................... $ 483,863 $26,442
========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCRUED EXPENSES............................................ $ 100 $26,442
--------- -------
Total liabilities................................. 100 26,442
--------- -------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; 60,600 and 0 shares issued and
outstanding............................................ 606,000
Common stock, $.01 par value; 9,000,000 shares authorized;
377,800 and 0 shares issued and outstanding............ 3,778
Deficit accumulated during development stage.............. (126,015)
--------- -------
Total shareholders' equity........................ 483,763
--------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $ 483,863 $26,442
========= =======
</TABLE>
See notes to financial statements.
F-3
<PAGE> 85
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 15, 1997
(DATE OF INCORPORATION)
TO
MARCH 31, 1998
AND
THREE MONTHS ENDED
MARCH 31, 1998
-----------------------
(UNAUDITED)
<S> <C>
EXPENSES:
Salaries and benefits..................................... $ 61,169
Occupancy and equipment................................... 3,455
Other..................................................... 34,949
---------
Net loss before cumulative effect of changes in accounting
for organizational costs............................... (99,573)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR ORGANIZATIONAL
COSTS (Note 1)............................................ (26,442)
---------
Net loss.......................................... $(126,015)
=========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 86
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK DURING
----------------- ---------------- DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT STAGE
------ -------- ------- ------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997
Net loss........................................ $126,015
Issuance of preferred stock..................... 60,600 $606,000
Issuance of common stock........................ 377,800 $3,778
------ -------- ------- ------ --------
Balance, March 31, 1998......................... 60,600 $606,000 377,800 $3,778 $126,015
====== ======== ======= ====== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 87
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 15, 1997
(DATE OF INCORPORATION)
TO
MARCH 31, 1998
AND
THREE MONTHS ENDED
MARCH 31, 1998
-----------------------
(UNAUDITED)
<S> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $(126,015)
Adjustments to reconcile net loss to net cash used in
operating activities...................................
Decrease in organizational costs....................... 26,442
Decrease in accrued liabilities........................ (26,342)
---------
Net cash used in operating activities............. (125,915)
---------
FINANCING ACTIVITIES:
Proceeds from the issuance of stock....................... 609,778
Increase in deferred public offering costs................ (74,645)
---------
Net cash provided by financing activities......... 535,133
---------
NET INCREASE IN CASH........................................ 409,218
CASH, BEGINNING OF PERIOD................................... --
---------
CASH, END OF PERIOD......................................... $ 409,218
=========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 88
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENT
AS OF DECEMBER 31, 1997 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 (UNAUDITED)
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 -- Through December 31, 1997, incurred organizational
costs (consisting principally of legal, regulatory, consulting and incorporation
fees) were deferred and were to be amortized over the Company's initial sixty
months of operations. During the quarter ended March 31, 1998, the Company
elected to early adopt the provision of SOP 98-5, "Reporting on the Costs of
Start-Up Activities", which provides that start-up costs (including
organizational costs) should be expensed as incurred. The cumulative effect of
adoption of SOP 98-5 has been reflected in the Statement of Operations.
New Accounting Pronouncements -- During the quarter ended March 31, 1998,
the Company adopted 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. The Company has
no other comprehensive income in the three months ended March 31, 1998.
Interim Financial Information. Interim Financial Information at March 31,
1998 and for the three months ended March 31, 1998 is unaudited. The unaudited
interim financial statements reflect all adjustments consisting of only normal
accruals, which are, in the opinion of management, necessary to a fair statement
of the results for the interim period. Information for the interim period is not
necessarily indicative of results to be achieved for the full year.
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. 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
F-7
<PAGE> 89
FLORIDA BANKS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENT -- (CONTINUED)
purchase 800 shares of Common Stock at the initial public offering price, 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 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.
UNAUDITED
The Company has also entered into employment agreements with Donald D.
Roberts and Richard B. Kensler. Mr. Roberts' employment agreement provides that
he will serve as the President of the Jacksonville Market for a three year term.
Mr. Roberts' employment agreement further provides for an annual base salary of
$130,000 and the grant of options to purchase 20,000 shares of Common Stock at
the first Board of Directors meeting subsequent to the completion of the
Offering. Mr. Kensler's employment agreement provides that he will serve as the
Chief Credit Officer of the Company for a three year term. Mr. Kensler's
employment agreement further provides for an annual base salary of $110,000 and
the grant of options to purchase 20,000 shares of Common Stock at the first
Board of Directors meeting subsequent to the completion of the Offering. Both
Mr. Roberts' and Mr. Kensler's employment agreements contain "change in
control," termination, non-solicitation and non-compete provisions similar to
those discussed above.
F-8
<PAGE> 90
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-9
<PAGE> 91
FIRST NATIONAL BANK OF TAMPA
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------
1998 1997 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CASH AND DUE FROM BANKS..................................... $ 2,598,921 $ 2,788,211 $ 2,488,784
FEDERAL FUNDS SOLD.......................................... 9,090,000 10,245,000 12,410,000
----------- ----------- -----------
Total cash and cash equivalents.................... 11,688,921 13,033,211 14,898,784
INVESTMENT SECURITIES:
Available for sale, at fair value (cost $11,256,956
(unaudited), $10,445,885 and $8,289,420 at March 31,
1998 and December 31, 1997 and 1996 respectively)....... 11,233,108 10,452,185 8,279,765
Other investments......................................... 291,850 313,050 270,850
LOANS:
Commercial real estate.................................... 16,236,639 15,281,442 13,078,357
Commercial................................................ 14,394,770 13,157,905 12,412,325
Residential mortgage...................................... 3,395,685 3,268,704 3,952,731
Consumer.................................................. 1,287,123 1,222,045 1,423,161
Credit card and other loans............................... 885,645 869,031 838,108
----------- ----------- -----------
Total loans........................................ 36,199,862 33,799,127 31,704,681
Allowance for loan losses................................. (505,103) (481,462) (432,238)
Net deferred loan fees.................................... (84,269) (78,765) (77,621)
----------- ----------- -----------
Net loans.......................................... 35,610,490 33,238,900 31,194,822
PREMISES AND EQUIPMENT, NET................................. 533,499 511,503 488,077
ACCRUED INTEREST RECEIVABLE................................. 345,223 332,031 285,420
DEFERRED INCOME TAXES, NET.................................. 2,400,114 2,420,271
OTHER ASSETS................................................ 69,784 94,628 87,391
----------- ----------- -----------
TOTAL ASSETS................................................ $62,172,989 $60,395,779 $55,505,109
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Noninterest-bearing demand................................ $ 6,500,383 $ 6,441,785 $ 8,121,621
Interest-bearing demand................................... 2,581,607 3,073,535 3,917,819
Regular savings........................................... 6,450,486 5,874,911 2,712,877
Money market accounts..................................... 1,389,538 1,348,431 1,386,291
Time $100,000 and over.................................... 10,686,727 10,214,403 9,666,810
Other time................................................ 17,605,691 18,507,107 19,720,653
----------- ----------- -----------
Total deposits..................................... 45,214,432 45,460,172 45,526,071
REPURCHASE AGREEMENTS....................................... 7,964,257 5,911,513 5,389,440
OTHER BORROWED FUNDS........................................ 2,403,563 2,405,604 1,018,636
ACCRUED INTEREST PAYABLE.................................... 174,642 198,817 178,828
ACCOUNTS PAYABLE AND ACCRUED EXPENSES....................... 69,241 106,038 122,692
----------- ----------- -----------
Total liabilities.................................. 55,826,135 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 1,825,000
Additional paid-in capital................................ 3,725,148 3,725,148 1,070,359
Retained earnings (deficit of $8,134,037 eliminated upon
quasi-reorganization on December 31, 1995) (Note 11).... 811,492 759,707 383,738
Unrealized gain (loss) on available for sale investment
securities, net of tax.................................. (14,786) 3,780 (9,655)
----------- ----------- -----------
Total shareholders' equity......................... 6,346,854 6,313,635 3,269,442
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $62,172,989 $60,395,779 $55,505,109
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-10
<PAGE> 92
FIRST NATIONAL BANK OF TAMPA
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- ------------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees.............. $ 807,818 $ 796,532 $3,352,741 $2,890,204 $2,187,558
Investment securities.............. 162,716 140,132 583,590 460,321 436,973
Federal funds sold................. 96,289 100,757 365,658 263,552 312,512
---------- ---------- ---------- ---------- ----------
Total interest income...... 1,066,823 1,037,421 4,301,989 3,614,077 2,937,043
---------- ---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposits........................... 509,486 508,976 2,075,429 1,744,407 1,380,650
Repurchase agreements.............. 60,702 40,480 178,200 108,357 68,494
Borrowed funds..................... 24,715 6,634 42,099 18,878 24,414
---------- ---------- ---------- ---------- ----------
Total interest expense..... 594,903 556,090 2,295,728 1,871,642 1,473,558
---------- ---------- ---------- ---------- ----------
NET INTEREST INCOME.................. 471,920 481,331 2,006,261 1,742,435 1,463,485
PROVISION (BENEFIT) FOR LOAN
LOSSES............................. 15,000 15,000 60,000 60,000 (138,394)
---------- ---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
(BENEFIT) FOR LOAN LOSSES.......... 456,920 466,331 1,946,261 1,682,435 1,601,879
---------- ---------- ---------- ---------- ----------
NONINTEREST INCOME:
Service fees....................... 94,963 86,126 324,693 331,421 245,942
Gain on sale of loans.............. 19,709 64,375 94,805 137,655 41,767
Gain (loss) on sale of available
for sale investment
securities...................... 8,197 7,391 7,635 (2,446) 12,868
Gain on sale of other real estate
owned........................... 10,546
Other noninterest income........... 29,363 10,594 76,596 50,005 64,058
---------- ---------- ---------- ---------- ----------
152,232 168,486 503,729 516,635 375,181
---------- ---------- ---------- ---------- ----------
NONINTEREST EXPENSES:
Salaries and benefits.............. 299,870 238,782 999,382 872,643 784,517
Occupancy and equipment............ 75,710 60,165 256,160 226,965 295,562
Data processing.................... 25,465 22,767 92,633 75,366 62,068
Other.............................. 124,583 133,235 493,848 423,462 478,742
---------- ---------- ---------- ---------- ----------
525,628 454,949 1,842,023 1,598,436 1,620,889
---------- ---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. 83,524 179,868 607,967 600,634 356,171
PROVISION FOR INCOME TAX EXPENSES.... 31,739 68,637 231,998 216,896
---------- ---------- ---------- ---------- ----------
NET INCOME........................... $ 51,785 $ 111,231 $ 375,969 $ 383,738 $ 356,171
========== ========== ========== ========== ==========
EARNINGS PER SHARE:
Basic.............................. $ 0.03 $ 0.06 $ 0.21 $ 0.21 $ 0.20
========== ========== ========== ========== ==========
Diluted............................ $ 0.03 $ 0.06 $ 0.19 $ 0.20 $ 0.19
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-11
<PAGE> 93
FIRST NATIONAL BANK OF TAMPA
STATEMENTS OF SHAREHOLDERS' EQUITY
<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
Net income (unaudited)....... 51,785 51,785
Unrealized loss on available
for sale investment
securities, net
(unaudited)................ (18,566) (18,566)
---------- ---------- ----------- ----------- --------- ----------
BALANCE, MARCH 31, 1998
(unaudited).................. 1,825,000 $1,825,000 $ 3,725,148 $ 811,492 $ (14,786) $6,346,854
========== ========== =========== =========== ========= ==========
</TABLE>
See notes to financial statements.
F-12
<PAGE> 94
FIRST NATIONAL BANK OF TAMPA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------------- ----------------------------------------
1998 1997 1997 1996 1995
------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................. $ 51,785 $ 111,231 $ 375,969 $ 383,738 $ 356,171
Adjustments to reconcile
net income to net cash
provided by operating
activities:
SBA loans originated for
resale................ -- (1,064,674) (1,261,766) (1,121,977) (857,383)
Proceeds from sale of
SBA loans............. -- 846,218 1,454,895 1,852,401 570,650
Depreciation and
amortization.......... 31,587 24,915 109,595 87,056 111,726
Deferred income taxes... 31,739 68,637 231,998 216,896
Loss on disposition of
furniture and
equipment............. 57,253
Gain on sale of
securities............ (8,197) (7,391) (7,635) (12,868)
Gain on disposal of
other real estate
owned................. (10,546)
Amortization of premiums
on investments, net... (21,048) (1,709) 6,072 4,824
Provision (benefit) for
loan losses........... 15,000 15,000 60,000 60,000 (138,394)
Increase in accrued
interest receivable... (13,192) (12,092) (46,611) (60,350) (42,245)
Increase in accrued
interest payable...... (24,175) 11,226 19,989 41,779 17,503
Decrease (increase) in
other assets.......... 24,844 (14,398) (7,237) (42,797) 247,374
Increase (decrease) in
other liabilities..... (36,797) (51,227) (16,654) 35,288 57,405
------------ ------------ ------------ ----------- -----------
Net cash (used in)
provided by
operating
activities....... 51,546 (74,264) 918,615 1,452,034 361,470
------------ ------------ ------------ ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales,
paydowns and maturities
of investment
securities:
Available for sale...... 3,716,159 5,753,841 13,543,810 3,884,442 4,415,664
Other................... 28,600
Purchases of investment
securities:
Available for sale...... (4,497,985) (6,521,388) (15,698,714) (5,683,851) (3,494,601)
Other investments....... (7,400) (17,000) (42,200)
Net increase in loans...... (2,371,590) (2,186,757) (2,297,207) (5,753,768) (6,065,863)
Purchases of premises and
equipment............... (53,583) (28,304) (133,020) (33,709) (424,905)
</TABLE>
F-13
<PAGE> 95
FIRST NATIONAL BANK OF TAMPA
STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------------- ----------------------------------------
1998 1997 1997 1996 1995
------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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....... (3,200,799) (2,999,608) (4,627,331) (7,541,886) (5,034,135)
------------ ------------ ------------ ----------- -----------
FINANCING ACTIVITIES:
Net increase in demand
deposits, money market
accounts and savings
accounts................ 183,352 (1,987,032) 600,054 3,436,405 1,328,694
Net increase (decrease) in
time deposits........... (429,092) 201,995 (665,952) 7,456,862 1,417,852
Increase in repurchase
agreements.............. 2,052,744 867,656 522,073 1,780,682 3,608,758
Increase (decrease) in
other borrowed funds.... (2,041) 278,094 1,386,968 415,002 (176,354)
------------ ------------ ------------ ----------- -----------
Net cash provided
by (used in)
financing
activities....... 1,804,963 (639,287) 1,843,143 13,088,951 6,178,950
------------ ------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS................ (1,344,290) (3,713,159) (1,865,573) 6,999,099 1,506,285
CASH AND CASH EQUIVALENTS:
Beginning of year.......... 13,033,211 14,898,784 14,898,784 7,899,685 6,393,400
------------ ------------ ------------ ----------- -----------
End of year................ $ 11,688,921 $ 11,185,625 $ 13,033,211 $14,898,784 $ 7,899,685
============ ============ ============ =========== ===========
</TABLE>
See notes to financial statements.
F-14
<PAGE> 96
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND THREE MONTHS ENDED
MARCH 31, 1998 AND 1997 (UNAUDITED)
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-15
<PAGE> 97
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 at December 31, 1997 and
1996 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-16
<PAGE> 98
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 -- During the quarter ended March 31,
1998, the Bank adopted 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. Total comprehensive income for the three months ended March 31, 1998
was $33,219. Other comprehensive income was comprised solely of the change
in unrealized gain (loss) on available for sale investment securities, net.
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. Interest paid on deposits and borrowed funds for the three
month periods ended March 31, 1998 and 1997 was $619,078 and $544,864
(unaudited), respectively.
Interim Financial Information -- Interim Financial Information at
March 31, 1998 and for the three months ended March 31, 1998 and 1997 is
unaudited. The unaudited interim financial statements reflect all
adjustments consisting of normal reoccuring accruals which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods. Information for the interim periods is not necessarily
indicative of results to be achieved for the full year.
F-17
<PAGE> 99
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-18
<PAGE> 100
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
F-19
<PAGE> 101
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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>
F-20
<PAGE> 102
FIRST NATIONAL BANK OF TAMPA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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-21
<PAGE> 103
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-22
<PAGE> 104
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-23
<PAGE> 105
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>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Weighted average number of common shares
outstanding -- Basic.................... 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000
Incremental shares from the assumed
conversion of stock options............. 155,840 129,010 129,010 82,570 50,919
--------- --------- --------- --------- ---------
Total -- Diluted................ 1,980,840 1,954,010 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-24
<PAGE> 106
======================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER OR SOLICITATION IS
UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
Forward-looking Statements............ 14
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Financial Data............... 17
Pro Forma Financial Data.............. 19
Business.............................. 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 31
Supervision and Regulation............ 55
Description of Bank Acquisition....... 59
Management............................ 62
Certain Transactions.................. 67
Security Ownership of Certain
Beneficial Owners and Management.... 69
Description of Capital Stock.......... 71
Shares Eligible for Future Sale....... 73
Underwriting.......................... 75
Legal Matters......................... 76
Experts............................... 76
Additional Information................ 76
Index to Financial Statements......... F-1
</TABLE>
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock offered hereby, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
======================================================
======================================================
4,000,000 SHARES
FLORIDA BANKS, INC.
COMMON STOCK
[LOGO]
-------------------------
PROSPECTUS
-------------------------
THE ROBINSON-HUMPHREY
COMPANY
INTERSTATE/JOHNSON LANE
CORPORATION
KELTON INTERNATIONAL LTD.
, 1998
======================================================
<PAGE> 107
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 16,284
Blue Sky Fees and Expenses.................................. 0
Printing and Engraving Expenses............................. 125,000*
Legal Fees and Expenses..................................... 150,000*
Accounting Fees and Expenses................................ 130,000*
Miscellaneous............................................... 28,716*
--------
Total............................................. $450,000
========
</TABLE>
- ---------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As provided under Florida law, the Company's Articles of Incorporation
provide that a director shall not be personally liable to the Company or its
shareholders for monetary damages for breach of duty of care or any other duty
owed to the Company 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 Company
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful; except that such provision 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 Company in
violation of Section 607.06401 of the FBCA, or (iv) for willful misconduct or a
conscious disregard for the best interests of the Company in a proceeding by or
in the right of the Company to procure judgment in its favor or in a proceeding
by or in the right of a shareholder.
Article VI of the By-Laws provides that the Company shall indemnify a
director, officer, employee or agent who has been successful on the merits or
otherwise in the defense of any action, suit or proceeding to which he was a
party or in defense of any claim, issue or matter therein because he is or was a
director of the Company, against reasonable expenses incurred by him in
connection with such defense.
The By-Laws also provide that the Company is required to indemnify any
director, officer, employee or agent made a party to a proceeding because he is
or was a director, employee or agent against liability incurred in the
proceeding if he acted in a manner he believed in good faith or to be in or not
opposed to the best interests of the Company and, in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Determination concerning whether or not the applicable standard of conduct has
been met can be made by (a) a majority vote of a quorum of the Board of
Directors consisting of disinterested directors, (b) a majority of a committee
of disinterested directors, (c) independent legal counsel, or (d) an affirmative
vote of a majority of a quorum of shares held by disinterested stockholders. No
indemnification may be made to or on behalf of a director, officer, employee or
agent in connection with a proceeding by or in the right of the Company in which
such person was adjudged liable to the Company unless the court in which the
action, suit or proceeding was brought, upon application, determines
indemnification is fair and reasonable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On February 3, 1998, the Company sold 101 equity units ("Units"), whereby
each Unit was comprised of 800 shares of Common Stock, 600 shares of the Series
A Preferred Stock, and a warrant to purchase 800
II-1
<PAGE> 108
shares of Common Stock. The Units were sold to eight foreign investors at a
purchase price of $6,008 per Unit, for a total consideration of $606,808. The
Units were sold with the assistance of Kelton International, Ltd. The fees paid
to Kelton International, Ltd. ($45,450 total) were paid by the foreign investors
directly to Kelton International, Ltd., over and above the purchase price of the
Units. The Units were issued in reliance upon an exemption from the registration
requirements of the Securities Act, pursuant to the provisions of Rule 506
promulgated thereunder.
On February 11, 1998, the Company sold 297,000 shares of Common Stock to
certain founding officers and directors of the Company and other individuals
instrumental in the organization of the Company for a purchase price of $.01 per
share. These shares were issued in reliance upon an exemption from the
registration requirements of the Securities Act, pursuant to the provisions of
Rule 506 promulgated thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
1 -- Form of Underwriting Agreement*
2 -- Agreement and Plan of Merger, dated as of March 30, 1998 by
and between Florida Banks, Inc. and First National Bank of
Tampa.**
3.1 -- Articles of Incorporation of the Company, as amended.**
3.1.1 -- Second Amended and Restated Articles of Incorporation.*
3.2 -- By-Laws of the Company.**
3.2.1 -- Amended and Restated By-Laws of the Company*
4.1 -- Specimen Common Stock Certificate.*
4.2 -- See Exhibits 3.1.1 and 3.2.1 for provisions of the Articles
of Incorporation, as amended, and By-Laws of the Company
defining rights of the holders of the Common Stock of the
Company.
5 -- Opinion of Smith, Gambrell & Russell, LLP.*
10.1 -- Form of Employment Agreement between the Company and Charles
E. Hughes, Jr.**
10.2 -- The Company's 1998 Stock Option Plan.**
10.2.1 -- Form of Incentive Stock Option Agreement*
10.2.2 -- Form of Non-qualified Stock Option Agreement*
10.3 -- Form of Employment Agreement between the Company and John S.
McMullen, T. Edwin Stinson, Jr., Donald D. Roberts and
Richard B. Kensler.*
10.4 -- Consulting Agreement dated as of January 20, 1998 between
the Company and T. Stephen Johnson & Associates, Inc.*
23.1 -- Consent of Smith, Gambrell & Russell, LLP (contained in
their opinion at Exhibit 5).
23.2 -- Consent of Deloitte & Touche LLP.*
24 -- Power of Attorney (included in original signature page to
this Registration Statement).
27 -- Financial Data Schedule (for SEC use only).*
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 14, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in that 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
II-2
<PAGE> 109
the securities being registered, the Registrant will, 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 eh Act and will be governed by
the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted form the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) To provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
II-3
<PAGE> 110
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-1 and has authorized this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of Jacksonville, State of Florida, on the 5th day of June, 1998.
FLORIDA BANKS, INC.
By: /s/ CHARLES E. HUGHES, JR.
------------------------------------
Charles E. Hughes, Jr.
President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement was signed by the following
persons in the capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CHARLES E. HUGHES, JR. President and Chief Executive June 5, 1998
- ----------------------------------------------------- Officer (Principal Executive
Charles E. Hughes, Jr. Officer) and Director
/s/ NANCY E. LAFOY Secretary, Treasurer (Principal June 5, 1998
- ----------------------------------------------------- Financial and Accounting
Nancy E. LaFoy Officer)
and Director
* Chairman of the Board Director June 5, 1998
- -----------------------------------------------------
M.G. Sanchez
* Vice-Chairman of the Board June 5, 1998
- -----------------------------------------------------
T. Stephen Johnson
* Director June 5, 1998
- -----------------------------------------------------
Clay M. Biddinger
* Director June 5, 1998
- -----------------------------------------------------
P. Bruce Culpepper
* Director June 5, 1998
- -----------------------------------------------------
J. Malcolm Jones, Jr.
* Director June 5, 1998
- -----------------------------------------------------
W. Andrew Krusen, Jr.
* Director June 5, 1998
- -----------------------------------------------------
Wilford C. Lyon, Jr.
* Director June 5, 1998
- -----------------------------------------------------
David McIntosh
</TABLE>
II-4
<PAGE> 111
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director June 5, 1998
- -----------------------------------------------------
John S. McMullen
By: /s/ CHARLES E. HUGHES, JR.
------------------------------------------------
Charles E. Hughes, Jr., as
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 112
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement.
3.1.1 -- Second Amended and Restated Articles of Incorporation.
3.2.1 -- Amended and Restated By-Laws of the Company.
4.1 -- Specimen Common Stock Certificate.
5 -- Opinion of Smith, Gambrell & Russell, LLP.
10.2.1 -- Form of Incentive Stock Option Agreement.
10.2.2 -- Form of Non-qualified Stock Option Agreement.
10.3 -- Form of Employment Agreement between the Company and John S.
McMullen, T. Edwin Stinson, Jr., Donald D. Roberts and
Richard B. Kensler.
10.4 -- Consulting Agreement, dated as of January 20, 1998, between
the Company and T. Stephen Johnson & Associates, Inc.
23.1 -- Consent of Smith, Gambrell & Russell, LLP (contained in
their opinion at Exhibit 5).
23.2 -- Consent of Deloitte & Touche LLP.
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
II-6
<PAGE> 1
EXHIBIT 1
FLORIDA BANKS, INC.
COMMON STOCK
----------------------
UNDERWRITING AGREEMENT
_____________, 1998
THE ROBINSON-HUMPHREY COMPANY, LLC
INTERSTATE/JOHNSON LANE CORPORATION
As Representatives of the several Underwriters named in Schedule I hereto
c/o The Robinson-Humphrey Company, LLC
3333 Peachtree Road, N.E.
Atlanta, Georgia 30326
Ladies and Gentlemen:
Florida Banks, Inc., a Florida corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I (the "Underwriters") an aggregate of ________
shares of common stock, par value $.01 per share ("Common Stock"), of the
Company (the "Firm Shares"), and at the election of the Underwriters, subject to
the terms and conditions stated herein, to issue and sell to the Underwriters up
to _______ additional shares of Common Stock (the "Optional Shares") (the Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof are collectively called the "Shares" ).
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-_____)
(the "Initial Registration Statement") with respect to the Shares,
including a prospectus subject to completion, has been filed by the
Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and one or
more amendments to such Initial Registration Statement have been so
filed. After the execution of this Underwriting Agreement (the
"Agreement"), the Company will file with the Commission either (A) if
such Initial Registration Statement, as it may have been amended, has
become effective under the Act and information has been omitted
therefrom in accordance with Rule 430A under the Act, a prospectus in
the
<PAGE> 2
form most recently included in an amendment to such Initial
Registration Statement with such changes or insertions as are required
by Rule 430A or permitted by Rule 424(b) under the Act and as have been
provided to and approved by the Representatives, or (B) if such Initial
Registration Statement, as it may have been amended, has not become
effective under the Act, an amendment to such Initial Registration
Statement, including a form of prospectus, a copy of which amendment
has been provided to and approved by the Representatives prior to the
execution of this Agreement or (C) if such Initial Registration
Statement, as it may have been amended, has become effective under the
Act and the number of shares to be offered has subsequently been
increased, a registration statement (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Act and as has
been provided to and approved by the Representatives. The approval of
the Representatives, as required in this Section 1(i), shall not be
unreasonably withheld by such parties. As used in this Agreement, the
term "Registration Statement" means such Initial Registration
Statement, as amended at the time when it was or is declared effective,
including all financial statement schedules and exhibits thereto
together with any Rule 462(b) Registration Statement and including any
information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term
"Preliminary Prospectus" means each Prospectus subject to completion
included in such Initial Registration Statement or any amendment or
post-effective amendment thereto (including the Prospectus subject to
completion, if any, included in the Registration Statement at the time
it was or is declared effective); and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act or, if no prospectus is required to be so filed, such
term means the prospectus included in the Registration Statement. For
purposes of the following representations and warranties, to the extent
reference is made to the Prospectus and at the relevant time the
Prospectus is not yet in existence, such reference shall be deemed to
be to the most recent Preliminary Prospectus.
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued and no proceeding for that
purpose has been instituted or, to the knowledge of the Company,
threatened by the Commission or the securities authority of any state
or other jurisdiction. If the Registration Statement has become
effective under the Act, no stop order suspending the effectiveness of
the Registration Statement or any part thereof has been issued and, to
the knowledge of the Company, no proceeding for that purpose has been
instituted or threatened or is contemplated by the Commission or the
securities authority of any state or other jurisdiction.
(iii) When any Preliminary Prospectus was filed with the
Commission it (A) contained all statements required to be stated
therein in accordance with, and complied in all material respects with
the requirements of, the Act and the rules and regulations of the
Commission thereunder and (B) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration Statement
or any amendment thereto was or is declared effective, and at each Time
of Delivery (as hereinafter defined), it (A) contained
<PAGE> 3
or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (B) did not or will not include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the
Prospectus or any amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective)
and at each Time of Delivery, the Prospectus, as amended or
supplemented at any such time, (A) contained or will contain all
statements required to be stated therein in material accordance with,
and complied or will comply in all material respects with the
requirements of, the Act and the rules and regulations of the
Commission thereunder and (B) did not or will not include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this Section 1(iii) do not apply to statements or
omissions made in any Preliminary Prospectus, the Registration
Statement or any amendment thereto or the Prospectus or any amendment
or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Underwriter specifically
for use therein. The Company and the Underwriters hereby acknowledge
that the following constitutes the only information furnished in
writing to the Company by the Underwriters specifically for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus,
or any such amendment or supplement: (i) the statements in the last
paragraph on the cover page of the Prospectus; (ii) the statements with
respect to stabilization in the paragraph at the bottom of the inside
front cover page of the Prospectus; and (iii) the statements under the
caption "Underwriting" in the Prospectus.
(iv) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings or contracts
and other documents are materially accurate and fairly present, in all
material respects, the information required to be shown under the Act
and the rules and regulations of the Commission thereunder; and there
are no statutes or legal or governmental proceedings required under the
Act and the rules and regulations of the Commission thereunder to be
described in the Registration Statement or the Prospectus that are not
described as required and no material contracts that are required under
the Act and the rules and regulations of the Commission thereunder to
be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described
and filed.
(v) Each of the Company, [Interim Acquisition Corp., a
_______________ corporation] ("Subsidiary") and First National Bank of
Tampa, N.A., Tampa, Florida (the "Bank") has been duly incorporated or
duly formed, is validly existing as a corporation or national banking
association, as the case may be, in good standing under the laws of its
jurisdiction of incorporation, association or organization
<PAGE> 4
and has full power and authority (corporate or other) to own or lease
its properties and conduct its business as described in the
Registration Statement and the Prospectus. The Company is a duly
registered "bank holding company" under the Bank Holding Company Act of
1956, as amended (the "BHC Act"), is in good standing and in full
compliance in all material respects with the BHC Act and the rules and
regulations thereunder. The Subsidiary and the Bank have been duly
incorporated or organized and are validly existing as national banking
associations, as the case may be, in good standing under the laws of
the United States, are members in good standing of the Federal Reserve
System and of the Bank Insurance Fund ("BIF") of the Federal Deposit
Insurance Corporation ("FDIC"). The Company has full power and
authority (corporate and other) to enter into this Agreement and to
perform its obligations hereunder. Each of the Company, the Subsidiary
and the Bank is duly qualified to transact business as a foreign
corporation or association and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, except
where the failure to so qualify would not have a material adverse
effect on the financial condition, results of operations or business of
the Company, the Subsidiary and the Bank, taken as a whole.
(vi) The Company's authorized, issued and outstanding capital
stock is as disclosed in the Prospectus. All of the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and
conform to the description of the Common Stock contained in the
Prospectus. None of the issued shares of capital stock of the Company,
Subsidiary or the Bank has been issued or is owned or held in violation
of any preemptive rights of shareholders, and no person or entity
(including any holder of outstanding shares of capital stock of the
Company, Subsidiary or the Bank) has any preemptive or other rights to
subscribe for any of the Shares. As of the First Time of Delivery (as
hereinafter defined), after giving effect to the consummation of the
merger of the Bank with and into the Subsidiary (the "Merger"), all of
the outstanding shares of capital stock and derivative securities
relating thereto of the Bank will have ceased to be outstanding and
will have been exchanged for the consideration set forth in Sections
3.1(c) and 3.4 of the Merger Agreement. Upon completion of the Merger
in the manner described in the Registration Statement, the shares of
Common Stock of the Company to be issued in the Merger will be duly
authorized, validly issued and fully paid and non-assessable. The
description of the Company's and the Bank's stock option, stock bonus
and other stock plans or arrangements, and the options or other rights
granted thereunder, set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such
plans, arrangements, options and rights.
(vii) All of the issued and outstanding shares of capital
stock of the Subsidiary have been duly authorized and validly issued,
are fully paid and nonassessable and are owned beneficially by the
Company free and clear of all liens, security interests, pledges,
charges, encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever. Other than the
Subsidiary listed on Exhibit [21.01] to the Registration Statement, the
Company does not own, directly or indirectly, any
<PAGE> 5
capital stock or other equity securities of any corporation or any
ownership interest in any partnership, joint venture or other
association.
(viii) Except as set forth on Schedule 1(viii) attached
hereto, there are no outstanding (A) securities or obligations of the
Company, the Subsidiary or the Bank convertible into or exchangeable
for any capital stock of the Company, the Subsidiary or the Bank, (B)
warrants, rights or options to subscribe for or purchase from the
Company, the Subsidiary or the Bank any such capital stock or any such
convertible or exchangeable securities or obligations, or (C)
obligations of the Company, the Subsidiary or the Bank to issue any
shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
(ix) Since the date of the most recent audited financial
statements included in the Prospectus, neither the Company, the
Subsidiary nor the Bank has sustained any material loss or interference
with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as disclosed in
or contemplated by the Prospectus.
(x) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and other than
as disclosed in or contemplated by the Registration Statement and the
Prospectus, (A) none of the Company, the Subsidiary or the Bank has
incurred any liabilities or obligations, direct or contingent, or
entered into any transactions, not in the ordinary course of business,
that are material to the Company, the Subsidiary and the Bank, (B) none
of the Company, the Subsidiary or the Bank has purchased any of its
outstanding capital stock or declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock, (C) there
has not been any material change in the capital stock, long-term debt
or short-term debt of the Company, the Subsidiary or the Bank, (D)
there has not been any material adverse change or any development
involving a prospective material adverse change in or affecting the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company, the
Subsidiary or the Bank taken as a whole, whether or not occurring in
the ordinary course of business, and (E) there has not been any
material transaction entered into or any material transaction that is
probable of being entered into by the Company or the Subsidiary, other
than transactions in the ordinary course of business and changes and
transactions described in or contemplated by the Registration
Statement.
(xi) The Shares have been duly authorized and, when issued
and delivered against payment therefor as provided herein, will be
validly issued and fully paid and nonassessable and will conform to the
description of the Common Stock contained in the Prospectus; and the
certificates evidencing the Shares comply with all applicable
requirements of Florida law. None of the authorized or outstanding
shares of Common Stock is subject to any preemptive or similar right to
purchase any shares of Common Stock. The Underwriters will receive good
title to the Shares to be issued and
<PAGE> 6
delivered by the Company hereunder, in good delivery form and free and
clear of all pledges, liens, hypothecations, encumbrances, claims,
security interests, restrictions, agreements, voting trusts and adverse
interests whatsoever. The Shares have been approved for inclusion on
the Nasdaq National Market, subject only to official notice of
issuance.
(xii) There are no contracts, agreements or understandings
between the Company, the Subsidiary or the Bank and any person granting
such person the right to require the Company, the Subsidiary or the
Bank to file a registration statement under the Act with respect to any
securities of the Company, the Subsidiary or the Bank owned or to be
owned by such person or to require the Company, the Subsidiary or the
Bank to include such securities in the securities registered pursuant
to the Registration Statement (or any such right has been effectively
waived) or in any securities being registered pursuant to any other
registration statement filed by the Company, the Subsidiary or the Bank
under the Act.
(xiii) All offers and sales of the Company's, the Subsidiary's
and the Bank's capital stock were at all relevant times duly registered
under the Act or exempt from the registration requirements of the Act
and were duly registered or the subject of an available exemption from
the registration requirements of the applicable state securities or
blue sky laws.
(xiv) Neither the Company, the Subsidiary nor the Bank is, or
with the giving of notice or passage of time or both would be, in
violation of or in default under its Articles of Incorporation,
Articles of Association or Bylaws or other governing organizational
instrument or under any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which the Company,
the Subsidiary or the Bank is a party or to which any of its properties
or assets are subject and which default has had or which the Company
reasonably expects to have a material adverse effect on the financial
condition, results of operations or business of the Company, the
Subsidiary and the Bank taken as a whole.
(xv) The issue and sale of the Shares and the performance of
this Agreement and the consummation of the transactions herein
contemplated and the Merger will not conflict with, or (with or without
the giving of notice or the passage of time or both) result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which the Company, the
Subsidiary or the Bank is a party or to which any of their respective
properties or assets is subject, nor will such action conflict with or
violate any provision of the Articles of Incorporation, Articles of
Association or Bylaws of the Company, the Subsidiary or the Bank or any
statute, rule or regulation or any order, judgment or decree of any
court or governmental agency or body having jurisdiction over the
Company, the Subsidiary or the Bank or any of their properties or
assets.
<PAGE> 7
(xvi) The Company, the Subsidiary and the Bank have good and
indefeasible title in fee simple to all real property, if any, and good
title to all personal property owned by them, in each case free and
clear of all liens, security interests, pledges, charges, encumbrances,
mortgages and defects, except such as are disclosed in the Prospectus
or such as do not materially and adversely affect the value of such
property and do not materially interfere with the use made or proposed
to be made of such property by the Company, the Subsidiary and the
Bank; and any real property and buildings held under lease by the
Company, the Subsidiary or the Bank are held under leases which are
valid and enforceable as to the Company, the Subsidiary and the Bank
and, to the Company's knowledge, as to others, with such exceptions as
are disclosed in the Prospectus or are not material and do not
materially interfere with the use made or proposed to be made of such
property and buildings by the Company, the Subsidiary or the Bank.
(xvii) No consent, approval, authorization, order or
declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body is required for the sale of
the Shares or the consummation of the transactions contemplated by this
Agreement, except the registration of the Shares under the Act (which,
if the Registration Statement is not effective as of the time of
execution hereof, shall be obtained as provided in this Agreement) and
such as may be required from the National Association of Securities
Dealers, Inc. (the "NASD") and under state securities or blue sky laws
in connection with the offer, sale and distribution of the Shares by
the Underwriters.
(xviii) Except as disclosed on Schedule 1(xviii), there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or, to the Company's knowledge, threatened in
which the Company, the Subsidiary or the Bank is a party or of which
any of its properties or assets are the subject. Neither the Company,
the Subsidiary nor the Bank is in violation of, or in default with
respect to, any statute, rule, regulation, order, judgment or decree.
(xix) Deloitte & Touche, LLP, who have certified certain
financial statements of the Company and its consolidated Subsidiary,
are and were during the periods covered by their reports included in
the Registration Statement and the Prospectus, independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(xx) The financial statements and schedules (including the
related notes) of the Company, the Subsidiary and the Bank included in
the Registration Statement, the Prospectus or any Preliminary
Prospectus were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, fairly present the financial condition, results of
operations, cash flows and changes in shareholders' equity of the
Company, the Subsidiary and the Bank, on a consolidated basis, at the
dates and for the periods presented all adjustments necessary for a
fair presentation of results for such period have been made. Except for
the pro forma
<PAGE> 8
financial statements discussed below, no other financial statements are
required to be included in the Registration Statement. No supporting
schedules are required to be included in the Registration Statement.
The selected financial data, the tables and financial and statistical
data set forth in the Prospectus fairly present, on the basis stated in
the Prospectus, the information included therein on a basis consistent
with that of the audited and pro forma financial statements contained
in the Registration Statement and the books and records of the Company
and the Bank, as applicable. The pro forma combined financial
statements of the Company and the Bank together with the related notes
thereto included in the Prospectus and in the Registration Statement
present fairly the information contained therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly presented on the
pro forma basis described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances
referred to therein. The financial statements and schedules included in
the Registration Statement and the Prospectus conform to the
requirements of Regulation S-X of the Commission applicable thereto and
present fairly the information presented therein for the periods shown.
The statistical information required by Commission Industry Guide 3 to
be included in the Registration Statement and the Prospectus present
fairly the information set forth therein, are in compliance with the
Act, the 1933 Act Regulations, and such Guide 3, and are consistent
with the Company's consolidated financial statements included in the
Registration Statement and the Prospectus. The Company, the Subsidiary
and the Bank have no material contingent obligations that are required
to be disclosed in the Company's or the Bank's financial statements in
accordance with generally accepted accounting principles which have not
been so disclosed in the financial statements included in the
Registration Statement.
(xxi) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms, subject, as to enforcement, to applicable law limiting
enforcement of indemnification provisions herein, to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other
laws relating to or affecting the enforcement of creditors' rights
generally and to general equitable principles.
(xxii) Neither the Company, the Subsidiary or the Bank nor, to
the knowledge of the Company, any of their respective officers,
directors or other affiliates has (A) taken, directly or indirectly,
any action designed to cause or result in, or that has constituted or
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares or (B) since the filing of the
Registration Statement (1) sold, bid for, purchased or paid anyone any
compensation for soliciting purchases of, the Shares or (2) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company. The Company, the
Subsidiary, and the Bank and their respective officers, directors and
employees have complied with Section 5 of the Act and
<PAGE> 9
no one has been authorized by the Company or any person purporting to
act in the name or on behalf of the Company to give any information or
to make any representations or warranties with respect to any matters
described in or incorporated by reference into the Prospectus other
than those contained in the Prospectus.
(xxiii) The Company has obtained for the benefit of the
Company and the Underwriters from each of the Company's and the Bank's
directors, executive officers, and persons listed on Schedule 1(xxiii)
a written agreement that for a period of 180 days from the date of the
Prospectus such director, executive officer or persons listed on
Schedule 1(xxiii) will not, without the prior written consent of The
Robinson-Humphrey Company, LLC, directly or indirectly sell, offer to
sell, contract to sell, solicit an offer to buy, grant any option,
right or warrant for the purchase or sale of, assign, pledge,
distribute or otherwise transfer, dispose of, encumber or reduce any
risk of ownership, (or make any announcement with respect to any of the
foregoing), any shares of Common Stock, or any options, rights,
warrants or other securities convertible into or exercisable or
exchangeable for Common Stock or evidencing any right to purchase or
subscribe for shares of Common Stock, whether or not beneficially owned
by the undersigned, except as provided in Section 2.
(xxiv) Neither the Company, the Subsidiary nor the Bank, nor,
to the knowledge of the Company, any director, officer, agent, employee
or other person associated with or acting on behalf of the Company, the
Subsidiary or the Bank has, directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; made any unlawful
payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from corporate
funds; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(xxv) (a) The operations of the Company, the Subsidiary and
the Bank with respect to any real property currently leased or owned or
by any means controlled by the Company, the Subsidiary or the Bank (the
"Real Property") are in material compliance with all federal, state and
local laws, ordinances, rules and regulations relating to occupational
health and safety and the environment (collectively, "Laws"); (b) the
Company, the Subsidiary and the Bank have all licenses, permits and
authorizations necessary to operate under all Laws and are in material
compliance with all terms and conditions of such licenses, permits and
authorizations; (c) the Company, the Subsidiary and the Bank have not
authorized or conducted and have no knowledge of the generation,
transportation, storage, use, treatment, disposal or release of any
hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, petroleum
product, natural gas, liquefied gas or synthetic gas defined or
regulated under any environmental law on, in or under any Real
Property; and (d) there is no pending or, to the knowledge of the
Company, threatened claim, litigation or any administrative agency
proceeding, nor has the Company, the Subsidiary or the Bank received
any written or oral notice from any governmental entity
<PAGE> 10
or third party, that: (A) alleges a violation of any Laws by the
Company, the Subsidiary or the Bank; (B) alleges the Company, the
Subsidiary or the Bank is a liable party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.
9601 et seq. or any state superfund law; (C) alleges possible
contamination of the environment by the Company, the Subsidiary or the
Bank; or (D) alleges possible contamination of the Real Property.
(xxvi) The Data Processing Services Agreement dated June 1,
1996 among M&I Data Services, a division of the Marshall & Ilsley
Corporation and Subsidiary (the "Data Processing Agreement"), has been
duly authorized, executed and delivered by the Bank and is enforceable
against the Bank, and to the knowledge of the Company, against the
respective parties to the Data Processing Agreement, in accordance with
its terms, except to the extent that enforcement thereof may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity). The
Company, the Subsidiary and the Bank have fulfilled and performed all
of their material obligations (for which performance has become due)
with respect to the Data Processing Agreement, and related agreements,
and the Data Processing Agreement, and related agreements, remain in
full force and effect; and no event has occurred with respect to the
Data Processing Agreement, and related agreements, which has had or
would be reasonably expected to have a material adverse effect on the
business of the Company, the Subsidiary and the Bank, taken as whole.
(xxvii) The Lease Agreement dated June 29, 1995 (the "Lease
Agreement") by and between Bay Villa Developers, Inc., as managing
agent for Riverside Plaza Associates, Inc. (the "Landlord") and Bank
(for purposes of this Section 1(xxvii), the "Tenant"), has been duly
authorized, executed and delivered by the Bank and is enforceable
against the Bank, and to the knowledge of the Company, against the
respective parties to the Lease Agreement, in accordance with its
terms, except to the extent that enforcement thereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity). The
Company, the Subsidiary and the Bank have fulfilled and performed all
of their material obligations (for which performance has become due)
with respect to the Lease Agreement and the Lease Agreement remains in
full force and effect; and no event has occurred with respect to the
Lease Agreement which has had or would reasonably be expected to have a
material adverse effect on the business of the Company, the Subsidiary
and the Bank, taken as a whole.
(xxviii) The Company or the Subsidiary own or the Subsidiary
or the Bank possess, or are licensed or otherwise have the legal right
to utilize, the patents, patent rights, licenses, inventions,
copyrights, know-how, trademarks (including, without limitation, the
right to use the marks "FLORIDA BANKS, INC.", "FLORIDA BANK,
<PAGE> 11
N.A.", and "FIRST NATIONAL BANK OF TAMPA"), service marks, trade names
and other intangible property (collectively, the "Intellectual Property
Rights") presently employed by them in connection with the business now
operated by them except where the failure to so own or possess such
legal rights could not reasonably be expected to have a material
adverse effect on the business of the Company, the Subsidiary and the
Bank, taken as a whole and none of the Company, the Subsidiary or the
Bank has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any
intellectual property rights or other proprietary rights which,
singularly or in the aggregate, if the subject of an unfavorable final
determination, could reasonably be expected to have a material adverse
effect on the business of the Company, the Subsidiary and the Bank,
taken as a whole.
(xxix) The Company has delivered or made available to you, or
your counsel, prior to the date the Registration Statement was declared
effective copies 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, without limitation,
"employee benefit plans" as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
adopted, maintained, sponsored in whole or in part or contributed to by
the Company, the Subsidiary or the Bank or their respective
predecessors 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 "Company Benefit Plans").
The Company, the Subsidiary or the Bank (and each of their
respective predecessors that adopted or contributed to a Company
Benefit Plan) has maintained all Company Benefit Plans (including
filing all reports and returns required to be filed with respect
thereto) in material accordance with their terms and is in compliance
in all material respects with all presently applicable provisions of
ERISA, the Internal Revenue Code and any other applicable federal and
state laws. Each Company Benefit Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code has either received a
favorable determination letter from the Internal Revenue Service or
will timely request such a letter prior to the expiration of any
remedial amendment period applicable without penalty to the Company
Benefit Plan under the Internal Revenue Code and has at all times been
maintained in accordance with Section 401 of the Internal Revenue Code.
Neither the Company, the Subsidiary nor the Bank has engaged in a
transaction with respect to any Company Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would
subject the Company, the Subsidiary or the Bank to a tax or penalty
imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA.
<PAGE> 12
Neither the Company, the Subsidiary nor the Bank is obligated
to provide post-retirement medical benefits or any other unfunded
post-retirement welfare benefits. Neither the Company, the Subsidiary
nor the Bank, nor any member of a group of trades or businesses under
common control (as defined in ERISA Sections 4001(a)(14) and
4001(b)(1)) with the Company, the Subsidiary or the Bank have at any
time within the last six years sponsored, contributed to or been
obligated under Title I or IV of ERISA to contribute to a "defined
benefit plan" (as defined in ERISA Section 3(35)). Within the last six
years, neither the Company, the Subsidiary nor the Bank nor any member
of a group of trades or businesses under common control (as defined in
ERISA Sections 4001(a)(14) and 4001(b)(1)) with the Company, the
Subsidiary or the Bank have had an "obligation to contribute" (as
defined in ERISA Section 4212) to a "multiemployer plan" (as defined in
ERISA Sections 4001(a)(3) and 3(37)(A)).
(xxx) No labor dispute exists or, to the knowledge of the
Company, is imminent with the Company's, the Subsidiary's or the Bank's
employees which could reasonably be expected to materially adversely
affect the financial condition, results of operations or business of
the Company, the Subsidiary and the Bank, taken as a whole.
(xxxi) The Company, the Subsidiary and the Bank are insured
by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are customary in the businesses in
which they are engaged; and neither the Company, the Subsidiary nor the
Bank has knowledge of any facts or circumstances that would prevent the
renewal of its existing insurance coverage as and when such coverage
expires or that would prevent such entity from obtaining similar
coverage from similar insurers as may be necessary to continue its
business at a comparable cost.
(xxxii) Each of the Company, the Subsidiary and the Bank
makes and keeps books and records reflecting its assets and maintains
internal accounting controls which provide reasonable assurance that
(A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit
preparation of the Company's and the Bank's consolidated financial
statements in accordance with generally accepted accounting principles
and to maintain accountability for the assets of the Company, the
Subsidiary and the Bank, (C) access to the assets of the Company, the
Subsidiary and the Bank is permitted only in accordance with
management's authorization, (D) the recorded accountability for assets
of the Company, the Subsidiary and the Bank is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences, and (E) such controls would prevent or
detect errors or irregularities in amounts that would be material in
relation to the Company's or the Bank's financial statements,
respectively.
(xxxiii) The Company's, Subsidiary's and the Bank's business
systems, including its computer hardware and software, (i) will
correctly and unambiguously process date information at all times,
including as the years 1999 and 2000 are approached and reached; and
(ii) will not suffer any abends, aborts, improper operation, invalid or
incorrect results or other interruptions in operation as a result of
the approach or reaching of any particular date or the improper
processing of any date. "Processing" of
<PAGE> 13
date information includes, but is not limited to, accepting input of
dates without ambiguity, outputting all dates in an unambiguous form,
and performing calculations, comparisons or operations or taking
actions or making decisions using dates, portions of dates, or time
periods. The concept of Year 2000 Compliance includes all issues
relating to the handling of dates or time periods, including the
processing of the leap year that will occur in the year 2000. In the
case of products with which the parties provide that the System shall
perform as a larger system, then the expression "Year 2000 Compliant"
means that the larger system shall be Year 2000 Compliant.
(xxxiv) Except as disclosed in the Prospectus, neither the
Subsidiary nor the Bank is currently prohibited (or with respect to the
Bank, at the First Time of Delivery), directly or indirectly, from
paying any dividends to the Company, from making any other
distributions on the Subsidiary's or the Bank's capital stock, from
repaying to the Company any loans or advances to the Subsidiary or the
Bank or from transferring any of the Subsidiary's or Bank's property or
assets to the Company.
(xxxv) The Company, the Subsidiary and the Bank have filed
all foreign, federal, state and local tax returns that are required to
be filed by them and have paid all taxes shown as due on such returns
as well as all other material taxes, assessments and governmental
charges that are due and payable, and, to the knowledge of the Company,
no material deficiency with respect to any such return has been
assessed or proposed. All applicable income and employment taxes have
been withheld and paid for any individuals who would be considered
common law employees of the Company and the Subsidiary for federal
income and employment tax withholding purposes. The Company and the
Bank have prepared or filed all tax information reports, currency
transaction reports and secured all IRS W-9 forms or begun back-up
withholding as required by law, except where the failure to so file is
not reasonably likely to have a material adverse effect. There is no
tax deficiency that has been asserted against the Company or the Bank
that is reasonably likely to have a material adverse effect on the
Company or the Bank, respectively.
(xxxvi) The Company is not, will not become as a result of
the transactions contemplated hereby, and does not intend to conduct
its business in a manner that would cause it to become, an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(xxxvii) There are no related-party transactions involving
the Company, the Subsidiary or the Bank or any other person required to
be described in the Prospectus which have not been described as
required.
(xxxviii) The Company and the Bank have entered into the
Agreement and Plan of Merger, set forth as Exhibit ____ to the
Registration Statement, pursuant to which the Bank will merge with and
into Subsidiary (the "Merger Agreement"). The Merger Agreement is in
full force and effect, has been duly and validly authorized,
<PAGE> 14
executed and delivered by the parties thereto, constitutes a valid and
binding agreement of the parties thereto, and is enforceable against
the parties thereto in accordance with its terms, except as such
enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles except as rights to indemnification may be limited by
principles of public policy as they relate to federal and state
securities laws, and none of the parties thereto is in default in any
respect thereunder. A complete and correct copy of the Merger Agreement
(including exhibits and schedules) has been delivered to the
Representatives and no changes therein will be made subsequent hereto
and prior to the Closing Date. Immediately prior to the First Time of
Delivery, the Merger became effective and was consummated (without any
waiver of any obligation of any party) and the [Articles of Merger with
respect to the Merger has been filed with and accepted by the Secretary
of State of the State of Florida] and a Certificate of merger has been
issued to Subsidiary by the OCC with respect to the Merger specifying
an effective time prior to the First Time of Delivery. Not later than
immediately prior to the First Time of Delivery each of the Company,
Subsidiary and Bank has received all corporate, shareholder, regulatory
and other approvals required to consummate the Merger.
(xxxix) The representations and warranties made in the Merger
Agreement by the Company and by the Bank are true and correct in all
material respects, except for such changes permitted or contemplated by
such Merger Agreement.
(xxxx) Any certificate signed by an officer of the Company
or the Bank and delivered to the Representatives or to counsel for the
Underwriters shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters set forth therein.
(xxxxi) The Company confirms as of the date hereof that the
Company and the Bank are in compliance with all provisions of Section 1
of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of
Doing Business with Cuba, and the Company further agrees that if it
commences engaging in business with the government of Cuba or with any
person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with
the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported in the
Prospectus, if any, concerning the Company's business with Cuba or with
any person or affiliate located in Cuba changes in any material way,
the Company will provide the Department notice of such business or
change, as appropriate, in a form acceptable to the Department.
(xxxxii) Except as disclosed in the financial statements
included in the Registration Statement and Prospectus none of the
Company, the Bank nor the Subsidiary has liabilities, whether accrued,
absolute, contingent or otherwise due or to become due other than
liabilities incurred in the ordinary course of business consistent with
past
<PAGE> 15
practice since the date of such financial statements and which could
not have, individually or in the aggregate, a material adverse effect
on the Company, Subsidiary and Bank, taken as a whole.
(xxxxiii) No statement, certificate, instrument, or other
writing furnished or to be furnished by the Company, the Subsidiary or
the Bank to the Representatives pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will
contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No document
to be filed by the Company, the Subsidiary or the Bank with any
regulatory authority in connection with the transactions contemplated
hereby or the Merger, will, at the respective time such documents are
filed, be false or misleading with respect to any material fact, or
omit to state any material fact. All documents that the Company, the
Subsidiary or the Bank is responsible for filing with any regulatory
authority in connection with the transactions contemplated hereby or
the Merger will comply as to form in all material respects with the
provisions of applicable law.
2. PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
herein set forth, (a) the Company agrees to sell to each of the Underwriters,
and each of the Underwriters agrees, severally and not jointly, to purchase from
the Company at a purchase price of $____ per share, the number of Firm Shares to
be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and (b) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares as provided
below, the Company agrees to issue and sell to each of the Underwriters,
severally and not jointly, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares to be sold by the Company as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares that such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of the Optional Shares that all of the Underwriters are entitled to
purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase, at
their election in whole or in part on one occasion, up to _______ Optional
Shares, at the purchase price per share set forth in clause (a) in the paragraph
above, for the sole purpose of covering over-allotments in the sale of Firm
Shares. Any such election to purchase Optional Shares may be exercised by
written notice from you to the Company, given within a period of 30 calendar
days after the date of this Agreement and setting forth the aggregate number of
Optional Shares to be purchased and the date on which such Optional Shares are
to be delivered, as determined by you but in no event earlier than the First
Time of Delivery (as hereinafter defined) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice. In the event you elect to purchase all or a
portion of the Optional Shares, the Company agrees to furnish or cause to be
furnished to you the certificates, letters and opinions, and to satisfy all
conditions, set forth in Section 7 hereof at the Subsequent Time of Delivery (as
hereinafter defined).
<PAGE> 16
3. OFFERING BY THE UNDERWRITERS. Upon the authorization by you of the
release of the Shares, the several Underwriters propose to offer the Shares for
sale upon the terms and conditions disclosed in the Prospectus.
4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form for the
Shares to be purchased by each Underwriter hereunder, and in such denominations
and registered in such names as The Robinson-Humphrey Company, LLC may request
upon at least 48 hours' prior notice to the Company, shall be delivered by or on
behalf of the Company to you for the account of such Underwriter against payment
by such Underwriter on its behalf of the purchase price therefor by wire
transfer, payable to the order of the Company, in same-day available funds. The
closing of the sale and purchase of the Shares shall be held at the offices of
Alston & Bird LLP, One Atlantic Center, 1201 West Peachtree Street, Atlanta,
Georgia 30309-3424, or at such other location as you and the Company may agree
upon, except that physical delivery of such certificates shall be made at the
office of The Depository Trust Company, 55 Water Street, New York, New York
10041. The time and date of such delivery and payment shall be, with respect to
the Firm Shares, at 9:00 a.m., Eastern Standard Time, on the third (or if the
Firm Shares are priced, as contemplated by Rule 15c6-1(c) promulgated pursuant
to the Securities Act of 1934, as amended (the "Exchange Act"), after 4:30 p.m.,
Eastern Standard Time, the fourth) full business day after this Agreement is
executed or at such other time and date not less than the seventh full business
day thereafter as you and the Company may agree upon in writing, and, with
respect to the Optional Shares, at 9:00 a.m., Eastern Standard Time, on the date
and at the location specified by you in the written notice given by you of the
Underwriters' election to purchase all or part of such Optional Shares, or at
such other time and date as you and the Company may agree upon. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery," such time and date for delivery of any Optional Shares, if not the
First Time of Delivery, is herein called a "Subsequent Time of Delivery," and
each such time and date for delivery is herein called a "Time of Delivery." The
Company will make such certificates available for checking and packaging at
least 24 hours prior to each Time of Delivery at the office of The Depository
Trust Company, 55 Water Street, New York, New York 10041 or at such other
location specified by you in writing at least 48 hours prior to such Time of
Delivery.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
of the Underwriters:
(i) If the Registration Statement has been declared effective
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance
with subparagraph (1) (or, if applicable, subparagraph (4)) of Rule
424(b) not later than the earlier of (A) the second business day
following the execution and delivery of this Agreement or (B) the
fifteenth business day after the date on which the Registration
Statement is declared effective. The Company will advise you promptly
of any such filing pursuant to Rule 424(b).
<PAGE> 17
(ii) The Company will not file with the Commission the
prospectus or the amendment referred to in the second sentence of
Section l(i) hereof, any amendment or supplement to the Prospectus or
any amendment to the Registration Statement unless you have received a
reasonable period of time to review any such proposed amendment or
supplement and consented to the filing thereof (which consent shall not
be unreasonably withheld) and will use its best efforts to cause any
such amendment to the Registration Statement to be declared effective
as promptly as possible. Upon the reasonable request of the
Representatives or counsel for the Underwriters, the Company will
promptly prepare and file with the Commission, in accordance with the
rules and regulations of the Commission, any amendments to the
Registration Statement or amendments or supplements to the Prospectus
that may be necessary or advisable in connection with the distribution
of the Shares by the several Underwriters and will use its best efforts
to cause any such amendment to the Registration Statement to be
declared effective as promptly as possible. If required, the Company
will file any amendment or supplement to the Prospectus with the
Commission in the manner and within the time period required by Rule
424(b) under the Act. The Company will advise the Representatives,
promptly after receiving notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement
thereto has been filed and will provide evidence to the Representatives
of each such filing or effectiveness.
(iii) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 p.m. Eastern
Standard Time, on the date of this Agreement, and the Company shall at
the time of filing either pay to the Commission the filing fee for the
Rule 462(b) Registration Statement or give irrevocable instructions for
the payment of such fee pursuant to Rule 111(b) under the Act.
(iv) The Company will advise you promptly after receiving
notice or obtaining knowledge of (A) the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or any part thereof or any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or of the initiation or threatening of any
proceeding for any such purpose, (B) the suspension of the
qualification of the Shares for offer or sale in any jurisdiction or of
the initiation or threatening of any proceeding for any such purpose,
or (C) any request made by the Commission or any securities authority
of any other jurisdiction for amending the Registration Statement, for
amending or supplementing the Prospectus or for additional information.
The Company will use its best efforts to prevent the issuance of any
such stop order and, if any such stop order is issued, to obtain the
withdrawal thereof as promptly as possible.
(v) If the delivery of a prospectus relating to the Shares
by an underwriter or dealer is required under the Act at any time prior
to the expiration of nine months after the date of the Prospectus and
if at such time any events have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue
<PAGE> 18
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if for any
reason it is necessary during such same period to amend or supplement
the Prospectus to comply with the Act or the rules and regulations
thereunder, the Company will promptly notify you, and at the Company's
expense, prepare and file with the Commission an amendment or
supplement to the Prospectus that corrects such statement or omission
or effects such compliance and will furnish without charge to each
Underwriter and to any dealer in securities as many copies of such
amended or supplemented Prospectus as you may from time to time
reasonably request. If the delivery of a prospectus by an underwriter
or dealer relating to the Shares is required under the Act at any time
nine months or more after the date of the Prospectus, upon your request
but at the expense of such Underwriter, the Company will prepare and
deliver to such Underwriter as many copies as you may reasonably
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act. Neither your consent to, nor the Underwriters'
delivery of, any such amendment or supplement shall constitute a waiver
of any of the conditions set forth in Section 7.
(vi) The Company promptly from time to time will take such
action to qualify the Shares for offering and sale under the securities
or blue sky laws of such jurisdictions as you may reasonably request
and will continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Shares, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction.
(vii) The Company will promptly provide you, without charge,
(A) two manually executed copies of the Registration Statement as
originally filed with the Commission and of each amendment thereto, (B)
for each other Underwriter a conformed copy of the Registration
Statement as originally filed and of each amendment thereto, without
exhibits, and (C) so long as a prospectus relating to the Shares is
required to be delivered under the Act, as many copies of each
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto as you may reasonably request.
(viii) As soon as practicable, but in any event not later than
45 days after the end of the Company's fiscal quarter in which the
first anniversary of the effective date of the Registration Statement
occurs, the Company will make generally available to its security
holders an earnings statement of the Company and the Subsidiary, if
any, covering a period of at least 12 months beginning after the
effective date of the Registration Statement (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder.
(ix) During the period beginning on the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, the Company will not, without your prior written consent,
offer, pledge, issue, sell, contract to sell, grant any option, right
or warrant for the sale of, or otherwise dispose of (or announce any of
the foregoing, directly or indirectly), any shares of Common Stock or
securities convertible
<PAGE> 19
into, exercisable or exchangeable for, shares of Common Stock, except
as provided in Section 2 and except that the Company may (A) grant
options to the extent described in the Registration Statement pursuant
to the Company's stock option plans; (B) issue shares of Common Stock
upon the exercise of any of the Company's outstanding stock options as
described in the Registration Statement or stock options granted under
clause (A) above.
(x) Subject to compliance with all applicable laws and
regulations, during a period of five years from the effective date of
the Registration Statement, the Company will furnish to you and, upon
request, to each of the other Underwriters, without charge, (A) copies
of all reports or other communications (financial or other) furnished
to shareholders, (B) as soon as they are available, copies of any
reports and financial statements (not to include projections) furnished
to or filed with the Commission, the NASD or any national securities
exchange, and (C) such additional information concerning the business
and financial condition of the Company and the Subsidiary, if any, as
you may reasonably request (subject to the Underwriter's obligation to
handle any material non-public information provided to them by the
Company in a confidential manner and in accordance with their
obligations under applicable federal securities law).
(xi) Neither the Company, the Subsidiary, the Bank nor, with
the consent of the Company, any of its officers, directors or other
affiliates will (A) take, directly or indirectly, prior to the
termination of the underwriting syndicate contemplated by this
Agreement, any action designed to cause or to result in, or that might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of any of the Shares, (B) sell, bid for, purchase or pay anyone
any compensation for soliciting purchases of, the Shares or (C) pay or
agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(xii) The Company will apply the net proceeds from the
offering in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(xiii) The Company will use its best efforts to cause the
Shares to remain included in the Nasdaq National Market at each Time of
Delivery and for at least one year from the date hereof.
(xiv) If at any time during the period beginning on the date
the Registration Statement becomes effective and ending on the later of
(A) the date 30 days after such effective date and (B) the date that is
the earlier of (1) the date on which the Company first files with the
Commission a Quarterly Report on Form 10-Q or an Annual Report on Form
10-K after such effective date and (2) the date on which the Company
first issues a quarterly or annual financial report to shareholders
after such effective date, any rumor, publication or event relating to
or affecting the Company shall occur as a result of which in your
reasonable opinion the market price of the Common Stock has
<PAGE> 20
been or is likely to be materially affected (regardless of whether such
rumor, publication or event necessitates an amendment of or supplement
to the Prospectus), the Company will, after written notice from you
advising the Company to the effect set forth above, forthwith consult
with you concerning any appropriate remedial action, including, without
limitation, the substance of, and the advisability of disseminating a
press release or other public statement, reasonably satisfactory to
you, responding to or commenting on such rumor, publication or event.
6. EXPENSES. The Company and the Bank will pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated hereby are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including, without limitation, all
costs and expenses incident to (i) the reasonable fees, disbursements and
expenses of the Company's, the Subsidiary's and the Bank's counsel and
accountants in connection with the registration of the Shares under the Act and
the Merger and all other expenses in connection with the Merger and the
preparation, printing and filing of the Registration Statement (including all
amendments thereto), any Preliminary Prospectus, the Prospectus and, if
applicable, any amendments and supplements thereto, this Agreement and any blue
sky memoranda; (ii) the delivery of copies of the foregoing documents to the
Underwriters; (iii) the filing fees of the Commission and the NASD relating to
the Shares and the related reasonable fees and disbursements of counsel for the
Underwriters in connection with filings with the NASD; (iv) the preparation,
issuance and delivery to the Underwriters of any certificates evidencing the
Shares, including transfer agent's and registrar's fees; (v) the qualification
of the Shares for offering and sale under state securities and blue sky laws,
including filing fees and reasonable fees and disbursements of counsel for the
Underwriters relating thereto; (vi) any listing of the Shares on the Nasdaq
National Market and (vii) any reasonable expenses for travel, lodging and meals
incurred by the Company and any of its officers, directors and employees in
connection with any meetings with prospective investors in the Shares. It is
understood, however, that, except as provided in this Section, Section 8 and
Section 10 hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel, stock transfer taxes on resale of
any of the Shares by them, and any advertising expenses relating to the offer
and sale of the Shares.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder to purchase and pay for the Shares to be delivered at
each Time of Delivery shall be subject to the accuracy of the representations
and warranties of the Company contained herein as of the date hereof and as of
such Time of Delivery, to the accuracy of the statements of Company officers
made pursuant to the provisions of Section 7(h) hereof, to the performance by
the Company of their covenants and agreements hereunder, and to the following
additional conditions precedent:
(a) If the registration statement as amended to date has not
become effective prior to the execution of this Agreement, such registration
statement shall have been declared effective not later than 4:00 p.m., Eastern
Standard Time, on the day following the date of this Agreement or such later
date and/or time as shall have been consented to by you in writing. The
Prospectus and any amendment or supplement thereto shall have been filed with
the Commission
<PAGE> 21
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing and in accordance with Section 5(a) of this Agreement; if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall
have become effective by 10:00 p.m. Eastern Standard Time, on the date of this
Agreement; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceedings for that
purpose shall have been instituted, threatened or, to the knowledge of the
Company and the Representatives, contemplated by the Commission; and all
requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction.
(b) Alston & Bird LLP, counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Company, the validity of the Shares
being delivered at such Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and the
Company shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(c) You shall have received an opinion, dated such Time of
Delivery, of Smith, Gambrell & Russell, LLP, counsel for the Company, in form
and substance reasonably satisfactory to you and your counsel, to the effect
that:
(i) The Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the State of Florida and has the corporate power and authority to own
or lease its properties and conduct its business as described in the
Registration Statement and the Prospectus and to enter into this
Agreement and perform its obligations hereunder. The Company is duly
qualified to transact business as a foreign corporation and is in good
standing under the laws of each other jurisdiction in which it owns or
leases property, or conducts any business, except where the failure to
so qualify would not have a material adverse effect on the financial
condition, results of operations or business of the Company and the
Subsidiary, taken as a whole.
(ii) The Subsidiary has been duly incorporated or
duly formed, is validly existing as a national banking association, in
good standing under the laws of its jurisdiction of incorporation or
organization and has the full power and authority (corporate and other)
to own or lease its properties and conduct its business as described in
the Registration Statement and the Prospectus. The Subsidiary is duly
qualified to transact business as a foreign corporation or association
and is in good standing under the laws of each other jurisdiction in
which it owns or leases property, or conducts any business, except
where the failure to so qualify would not have a material adverse
effect on the financial condition, results of operations or business of
the Company or the Subsidiary taken as a whole. The Merger of the Bank
with and into the Subsidiary is effective and has been consummated
immediately prior to First Time of Delivery as evidenced by the
Certificate of Merger issued by the OCC and the [Articles of Merger
filed and accepted by the Secretary of State of the State of Florida].
The Company and the Subsidiary have each received all corporate,
shareholder, regulatory and other approvals and filed all required
notices necessary to consummate the Merger.
<PAGE> 22
(iii) The Company's authorized, issued and
outstanding capital stock is as disclosed in the Prospectus. All of the
issued and outstanding shares of capital stock of the Company have been
duly authorized and validly issued, are fully paid and nonassessable
and conform to the description of the Common Stock contained in the
Prospectus. None of the issued shares of capital stock of the Company,
or its predecessors, or the Subsidiary, have been issued or are owned
or held in violation of any statutory preemptive rights of
shareholders, and no person or entity (including any holder of
outstanding shares of capital stock of the Company or the Subsidiary)
has any statutory preemptive or, to such counsel's knowledge, other
rights to subscribe for any of the Shares in the Company or the
Subsidiary.
(iv) Except as disclosed in the Prospectus, all of
the issued and outstanding shares of capital stock of the Subsidiary
have been duly authorized and validly issued, are fully paid and
nonassessable, and, to the knowledge of such counsel, are owned
beneficially by the Company free and clear of all liens, security
interests, pledges, charges, encumbrances, shareholders' agreements,
voting trusts, defects, equities or claims of any nature whatsoever. To
such counsel's knowledge, other than the subsidiary, as listed on
Exhibit [22.01] to the Registration Statement, the Company does not
own, directly or indirectly, any capital stock or other equity
securities of any other corporation or any ownership interest in any
partnership, joint venture or other association.
(v) Other than as disclosed in Schedule 1(viii)
attached hereto, to the knowledge of such counsel, there are no
outstanding (A) securities or obligations of the Company or the
Subsidiary convertible into or exchangeable for any capital stock of
the Company, the Subsidiary or the Bank, (B) warrants, rights or
options to subscribe for or purchase from the Company or the Subsidiary
any such capital stock or any such convertible or exchangeable
securities or obligations or (C) obligations of the Company or the
Subsidiary to issue any shares of capital stock, any such convertible
or exchangeable securities or obligations, or any such warrants, rights
or options.
(vi) The Shares to be issued and sold by the Company
have been duly authorized and, when issued and delivered against
payment therefor as provided herein, will be validly issued and fully
paid and nonassessable and will conform to the description of the
Common Stock contained in the Prospectus; the form of certificate
evidencing the Shares complies, in all material respects, with all
applicable requirements of Florida law. None of the authorized or
outstanding shares of Common Stock is subject to any preemptive or
similar right to purchase any shares of Common Stock. The Underwriters
will receive good title to the Shares to be issued and delivered by the
Company hereunder, in good delivery form and free and clear of all
pledges, liens, hypothecations, encumbrances, claims, security
interests, restrictions, agreements, voting trusts and adverse
interests whatsoever.
<PAGE> 23
(vii) To the knowledge of such counsel, there are no
contracts, agreements or understandings between the Company or the
Subsidiary and any person granting such person the right to require the
Company, the Subsidiary or the Bank to file a registration statement
under the Act with respect to any securities of the Company, the
Subsidiary or the Bank owned or to be owned by such person or to
require the Company, the Subsidiary or the Bank to include such
securities in the securities registered pursuant to the Registration
Statement (or any such right has been effectively waived) or in any
securities being registered pursuant to any other registration
statement filed by the Company or the Subsidiary under the Act.
(viii) All offers and sales of the Company's capital
stock set forth in Item 15 of Part II of the Registration Statement
were at all relevant times duly registered under the Act or exempt from
the registration requirements of the Act, or if not registered or
exempt in compliance with the Act, any private rights of action for
rescission or damages arising from such failure to register any such
securities are time barred by applicable statutes of limitations or
equitable principles, including laches.
(ix) To such counsel's knowledge, neither the
Company nor the Subsidiary is, or with the giving of notice or passage
of time or both, would be, in violation of its respective Articles of
Incorporation, Articles of Association or Bylaws or other governing
organizational instrument.
(x) The issue and sale of the Shares being issued
at such Time of Delivery and the performance of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with, or (with or without the giving of notice or the passage of time
or both) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which the Company or the Subsidiary is a party or to which any of
their respective properties or assets is subject which is filed as an
Exhibit to the Registration Statement, nor will such action conflict
with or violate any provision of the Articles of Incorporation,
Articles of Association, Bylaws or other governing organizational
instrument of the Company or the Subsidiary or, to such counsel's
knowledge, any statute, rule or regulation (assuming compliance with
all applicable state securities or blue sky laws, as to which such
counsel need express no opinion) or any order, judgment or decree of
any court or governmental agency or body having jurisdiction over the
Company or the Subsidiary or any of their respective properties or
assets.
(xi) No consent, approval, authorization, order or
declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body is required for the issue and
sale of the Shares or the consummation of the transactions contemplated
by this Agreement, except the registration of the Shares under the Act
and such as may be required from the NASD or under state securities or
blue sky laws.
<PAGE> 24
(xii) To such counsel's knowledge, except as
disclosed in the Prospectus, there is no litigation, arbitration,
claim, proceeding (formal or informal) or investigation pending or
threatened in which the Company or the Subsidiary is a party or of
which any of their respective properties or assets is the subject
which, if determined adversely to the Company or the Subsidiary,
individually or in the aggregate, reasonably would be expected to have
a material adverse effect on the financial condition, results of
operations or business of the Company or the Subsidiary, taken as a
whole; and, to such counsel's knowledge, neither the Company nor the
Subsidiary is in violation of, or in default with respect to, any
statute, rule, regulation, order, judgment or decree, except as do not
and will not individually or in the aggregate have a material adverse
effect on the financial condition, results of operations or business of
the Company and the Subsidiary, taken as a whole.
(xiii) To the knowledge of such counsel and except
where the failure to own or possess such rights could not reasonable be
expected to have a material adverse effect on the business of the
Company and the Subsidiary, taken as a whole, the Company or the
Subsidiary owns or has the right to use all patents, trademarks, trade
names, service marks, copyrights, and applications therefor;
franchises; trade secrets; proprietary or other confidential
information and intangible properties and assets (collectively,
"Intangibles"), including, but not limited to, the right to use the
marks "FLORIDA BANKS, INC." and certain related marks and logos
presently employed by it in connection with its business as presently
conducted or as the Prospectus indicates the Company or the Subsidiary
proposes to conduct; to the knowledge of such counsel, neither the
Company nor the Subsidiary have infringed and are not infringing, nor
will the conduct of Company's or the Subsidiary's business as proposed
in the Prospectus infringe, and neither the Company nor the Subsidiary
have received notice of infringement with respect to asserted
Intangibles of others; and, to the knowledge of such counsel, except
where the alleged infringement is not reasonably likely to have a
material adverse effect on the business of the Company and the
Subsidiary, taken as a whole, and to the knowledge of such counsel
there is no infringement by others of Intangibles of the Company or the
Subsidiary.
(xiv) The Company has full legal right, power and
authority to enter into this Agreement and to issue, sell and deliver
the Shares to be sold by it to the Underwriters as provided herein; and
this Agreement has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by the
Representatives constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(xv) The Registration Statement and the Prospectus
and each amendment or supplement thereto (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion), as of their respective effective or issue dates,
complied as to form in all material respects with the requirements of
the Act and the rules and regulations thereunder. The descriptions in
the Registration Statement and the Prospectus of statutes, legal and
governmental proceedings or contracts and other documents are accurate
in all material respects and
<PAGE> 25
fairly present the information required to be shown; and such counsel
does not know of any contracts or documents of a character required to
be described in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement which are not described and
filed as required.
(xvi) The Registration Statement has been declared
effective by the Commission under the Act; any required filing of the
Prospectus pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or threatened or are
contemplated by the Commission.
(xvii) The Company is not, and will not be as a
result of the consummation of the transactions contemplated by this
Agreement, an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act
of 1940, as amended.
Such counsel shall also state that nothing has come to the attention of
such counsel which gives them reason to believe (i) that the Registration
Statement, or any further amendment thereto made prior to such Time of Delivery,
on its effective date and as of such Time of Delivery, contained or contains any
untrue statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) that the Prospectus, or any amendment or supplement
thereto made prior to such Time of Delivery, as of its issue date and as of such
Time of Delivery, contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (provided that such counsel need express no belief regarding the
financial statements, notes and related schedules and other financial or
statistical data contained in the Registration Statement, any amendment thereto,
or the Prospectus, or any amendment or supplement thereto). With respect to such
statement, such counsel may state that their belief is based upon the procedures
set forth therein, but is without independent check and verification.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on certificates of responsible
officers of the Company and public officials. Such counsel may also rely on
local counsel as to matters not governed by Georgia law.
(d) You shall have received an opinion, dated such Time of
Delivery, of Igler & Dougherty, P.A., counsel for the Bank, in form and
substance reasonably satisfactory to you and your counsel, to the effect that:
(i) The Bank has been duly incorporated or duly
formed, is validly existing as a national banking association, in good
standing under the laws of its jurisdiction of incorporation or
organization and has the full power and authority (corporate and other)
to own or lease its properties and conduct its business as described
<PAGE> 26
in the Registration Statement and the Prospectus. The Bank is duly
qualified to transact business as a foreign corporation or association
and is in good standing under the laws of each other jurisdiction in
which it owns or leases property, or conducts any business, except
where the failure to so qualify would not have a material adverse
effect on the financial condition, results of operations or business of
the Bank. The Merger of the Bank with and into the Subsidiary is
effective and has been consummated immediately prior to First Time of
Delivery as evidenced by the Certificate of Merger issued by the OCC
and the [Articles of Merger filed and accepted by the Secretary of
State of the State of Florida]. The Bank has each received all
corporate, shareholder, regulatory and other approvals and filed all
required notices necessary to consummate the Merger.
(ii) None of the issued shares of capital stock of
the Bank have been issued or are owned or held in violation of any
statutory preemptive rights of shareholders, and no person or entity
(including any holder of outstanding shares of capital stock of the
Bank) has any statutory preemptive or, to such counsel's knowledge,
other rights to subscribe for any of the Shares in the Company,
Subsidiary or the Bank.
(iii) Except as disclosed in the Prospectus, all of
the issued and outstanding shares of capital stock of the Bank and
derivative securities have been duly authorized and validly issued, are
fully paid and nonassessable, have been converted into Company common
Stock and have ceased to exist pursuant to the terms of the Merger, and
there is no outstanding or continuing security interest, mortgage,
pledge, lien, encumbrance or claim, no options, warrants or other
rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or
ownership interests in the Bank capital stock. To such counsel's
knowledge, the Bank does not own, directly or indirectly, any capital
stock or other equity securities of any other corporation or any
ownership interest in any partnership, joint venture or other
association.
(iv) To the knowledge of such counsel, there are no
outstanding (A) securities or obligations of the Bank convertible into
or exchangeable for any capital stock of the Company, the Subsidiary or
the Bank, (B) warrants, rights or options to subscribe for or purchase
from the Bank any such capital stock or any such convertible or
exchangeable securities or obligations or (C) obligations of the Bank
to issue any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or
options.
(v) None of the authorized or outstanding shares of
Bank capital stock is subject to any preemptive or similar rights.
(vi) To the knowledge of such counsel, there are no
contracts, agreements or understandings between the Bank and any person
granting such person the right to require the Company, the Subsidiary
or the Bank to file a registration statement under the Act with respect
to any securities of the Company, the Subsidiary or the Bank owned or
to be owned by such person or to require the Company, the Subsidiary or
the
<PAGE> 27
Bank to include such securities in the securities registered pursuant
to the Registration Statement (or any such right has been effectively
waived) or in any securities being registered pursuant to any other
registration statement filed by the Company, the Subsidiary or the Bank
under the Act.
(vii) All shares of the Bank's capital stock, were
at all relevant times duly registered under the Act or exempt from the
registration requirements of the Act, or if not registered or exempt in
compliance with the Act, any private rights of action for rescission or
damages arising from such failure to register any such securities are
time barred by applicable statutes of limitations or equitable
principles, including laches.
(viii) To such counsel's knowledge, the Bank is not,
nor with the giving of notice or passage of time or both, would be, in
violation of its respective Articles of Incorporation, Articles of
Association or Bylaws or other governing organizational instrument.
(ix) The issue and sale of the Shares being issued
at such Time of Delivery and the performance of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with, or (with or without the giving of notice or the passage of time
or both) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which the Bank is a party or to which any of their respective
properties or assets is subject, nor will such action conflict with or
violate any provision of the Articles of Incorporation, Articles of
Association, Bylaws or other governing organizational instrument of the
Bank or, to such counsel's knowledge, any statute, rule or regulation
(assuming compliance with all applicable state securities or blue sky
laws, as to which such counsel need express no opinion) or any order,
judgment or decree of any court or governmental agency or body having
jurisdiction over the Bank or any of their respective properties or
assets.
(x) To such counsel's knowledge, there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or threatened in which the Bank is a party or of
which any of its properties or assets is the subject which, if
determined adversely to the Bank, individually or in the aggregate,
reasonably would be expected to have a material adverse effect on the
financial condition, results of operations or business of the Bank;
and, to such counsel's knowledge, the Bank is not in violation of, or
in default with respect to, any statute, rule, regulation, order,
judgment or decree, except as do not and will not individually or in
the aggregate have a material adverse effect on the financial
condition, results of operations or business of the Bank.
(xi) To the knowledge of such counsel and except
where the failure to own or possess such rights could not reasonable be
expected to have a material adverse effect on the business of the Bank,
the Bank owns or has the right to use all patents, trademarks, trade
names, service marks, copyrights, and applications therefor;
franchises; trade secrets; proprietary or other confidential
information and intangible properties and
<PAGE> 28
assets (collectively, "Intangibles"), including, but not limited to,
the right to use the marks "FLORIDA BANK, N.A." and "FIRST NATIONAL
BANK OF TAMPA" and certain related marks and logos presently employed
by it in connection with its business as presently conducted; to the
knowledge of such counsel, the Bank has not infringed and is not
infringing, and the Bank has not received notice of infringement with
respect to asserted Intangibles of others; and, to the knowledge of
such counsel, except where the alleged infringement is not reasonably
likely to have a material adverse effect on the business of the Bank,
and to the knowledge of such counsel there is no infringement by others
of Intangibles of the Bank.
Such counsel shall also state that nothing has come to the attention of
such counsel which gives them reason to believe (i) that the Registration
Statement, or any further amendment thereto made prior to such Time of Delivery,
on its effective date and as of such Time of Delivery, contained or contains any
untrue statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) that the Prospectus, or any amendment or supplement
thereto made prior to such Time of Delivery, as of its issue date and as of such
Time of Delivery, contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (provided that such counsel need express no belief regarding the
financial statements, notes and related schedules and other financial or
statistical data contained in the Registration Statement, any amendment thereto,
or the Prospectus, or any amendment or supplement thereto). With respect to such
statement, such counsel may state that their belief is based upon the procedures
set forth therein, but is without independent check and verification.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on certificates of responsible
officers of the Bank and public officials. Such counsel may also rely on local
counsel as to matters not governed by Florida law.
(e) You shall have received from Deloitte & Touche, LLP
letters dated, respectively, the date hereof and each Time of Delivery, in form
and substance reasonably satisfactory to you, stating that they are independent
public accountants with respect to the Company and the Bank within the meaning
of the Act and the applicable published rules and regulations thereunder, and to
the effect that:
(i) In their opinion, the financial statements and
schedules audited by them and included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder with respect to registration statements on Form
S-1;
(ii) The unaudited summary and selected financial
information included in the Preliminary Prospectus and the Prospectus
under the captions "Prospectus Summary", "Selected Financial Data",
"Capitalization" and "Proforma Financial Data" agrees with the
corresponding amounts in the audited financial statements included in
the Prospectus or previously reported on by them;
<PAGE> 29
(iii) On the basis of a reading of the latest
available audited interim financial statements of the Company, the
Subsidiary and the Bank, a reading of the minute books of the Company,
the Subsidiary and the Bank, inquiries of officials of the Company, the
Subsidiary and the Bank responsible for financial and accounting
matters and other specified procedures, all of which have been agreed
to by the Representatives, nothing came to their attention that caused
them to believe that:
(A) the audited financial statements
described in paragraph (i) above and included in the
Registration Statement do not comply as to form in all
material respects with the accounting requirements of the Act
and the related published rules and regulations thereunder and
any material modifications should be made to such audited
financial statements for them to be in conformity with
generally accepted accounting principles;
(B) at a specified date not more than five
days prior to the date of delivery of such respective letter,
there was any change in the capital stock, decline in
shareholders' equity or increase in long-term debt of the
Company, the Subsidiary or the Bank, or other items specified
by the Underwriters by the date of this Agreement, in each
case as compared with amounts shown in the latest balance
sheets included in the Prospectus, except in each case for
changes, decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in such
letters; and
(C) for the period from the closing date of
the latest statements of revenues and expenses included in the
Prospectus to a specified date not more than five days prior
to the date of delivery of such respective letter, there were
any decreases in revenues or net income of the Company, the
Subsidiary or the Bank, or other items specified by the
Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the corresponding
period of the preceding year, except in each case for
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter.
(iv) They have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentages and statistical and financial information specified by you
by the date of this Agreement which are derived from the general
accounting records of the Company, the Subsidiary and the Bank, which
appear in the Prospectus and have compared and agreed such amounts,
percentages and statistical and financial information with the
accounting records of the Company, the Subsidiary and the Bank or to
analyses and schedules prepared by the Company, the Subsidiary or the
Bank from their respective detailed accounting records.
In the event that the letters to be delivered at the Time of
Delivery referred to above set forth any such changes, decreases or
increases, it shall be a further condition to
<PAGE> 30
the obligations of the Underwriters that the Underwriters shall have
determined, after discussions with officers of the Company responsible
for financial and accounting matters and with Deloitte & Touche, LLP,
that such changes, decreases or increases as are set forth in such
letters do not reflect a material adverse change or trend in the
shareholder's equity or long-term debt of the Company, the Subsidiary
or the Bank as compared with the amounts shown in the latest
consolidated balance sheets of the Company, the Subsidiary and the Bank
included in the Prospectus, or a material adverse change or trend in
revenues or net income of the Company, the Subsidiary and the Bank, in
each case as compared with the corresponding period of the prior year.
(f) Since the date of the latest audited financial statements
included in the Prospectus, neither the Company, the Subsidiary nor the Bank
shall have sustained (i) any loss or interference with their respective business
from fire, explosion, flood, hurricane or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as disclosed in or contemplated by the Prospectus, or
(ii) any change, or any development involving a prospective change (including
without limitation a change in management or control of the Company or the
Bank), in or affecting the condition (financial or otherwise), results of
operations, net worth or business prospects of the Company, the Subsidiary or
the Bank, taken as a whole, otherwise than as disclosed in or contemplated by
the Prospectus, the effect of which, in either such case, is in your reasonable
judgment so material and adverse as to make it impracticable or inadvisable to
proceed with the purchase, sale and delivery of the Shares being delivered at
such Time of Delivery as contemplated by the Registration Statement, as amended
as of the date hereof.
(g) The Shares shall be listed on the Nasdaq National Market,
subject to notice of issuance.
(h) Subsequent to the date hereof there shall not have
occurred any of the following: (i) any suspension or limitation in trading in
securities generally on the New York Stock Exchange or the Nasdaq National
Market, or any setting of minimum prices for trading on such exchange, or in the
Common Stock by the Commission or the NASD or the Nasdaq National Market; (ii) a
moratorium on commercial banking activities in New York declared by either
federal or state authorities; (iii) any outbreak or escalation of hostilities
involving the United States, declaration by the United States of a national
emergency or war or any other national or international calamity or emergency if
the effect of any such event specified in this clause (iii) in your reasonable
judgment makes it impracticable or inadvisable to proceed with the purchase,
sale and delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement, as amended as of the date hereof;
(iv) the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects or may materially and adversely
affect the business or operations of the Company, the Subsidiary or the Bank; or
(v) the taking of any action by any governmental body or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States.
<PAGE> 31
(i) With respect to the Merger:
(i) Each condition to the obligations of the
Company set forth in the Merger Agreements shall have been satisfied,
without waiver or modification, except as may be approved by the
Representatives.
(ii) Each certificate delivered to the Company
pursuant to each Merger Agreement shall have also been delivered to the
Representatives.
(iii) Counsel for the Bank shall have furnished to
the Representatives a letter, in form and substance satisfactory to the
Representatives, to the effect that they are entitled to rely on the
opinion of such counsel delivered to the Company pursuant to the Merger
Agreement as if such opinion were addressed to them.
(iv) Pursuant to the Merger, all of the Bank capital
stock and derivative securities shall have been converted into Company
common stock and have ceased to exist, and there are no outstanding or
continuing security interest, mortgage, pledge, lien, encumbrance or
claim and options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations
into shares of capital stock or ownership interests in the Bank.
(j) The Company shall have furnished to you at such Time of
Delivery certificates of officers of the Company reasonably satisfactory to you
as to the accuracy of the representations and warranties of the Company herein,
including without limitation that the Merger is effective and has been
consummated, at and as of such Time of Delivery, as to the performance by the
Company of all of its respective obligations, covenants and agreements hereunder
to be performed at or prior to such Time of Delivery and as to such other
matters as you may reasonably request, and the Company shall have furnished or
caused to be furnished certificates as to the matters set forth in subsections
(a) and (f) of this Section 7.
(k) The Lock-up Agreements described herein shall be in full
force and effect.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter or controlling person or
representative of such Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon: (i)
any inaccuracy in the representations and warranties set forth in Section 1 of
this Agreement; (ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, any audio or visual materials supplied by the Company or its
representatives and used in connection with the marketing of the Shares,
including without limitation, slides, videos, films and tape recordings and
computer-aided presentations, or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in
<PAGE> 32
order to qualify the Shares under the securities or blue sky laws thereof or
filed with the Commission or any securities association or securities exchange
(each an "Application"); (iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto or other material described in
Section 8(a)(ii)(A), or any Application a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iv) any
failure of the Company to perform its obligations hereunder or under law, and
will reimburse upon demand each Underwriter or controlling person or
representative of such Underwriter for any legal or other expenses reasonably
incurred by such Underwriter or controlling person or representative of such
Underwriter in connection with investigating, defending against or appearing as
a third-party witness in connection with any such loss, claim, damage, liability
or action whether or not such Underwriter or controlling person or
representative of such Underwriter is a party to any action or proceeding;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or any amendment thereto,
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto or any Application in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through you expressly
for use therein (provided that the Company and the Underwriters hereby
acknowledge that the following constitutes the only information furnished in
writing to the Company by the Underwriters specifically for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
such amendment or supplement: (i) the statements in the last paragraph on the
cover page of the Prospectus; (ii) the statements with respect to stabilization
in the paragraph at the bottom of the inside front cover page of the Prospectus;
and (iii) the statements under the caption "Underwriting" in the Prospectus);
provided, further, that with respect to any Preliminary Prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or expense
purchased Shares, or any person controlling such underwriter, if copies of the
Prospectus were timely delivered to the Underwriter and a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Shares to such person, and
if the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage, liability or expense. The Company will
not, without the prior written consent of each Underwriter, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding (or related cause of action or portion thereof) in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter from all liability arising out of such claim, action, suit or
proceeding (or related cause of action or portion thereof).
(b) Each Underwriter, severally but not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which such person may become subject under the
Act or otherwise, insofar as such losses,
<PAGE> 33
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or any Application or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through you expressly for use therein (provided that the Company and the
Underwriters hereby acknowledge that the following constitutes the only
information furnished in writing to the Company by the Underwriters specifically
for use in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any such amendment or supplement: (i) the statements in the last
paragraph on the cover page of the Prospectus; (ii) the statements with respect
to stabilization in the paragraph at the bottom of the inside front cover page
of the Prospectus; and (iii) the statements under the caption "Underwriting" in
the Prospectus); and will reimburse such persons for any legal or other expenses
reasonably incurred by such person in connection with investigating or defending
any such loss, claim, damage, liability or action. In addition, in a situation
when an Underwriter is an indemnifying party under this subsection (b), the
Underwriter will not, without the prior written consent of the Company, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding (or related cause of action or
portion thereof) in respect of which indemnification may be sought hereunder
(whether or not the Company is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Company from all liability arising out of such
claim, action, suit or proceeding (or related cause of action or portion
thereof).
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party, unless and to the extent such omission results in the
forfeiture by the indemnifying party of substantial rights and defenses, shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party and such
indemnified party shall have the right to select separate counsel to defend such
action on behalf of such indemnified party. After such notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and reasonable approval by such
<PAGE> 34
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 8 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. Nothing in this Section 8(c)
shall preclude an indemnified party from participating at its own expense in the
defense of any such action so assumed by the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act)
<PAGE> 35
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in its
obligation to purchase Shares at a Time of Delivery, you may in your discretion
arrange for you or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six (36) hours after such default by
any Underwriter you do not arrange for the purchase of such Shares, the Company
shall be entitled to a further period of thirty-six (36) hours within which to
procure another party or other parties reasonably satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that the Company has so
arranged for the purchase of such Shares, you or the Company shall have the
right to postpone a Time of Delivery for a period of not more than seven days in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus that may thereby be made reasonably necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed
<PAGE> 36
one-eleventh of the aggregate number of Shares to be purchased at such Time of
Delivery, then the Company shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made, but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. TERMINATION. (a) This Agreement may be terminated with respect to
the Firm Shares or any Optional Shares in the sole discretion of the
Representatives by notice to the Company given prior to the First Time of
Delivery or any Subsequent Time of Delivery, respectively, in the event that (i)
any condition to the obligations of the Underwriters set forth in Section 7
hereof has not been satisfied in all material respects, or (ii) the Company
shall have failed, refused or been unable to deliver the Shares or to perform in
all material respects all obligations and satisfy all conditions to be performed
or satisfied hereunder at or prior to such Time of Delivery, in either case
other than by reason of a default by any of the Underwriters. If this Agreement
is terminated pursuant to this Section 10(a), the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable counsel fees and disbursements) that shall have been incurred by them
in connection with the proposed purchase and sale of the Shares. The Company
shall not in any event be liable to any of the Underwriters for the loss of
anticipated profits from the transactions covered by this Agreement.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company as provided in Section 9(a), the aggregate number of such Shares
which remains unpurchased exceeds one-eleventh of the aggregate number of Shares
to be purchased at such Time of Delivery, or if the Company shall not exercise
the right described in Section 9(b) to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to a Subsequent Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriters or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
11. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company, its officers, and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person referred to in
Section 8(d) or the Company or any officer or director or controlling person of
the Company referred to in Section 8(d), and shall survive delivery of and
payment for the Shares. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6 and 8 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
<PAGE> 37
12. NOTICES. All communications hereunder shall be in writing and, if
sent to any of the Underwriters, shall be mailed, delivered or sent by facsimile
transmission and confirmed in writing to you in care of The Robinson-Humphrey
Company, LLC, 3333 Peachtree Road, N.E., Atlanta, Georgia 30326, Attention:
Corporate Finance Department (with a copy to Alston & Bird LLP, One Atlantic
Center, 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attention: W.
Thomas Carter III, Esquire); if sent to the Company, shall be mailed, delivered
or sent by facsimile transmission and confirmed in writing to the Company at
Florida Banks, Inc., 4110 Southpoint Boulevard, Suite 212, Southpoint Square II,
Jacksonville, Florida 32216-0925, Attention: President (with a copy to Smith,
Gambrell & Russell, LLP, Promenade II, Suite 3100, 1230 Peachtree Street, N.E.,
Atlanta, Georgia 30309, Attention: Terry Ferraro Schwartz).
13. REPRESENTATIVES. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any action
under this Agreement taken by you jointly or by The Robinson-Humphrey Company,
LLC will be binding upon all the Underwriters. The Representatives hereby
represent and warrant that they are so authorized to act on behalf of the
several Underwriters.
14. BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, the Underwriters and the Company and to the extent
expressly provided herein, officers and directors and controlling persons
referred to therein and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without giving effect to any
provisions regarding conflicts of laws.
16. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
17. GENERAL PROVISIONS. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understanding and negotiations with respect
to the subject matter hereof. This Agreement may not be amended or modified
unless in writing by all of the parties hereto, and no condition herein (express
or implied) may be waived unless waived in writing by each party whom the
condition is meant to benefit.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and upon
the acceptance hereof by The Robinson-Humphrey Company, LLC, on behalf of each
of the Underwriters, this letter will constitute a binding agreement among the
Underwriters and the Company. It is understood that
<PAGE> 38
your acceptance of this letter on behalf of each of the Underwriters is pursuant
to the authority set forth in the Master Agreement among Underwriters, a copy of
which shall be submitted to the Company for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
FLORIDA BANKS, INC.
By:
Name: Charles E. Hughes, Jr.
Title: President and Chief Executive Officer
The foregoing Agreement is hereby confirmed
and accepted, on behalf of each of the
Underwriters, as of the date first written
above at Atlanta, Georgia.
THE ROBINSON-HUMPHREY COMPANY, LLC
INTERSTATE/JOHNSON LANE CORPORATION
By: The Robinson-Humphrey Company, LLC
By:
Name:
Title:
(Authorized Representative)
<PAGE> 39
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Optional Shares to
Total Number of Firm be Purchased if
Shares to be Maximum Option
Underwriter Purchased Exercised
----------- --------- ---------
<S> <C> <C>
The Robinson-Humphrey Company, LLC
Interstate/Johnson Lane Corporation
Kelton International
_________ _________
TOTAL UNDERWRITERS (__)
</TABLE>
<PAGE> 40
Schedule 1(viii)
OUTSTANDING SECURITIES
[INSERT TABLE]
1.
<PAGE> 1
EXHIBIT 3.1.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FLORIDA BANKS, INC.
Pursuant to Section 607.1003 and Section 607.1007 of the Florida
Business Corporation Act these Amended and Restated Articles of Incorporation
were approved by the Board of Directors and the Shareholders of the Corporation
on May 18, 1998 and June 4, 1998, respectively.
I.
The corporate name that satisfies the requirements of 607.0401 is
Florida Banks, Inc.
II.
The Corporation is organized for the following purpose or purposes:
To act as a bank holding company and, to the extent permitted under
applicable federal and state laws, now or hereafter existing, to engage in such
business as related to banks and to bank holding companies and their activities;
To acquire, own, hold, sell, exchange, assign, transfer, create security
interests in, pledge or otherwise dispose of shares, or voting trust
certificates or depository receipts for shares, or capital stock of, or any
bonds, notes debentures or other evidence of indebtedness, options, warrants or
other securities issued by any other business of any lawful character,
including, but not limited to, banks and other businesses providing goods or
services related to banking;
To acquire and hold other investment assets and to engage in any lawful
activities related thereto;
To acquire, own interest in and otherwise participate in and exercise
ownership rights in joint ventures, partnerships, limited partnerships, trusts,
corporations, unincorporated associations and other entities for the furtherance
of all corporate activities; to borrow and to lend money and to buy, sell,
guarantee and otherwise deal in the obligations of others and conduct financing,
brokerage, and discount and factoring businesses in connection with the
foregoing or otherwise;
In general, to carry on any other lawful business whatsoever, and to
have, enjoy and exercise all the rights, powers and privileges which are now or
which may hereafter be conferred upon corporations organized under the Florida
Business Corporation Act.
<PAGE> 2
III.
The corporation shall have authority to issue 31,000,000 shares of
capital stock, which shall be divided into classes and shall have the following
designations, preferences, limitations and relative rights;
A. Common Stock. One class shall consist of 30,000,000 shares of common
stock of $.01 par value, designated "Common Stock." The holders of Common Stock
shall be entitled to elect all of the members of the Board of Directors of the
Corporation, and such holders shall be entitled to vote as a class on all
matters required or permitted to be submitted to the shareholders of the
Corporation.
B. Preferred Stock. One class shall consist of 1,000,000 shares of
preferred stock of $.01 par value, designated "Preferred Stock." The Board of
Directors of the Corporation shall be empowered to divide any and all shares of
the Preferred Stock into series and to fix and determine the relative rights and
preferences of the shares of any series so established in accordance with
Section 607.062 of the Florida Business Corporation Act, including (i) the
distinctive designation of such series and the number of shares which shall
constitute such series; (ii) the annual rate of dividends payable on shares of
such series, whether dividends shall be cumulative and conditions upon which and
the date when such dividends shall be accumulated on all shares of such series
issued prior to the record date for the first dividend of such series; (iii) the
time or times when and the price or prices at which shares of such series shall
be redeemable at the option of the holder or of the Corporation and the sinking
fund provisions, if any, for the purchase or redemption of such shares; (iv) the
amount payable on shares of such series in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether all or a
portion is paid before any amount is paid on the Common Stock; (v) the rights,
if any, of the holders of shares of such series to convert such shares into, or
exchange such shares for, shares of Common Stock or shares of any other series
of Preferred Stock and the terms and conditions of such conversion or exchange;
and (vi) whether the shares of such series have voting rights and the extent of
such voting rights, if any.
The Board of Directors shall have the power to reclassify any unissued
shares of any series of Preferred Stock from time to time by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption, including but not limited to, but subject to the limitations
described in, the above provisions.
Any action by the Board of Directors in authorizing the issuance of
Preferred Stock and fixing and determining the provisions thereof is hereby
ratified and approved.
IV.
The street address of the registered office of the Corporation is c/o CT
Corporation System, 1200 South Pine Island Road, City of Planation, Florida
33324, and the name of its initial registered agent at such address is CT
Corporation System.
2
<PAGE> 3
V.
The street address and mailing address of the initial principal office
of the Corporation is c/o Smith, Gambrell & Russell, LLP, 1230 Peachtree Street,
N.E., Suite 3100, Atlanta, Georgia 30309.
VI.
A. The number of directors of the Corporation shall be fixed from time
to time by resolution of the Board of Directors; provided, however that the
number of directors fixed by the Board of Directors shall not be less than two
(2) or more than twenty-five (25).
B. Concurrent with the adoption of these Articles of Incorporation, the
Board of Directors, other than those who may be elected by the holders of
preferred stock or any class or series of stock having a preference over the
common stock as to dividends or upon liquidation or any resolution or
resolutions providing for the issue of such class or series of stock adopted by
the Board, shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible: (i) one class ("Class I") of directors to be originally elected for a
term expiring at the annual meeting of stockholders to be held in 1999, (ii)
another class of directors ("Class II") to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 2000, and (iii)
another class of directors ("Class III") to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 2001, with each
member of each class to hold office, until his successors are elected and
qualified. At each annual meeting of the stockholders of the Corporation the
date of which shall be fixed by or pursuant to the Bylaws of the Corporation,
the successors of the class of directors whose terms expire at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
C. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, if any vacancy shall occur in the membership of the Board by
reason of newly created directorships or resulting from the resignation,
disqualification, retirement or death of a director, the remaining directors
shall continue to act, and such vacancies may be filled by the affirmative vote
of the majority of the directors then in office, although less than a quorum of
the Board, and if not therefore filled by action of the directors, may be filled
by the shareholders at any meeting held during the existence of such vacancy. If
any vacancy shall occur among the directors by reason of the removal from office
of a director, such vacancy shall be filled by the vote of three-fourths (3/4)
of the outstanding shares of each class of stock entitled to vote in elections
of directors. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. No decrease in the number of
directors constituting the Board shall shorten the term of any incumbent
director. Any increase or decrease in the number of directors shall be so
apportioned among the classes of directors as to make all classes as nearly
equal in number as possible.
D. Notwithstanding the foregoing provisions of this Article VI, any
director whose term of office has expired shall continue to hold office until
his successor shall be elected and qualify.
3
<PAGE> 4
E. Notwithstanding any other provisions of these Articles of
Incorporation or the By-laws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, these Articles of
Incorporation or the By-laws of the Corporation), the affirmative vote of the
holders of at least three-fourths (3/4) of the total number of votes entitled to
be cast by the holders of all of the shares of capital stock of the Corporation
then entitled to vote generally in the election of directors shall be required
to amend, alter, change or repeal, or to adopt any provision as part of these
Articles of Incorporation inconsistent with, this Article VI. The holder of each
share of capital stock entitled to vote thereon shall be entitled to cast the
same number of votes as the holder of such shares is entitled to cast generally
in the election of each director.
VII.
The Corporation expressly elects not to be governed by Section 607.0901
of the Florida Business Corporation Act, relating to affiliated transactions.
VIII.
In addition to any approval of the Board of Directors or any shareholder
vote or consent required by the laws of the State of Florida or any other
provision of these Articles of Incorporation or otherwise, the affirmative vote
or consent of the holders of not less than two-thirds (2/3) of the shares of
each class of stock of the Corporation entitled to vote in elections of
directors shall be required to authorize, adopt or approve a Covered
Transaction; however, the provisions of this Article VIII shall not apply to any
Covered Transaction referred to in this Article VIII with any Interested Person
if the Covered Transaction is approved by three-fourths (3/4) of the entire
membership of the Board of Directors of the Corporation, in which event the
affirmative vote of not less than a majority of the holders of each class of
stock of the Corporation entitled to vote in elections of directors shall be
required.
For the purpose of this Article VIII:
1. "Affiliate" and "associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as
amended, as in effect on the date hereof.
2. A person shall be the "beneficial owner" and "beneficially
owns" shares of stock of the Corporation (other than shares of
the Corporation's stock held in its treasury) (a) which such
person and its affiliates and associates beneficially own,
directly or indirectly, whether of record or not, (b) which
such person or any of its affiliates or associates has the
right to acquire, pursuant to any agreement upon the exercise
of conversion rights, warrants or options, or otherwise, (c)
which such person or any of its affiliates or associates has
the right to sell or vote pursuant to any agreement, or (d)
which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of securities of the Corporation.
4
<PAGE> 5
3. "Covered Transaction" is:
(a) any merger or consolidation of the Corporation or any
subsidiary of the Corporation with or into any
Interested Person (regardless of the identity of the
surviving corporation);
(b) any 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 the Corporation) of the assets of the
Corporation or any subsidiary of the Corporation to
any Interested Person for cash, real or personal
property, including securities, or any combination
thereof;
(c) any issuance or delivery of securities of the
Corporation or a subsidiary of the Corporation (which
the beneficial owner shall have the right to vote, or
to vote upon exercise, conversion or by contract) to
an Interested Person in consideration for or in
exchange of any securities or other property
(including cash); or
(d) the liquidation of the Corporation.
4. "Interested Person" is any person which, as of the record date
for the determination of shareholders entitled to notice of any
Covered Transaction and to vote thereon or consent thereto, or
as of the date of any such vote or consent, or immediately prior
to the consummation of any Covered Transaction, beneficially
owns, directly or indirectly, five percent (5%) or more of the
shares of stock of the Corporation entitled to vote in elections
of directors.
5. "Person" is any individual, partnership, corporation or other
entity.
6. "Subsidiary of the Corporation" is any corporation of which
fifty percent (50%) or more of any class of stock is
beneficially owned, directly or indirectly, by the Corporation.
No amendment to these Articles of Incorporation shall amend, alter, change
or repeal any of the provisions of this Article VIII, unless such amendment, in
addition to receiving any shareholder vote or consent required by the laws of
the State of Florida in effect at the time, shall receive the affirmative vote
or consent of the holders of three-fourths (3/4) of the outstanding shares of
each class of stock of the Corporation entitled to vote in elections of
directors.
IX.
A. In addition to any approval of the Board of Directors or any
shareholder vote or consent required by the laws of the State of Florida or any
other provision of these Articles of Incorporation or otherwise, there shall be
required for the approval, adoption or authorization of a Business Combination
with an Interested Person the affirmative vote or consent of the holders of a
majority of the shares of each class of stock of the Corporation entitled to
vote in elections of
5
<PAGE> 6
directors considered separately for the purposes of this Article IX, which are
not beneficially owned, directly or indirectly, by such Interested Person;
provided, however, that said majority voting requirements shall not be
applicable if all of the conditions specified in subparagraphs (1), (2) and (3)
below are met:
1. The consideration to be received per share for each class of
stock in such Business Combination by holders of the stock of the Corporation is
payable in cash or Acceptable Securities, or a combination of both, and such
consideration has a fair market value per share with respect to each class of
the Corporation's stock of not less than either:
(a) the highest price (including the highest per share
brokerage commissions, transfer tax and soliciting dealers fees) paid by said
Interested Person in acquiring any of the Corporation's stock of that class; or
(b) a price per share obtained by multiplying the aggregate
earnings per share of stock of the Corporation (appropriately adjusted for any
subdivision of shares, stock dividend or combination of shares during the
period) for the four full consecutive fiscal quarters immediately preceding the
record date for solicitation of votes or consents on such Business Combination
by the figure obtained by dividing the highest per share price (including the
highest per share brokerage commissions, transfer tax and soliciting dealers
fees) paid by such Interested Person in acquiring any of the Corporation's stock
by the aggregate earnings per share of the Corporation for the four full
consecutive fiscal quarters immediately preceding the time when the Interested
Person shall have become the beneficial owner of five percent (5%) or more of
the outstanding stock of the Corporation entitled to vote in elections of
directors.
If any securities were issued by an Interested Person in
exchange for stock of the Corporation prior to the proposed Business
Combination, the fair market value of said securities at the time of issue shall
be used in determining the per share price paid for said stock.
2. After the Interested Person has become the beneficial owner
of five percent (5%) or more of the stock of the Corporation entitled to vote in
the election of directors and prior to the consummation of such Business
Combination, there shall have been no reduction in the rate of dividends payable
on the Corporation's stock which would result in a quarterly dividend rate per
share which is less than the average quarterly dividend rate per share for the
four full consecutive fiscal quarters immediately preceding the time when the
Interested Person shall have become the beneficial owner of said five percent
(5%) or more of the stock of the Corporation, unless such reduction in the rate
of dividends has been approved by three-fourths (3/4) of the entire membership
of the Board of Directors of the Corporation. For the purposes of this
paragraph, "quarterly dividend rate per share" for any quarterly dividend shall
be equal to the percentage said quarterly dividend per share bears to the
earnings per share for the four full fiscal quarters immediately preceding the
declaration of said quarterly dividend.
3. The consideration to be received by shareholders who are not
Interested Persons shall be in cash or in the same form as the Interested Person
has previously paid for shares of such class of stock; if the Interested Person
has paid for shares of any class of any stock with varying
6
<PAGE> 7
forms of consideration, the form of consideration for such class of stock shall
be either cash or the form used to acquire the largest number of shares of such
class of stock previously acquired by it.
B. For the purposes of this Article IX:
1. "Acceptable Securities" shall mean (a) securities of the same
class or series, with the same rights, powers and benefits and of the same
denomination, term and interest, or dividend, if any, as the securities issued
and delivered by the Interested Person in exchange for the majority of the stock
of the corporation acquired by the Interested Person, or (b) the class of common
stock of the Interested Person which is beneficially owned by most persons.
2. "Affiliate" and "associate" shall have the respective
meanings given those terms in Rule l2b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, as in effect on the date
hereof.
3. A person shall be the "beneficial owner" and "beneficially
own" shares of stock of the Corporation (other than shares of the Corporation's
stock held in its treasury) (a) which such person and its affiliates or
associates beneficially own, directly or indirectly, whether of record or not,
(b) which such person or any of its affiliates or associates has the right to
acquire, pursuant to any agreement upon the exercise of conversion rights,
warrants, or options, or otherwise, (c) which such person or any of its
affiliates or associates has the right to sell or vote pursuant to any
agreement, or (d) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purposes of
acquiring, holding, voting or disposing of securities of the Corporation.
4. "Business Combination" is:
a. any merger or consolidation of the Corporation or any
subsidiary of the Corporation with or into any Interested Person (regardless of
the identity of the surviving corporation);
b. any sale, lease or other disposition of all or any
substantial part (assets having a fair market value of twenty-five percent (25%)
of the total assets of the Corporation) of the assets of the Corporation or any
subsidiary of the Corporation to any Interested Person for cash, real or
personal property, including securities, or any combination thereof; or
c. any issuance or delivery of securities of the Corporation
or a subsidiary of the Corporation (which the beneficial owner shall have the
right to vote, or to vote upon exercise, conversion or by contract) to an
Interested Person in consideration of or in exchange for any securities or other
property (including cash).
5. "Interested Person" is any person which, as of the record
date for the determination of shareholders entitled to notice of any Business
Combination and to vote thereon or consent thereto, or as of the date of any
such vote or consent, immediately prior to the
7
<PAGE> 8
consummation of any Business Combination, beneficially owns, directly or
indirectly, five percent (5%) or more of the shares of stock of the Corporation
entitled to vote in elections of directors.
6. "Person" is an individual, partnership, corporation or other
entity.
7. "Subsidiary of the Corporation" is any corporation of which
fifty percent (50%) or more of any class of stock is beneficially owned,
directly or indirectly, by the Corporation.
C. No amendment to these Articles of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article IX, unless such
amendment, in addition to receiving any shareholder vote or consent required by
the laws of the State of Florida in effect at the time, shall receive the
affirmative vote or consent of the holders of three-fourths (3/4) of the
outstanding shares of each class of stock of the Corporation entitled to vote in
elections of directors.
X.
A. The Board of Directors of the Corporation, when evaluating any
offer of another individual, firm, corporation or other entity ("Person") (a) to
make a tender or exchange offer for any equity security of the Corporation, (b)
to merge or consolidate the Corporation with such other Person, or (c) to
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation (such offers individually referred to as an
"Acquisition Proposal"), shall, in connection with the exercise of its business
judgment in determining what is in the best interest of the Corporation and its
Shareholders, give due consideration to all relevant factors, including without
limitation, the consideration being offered in the Acquisition Proposal in
relation to the then-current market price of the Corporation's stock, but also
in relation to the then-current value of the Corporation in a freely negotiated
transaction and in relation to the Board of Directors' then-estimate of the
future value of the Corporation as an independent entity, the social and
economic effects on the employees, customers, suppliers, and other constituents
of the Corporation and on the communities in which the Corporation operates or
is located and the desirability of maintaining independence from any other
business or business entity; provided, however, that this Article shall be
deemed solely to grant discretionary authority to the directors and shall not be
deemed to provide any constituency any right to be considered.
B. No amendment to these Articles of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article X, unless such
amendment, in addition to receiving any shareholder vote or consent required by
the laws of the State of Florida in effect at the time, shall receive the
affirmative vote or consent of the holders of three-fourths (3/4) of the
outstanding shares of each class of stock of the Corporation entitled to vote in
elections of directors.
XI.
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,
8
<PAGE> 9
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.
XII.
Except as otherwise specifically provided herein, these Articles of
Incorporation may be amended, altered, changed or repealed only by the
affirmative vote or consent of the holders of at least one-half (1/2) of the
shares of each class of stock of the Corporation entitled to vote in elections
of directors.
Signed this 5th day of June, 1998
FLORIDA BANKS, INC.
By: /s/ Nancy E. LaFoy
--------------------------------
Nancy E. LaFoy
Secretary and Treasurer
9
<PAGE> 10
APPENDIX A
SERIES A PREFERRED STOCK
1. Designation. 600,000 shares of the preferred stock, par value,
$0.01 per share, stated value $10.00 per share, of the Corporation are hereby
constituted as a series of the preferred stock designated as "Series A Preferred
Stock" (the "Series A Preferred Stock") and having relative rights and
preferences to all other classes and series of the capital stock of the
Corporation as set forth herein.
2. Dividends.
No dividends or other distributions shall be declared or
payable with respect to Series A Preferred Stock.
3. Preference on Liquidation.
(a) Liquidation Preference for Series A Preferred Stock. In
the event that the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution of
the assets of the Corporation shall be made to the holders of shares of Common
Stock or other Junior Securities (as hereinafter defined)(and no monies shall be
set apart for such purpose) unless (i) prior thereto, the holders of shares of
Series A Preferred Stock shall have received from the assets of the Corporation
an amount per share having a value equal to not less than $10.00 (the "Series A
Liquidation Preference").
(b) Pro Rata Payments. If, upon any such liquidation,
dissolution or other winding up of the affairs of the Corporation, the assets of
the Corporation shall be insufficient to permit the payment in full of the
Series A Liquidation Preference for each share of Series A Preferred Stock then
outstanding and the full liquidating payments on all Parity Securities (as
hereinafter defined) then the assets of the Corporation remaining after the
distribution to holders of any Senior Securities (as hereinafter defined) of the
full amounts to which they may be
A-1
<PAGE> 11
entitled shall be ratably distributed among the holders of Series A Preferred
Stock and of any Parity Securities in proportion to the full amounts to which
they would otherwise be respectively entitled if all amounts thereon were paid
in full.
(c) Sale not a Liquidation. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations or other Person (as
hereinafter defined) shall be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, of the Corporation.
(d) Notice of Liquidation. Written notice of any liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when and the place or places where amounts distributable in such circumstances
shall be payable, shall be given by first class mail, postage prepaid, not less
than thirty (30) days prior to any payment date specified therein, to the
holders of record of the Series A Preferred Stock at their respective addresses
as shall appear on the records of the Corporation.
Voting. Except as otherwise provided by law, the shares of the
Series A Preferred Stock shall have no voting rights.
4. Redemption.
(a) Redemption Price. Any redemption of the Series A Preferred
Stock pursuant to this Section 5 shall be at a price equal to $10.00 per share
(the "Redemption Price").
(b) Optional Redemption. At the option of the Corporation,
shares of the Series A Preferred Stock may be redeemed at any time as a whole or
in part from time to time, out of funds legally available therefor, at a cash
redemption price of $10.00 per share.
(c) Procedures for Redemption. In the event the Corporation
shall elect to redeem shares of Series A Preferred Stock pursuant to Section
5(b), the Corporation shall give written notice of such redemption by first
class mail, postage prepaid, mailed not less than thirty (30) nor more than
ninety (90) days prior to the Redemption Date (as hereinafter defined), to each
holder of record of the shares to be redeemed, at such holder"s address as the
same appears on the stock records of the Corporation. Each such notice shall
state: (i) the date on which the shares of the Series A Preferred Stock shall be
redeemed (the "Redemption Date"); (ii) the number of shares of Series A
Preferred Stock to be redeemed; (iii) the Redemption Price; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the Redemption Price; (v) that payment will be made upon presentation and
surrender of such Series A Preferred Stock; and (vi) that such redemption is
mandatory. Notice having been mailed as aforesaid, from and after the Redemption
Date, unless the Corporation shall be in default in the payment of the
Redemption Price (A) shares of Series A Preferred Stock shall be deemed no
longer outstanding, and (B) all rights of the holders thereof as stockholders of
the Corporation
A-2
<PAGE> 12
(except the right to receive from the Corporation any moneys payable upon
redemption without interest thereon) shall cease.
Upon surrender in accordance with such notice of the
certificates for any such shares so redeemed (properly endorsed or assigned for
transfer with signatures guaranteed), such shares shall be redeemed by the
Corporation at the applicable Redemption Price.
5. Shares to be Retired. Any share of Series A Preferred Stock
repurchased or otherwise acquired by the Corporation shall be retired and
canceled and shall upon cancellation be restored to the status of authorized but
unissued shares of preferred stock, subject to reissuance by the Board of
Directors as shares of preferred stock of one or more other series but not as
shares of Series A Preferred Stock.
6. Definitions. As used herein, the following terms shall have
the respective meanings set forth below:
"Business Day" means any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the
State of Florida.
"Common Stock" means the Corporation's Common Stock, $.01 par
value per share, and any stock into which such Common Stock may
hereafter be changed or for which such Common Stock may be exchanged
after giving effect to the terms of such change or exchange (by way of
reorganization, recapitalization, merger, consolidation or otherwise).
"Junior Securities" means the Common Stock and any other class
of capital stock or series of preferred stock hereafter created by the
Corporation which does not expressly provide that it ranks senior to or
pari passu with the Series A Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
"Parity Securities" mean any class of capital stock or series
of preferred stock hereafter created by the Corporation which expressly
provides that it ranks pari passu with the Series A Preferred Stock as
to dividends, other distributions, liquidation preference or otherwise.
"Person" or "person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint venture,
government or agency, political subdivision thereof, or any other
entity of any kind.
"Senior Securities" means any class or series of capital
stock, debt instrument or security convertible into capital stock or
debt securities of the Corporation other than Parity Securities or
Junior Securities.
A-3
<PAGE> 13
"Series A Liquidation Preference" shall have the meaning set
forth in Section 3(a).
"Series A Preferred Stock" shall have the meaning set forth in
Section 1.
7. Notices. Except as may otherwise be provided for herein, all
notices referred to herein shall be in writing, and all notices hereunder shall
be deemed to have been given upon the earlier of (x) receipt of such notice, (y)
two Business Days after the mailing of such notice if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms hereof) or (z) the Business Day following the date such notice is put
in the possession of an overnight courier, in any case with postage or delivery
charges prepaid, addressed: if to the Corporation, to its temporary offices at
9755 Dogwood Road, Suite 310, Roswell, Georgia 30075, Attention: Nancy E. LaFoy,
Secretary and Treasurer of the Corporation, or to an agent of the Corporation
designated as permitted by the Articles of Incorporation, or, if to any holder
of the Series A Preferred Stock, to such holder at the address of such holder of
the Series A Preferred Stock as listed in the stock record books of the
Corporation.
A-4
<PAGE> 1
Exhibit 3.2.1
AMENDED AND RESTATED
BY-LAWS
OF
FLORIDA BANKS, INC.
<PAGE> 2
AMENDED AND RESTATED
BY-LAWS
OF
FLORIDA BANKS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. - -DEFINITIONS .............................................. -1-
ARTICLE II. - -GENERAL PROVISIONS REGARDING NOTICES .................... -2-
Section 1. NOTICES ............................................... -2-
Section 2. WAIVER OF NOTICE ...................................... -2-
ARTICLE III. - SHAREHOLDERS' MEETINGS .................................. -4-
Section 1. PLACE OF MEETING ...................................... -4-
Section 2. ANNUAL MEETING ........................................ -4-
Section 3. SPECIAL MEETINGS ...................................... -4-
Section 4. NOTICE TO SHAREHOLDERS ................................ -4-
Section 5. FIXING OF RECORD DATE ................................. -5-
Section 6. QUORUM AND VOTING REQUIREMENTS ........................ -6-
Section 7. PROXIES ............................................... -7-
Section 8. ACTION OF SHAREHOLDERS WITHOUT A MEETING .............. -7-
ARTICLE IV. - DIRECTORS ................................................ -7-
Section 1. GENERAL POWERS ........................................ -7-
Section 2. NUMBER, TENURE, QUALIFICATIONS ........................ -7-
Section 3. VACANCIES, HOW FILLED ................................. -8-
Section 4. PLACE OF MEETING ...................................... -8-
Section 5. COMPENSATION .......................................... -8-
Section 6. REGULAR MEETINGS ...................................... -8-
Section 7. SPECIAL MEETINGS ...................................... -8-
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER ........ -8-
Section 9. QUORUM ................................................ -9-
Section 10. MANNER OF ACTING ...................................... -9-
Section 11. COMMITTEES ............................................ -9-
Section 12. ACTION WITHOUT FORMAL MEETING ......................... -10-
Section 13. CONFERENCE CALL MEETINGS .............................. -10-
ARTICLE V. - OFFICERS .................................................. -10-
Section 1. GENERALLY ............................................. -10-
Section 2. COMPENSATION .......................................... -11-
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3. VACANCIES ............................................. -11-
Section 4. CHAIRMAN OF THE BOARD ................................. -11-
Section 5. VICE-CHAIRMAN OF THE BOARD ............................ -11-
Section 6. CHIEF EXECUTIVE OFFICER ............................... -12-
Section 7. SECRETARY ............................................. -12-
Section 8. THE CHIEF FINANCIAL OFFICER ........................... -12-
Section 9. DEPUTY OFFICERS ....................................... -13-
Section 10. ASSISTANT OFFICERS .................................... -13-
ARTICLE VI. - INDEMNIFICATION .......................................... -13-
Section 1. ACTION BY PERSONS OTHER THAN THE CORPORATION .......... -13-
Section 2. ACTIONS BY OR IN THE NAME OF THE CORPORATION .......... -14-
Section 3. SUCCESSFUL DEFENSE -14-
Section 4. AUTHORIZATION OF INDEMNIFICATION ...................... -14-
Section 5. REASONABLENESS OF EXPENSES ............................ -15-
Section 6. PREPAYMENT OF EXPENSES ................................ -15-
Section 7. NON-EXCLUSIVE RIGHT ................................... -15-
Section 8. SUCCESSORS ............................................ -16-
Section 9. JUDICIAL DETERMINATION ................................ -16-
Section 10. INSURANCE ............................................. -16-
Section 11. INFORMATION TO SHAREHOLDERS ........................... -17-
ARTICLE VII. - FISCAL YEAR ............................................. -17-
ARTICLE VIII. - ANNUAL STATEMENTS ...................................... -17-
ARTICLE IX. - CAPITAL STOCK ............................................ -18-
Section 1. FORM .................................................. -18-
Section 2. TRANSFER -18-
Section 3. RIGHTS OF HOLDER ...................................... -19-
Section 4. LOST OR DESTROYED CERTIFICATES ........................ -19-
ARTICLE X. - SEAL ...................................................... -19-
ARTICLE XI. - REGISTERED OFFICE AND REGISTERED AGENT ................... -19-
ARTICLE XII. - AMENDMENTS .............................................. -19-
Section 1. AMENDMENTS GENERALLY .................................. -19-
Section 2. BY-LAW INCREASING QUORUM OR VOTING REQUIREMENTS ....... -20-
</TABLE>
(ii)
<PAGE> 4
AMENDED AND RESTATED
BY-LAWS
OF
FLORIDA BANKS, INC.
ARTICLE I.
DEFINITIONS
As used in these By-Laws, the terms set forth below shall have the
meanings indicated, as follows: "Act" shall mean the Florida Business
Corporation Act, as amended from time to time.
"Articles of Incorporation" means the Articles of Incorporation of the
Corporation, as amended from time to time.
"Board" shall mean the Board of Directors of the Corporation.
"Chairman of the Board" shall mean the Chairman of the Board of
Directors, or such other officer as shall be designated by the Board as having
the duties of the Chairman of the Board, as described in Section 4 of Article V
of these By-Laws.
"Chief Executive Officer" shall mean the President of the Corporation,
or such other officer as shall be designated by the Board as having the duties
of the Chief Executive Officer, as described in Section 5 of Article V of these
By-Laws.
"Corporation" shall mean Florida Bank Holdings, Inc., a Florida
corporation.
"Secretary" shall mean the Secretary of the Corporation, or such other
officer as shall be designated by the Board as having the duties of the
corporate Secretary as described in Section 6 of Article V of these By-Laws.
"Secretary of State" shall mean the Secretary of State of Florida.
"Voting group" shall have the meaning set forth in subsection (a) of
Section 6 of Article III of these By-Laws.
<PAGE> 5
ARTICLE II.
GENERAL PROVISIONS REGARDING NOTICES
Section 1. NOTICES. Except as otherwise provided in the Articles of
Incorporation or these By-Laws, or as otherwise required by applicable law:
(a) Any notice required by these By-Laws or by law shall be in writing
unless oral notice is reasonable under the circumstances.
(b) Notice may be communicated in person; by telephone, telegraph,
teletype, or other form of electronic communication; or by mail.
(c) Written notice by the Corporation to any shareholder is effective
when deposited in the mail, if mailed with first-class postage prepaid and
correctly addressed to the shareholder's address shown in the Corporation's
current stock transfer books; provided that it may utilize a class of mail other
than first class if the notice of the meeting is mailed, with adequate postage
prepaid, not less than 30 days before the date of the meeting.
(d) Written notice to the Corporation may be addressed to its registered
agent at its registered office or to the Corporation or its Secretary at its
principal office shown in its most recent annual registration with the Secretary
of State.
(e) Except as provided in subsection (c) of this Section 1, written
notice, if in a comprehensible form, is effective at the earliest of the
following:
(1) When received;
(2) Five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and correctly
addressed; or
(3) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed
by or on behalf of the addressee.
(f) Oral notice is effective when communicated if communicated directly
to the person to be notified in a comprehensible manner.
(g) In calculating time periods for notice under these By-Laws, when a
period of time measured in days, weeks, months, years, or other measurement of
time is prescribed for the exercise of any privilege or the discharge of any
duty, the first day shall not be counted but the last day shall be counted.
Section 2. WAIVER OF NOTICE. Except as otherwise provided or required by the
Articles of Incorporation, these By-Laws or applicable law:
-2-
<PAGE> 6
(a) A shareholder may waive any notice required to be given to such
shareholder, before or after the date and time stated in the notice. The waiver
must be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's corporate records.
(b) A shareholder's attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of the meeting,
unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; and
(2) Waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the
matter when it is presented.
(c) Neither the business transacted nor the purpose of the meeting need be
specified in the waiver, except that any waiver by a shareholder of the notice
of a meeting of shareholders with respect to an amendment of the Articles of
Incorporation, a plan of merger or share exchange, a sale of assets or any other
action which would entitle the shareholder to exercise statutory dissenter's
rights under the Act and obtain payment for his shares shall not be effective
unless:
(1) Prior to the execution of the waiver, the shareholder shall have been
furnished the same material that under the Act would have been
required to be sent to the shareholder in a notice of the meeting,
including notice of any applicable dissenters' rights as provided in
the Act; or
(2) The waiver expressly waives the right to receive the material required
to be furnished.
(d) A director may waive any notice required to be given to such director
by the Act, the Articles of Incorporation, or these By-Laws before or after the
date and time stated in the notice. Except as provided by subsection (e) of this
Section 2, the waiver must be in writing, signed by the director entitled to the
notice, and delivered to the Corporation for inclusion in the minutes or filing
with the Corporation's corporate records.
(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
-3-
<PAGE> 7
ARTICLE III.
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETING. The Board may designate any place within or
outside the State of Florida as the place of meeting for any annual or special
shareholders' meeting. A waiver of notice signed by all shareholders entitled to
vote at a meeting may designate any place within or outside the State of Florida
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the Corporation.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders shall be
held on the fourth Friday in March of each year, if not a legal holiday (and if
such is a legal holiday, then on the next following business day not a legal
holiday), at such time and place as the Board shall determine, at which time the
shareholders shall elect a Board and transact such other business as may be
properly brought before the meeting. Notwithstanding the foregoing, the Board
may cause the annual meeting of shareholders to be held on such other date in
any year as the Board shall determine to be in the best interests of the
Corporation, and any business transacted at that meeting shall have the same
validity as if transacted on the date designated herein. If the annual meeting
is not held within any 13-month period, the circuit court of the circuit in
which the principal office of the Corporation is located may, on application of
any shareholder, summarily order a meeting to be held.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, except to the extent otherwise prescribed by statute or the
Articles of Incorporation, may be called by the Chief Executive Officer, or by
the presiding officer of the Board, if any. The Chief Executive Officer or the
Secretary shall call a special meeting when: (1) requested in writing by any
three or more of the directors; or (2) requested in writing by shareholders
owning not less than one tenth of all shares entitled to vote. Any such written
request shall be signed and dated and shall state the purpose or purposes of the
proposed meeting.
Section 4. NOTICE TO SHAREHOLDERS.
(a) Except as otherwise specifically provided in this Section 4,
requirements with respect to the giving of notice and waiver of notice shall be
governed by the provisions of Article II of these By-Laws.
(b) The Corporation shall give notice to each shareholder entitled to vote
thereat of the date, time and place of each annual and special shareholders'
meeting not less than ten (10) nor more than sixty (60) days before the meeting
date.
(c) Unless otherwise required by the Act with respect to meetings at which
specified actions will be considered (including but not limited to mergers,
certain share exchanges, certain
-4-
<PAGE> 8
asset sales by the Corporation, and dissolution of the Corporation), notice of
an annual meeting need not contain a description of the purpose or purposes for
which the meeting is called.
(d) Notice of a special meeting must include a description of the purpose or
purposes for which the meeting is called.
(e) Unless a new record date is set (or is required by law or by the terms
of these By-Laws to be set) therefor, notice of the date, time and place of any
adjourned meeting need not be given otherwise than by the announcement at the
meeting before adjournment. If a new record date for the adjourned meeting is or
must be fixed, however, notice of the adjourned meeting must be given in
accordance with these By-Laws as if such adjourned meeting were a newly-called
meeting.
(f) If any corporate action proposed to be considered at a meeting of
shareholders would or might give rise to statutory dissenters' rights under the
Act, the notice of such meeting shall state that the meeting is to include
consideration of such proposed corporate action, and that the consummation of
such action will or might give rise to such dissenters' rights, and shall
include the description of such statutory dissenters' rights required by the
Act.
Section 5. FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders, or shareholders entitled to demand a
special meeting of shareholders, or shareholders entitled to take any other
action, the Board may fix in advance (but not retroactively from the date the
Board takes such action) a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days prior
to the meeting or action requiring such determination of shareholders. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, the close of business on the last
business day before the first notice of such meeting is delivered to
shareholders shall be the record date. If no record date is fixed for
determining shareholders entitled to take action without a meeting, the date the
first shareholder signs the consent shall be the record date for such purpose.
If no record date is fixed for determining shareholders entitled to demand a
special meeting, or to take other action, the date of receipt of notice by the
Corporation of demand for such meeting, or the date on which such other action
is to be taken by the shareholders, shall be the record date for such purpose.
(b) A separate record date may be established for each voting group entitled
to vote separately on a matter at a meeting.
(c) A determination of shareholders entitled to notice of or to vote at a
shareholders meeting is effective for any adjournment of the meeting unless the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting, in which event, a new record date shall be set.
-5-
<PAGE> 9
(d) For the purpose of determining shareholders entitled to a distribution
by the Corporation (other than one involving a purchase, redemption or other
acquisition of the Corporation's shares), the record date shall be the date
fixed for such purpose by the Board, or if the Board does not fix such a date,
the date on which the Board authorizes such distribution.
Section 6. QUORUM AND VOTING REQUIREMENTS.
(a) Except as otherwise provided by the Articles of Incorporation or the
Act:
(i) A "voting group" with respect to any given matter means all shares
of one or more class or series which, under the Articles of
Incorporation or the Act, are entitled to vote and be counted
together collectively on that matter, and unless specified
otherwise in the Articles of Incorporation, the Act or these
By-Laws, all shares entitled to vote on a given matter shall be
deemed to be a single voting group for purposes of that matter.
(ii) Each outstanding share, regardless of class, is entitled to one
vote on each matter voted on at a shareholders' meeting.
(iii) A majority of the votes entitled to be cast on the matter by a
voting group constitutes a quorum of that voting group for action
on that matter.
(iv) The presence of a quorum of each voting group entitled to vote
thereon shall be the requisite for transaction of business on a
given matter.
(v) Action on a matter other than election of directors is approved by
a voting group if a quorum of such voting group exists and the
number of votes cast within such voting group in favor of such
action exceeds the number of votes cast within such voting group
against such action.
(vi) Except as otherwise provided in these By-Laws, all shares entitled
to vote for election of directors shall vote thereon as a single
voting group, and directors shall be elected by a plurality of
votes cast by shares entitled to vote in the election in a meeting
at which a quorum of such voting group is present.
(b) Once a share is represented for any purpose other than solely to object
to holding a meeting or transacting business at the meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is, or is required by law
or these By-Laws to be, set for that adjourned meeting.
(c) If a quorum for transaction of business shall not be present at a
meeting of shareholders, the shareholders entitled to vote thereat, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting stock
-6-
<PAGE> 10
shall be present. No notice other than announcements at the meeting before
adjournment shall be required of the new date, time or place of the adjourned
meeting, unless a new record date for such adjourned meeting is, or is required
by law or these By-Laws to be, fixed. At such adjourned meeting (for which no
new record date is, or is required to be, set) at which a quorum shall be
present in person or by proxy, any business may be transacted that might have
been transacted at the meeting originally called.
Section 7. PROXIES. At every meeting of the shareholders, any shareholder
having the right to vote shall be entitled to vote in person or by proxy, but no
proxy shall be: (i) effective unless given in writing and signed, either
personally by the shareholder or his attorney-in-fact; (ii) effective until
received by the Secretary or other officer or agent authorized to tabulate
votes; or (iii) valid after eleven months from its date, unless said proxy
expressly provides for a longer period.
Section 8. ACTION OF SHAREHOLDERS WITHOUT A MEETING. Unless otherwise
provided in the Articles of Incorporation, any action required or permitted to
be taken at any annual or special meeting of shareholders of the Corporation,
may be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock of each voting group entitled to vote thereon
having not less than the minimum number of votes with respect to each voting
group that would be necessary to authorize or take such action at a meeting at
which all voting groups and shares entitled to vote thereon were present and
voted.
Within 10 days after obtaining such authorization by written consent, notice
must be given to those shareholders who have not consented in writing or who are
not entitled to vote on the action. The notice shall fairly summarize the
material features of the authorized action and, if the action be such for which
dissenters rights are provided under Florida law, the notice shall contain a
clear statement of the right of shareholders dissenting therefrom to be paid the
fair value of their shares upon compliance with further provisions of Florida
law regarding the rights of dissenting shareholders.
ARTICLE IV.
DIRECTORS
Section 1. GENERAL POWERS. Except as may be otherwise provided by any legal
agreement among shareholders, the property and business of the Corporation shall
be managed by its Board of Directors. In addition to the powers and authority
expressly conferred by these By-Laws, the Board of Directors may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by law, or by any legal agreement among shareholders, or by the Articles of
Incorporation or by these By-Laws directed or required to be exercised or done
by the shareholders.
Section 2. NUMBER, TENURE, QUALIFICATIONS. The Board of Directors shall
consist of not less than two (2) nor more than twenty-five (25) members, the
precise number to be
-7-
<PAGE> 11
determined from time to time by affirmative vote of a majority of the entire
Board of Directors. Unless otherwise provided in the Articles of Incorporation,
the Directors shall be elected at the annual meeting of shareholders, to hold
office until the next succeeding annual meeting of shareholders held after his
election and until his successor has been duly elected and has qualified, or
until his earlier resignation, removal from office, or death. Directors shall be
natural persons who are eighteen (18) years of age or older, but need not be
shareholders or residents of Florida unless the Articles of Incorporation
require otherwise.
Section 3. VACANCIES, HOW FILLED. If any vacancy shall occur in the
membership of the Board by reason of newly created directorships or resulting
from the resignation, disqualification, retirement or death of a director, the
remaining directors shall continue to act, and such vacancies may be filled by
the affirmative vote of the majority of the directors then in office, though
less than a quorum, and if not therefore filled by action of the directors, may
be filled by the shareholders at any meeting held during the existence of such
vacancy. If any vacancy shall occur among the directors by reason of the removal
from office of a director, such vacancy shall be filled by the vote of
seventy-five percent (75%) of the outstanding shares of each class of stock
entitled to vote in elections of directors. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
Section 4. PLACE OF MEETING. The Board may hold its meetings at such place
or places within or without the State of Florida as it may from time to time
determine.
Section 5. COMPENSATION. Directors may be allowed such compensation for
attendance at regular or special meetings of the Board and of any special or
standing committees thereof as may be from time to time determined by resolution
of the Board.
Section 6. REGULAR MEETINGS. A regular annual meeting of the Board shall be
held, without other notice than this By-Law, immediately after the annual
meeting of shareholders. The Board may provide, by resolution, the time and
place within or without the State of Florida, for the holding of additional
regular meetings without other notice than such resolution.
Section 7. SPECIAL MEETINGS. Special meetings of the Board may be called by
the Chief Executive Officer or the presiding officer of the Board, if different
from the Chief Executive Officer, on not less than two (2) days' notice to each
director by mail, telegram, cablegram or other form of wire or wireless
communication, or personal delivery or other form of communication authorized
under the circumstances by the Act, and shall be called by the Chief Executive
Officer or the Secretary in like manner and on like notice on the written
request of any two (2) or more members of the Board. Such notice shall state the
time, date and place of such meeting, but need not describe the purpose of the
meeting. Any such special meeting shall be held at such time and place as shall
be stated in the notice of the meeting.
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER. Except as
otherwise expressly provided in this Article IV, matters relating to notice to
directors and waiver of notice by directors shall be governed by the provisions
of Article II of these By-Laws.
-8-
<PAGE> 12
Section 9. QUORUM. At all meetings of the Board, unless otherwise provided
in the Articles of Incorporation or other provisions of these By-Laws, the
presence of a majority of the Directors shall constitute a quorum for the
transaction of business. In the absence of a quorum a majority of the Directors
present at any meeting may adjourn from time to time until a quorum is obtained.
Notice of the time and place of any adjourned meeting need only be given by
announcement at the meeting at which adjournment is taken.
Section 10. MANNER OF ACTING. Except as expressly otherwise provided by the
Articles of Incorporation or other provisions of these By- Laws, if a quorum is
present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the Board. A director who is present at a meeting when
corporate action is taken is deemed to have assented to the action unless:
(1) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting; or
(2) His dissent or abstention from the action taken is entered in the
minutes of the meeting and his reason(s) for abstention is submitted in
writing to the Board.
Section 11. COMMITTEES.
(a) Except as otherwise provided by the Articles of Incorporation, the Board
may create an Executive Committee and one or more committees and appoint members
of the Board to serve on them. Each committee may have two or more members, who
serve at the pleasure of the Board.
(b) The provisions of these By-Laws and of the Act which govern meetings,
action without meetings, notice and waiver of notice, and quorum and voting
requirements of the Board, shall apply as well to committees created under this
Section 11 and their members.
(c) To the extent specified by the Articles of Incorporation, these By-Laws
and the resolution of the Board creating such committee, each committee may
exercise the authority of the Board, provided that a committee may not:
(1) Approve, or propose to shareholders for approval, action required by the
Act to be approved by shareholders;
(2) Fill vacancies on the Board or on any of its committees;
(3) Authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the Board of Directors;
(4) Adopt, amend, or repeal by-laws; or
-9-
<PAGE> 13
(5) Authorize or approve the issuance or sale or contract for the sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the Board of Directors may authorize a
committee (or a senior executive officer of the Corporation) to do so within
limits specifically prescribed by the Board of Directors.
Section 12. ACTION WITHOUT FORMAL MEETING. Except as expressly otherwise
provided in the Articles of Incorporation, any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if written consent thereto (which may take the form of one or
more counterparts) is signed by all members of the Board or of such committee,
as the case may be, and such written consent is filed with the minutes of the
proceedings of the Board or committee. A consent executed in accordance herewith
has the effect of a meeting vote and may be described as such in any document.
Section 13. CONFERENCE CALL MEETINGS. Members of the Board, or any committee
of the Board, may participate in a meeting of the Board or committee by means of
conference, telephone or similar communications equipment by means of which all
persons participating in the meeting can simultaneously hear each other during
the meeting, and participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting.
ARTICLE V.
OFFICERS
Section 1. GENERALLY. The Board shall from time to time elect or appoint
such officers as it shall deem necessary or appropriate to the management and
operation of the Corporation, which officers shall hold their offices for such
terms as shall be determined by the Board and shall exercise such powers and
perform such duties as are specified in these By-Laws or in a resolution of the
Board. Except as specifically otherwise provided in resolutions of the Board,
the following requirements shall apply to election or appointment of officers:
(a) The Corporation shall have, at a minimum, the following officers, which
offices shall bear the titles designated therefor by resolution of the Board,
but in the absence of such designation shall bear the titles set forth below:
<TABLE>
<CAPTION>
Office Title
------ -----
<S> <C>
Chairman of the Board Chairman
Vice Chairman of the Board Vice-Chairman
Chief Executive Officer President
Chief Financial Officer Treasurer
Secretary Secretary
</TABLE>
-10-
<PAGE> 14
(b) All officers of the Corporation shall serve at the pleasure of the
Board, and in the absence of specification otherwise in a resolution of the
Board, each officer shall be elected to serve until the next succeeding annual
meeting of the Board and the election and qualification of his successor,
subject to his earlier death, resignation or removal.
(c) Any person may hold two or more offices simultaneously, and no officer
need be a shareholder of the Corporation.
(d) If so provided by resolution of the Board, any officer may be delegated
the authority to appoint one or more officers or assistant officers, which
appointed officers or assistant officers shall have the duties and powers
specified in the resolution of the Board.
Section 2. COMPENSATION. The salaries of the officers of the Corporation
shall be fixed by the Board, except that the Board may delegate to any officer
or officers the power to fix the compensation of any other officer.
Section 3. VACANCIES. A vacancy in any office, because of resignation,
removal or death may be filled by the Board for the unexpired portion of the
term, or if so provided by resolution of the Board, by an officer of the
Corporation to whom has been delegated the authority to appoint the holder of
such vacated office.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors
shall, when present, preside at all meetings of the shareholders and the Board,
either annual or special. The Chairman shall assist the Board in the formulation
of policies to be pursued by the executive management of the Corporation, and he
shall study and make reports and recommendations with respect to major problems,
policies, and activities of the Corporation, and it shall be his responsibility
to see that the policy established by the Board is carried into effect by the
executive officers. The Chairman may sign and deliver on behalf of the
Corporation any deed, mortgages, bonds, contracts, powers of attorney, or other
instruments which the Board have authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board or by these By-Laws to some other officer or agent of the Corporation or
shall be required by law to be otherwise signed or executed, and he shall
perform such other duties as may be prescribed by the Board from time to time.
Section 5. VICE-CHAIRMAN OF THE BOARD. The Vice-Chairman of the Board of
Directors shall, when present and in the absence of the Chairman of the Board,
preside at all meetings of the Board. The Vice-Chairman shall assist the Board
in the formulation of policies to be pursued by the executive management of the
Corporation, and he shall study and make reports and recommendations with
respect to major problems, policies, and activities of the Corporation. The
Chairman may sign and deliver on behalf of the Corporation any deed,
-11-
<PAGE> 15
mortgages, bonds, contracts, powers of attorney, or other instruments which the
Board have authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by these By-Laws
to some other officer or agent of the Corporation or shall be required by law to
be otherwise signed or executed, and he shall perform such other duties as may
be prescribed by the Board from time to time.
Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
such title or titles designated by the Board and shall be the principal
executive officer of the Corporation. Subject to the control of the Board, the
Chief Executive Officer shall in general manage, supervise and control all of
the business and affairs of the Corporation. He shall, when present, preside at
all meetings of all of the stockholders. He may sign, individually or in
conjunction with any other proper officer of the Corporation thereunto
authorized by the Board, certificates for shares of the Corporation, any deeds,
mortgages, bonds, policies of insurance, contracts, investment certificates, or
other instruments which the Board has authorized to be executed, except in cases
where the execution thereof shall be expressly delegated by the Board or by the
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of the Chief Executive Officer of the Corporation
and such other duties as may be prescribed by the Board from time to time.
Section 7. SECRETARY. The Secretary may be designated by any such title as
determined by resolution of the Board, and shall: (a) attend and keep the
Minutes of the shareholders' meetings and of the Board's meetings in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as otherwise required by law
or the provisions of the Articles of Incorporation; (c) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all documents, the execution of which on behalf of
the Corporation under its seal is duly authorized; (d) maintain, or cause an
agent designated by the Board to maintain, a record of the Corporation's
shareholders in a form that permits the preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares, showing
the number and class of shares held by each; (e) have general charge of the
stock transfer books of the Corporation or responsibility for supervision, on
behalf of the Corporation, of any agent to which stock transfer responsibility
has been delegated by the Board; (f) have responsibility for the custody,
maintenance and preservation of those corporate records which the Corporation is
required by the Act or otherwise to create, maintain or preserve; (g) in general
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board.
Section 8. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer, unless
otherwise determined by the Board, shall: (a) have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by
-12-
<PAGE> 16
the Board; and (b) in general perform all the duties incident to the office of
Chief Financial Officer and such other duties as from time to time may be
assigned by the Board.
Section 9. DEPUTY OFFICERS. The Board may create one or more deputy
officers whose duties shall be, among any other designated thereto by the Board,
to perform the duties of the officer to which such office has been deputized in
the event of the unavailability, death or inability or refusal of such officer
to act. Deputy officers may hold such titles as designated therefor by the
Board; however, any office designated with the prefix "Vice" or "Deputy" shall
be, unless otherwise specified by resolution of the Board, automatically a
deputy officer to the office with the title of which the prefix term is
conjoined. Deputy officers shall have such other duties as prescribed by the
Board from time to time.
Section 10. ASSISTANT OFFICERS. The Board may appoint one or more
officers who shall be assistants to principal officers of the Corporation, or
their deputies, and who shall have such duties as shall be delegated to such
assistant officers by the Board or such principal officers, including the
authority to perform such functions of those principal officers in the place of
and with full authority of such principal officers as shall be designated by the
Board or (if so authorized) by such principal officers. The Board may by
resolution authorize appointment of assistant officers by those principal
officers to which such appointed officers will serve as assistants.
ARTICLE VI.
INDEMNIFICATION
Section 1. ACTION BY PERSONS OTHER THAN THE CORPORATION. Under the
circumstances prescribed in Sections 3 and 4 of this Article, the Corporation
shall indemnify any person who was or is a party to any, threatened, pending or
completed action, suit or other type of proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal (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 of the Corporation, 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 expenses (including attorney's fees), judgments, fines,
penalties and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding, including any appeal
thereof, if he acted 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 criminal action or proceeding, he had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, 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 corporation, or with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
-13-
<PAGE> 17
Section 2. ACTIONS BY OR IN THE NAME OF THE CORPORATION. Under the
circumstances prescribed in Sections 3 and 4 of this Article, the Corporation
shall indemnify and hold harmless any person who was or is a party to any,
threatened, pending or completed action, suit or other type of proceeding,
whether civil, criminal, administrative or investigative, and whether formal or
informal, by or in the right of the Corporation 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 Corporation, 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 expenses (including attorney's
fees) and amounts paid in settlement not exceeding, in the judgment of the Board
of Directors, the estimated expense of litigating the action, suit or proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or settlement of such action, suit or proceeding, including any appeal thereof.
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 Corporation; except that no indemnification shall be made in respect to
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation, unless and only to the extent that, the court in
which such action, suit or proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
Section 4. AUTHORIZATION OF INDEMNIFICATION. Except as provided in Section 3
of this Article and except as may be ordered by a court, any indemnification
under Sections 1 and 2 of this Article shall be made by the Corporation only as
authorized in the specific case upon a 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 Sections 1 and 2. Such
determination shall be made:
(a) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding;
(b) 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 a party may participate) consisting solely of
two or more directors not at the time parties to the action, suit or
proceeding;
(c) by independent legal counsel (i) selected by the Board of
Directors prescribed in paragraph (a) of this Section or the committee
prescribed in paragraph (b) of this Section; or (ii) if a quorum of the
directors cannot be obtained for paragraph (a)
-14-
<PAGE> 18
of this Section and the committee cannot be designated under paragraph (b)
of this Section, selected by a majority vote of the full Board of Directors
(in which directors who are a party may participate); or
(d) by the shareholders by a majority vote of a quorum consisting
of shareholders who were not parties to such action, suit or proceeding or,
if no such quorum is obtainable, by a majority vote of shareholders who
were not parties to such action, suit or proceeding.
Section 5. REASONABLENESS OF EXPENSES. Evaluation of the reasonableness of
expenses and authorization of indemnification shall be made in the same manner
as the determination that indemnification is permissible. However, if the
determination of permissibility is made by independent legal counsel, persons
specified by Section 4(c) shall evaluate the reasonableness of expenses and may
authorize indemnification.
Section 6. PREPAYMENT OF EXPENSES. Expenses incurred by a director or
officer in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article.
Expenses incurred by other employees and agents may be paid in advance upon such
terms or conditions that the Board of Directors deems appropriate.
Section 7. NON-EXCLUSIVE RIGHT. The indemnification and advancement of
expenses provided by this Article are not exclusive, and the Corporation 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:
(a) 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;
(b) A transaction from which the director, officer, employee or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of Florida Business Corporation Act ss. 607.0834 are
applicable; or
-15-
<PAGE> 19
(d) 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 a judgment in its favor or in a proceeding by or
in the right of a shareholder.
(e) Recklessness or an act or omission which was committed in
bad faith or with malicious purpose or in a manner exhibiting wanton and
willful disregard of human rights, safety or property in a proceeding by
or in the right of someone other than the Corporation or a shareholder.
Section 8. SUCCESSORS. Indemnification and advancement of expenses as
provided in this Article shall continue as, unless otherwise provided when
authorized or ratified, 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.
Section 9. JUDICIAL DETERMINATION. Unless the Articles of Incorporation
provide otherwise, notwithstanding the failure of the Corporation 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
Corporation 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:
(a) The director, officer, employee or agent is entitled to
mandatory indemnification under Section 3, in which case the court shall
also order the Corporation to pay the director reasonable expenses
incurred in obtaining court-ordered indemnification or advancement of
expenses;
(b) The director, officer, employee or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the Corporation of its power pursuant to Section 7; or
(c) 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 Section 1, Section
2 or Section 7.
Section 10. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, 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 any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
-16-
<PAGE> 20
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article.
Section 11. INFORMATION TO SHAREHOLDERS. 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 Corporation, the Corporation shall report the indemnification
or advance in writing to the shareholders with or before the notice of the next
shareholders meeting, or prior to such meeting if the indemnification or advance
occurs after the giving of such notice but prior to the time such meeting is
held, which report shall include a statement specifying the persons paid, the
amount paid, and the nature and status at the time of such payment of the
litigation or threatened litigation.
ARTICLE VII.
FISCAL YEAR
The fiscal year of the Corporation shall be established by the Board or,
in the absence of Board action establishing such fiscal year, by the Chief
Executive Officer.
ARTICLE VIII.
ANNUAL STATEMENTS
No later than 120 days after the close of each fiscal year, the
Corporation shall furnish its shareholders the following financial statements:
(a) A balance sheet as of the end of the fiscal year;
(b) An income statement for that year; and
(c) A statement of cash flows for that year.
In addition, upon written request, the Corporation shall mail promptly
to any shareholder of record a copy of the most recent such balance sheet,
income statement and statement of cash flows.
-17-
<PAGE> 21
ARTICLE IX.
CAPITAL STOCK
Section 1. FORM.
(a) Except as otherwise provided for in paragraph (b) of this Section 1,
the interest of each shareholder shall be evidenced by a certificate
representing shares of stock of the Corporation, which shall be in such form as
the Board may from time to time adopt and shall be numbered and shall be entered
in the books of the Corporation as they are issued. Each certificate shall
exhibit the holder's name, the number of shares and class of shares and series,
if any, represented thereby, the name of the Corporation, a statement that the
Corporation is organized under the laws of the State of Florida, the par value
of each share or a statement that the shares are without par value and a summary
of the designations, relative rights, preferences, and limitations applicable to
each class and the variations in rights, preferences, and limitations determined
for each series (and the authority of the Board of Directors to determine
variations for future series) or a statement that the Corporation will furnish
the shareholder a full statement of this information on request and without
charge. Each certificate shall be signed by one or more officers of the
Corporation specified by resolution of the Board, but in the absence of such
specifications, shall be valid if executed by the Chief Executive Officer or any
Deputy or Assistant thereto, and such execution is countersigned by the
Secretary, or any Deputy or Assistant thereto. Each stock certificate may but
need not be sealed with the seal of the Corporation.
(b) If authorized by resolution of the Board, the Corporation may issue
some or all of the shares of any or all of its classes or series without
certificates. The issuance of such shares shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of any shares not
represented by certificates, the Corporation shall send to the holder of such
shares a written statement setting forth, with respect to such shares (i) the
name of the Corporation as issuer and the Corporation's state of incorporation,
(ii) the name of the person to whom such shares are issued, (iii) the number of
shares and class of shares and series, if any, and (iv) the terms of any
restrictions on transfer which, were such shares represented by a stock
certificate would be required to be noted on such certificate, by law, by the
Articles of Incorporation or these By-Laws, or by any legal agreement among the
shareholders of the Corporation.
Section 2. TRANSFER. Transfers of stock shall be made on the books of
the Corporation only by the person named in the certificate, or, in the case of
shares not represented by certificates, the person named in the Corporation's
stock transfer records as the owner of such shares, or, in either case, by
attorney lawfully constituted in writing. In addition, with respect to shares
represented by certificates, transfers shall be made only upon surrender of the
certificate therefor, or in the case of a certificate alleged to have been lost,
stolen or destroyed, upon compliance with the provisions of Section 4, Article
IX of these By-Laws.
-18-
<PAGE> 22
Section 3. RIGHTS OF HOLDER. The Corporation shall be entitled to treat
the holder of record of any share of the Corporation as the person entitled to
vote such share (to the extent such share is entitled to vote), to receive any
distribution with respect to such share, and for all other purposes and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 4. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board may require and shall if the
Board so requires, give the Corporation a bond of indemnity in the form and
amount and with one or more sureties satisfactory to the Board, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
ARTICLE X.
SEAL
The corporate seal shall be in such form as shall be specified in the
minutes of the organizational meeting of the Corporation, or as the Board may
from time to time determine.
ARTICLE XI.
REGISTERED OFFICE AND REGISTERED AGENT
The address of the initial registered office of the corporation is c/o
CT Corporation System, 1200 South Pine Island Road, City of Plantation, Florida
33324 and the name of the initial registered agent is CT Corporation System. The
corporation may amend this Article XI at any time to change its registered
office or registered agent, without further action of its officers or directors,
by filing with the Secretary of State a notice of such change, in accordance
with Section 607.0502 of the Act, or any successor statute.
The corporation may have other offices at such places within or without
the State of Florida as the Board may from time to time designate or the
business of the Corporation may require or make desirable.
ARTICLE XII.
AMENDMENTS
Section 1. AMENDMENTS GENERALLY.
(a) Except as otherwise provided in the Articles of Incorporation or by
applicable law, the By-Laws of the Corporation may be altered or amended and new
By-Laws may be adopted by
-19-
<PAGE> 23
the shareholders or by the Board of Directors at any regular or special meeting
of the Board of Directors; provided, however, that, if such action is to be
taken at a meeting of the shareholders, notice of the general nature of the
proposed change in the By-Laws shall have been given in the notice of a meeting.
Except as otherwise provided in this Article XII, action by the shareholders
with respect to By-Laws shall be taken by an affirmative vote of seventy-five
percent (75%) of each class of stock entitled to elect directors, and action by
the directors with respect to By-Laws shall be taken by an affirmative vote of a
majority of all directors then holding office.
Section 2. BY-LAW INCREASING QUORUM OR VOTING REQUIREMENTS.
(a) Any By-Law which sets a greater quorum or voting requirement for
shareholders (or voting groups of shareholders) than the minimum required by the
Act may not be adopted, amended or repealed by the Board.
(b) Except as otherwise provided in the Articles of Incorporation, a
By-Law that fixes a greater quorum or voting requirement for the Board than the
minimum required by the Act:
(1) May be amended or repealed only by the shareholders if
originally adopted by the shareholders;
(2) May be amended or repealed either by the directors or the
shareholders if originally adopted by the Board of Directors.
(c) A By-Law adopted or amended by the shareholders that fixes a
greater quorum or voting requirement for the Board may be amended or repealed
only by a specified vote of either the shareholders or the Board, if such By-Law
provision so provides.
-20-
<PAGE> 1
EXHIBIT 4.1
NUMBER SHARES
FB
FLORIDA BANKS, INC.
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 340560 10 1
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.01 PER
SHARE, OF
FLORIDA BANKS, INC.
transferable on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
[SEAL]
/S/ NANCY E. LAFOY /S/ CHARLES E. HUGHES, JR.
SECRETARY AND TREASURER PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED
SUNTRUST BANK, ATLANTA
TRANSFER AGENT
AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<TABLE>
- ---------------------------------- -------------------------------------------------
<S> <C>
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: DAVID LOWRY: 215-830-2197
680 BLAIR MILL ROAD PROOF OF MAY 28, 1998
HORSHAM, PA 19044 FLORIDA BANKS, INC.
9215) 657-3480 H 56967fc
- ---------------------------------- -------------------------------------------------
SALES: A. HOBBS: 404-525-1455 OPERATOR: hj
- ---------------------------------- -------------------------------------------------
/NET/BANKNOTE/HOME57/FLORIDA 56967 NEW
- ---------------------------------- -------------------------------------------------
</TABLE>
<PAGE> 2
FLORIDA BANKS, INC.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS,
AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE
ISSUED, THE VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE
SHARES OF EACH SUCH CLASS AND SERIES SO FAR AS THE SAME HAVE BEEN FIXED AND
DETERMINE, AND THE AUTHORITY OF THE DIRECTORS TO FIX AND DETERMINE THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES AND SERIES. ANY SUCH
REQUEST SHALL BE ADDRESSED TO THE SECRETARY OF THE CORPORATION.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT- Custodian
TEN ENT -as tenants by the entireties ---------- ----------
JT TEN -as joint tenants with right (Cust) (Minor)
of survivorship and not as tenants under Uniform Gifts to Minors
in common Act
--------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
---------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
shares
- -----------------------------------------------------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney
- ----------------------------------------------------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with full power of substitution in the
premises.
Date
------------------------
--------------------------------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
-----------------------------------------------------------------------------------
THE SIGNATURES(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
- ---------------------------------- -------------------------------------------------
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: DAVID LOWRY: 215-830-2197
680 BLAIR MILL ROAD PROOF OF MAY 28, 1998
HORSHAM, PA 19044 FLORIDA BANKS, INC.
(215) 657-3480 H 56967bk
- ---------------------------------- -------------------------------------------------
SALES: A. HOBBS: 404-525-1455 OPERATOR: hj
- ---------------------------------- -------------------------------------------------
/NET/BANKNOTE/HOME57/FLORIDA 56967 NEW
- ---------------------------------- -------------------------------------------------
</TABLE>
<PAGE> 1
[SMITH, GAMBRELL & RUSSELL, LLP LETTERHEAD]
Terry Ferraro Schwartz
(404) 815-3731
E-Mail:[email protected]
June 5, 1998
Board of Directors
Florida Banks, Inc.
4110 Southpoint Boulevard
Suite 212, Southpoint Square II
Jacksonville, Florida 32216-0925
Re: Florida Banks, Inc.
Registration Statement on Form S-1
Registration Number 333-50867
4,600,000 Shares
--------------------------------
Ladies and Gentlemen:
We have acted as counsel for Florida Banks, Inc. (the "Company") in
connection with the proposed public offering of 4,600,000 Shares of Common
Stock, $.01 par value per share (the "Common Stock"), covered by the
above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation, as amended, of the Company,
certified by the Secretary of State of the State of Florida;
(2) The By-Laws of the Company, certified as complete and correct
by the Secretary of the Company;
(3) The minute book of the Company, certified as correct and
complete by the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company,
issued by the Secretary of State of the State of Florida; and
(5) The Registration Statement.
<PAGE> 2
Board of Directors
Florida Banks, Inc.
June 5, 1998
Page 2
Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion that:
(A) The Company has been duly incorporated under the laws of the
State of Florida and is validly existing and in good standing
under the laws of that state; and
(B) The 4,600,000 shares of Common Stock covered by the
Registration Statement to be sold by the Company have been
legally authorized and, when issued and sold in accordance
with the terms described in the Registration Statement, will
be legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus contained in said Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ Terry Ferraro Schwartz
------------------------------
Terry Ferraro Schwartz
TFS/DWG/cs
132548
2
<PAGE> 1
EXHIBITS 10.2.1
FLORIDA BANKS, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Option Agreement") made and
entered into this ___ day of ________, 199__ by and between FLORIDA BANKS, Inc.
(the "Company") and ___________ ("Employee");
W I T N E S S E T H:
The Board of Directors of the Company has adopted that certain 1998
Stock Option Plan, as amended (the "Plan"), a copy of which is attached hereto
as Exhibit "A" and incorporated herein by reference. Pursuant to the terms of
the Plan and in consideration of the efforts of Employee on behalf of the
Company, the Board of Directors has selected Employee to participate in the Plan
and desires to grant to Employee certain incentive stock options to purchase
shares of the Company's authorized $.01 par value common stock ("Stock"),
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INCORPORATION OF PLAN PROVISIONS
This Option Agreement is subject to and is to be construed in all
respects in a manner which is consistent with the terms of the Plan, the
provisions of which are hereby incorporated by reference into this Option
Agreement. Unless specifically provided otherwise, all terms used in this Option
Agreement shall have the same meaning as in the Plan.
2. GRANT OF OPTION
Subject to the further terms and conditions of this Option Agreement,
Employee is hereby granted a stock option to purchase _______ shares of Stock,
effective as of the date first written above. This stock option is intended to
be an Incentive Stock Option as provided in ss. 422 of the Internal Revenue
Code.
3. FAIR MARKET VALUE OF STOCK
The Board of Directors has determined, in good faith and in its best
judgment, that the fair market value per share of Stock as of the date this
stock option is granted is $_____.
4. OPTION PRICE
The Board of Directors has determined that the price for each share of
Stock purchased under this Option Agreement shall be $_____.
<PAGE> 2
5. EXPIRATION OF OPTIONS
The option to acquire Stock pursuant to this Option Agreement shall
expire (to the extent not previously fully exercised) upon the first to occur of
the following:
(a) ________, 200__ (the tenth anniversary of the date of
grant of the option);
(b) The date which is three (3) months following the date
which Employee ceases his employment with the Company or any subsidiary of the
Company, otherwise than as a result of Employee's death or total disability;
(c) The date which is the first anniversary of the date upon
which Employee ceases to be employed by the Company, or any subsidiary of the
Company, by reason of Employee's death or total disability; or
(d) The date upon which Employee ceases her employment with
the Company or any subsidiary of the Company, for any reason, including death or
total disability, with respect to any portion of this option that is not then
exercisable on the date Employee ceases her employment with the Company.
6. EXERCISE OF OPTION
Unless options hereunder shall earlier lapse or expire pursuant to
Article 5 hereof, this option shall be exercisable with respect to the full
number of shares subject to this Option Agreement as follows:
(i) as of __________,__________ shares;
(ii) as of __________,__________ shares;
(iii) as of __________,__________ shares; and
(iv) as of __________,__________ shares.
To the extent such options become exercisable in accordance with the
foregoing, Employee may exercise this stock option, in whole or in part, from
time to time. The option exercise price may be paid by Employee either (i) in
cash, (ii) by surrender of shares of Stock owned by Employee for more than six
months on the date of surrender and which have a fair market value on the date
of surrender equal to the aggregate exercise price of the shares as to which
such option shall be exercised, or (iii) shares of Stock issued or issuable in
connection with the exercise of this option.
Notwithstanding the foregoing ,Employee shall be permitted to pay the
exercise price of this option in shares of Stock pursuant to clauses (ii) and
(iii) above only if an organized trading market in the Stock exists on the date
of exercise of this option. In addition, any payment of the option exercise
price pursuant to the aforementioned clause (iii) shall be made only with the
prior consent of the Board of Directors of the Company.
For the purposes of this Article 6, an "organized trading market" shall
be deemed to exist on the date of exercise of the option if: (a) the Stock is
listed on a national securities exchange, or (b) the Stock has been quoted on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") for the 15 trading days preceding the date of exercise of the option,
or (c) bid
-2-
<PAGE> 3
and asked quotations for the Stock have been published by the National Quotation
Bureau or other recognized inter-dealer quotation publication (other than
NASDAQ) during 20 of the 30 trading days preceding the date of exercise of the
option. In the event that an organized trading market for the Stock exists on
the date of exercise of the option, Employee shall be given credit against the
option exercise price hereunder for such shares surrendered equal to (i) if the
Stock is listed on a national securities exchange or is quoted on the NASDAQ
National Market System, the last actual sales transaction price reported on the
day preceding exercise of the option, or, if there were no actual sales
transactions reported for such date, on the date next preceding such date on
which actual sales transactions were reported, or (ii) if the Stock is quoted on
NASDAQ (other than the NASDAQ National Market System) or by the National
Quotation Bureau or other recognized inter-dealer quotation publication, the
average of the high and low price quotations on the day preceding exercise of
the option, or, if there were no price quotations for such date, on the date
next preceding such date on which there were high and low price quotations for
the Stock.
7. MANNER OF EXERCISE
This stock option may be exercised by written notice to the Secretary
of the Company specifying the number of shares to be purchased and signed by
Employee or such other person who may be entitled to acquire Stock under this
Option Agreement. If any such notice is signed by a person other than Employee,
such person shall also provide such other information and documentation as the
Secretary of the Company may reasonably require to assume that such person is
entitled to acquire Stock under the terms of the Plan and this Option Agreement.
After receipt of the notice and any other assurances requested by the Company
under this Article 7, and upon receipt of the full option price, the Company
shall issue to the person giving notice of exercise under this Option Agreement
the number of shares specified in such notice.
8. RESTRICTIONS ON TRANSFERABILITY
The stock option granted hereunder shall not be transferable by
Employee otherwise than by will or by the laws of descent and distribution, and
such stock option shall be exercisable during Employee's lifetime only by
Employee.
9. FURTHER RESTRICTIONS ON EXERCISE AND SALE OF STOCK
Neither this Option nor any portion thereof shall be exercisable at any
time during which there is not on file with the Securities and Exchange
Commission an effective Registration Statement covering the option shares on
Form S-8, or similar form promulgated by the Securities and Exchange Commission.
Nothing contained in this section shall be construed to obligate the
Company to, or to grant any right to the holder of this Option to, cause the
Company to file any Registration Statement; or, if any such Registration
Statement is filed, to prepare any additional prospectus, to file any amendments
to the Registration Statement, or to continue said Registration Statement in
effect.
If at any time during which this Option is otherwise exercisable
according to its terms there is no effective Registration Statement on file with
the Securities and Exchange Commission covering the shares then acquirable
hereunder, the Board of Directors may, in its sole discretion, permit this
Option to be exercised by the holder hereof, upon its satisfaction that the
offer and sale of such option shares to the option holder is exempt in fact from
the registration requirements of the Securities Act of 1933, as amended, and
such state securities laws as shall be applicable, and may condition such
exercise upon its
-3-
<PAGE> 4
receipt of such representations, factual assurances and legal opinions as it
shall deem necessary to determine and document the availability of any such
exemption and may further condition such exercise upon such undertakings by the
holder hereof or such restriction upon the transferability of the shares to be
acquired hereunder as it shall determine to be necessary to effectuate and
protect the claim to any such exemption.
10. REORGANIZATION
In the event that dividends are payable in Common Stock of the Company
or in the event there are splits, subdivisions or combinations of shares of
Common Stock of the Company, the number of Shares available under the Plan shall
be increased or decreased proportionately, as the case may be, and the number of
Shares deliverable upon the exercise thereafter of any Option theretofore
granted shall be increased or decreased proportionately, as the case may be,
without change in the aggregate purchase price.
In case the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or in case the property or
stock of the Company is acquired by another corporation, or in case of a
separation, reorganization, recapitalization or liquidation of the Company, the
Board of Directors of the Company, or the Board of Directors of any corporation
assuming the obligations of the Company hereunder, shall either (i) make
appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Employee provide that the Option
(including the shares not then exercisable) must be exercised within sixty (60)
days of the date of such notice or it will be terminated.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by a member of the Board of Directors or a duly authorized officer of
the Company, and Employee has executed this Option Agreement as of the date
first written above.
FLORIDA BANKS, INC.
By:
--------------------------------
Charles E. Hughes, Jr.
President and Chief Executive Officer
"EMPLOYEE"
----------------------------------------
-4-
<PAGE> 1
EXHIBIT 10.2.2
FLORIDA BANKS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Option Agreement") made and
entered into this ____ day of ______, 199__ by and between FLORIDA BANKS, Inc.
(the "Company") and___________ ("Participant");
W I T N E S S E T H:
The Board of Directors of the Company has adopted that certain 1998
Stock Option Plan, as amended (the "Plan"), a copy of which is attached hereto
as Exhibit "A" and incorporated herein by reference. Pursuant to the terms of
the Plan and in consideration of the efforts of Participant on behalf of the
Company, the Board of Directors has selected Participant to participate in the
Plan and desires to grant to Participant certain non-qualified stock options to
purchase shares of the Company's authorized $.01 par value common stock
("Stock"), subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INCORPORATION OF PLAN PROVISIONS
This Option Agreement is subject to and is to be construed in all
respects in a manner which is consistent with the terms of the Plan, the
provisions of which are hereby incorporated by reference into this Option
Agreement. Unless specifically provided otherwise, all terms used in this Option
Agreement shall have the same meaning as in the Plan.
2. GRANT OF OPTION
Subject to the further terms and conditions of this Option Agreement,
Participant is hereby granted a stock option to purchase _______ shares of
Stock, effective as of the date first written above. This stock option is not
intended to be an Incentive Stock Option as provided in ss. 422 of the Internal
Revenue Code.
3. FAIR MARKET VALUE OF STOCK
The Board of Directors has determined, in good faith and in its best
judgment, that the fair market value per share of Stock as of the date this
stock option is granted is $_____.
4. OPTION PRICE
The Board of Directors has determined that the price for each share of
Stock purchased under this Option Agreement shall be $_____.
<PAGE> 2
5. EXPIRATION OF OPTIONS
The option to acquire Stock pursuant to this Option Agreement shall
expire (to the extent not previously fully exercised) upon the first to occur of
the following:
(a) _______, 200__ (the tenth anniversary of the date of
grant of the option);
(b) The date which is three (3) months following the date
which Participant ceases his employment with the Company or any subsidiary of
the Company, otherwise than as a result of Participant's death or total
disability;
(c) The date which is the first anniversary of the date upon
which Participant ceases to be employed by the Company, or any subsidiary of the
Company, by reason of Participant's death or total disability; or
(d) The date upon which Participant ceases her employment
with the Company or any subsidiary of the Company, for any reason, including
death or total disability, with respect to any portion of this option that is
not then exercisable on the date Participant ceases her employment with the
Company.
6. EXERCISE OF OPTION
Unless options hereunder shall earlier lapse or expire pursuant to
Article 5 hereof, this option shall be exercisable with respect to the full
number of shares subject to this Option Agreement as follows:
<TABLE>
<S> <C> <C>
(i) as of __________,__________ shares;
(ii) as of __________,__________ shares;
(iii) as of __________,__________ shares; and
(iv) as of __________,__________ shares.
</TABLE>
To the extent such options become exercisable in accordance with the
foregoing, Participant may exercise this stock option, in whole or in part, from
time to time. The option exercise price may be paid by Participant either (i) in
cash, (ii) by surrender of shares of Stock owned by Participant for more than
six months on the date of surrender and which have a fair market value on the
date of surrender equal to the aggregate exercise price of the shares as to
which such option shall be exercised, or (iii) shares of Stock issued or
issuable in connection with the exercise of this option.
Notwithstanding the foregoing, Participant shall be permitted to pay
the exercise price of this option in shares of Stock pursuant to clauses (ii)
and (iii) above only if an organized trading market in the Stock exists on the
date of exercise of this option. In addition, any payment of the option exercise
price pursuant to the aforementioned clause (iii) shall be made only with the
prior consent of the Board of Directors of the Company.
For the purposes of this Article 6, an "organized trading market" shall
be deemed to exist on the date of exercise of the option if: (a) the Stock is
listed on a national securities exchange, or (b) the Stock has been quoted on
the National Association of Securities Dealers Automated
-2-
<PAGE> 3
Quotation System ("NASDAQ") for the 15 trading days preceding the date of
exercise of the option, or (c) bid and asked quotations for the Stock have been
published by the National Quotation Bureau or other recognized inter-dealer
quotation publication (other than NASDAQ) during 20 of the 30 trading days
preceding the date of exercise of the option. In the event that an organized
trading market for the Stock exists on the date of exercise of the option,
Participant shall be given credit against the option exercise price hereunder
for such shares surrendered equal to (i) if the Stock is listed on a national
securities exchange or is quoted on the NASDAQ National Market System, the last
actual sales transaction price reported on the day preceding exercise of the
option, or, if there were no actual sales transactions reported for such date,
on the date next preceding such date on which actual sales transactions were
reported, or (ii) if the Stock is quoted on NASDAQ (other than the NASDAQ
National Market System) or by the National Quotation Bureau or other recognized
inter-dealer quotation publication, the average of the high and low price
quotations on the day preceding exercise of the option, or, if there were no
price quotations for such date, on the date next preceding such date on which
there were high and low price quotations for the Stock.
7. MANNER OF EXERCISE
This stock option may be exercised by written notice to the Secretary
of the Company specifying the number of shares to be purchased and signed by
Participant or such other person who may be entitled to acquire Stock under this
Option Agreement. If any such notice is signed by a person other than
Participant, such person shall also provide such other information and
documentation as the Secretary of the Company may reasonably require to assume
that such person is entitled to acquire Stock under the terms of the Plan and
this Option Agreement. After receipt of the notice and any other assurances
requested by the Company under this Article 7, and upon receipt of the full
option price, the Company shall issue to the person giving notice of exercise
under this Option Agreement the number of shares specified in such notice.
8. RESTRICTIONS ON TRANSFERABILITY
The stock option granted hereunder shall not be transferable by
Participant otherwise than by will or by the laws of descent and distribution,
and such stock option shall be exercisable during Participant's lifetime only by
Participant.
9. FURTHER RESTRICTIONS ON EXERCISE AND SALE OF STOCK
Neither this Option nor any portion thereof shall be exercisable at any
time during which there is not on file with the Securities and Exchange
Commission an effective Registration Statement covering the option shares on
Form S-8, or similar form promulgated by the Securities and Exchange Commission.
Nothing contained in this section shall be construed to obligate the
Company to, or to grant any right to the holder of this Option to, cause the
Company to file any Registration Statement; or, if any such Registration
Statement is filed, to prepare any additional prospectus, to file any amendments
to the Registration Statement, or to continue said Registration Statement in
effect.
If at any time during which this Option is otherwise exercisable
according to its terms there is no effective Registration Statement on file with
the Securities and Exchange Commission covering the shares then acquirable
hereunder, the Board of Directors may, in its sole discretion, permit this
-3-
<PAGE> 4
Option to be exercised by the holder hereof, upon its satisfaction that the
offer and sale of such option shares to the option holder is exempt in fact from
the registration requirements of the Securities Act of 1933, as amended, and
such state securities laws as shall be applicable, and may condition such
exercise upon its receipt of such representations, factual assurances and legal
opinions as it shall deem necessary to determine and document the availability
of any such exemption and may further condition such exercise upon such
undertakings by the holder hereof or such restriction upon the transferability
of the shares to be acquired hereunder as it shall determine to be necessary to
effectuate and protect the claim to any such exemption.
10. REORGANIZATION
In the event that dividends are payable in Common Stock of the Company
or in the event there are splits, subdivisions or combinations of shares of
Common Stock of the Company, the number of Shares available under the Plan shall
be increased or decreased proportionately, as the case may be, and the number of
Shares deliverable upon the exercise thereafter of any Option theretofore
granted shall be increased or decreased proportionately, as the case may be,
without change in the aggregate purchase price.
In case the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or in case the property or
stock of the Company is acquired by another corporation, or in case of a
separation, reorganization, recapitalization or liquidation of the Company, the
Board of Directors of the Company, or the Board of Directors of any corporation
assuming the obligations of the Company hereunder, shall either (i) make
appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Participant provide that the Option
(including the shares not then exercisable) must be exercised within sixty (60)
days of the date of such notice or it will be terminated.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by a member of the Board of Directors or a duly authorized officer of
the Company, and Participant has executed this Option Agreement as of the date
first written above.
FLORIDA BANKS, INC.
By:
--------------------------------------
Charles E. Hughes, Jr.
President and Chief Executive Officer
"PARTICIPANT"
-----------------------------------------
-4-
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the _____ day of ____________________
1998, by and between Florida Banks, Inc., a Florida corporation (the "Company"
or "Employer") and John S. McMullen (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company intends to seek
approval from the Board of Governors of the Federal Reserve System (the "Fed"),
the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance
Corporation ("FDIC") to acquire a national bank in Tampa, Florida (the "Bank")
and to expand the Company's banking business throughout Florida; and
WHEREAS, the Board of Directors of the Company intends to approve the
sale in a firm underwritten public offering of an amount of Company common stock
requisite to expanding the Company's banking business (the "Initial Public
Offering"); and
WHEREAS, Executive is willing to become the President of the Tampa
Bay Market Area of the Bank subject to the successful completion of the Initial
Public Offering and in accordance with the terms and conditions hereinafter set
forth;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer employs Executive and Executive accepts
employment upon the terms and conditions set forth in this Agreement; provided,
however, that the provisions of this Agreement shall become effective upon
commencement of the term of the Agreement set forth in Section 2 hereof.
Further, upon the commencement of the term of the Agreement, Executive cancels
and terminates any and all previous employment agreements entered into with the
First National Bank of Tampa and all provisions contained in any such employment
agreements are, as of the commencement of the term hereof, null and void and of
no further force or effect.
2. TERM. The term of employment of Executive under this Agreement
shall be the three year period commencing on the date of Closing of the Initial
Public Offering and ending on the last day of the thirty sixth (36th) month
thereafter.
3. COMPENSATION. The Company shall pay Executive a minimum annual
base salary of $135,000, payable in semi-monthly installments beginning the
first pay period immediately subsequent to the closing of the Initial Public
Offering. Salary payments shall be subject to withholding and other applicable
taxes.
<PAGE> 2
At the first Board of Directors Meeting subsequent to the
Closing of the Initial Public Offering Executive shall be granted options to
purchase 60,000 shares of common stock of the Company which options shall vest
on the following schedule: (i) options to purchase 20,000 shares shall vest and
become exercisable on the first anniversary of the date of grant; (ii) options
to purchase 20,000 shares shall vest and become exercisable on each of the
second and third anniversaries of the date of grant. All such options shall be
exercisable at a per share price equal to the per share price at which the
Company sold its shares of common stock in the Initial Public Offering, shall be
exercisable in whole or in part for a period of ten (10) years from the date of
grant and shall be subject to such other customary terms and conditions as set
forth in the option agreement which shall be delivered to Executive by the
Company as soon as practicable after the date of grant.
4. TITLE AND DUTIES. Executive shall be the President of the Tampa
Bay Market Area of the Bank and shall run the day-to-day activities of the Bank
in the Tampa Market and oversee the Bank in the Tampa Market within the
framework of the approved annual budget, and with the sound system of internal
controls and in compliance with the policies of the Board of Directors of the
Bank and all applicable laws and regulations.
5. EXTENT OF SERVICES. Executive shall devote his entire time,
attention and energies to the business of Employer and shall not during the term
of this Agreement be engaged in any other business activity which requires more
than nominal attention or participation of Executive during normal business
hours of Employer, recognition being given to the fact that Executive is
expected on occasion to participate in client development after normal business
hours. However, Executive may invest his assets in such form or manner as will
not require his active services in the operation of the affairs of the companies
in which such investments are made but which may require a nominal amount of
attention during business hours. Executive shall notify Employer of any
significant participation by him in any trade association or similar
organization and the Board of Directors shall approve in advance Executive's
service as a director of any entity or organization, other than service as
President and director of Andros Associates, Inc., which service is hereby
approved by the Board of Directors of the Company.
6. WORKING FACILITIES. Executive shall have such assistants,
perquisites, facilities and services as are suitable to his position and
appropriate for the performance of his duties, including membership in a country
club and business persons' luncheon club (including dues and assessments) as
mutually agreed upon by Executive and the Company.
7. EXPENSES. Executive may incur reasonable expenses for promoting
the business of the Employer, including expenses for entertainment, travel, and
similar items. Executive will be reimbursed for all such expenses upon
Executive's periodic presentation of an itemized account of such expenditures.
8. VACATIONS. Executive shall be entitled each year to a vacation in
accordance with the personnel policy established by the Company's Board of
Directors, during which time Executive's compensation shall be paid in full.
9. ADDITIONAL COMPENSATION. As additional consideration paid to
Executive, Executive shall be provided with health, hospitalization, disability
and a minimum of $135,000 in term life
2
<PAGE> 3
insurance. In addition, Executive shall be provided with an automobile for his
use or an automobile allowance, in accordance with the automobile policy
established by the Company's Board of Directors.
10. CHANGE IN CONTROL OF THE COMPANY. (a) In the event of a "change
in control" of the Company, as defined herein, Executive shall be entitled, for
a period of thirty (30) days from the date of closing of the transaction
effecting such change in control and at his election, to give written notice to
Employer of termination of this Agreement and to receive a cash payment equal to
two hundred ninety-nine percent (299%) times the compensation, including bonus,
if any, received by Executive in the one-year period immediately preceding the
change in control. The severance payments provided for in this Section 10(a)
shall be paid in cash, commencing not later than ten (10) days after the date of
notice of termination by Executive under this Section 10 or ten (10) days after
the date of closing of the transaction effecting the change in control of the
Company, whichever is later.
(b) In addition, if Executive elects to terminate this
Agreement pursuant to this Section 10, Executive shall further be entitled, in
lieu of shares of Common Stock of the Company issuable upon exercise of options
to which Executive is entitled under this Agreement, an amount in cash or Common
Stock of the Company (or any combination thereof) as Executive shall in his
election designate equal to the excess of the fair market value of the Common
Stock as of the date of closing of the transaction effecting the change in
control over the per share exercise price of the warrants held by Executive,
times the number of shares of Common Stock subject to such warrants (whether or
not then fully exercisable). The fair market value of the Common Stock shall be
equal to the higher of (i) the value as determined by the Board of Directors of
the Company if there is no organized trading market for the shares at the time
such determination is made, or (ii) the closing price (or the average of the bid
and asked prices if no closing price is available) on any nationally recognized
securities exchange or association on which the Company's shares may be quoted
or listed, or (iii) the highest per share price actually paid for Common Stock
in connection with any change in control of the Company. The severance payments
provided for in this Section 10(b) shall be paid in full not later than ten (10)
days after the date of notice of termination by Executive under this Section 10
or ten (10) days after the date of closing of the transaction effecting the
change in control of the Company, whichever is later.
(c) For purposes of this Section 10, "change in control" of the
Company shall mean:
(i) any transaction, whether by merger, consolidation,
asset sale, tender offer, reverse stock split, or
otherwise, which results in the acquisition or
beneficial ownership (as such term is defined under
rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended) by any
person or entity or any group of persons or entities
acting in concert, of 50% or more of the outstanding
shares of Common Stock of the Company;
(ii) the sale of all or substantially all of the assets of
the Company; or
3
<PAGE> 4
(iii) the liquidation of the Company.
11. TERMINATION. (a) For Cause. This Agreement may be terminated by
the Board of Directors of the Company without notice and without further
obligation than for monies already paid, for any of the following reasons:
(i) failure of Executive to follow reasonable written
instructions or policies of the Board of Directors of
the Company or the Bank;
(ii) receipt by the Company or the Bank of written notice
from any bank regulatory agency having jurisdiction
over the Company or the Bank that such agency has
criticized Executive's performance or his area of
responsibility;
(iii) gross negligence or willful misconduct of Executive
materially damaging to the business of the Company or
Bank during the term of this Agreement, or at any
time while he was employed by the Company prior to
the term of this Agreement, if not disclosed to the
Company prior to the commencement of the term of this
Agreement; or
(iv) conviction of Executive during the term of this
Agreement of a crime involving breach of trust or
moral turpitude.
In the event that the Bank discharges Executive alleging
"cause" under this Section 11(a) and it is subsequently determined judicially
that the termination was "without cause," then such discharge shall be deemed a
discharge without cause subject to the provisions of Section 11(b) hereof. In
the event that the Bank discharges Executive alleging "cause" under this Section
11(a), such notice of discharge shall be accompanied by a written and specific
description of the circumstances alleging such "cause." The termination of
Executive for "cause" shall not entitle the Bank to enforcement of the
non-competition and non-solicitation covenants contained in Section 13 hereof.
(b) Without Cause.
(i) The Bank may, upon thirty (30) days' written
notice to Executive, terminate this Agreement
without cause at any time during the term of this
Agreement upon the condition that Executive shall
be entitled, as liquidated damages in lieu of all
other claims, to the payment of Executive's
minimum annual base salary for one year. The
severance payments provided for in this Section
11(b) shall commence not later than thirty (30)
days after the actual date of termination of
employment of Executive. The termination of
Executive "without cause" shall not entitle the
Bank to enforcement of the non-competition and
non-solicitation covenants contained in Section
13 hereof.
(ii) Executive may upon thirty (30) days' written
notice to Employer terminate this Agreement
without cause at any time during the term of this
4
<PAGE> 5
Agreement. In the event of termination of this
Agreement by Executive, the Bank shall have no
further obligation to Executive than for monies
paid and the Bank shall be entitled to
enforcement of the non-competition and
non-solicitation covenants contained in Section
13 hereof.
12. DEATH OR DISABILITY. In the event of Executive's death, Employer
shall pay to Executive's designated beneficiary, or, if Executive has failed to
designate a beneficiary, to his estate, an amount equal to Executive's base
salary pursuant to Section 3(b) hereof through the end of the month in which
Executive's death occurred. Such compensation shall be in lieu of any other
benefits provided hereunder, except that (i) in the event of a change in control
of the Company as defined herein, Executive's designated beneficiary or his
estate, as the case may be, shall be entitled to the benefits of Section 10(b)
hereof, and (ii) any benefit payable pursuant to Section 3(b) shall be prorated
and made available to Executive in respect of any period prior to his death. The
Bank may maintain insurance on its behalf to satisfy in whole or in part the
obligations of this Section 12.
In the event of Executive's disability, as hereinafter defined,
Employer shall pay to Executive the base salary then in effect until such time
as benefits are paid under the disability insurance policy to be maintained by
the Company covering Executive. Executive shall be deemed disabled if, by reason
of physical or mental impairment, he is incapable of performing his duties
hereunder for a period of 180 consecutive days.
13. NON-COMPETITION AND NON-SOLICITATION. (a) Executive acknowledges
that he has performed services or will perform services hereunder which directly
affect Employer's business. Accordingly, the parties deem it necessary to enter
into the protective agreement set forth below, the terms and condition of which
have been negotiated by and between the parties hereto.
(b) In the event of termination of employment under this
Agreement by action of Executive pursuant to 11(b)(ii) prior to the expiration
of the term of this Agreement, Executive agrees with Employer that through the
actual date of termination of the Agreement, and for a period of twelve (12)
months after such termination date, Executive shall not, without the prior
written consent of Employer, within Hillsborough and Pinellas Counties, Florida
either directly or indirectly, serve as an executive officer of any bank, bank
holding company or other financial institution.
(c) The covenants of Executive set forth in this Section 13 are
separate and independent covenants for which valuable consideration has been
paid, the receipt, adequacy and sufficiency of which are acknowledged by
Executive, and have also been made by Executive to induce Employer to enter into
this Agreement. Each of the aforesaid covenants may be availed of or relied upon
by Employer in any court of competent jurisdiction, and shall form the basis of
injunctive relief and damages including expenses of litigation (including but
not limited to reasonable attorney's fees) suffered by Employer arising out of
any breach of the aforesaid covenants by Executive. The covenants of Executive
set forth in this Section 13 are cumulative to each other and to all other
covenants of Executive in favor of Employer contained in this Agreement and
shall survive the termination of this Agreement for the purposes intended.
Should any covenant, term, or condition contained in this Section 13 become or
be declared invalid or unenforceable by a court of competent jurisdiction, then
the parties may request that such court
5
<PAGE> 6
judicially modify such unenforceable provision consistent with the intent of
this Section 13 so that it shall be enforceable as modified, and in any event
the invalidity of any provision of this Section 13 shall not affect the validity
of any other provision in this Section 13 or elsewhere in this Agreement.
14. NOTICES. Any notice required or desired to be given under this
Agreement shall be deemed given if in writing sent by certified mail to his
residence in the case of Executive, or to its principal office in the case of
Employer.
15. WAIVER OF BREACH. The waiver by Employer of a breach of any
provision of this Agreement by Executive shall not operate or be construed as a
waiver of any subsequent breach by Executive. No waiver shall be valid unless in
writing and signed by an authorized officer of Employer.
16. ASSIGNMENT. Executive acknowledges that the services to be
rendered by him are unique and personal. Accordingly, Executive may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement. The rights and obligations of Executive under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
Employer.
17. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida.
18. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto regarding employment of Executive, and
supersedes and replaces any prior agreement relating thereto. It may not be
changed orally but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension, or discharge is
sought.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
"COMPANY"
FLORIDA BANKS, INC.
By:
-----------------------------------------
Name:
Title:
"EXECUTIVE"
--------------------------------------(L.S.)
John S. McMullen
6
<PAGE> 1
EXHIBIT 10.4
[T. STEPHEN JOHNSON & ASSOCIATES, INC. LETTERHEAD]
January 20, 1998
Mr. Charles E. Hughes, Jr.
President & CEO
Florida Banks, Inc.
Southpoint Square II, Suite 212
4110 Southpoint Boulevard
Jacksonville, Florida 32216
Dear Mr. Hughes:
Thank you for the opportunity to present this proposal to provide consulting
services to Florida Banks, Inc., Jacksonville, Florida (the "Company"). This
contract outlines the services that T. Stephen Johnson & Associates, Inc.
("TSJ&A") will provide concerning the formation and organization of the Company,
the Company's capital formation, and its proposed purchase and/or merger with
First National Bank of Tampa, Tampa, Florida, (the "Bank").
1. TSJ&A will perform a financial analysis of the target
institution and make recommendations regarding appropriate
purchase price. The analysis will consider prices paid in
similar transactions, currency values, ownership dilution,
earnings dilution and synergies that may be expected from
the combined institutions.
2. TSJ&A will make introductions, arrange meetings and attend
meetings with both parties involved in the potential
transaction.
3. TSJ&A may assist Company in negotiating the purchase of the
target bank.
4. TSJ&A will assist Company in the preparation of the Letter
of Intent for the purchase.
5. TSJ&A will orchestra the formation and incorporation of the
Company.
6. TSJ&A will assist in the efforts to identify and provide
funds for the organizational expenses of the Company.
<PAGE> 2
Mr. Hughes
January 20, 1998
Page 2
7. TSJ&A will assist in identifying and negoiating the
relationship to be established with an investment banking
firm which will have the ability to raise capital ranging
from $40 to $50 million.
8. TSJ&A will assist in the recruitment of directors and
executive management for the Company and the Bank.
9. TSJ&A will develop and prepare the strategies and business
plan for the Company and Bank which will include the
financial projections and assumptions for the Company's and
Bank's first 3 to 5 years of operations. This analysis will
include growth of the Bank into 5 markets within the state
of Florida and the financial model of each bank and the
analysis of capital needs.
10. TSJ&A will assist legal counsel, accountants, and
underwriters in the preparation of all securities documents
to be filed with the Securities and Exchange Commission.
11. TSJ&A will orchestrate, prepare and file the Bank Holding
Company Application with the Federal Reserve Bank of
Atlanta for approval of the holding company formation and
the acquisition of the Bank. In addition, TSJ&A will assist
in the preparation and filings of the interim charter
application and branch application required by the Office
of the Comptroller of the Currency.
12. TSJ&A will assist in the analysis and identification of
bank sites in the proposed markets which the Bank will
expand and/or locate within.
The above outlined consulting services will be provided for a fee of $15,000 per
month for a period of 6 months. The first payment of $15,000 will be due upon
execution of this contract and the following monthly payments due on the first
of each month beginning February 1, 1998 and ending on June 1, 1998. In addition
to the above fees, TSJ&A will be reimbursed for out-of-pocket expenses on a
monthly basis. Documented out-of-pocket expenses will include travel, long
distance telephone calls, Xerox charges, overnight delivery, facsimile, etc.
<PAGE> 3
Mr. Hughes
January 20, 1998
Page 3
In addition to the consulting fees paid to TSJ&A, in the event that Company
purchases the Bank, TSJ&A will be paid a success fee of 1% of the total purchase
price of the Bank acquired. The success fee will be calculated based on the
total purchase price as defined in the Definitive Agreement and will be due on
the date of consummation.
This contract can be terminated at any time during the engagement period by
either party upon ten days written notice, provided that all fees and expenses
incurred before the effective date of termination have been paid in full. In
addition, if the Company purchases the target institution within one year after
due diligence was performed, the success fee will be payable in full.
You acknowledge that TSJ&A regularly engages in the business of providing
consulting services to financial institutions, including those that are
operational as well as those that are in the formation stage. Except as noted
above, you acknowledge and agree that this engagement does not limit our
continuing to provide consulting services to those institutions nor are we
precluded from seeking and accepting consulting opportunities of other financial
institutions. We acknowledge that this engagement includes our responsibility
not to disclose your confidential information to our other clients.
Should you find the terms of this engagement acceptable, please return a signed
and dated copy of this letter to me.
Sincerely,
/s/ Nancy E. LaFoy
- --------------------------------------
Nancy E. LaFoy
Senior Vice President
T. Stephen Johnson & Associates
Agreed and Accepted:
/s/ Charles E. Hughes, Jr. 1/20/98
- --------------------------------- ----------------------------
Signature Date
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-50867 of Florida Bank, Inc. on Form S-1 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 Prospectus, which is part of this Registration
Statement, and to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
June 5, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF MARCH 31, 1998 AND THE STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FILING ON AMENDMENT NO. 1 TO FORM S-1.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 409,218
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 483,863
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 100
<LONG-TERM> 0
0
606,000
<COMMON> 3,778
<OTHER-SE> (126,015)
<TOTAL-LIABILITIES-AND-EQUITY> 483,863
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 99,573
<INCOME-PRETAX> (99,573)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> (26,442)
<NET-INCOME> (126,015)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
