<PAGE> 1
As filed with the Securities and Exchange Commission on September 15, 1998
Registration Statement No. 333-60431
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
UNITED FINANCIAL HOLDINGS, INC.
UFH CAPITAL TRUST I
(Name of small business issuer in its charter)
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FLORIDA 6022
DELAWARE 0000 59-2156002
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
NEIL W. SAVAGE
333 THIRD AVENUE NORTH 333 THIRD AVENUE NORTH
ST. PETERSBURG, FLORIDA 33701 ST. PETERSBURG, FLORIDA 33701
(727) 898- 2265 (727) 898-2265
(Address and telephone number (Name, address and telephone number
of principal executive offices) of agent for service)
Copies of communications to:
CHESTER E. BACHELLER, ESQUIRE JOHN P. GREELEY, ESQUIRE
HOLLAND & KNIGHT LLP SMITH, MACKINNON, GREELEY,
400 NORTH ASHLEY DRIVE, SUITE 2300 BOWDOIN & EDWARDS, P.A.
TAMPA, FLORIDA 33602 255 SOUTH ORANGE AVENUE, SUITE 800
(813) 227-8500 P. O. BOX 2254
TELECOPIER NO. (813) 229-0134 ORLANDO, FLORIDA 32801
(407) 843-7300
TELECOPIER NO. (407) 843-2448
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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, 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. / /
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TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
PER SHARE PRICE
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Common Stock of United Financial
Holdings, Inc............................. 840,000(1) $11.00 $9,240,000 $2,726.00*
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Preferred Securities of UFH Capital
Trust I .................................. 1,380,000(2) $5.00 $6,900,000 $2,036.00*
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Junior Subordinated Debentures of United N/A
Financial Holdings, Inc.(3)...............
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Guarantee and certain other back-up N/A
undertakings of United Financial
Holdings, Inc.(4)...........................
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(1) Estimated solely for purposes of deferring the registration fee pursuant to
Rule 457(a) under the Securities Act of 1933. Includes up to 90,000
additional shares of Common Stock that may be acquired by the Underwriters
to cover over-allotments, if any.
(2) Including up to 180,000 additional Preferred Securities of UFH Capital Trust
I which may be acquired by the Underwriter to cover over-allotments, if any.
(3) The Junior Subordinated Debentures will be purchased by UFH Capital Trust I
with the proceeds of the sale of the Preferred Securities. Such securities
may later be distributed for no additional consideration to the holders of
the Preferred Securities of UFH Capital Trust I upon its dissolution and the
distribution of its assets.
(4) Includes the obligations of United Financial Holdings, Inc. under the
Guarantee and certain other back-up undertakings, consisting of (i) the
Junior Subordinated Debentures, (ii) the Indenture, (iii) the Trust
Agreement, and (iv) the Expense Agreement, which obligations provide, in the
aggregate, a full, irrevocable and unconditional guarantee, on a
subordinated basis, as further described in the Registration Statement. This
Registration Statement is deemed to cover the guarantee resulting from the
back-up undertakings. No separate consideration will be received for the
guarantee resulting from the back-up undertakings , and pursuant to Rule
457(n) of the Securities Act, no separate fee is payable for the
guarantee resulting from the back-up undertakings.
* Previously paid.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[LOGO] SUBJECT TO COMPLETION, DATED JULY 31, 1998
661,889 Shares
UNITED FINANCIAL HOLDINGS, INC.
COMMON STOCK
$6,000,000
UFH Capital Trust I
1,200,000 Shares of ____% Cumulative Trust Preferred Securities
(Liquidation Amount $5 per Preferred Security)
guaranteed, as described herein, by
United Financial Holdings, Inc.
Of the 661,889 shares of Common Stock, par value $.01 per share (the
"Common Stock"), offered hereby (the "Common Stock Offering") 600,000 are being
issued and sold by United Financial Holdings, Inc. (the "Company") and 61,889
are being sold by certain shareholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders" and "Underwriting." The
Company will not receive any part of the proceeds from the sale of securities
by the Selling Stockholders. It is estimated that the Common Stock will be
issued and sold at a price ranging between $9 and $11 per share.
The ____% Cumulative Trust Preferred Securities (the "Preferred Securities"
and, together with the Common Stock, the "Securities") offered hereby (the
"Preferred Securities Offering" and, together with the Common Stock Offering,
the "Offerings") represent preferred undivided beneficial interests in the
assets of UFH Capital Trust I, a statutory business trust created under the laws
of the State of Delaware ("UFH Capital"). The Company will own all the common
securities representing undivided beneficial interests in the assets of UFH
Capital (the "Common Securities" and, together with the Preferred Securities,
the "Trust Securities"). The Common Stock Offering is contingent upon the
closing of the Preferred Stock Offering, and the Preferred Stock Offering is
contingent upon the closing of the Common Stock Offering.
(continued on inside cover)
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SEE "RISK FACTORS" BEGINNING ON PAGE 11 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK AND THE PREFERRED SECURITIES.
------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
A BANK AND ARE NOT INSURED BY THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
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====================================================================================================================================
Price to Underwriting Proceeds to Proceeds to Proceeds to
Public Commission(1)(3) UFH Capital(2)(3) Company(2)(3) Selling Stockholders(2)
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Per share of Common Stock ..... $ $ -- $ $
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Per Preferred Security ........ $5.00 $ $ 5.00 $5.00 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stock (4) ........ $ $ -- $ $
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Total Preferred Securities (5) $6,000,000 $6,000,000 -- N/A
====================================================================================================================================
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(1) UFH Capital and the Company have each agreed to indemnify the
Underwriter against certain liabilities under the Securities Act of
1933. See "Underwriting."
(2) Before deduction of expenses payable by the Company estimated at
$400,000.
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures
of the Company, the Company has agreed to pay to the Underwriter, as
compensation for arranging the investment therein of such proceeds,
$______ per Preferred Security (or $___________ in the aggregate). See
"Underwriting."
(4) The Company has granted the Underwriter an option, exercisable within
30 days after the date of this Prospectus, to purchase an aggregate of
up to 180,000 additional shares of Common Stock on the same terms and
conditions as set forth above to cover over-allotments, if any. If the
Underwriter exercises the over-allotment option in full, the total
Price to Public, Underwriting Commission, and Proceeds to Company will
be $___, $___, and $___, respectively. See "Underwriting."
(5) UFH Capital and the Company have granted the Underwriter an option,
exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional $900,000 aggregate liquidation amount of
the Preferred Securities on the same terms as set forth above, solely
to cover over-allotments, if any. If such over-allotment option is
exercised in full, the total Price to Public and Proceeds to UFH
Capital will be $6,900,000. See "Underwriting."
The Securities are offered by the Underwriter subject to receipt and
acceptance by it, prior sale and the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the certificates representing shares of the Common
Stock will be made on or about _____, 1998 through the Depository Trust Company
or at the offices of William R. Hough & Co., St. Petersburg, Florida, and that
delivery of the Preferred Securities will be made in book-entry form through the
book-entry facilities of The Depository Trust Company on or about __________,
1998 against payment therefor in immediately available funds.
WILLIAM R. HOUGH & CO.
The date of this Prospectus is __________, 1998
<PAGE> 3
(cover page continued)
Prior to the Common Stock Offering, there has been no public market for the
Common Stock of the Company. Without the prior consent of the Company, no
investor may purchase more than 100,000 shares of Common Stock in the Common
Stock Offering. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. Additionally,
application has been made to have the Common Stock listed for quotation on The
Nasdaq Small Cap Market under the symbol "UFHI." See "Risk Factors--Risk
Factors Relating to the Common Stock Offering--Absence of Prior Public Market
for the Common Stock; Determination of Offering Price."
Application has been made to list the Preferred Securities for quotation on
The Nasdaq Small-Cap Market under the symbol "UFHIP." See "Risk Factors--Risk
Factors Relating to the Preferred Securities Offering--Absence of Prior Public
Market for the Preferred Securities; Trading Price and Tax Considerations."
Wilmington Trust Company is the Property Trustee (as defined herein) of UFH
Capital. UFH Capital exists for the sole purpose of issuing the Trust Securities
and investing the gross proceeds thereof in an equivalent amount of ____% Junior
Subordinated Debentures (the "Junior Subordinated Debentures") of the Company.
The Junior Subordinated Debentures will mature on ____________, 2028 (the
"Stated Maturity"), which date may be shortened to a date not earlier than
____________, 2003, if certain conditions are met (including the Company having
received prior approval by the Board of Governors of the Federal Reserve System
or any successor agency (the "Federal Reserve") if then required under
applicable Federal Reserve capital guidelines or policies). The Common
Securities will represent an aggregate liquidation amount equal to at least 3.0%
of the total capital of UFH Capital. The Preferred Securities will have a
preference under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the Common
Securities. See "Description of the Preferred Securities--Subordination of
Common Securities."
The Preferred Securities will be represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as depository ("DTC"). Beneficial interests in the global securities will be
shown on, and transfer thereof will be effected only through, records maintained
by DTC and its participants. Except as described under "Description of the
Preferred Securities," Preferred Securities in definitive form will not be
issued and owners of beneficial interests in the global securities will not be
considered holders of Preferred Securities. Settlement for the Preferred
Securities will be made in immediately available funds. The Preferred Securities
will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity for the Preferred Securities will therefore settle in
immediately available funds.
Holders of Preferred Securities will be entitled to receive preferential
cumulative cash distributions, at the annual rate of ____% of the liquidation
amount of $5 per Preferred Security (the "Liquidation Amount"), accruing from
the date of original issuance and payable quarterly in arrears on the last day
of March, June, September and December of each year, commencing _______________,
1998 (the "Distributions"). Such distributions are considered under current law
to be interest paid by the Company to the holders of Preferred Securities for
United States federal income tax purposes. Interest on the Junior Subordinated
Debentures will accrue at the same rate as distributions accrue on the Preferred
Securities. The Company has the right, so long as no Debenture Event of Default
(as defined herein) has occurred and is continuing, to defer payment of interest
on the Junior Subordinated Debentures at any time or from time to time for a
period not to exceed 20 consecutive quarters with respect to each deferral
period (each, an "Extended Interest Payment Period"); provided that no Extended
Interest Payment Period may extend beyond the Stated Maturity. Upon the
termination of any such Extended Interest Payment Period and the payment of all
amounts then due, the Company may elect to begin a new Extended Interest Payment
Period subject to the requirements set forth herein. If interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on the Preferred
Securities will also be deferred, and the Company will not be permitted to
declare or pay any cash distributions with respect to debt securities that rank
pari passu with or junior to the Junior Subordinated Debentures or with respect
to its capital stock. During an Extended Interest Payment Period, interest on
the Junior Subordinated Debentures will continue to accrue (and the amount of
distributions to which holders of the Preferred Securities are entitled will
accumulate) at the rate of ____% per annum, compounded quarterly,
ii
<PAGE> 4
and under such circumstances holders of the Preferred Securities will be
required to include interest income (in the form of original issue discount) in
their gross income for United States federal income tax purposes in advance of
receipt of the cash distributions with respect to such deferred interest
payments. See "Description of the Junior Subordinated Debentures-Option to
Extend Interest Payment Period," "Material Federal Income Tax
Considerations--Interest Income and Original Issue Discount" and "-Sales of
Preferred Securities." The Company has no current intention of exercising its
right to defer payments of interest by extending the interest payment period on
the Junior Subordinated Debentures. The Company believes that the existence of
its right to defer interest payments should not cause the Preferred Securities
to be issued with original issue discount for federal income tax purposes. It is
possible, however, that the Internal Revenue Service could take the position
that the likelihood of deferral was not a remote contingency within the meaning
of applicable Treasury Regulations. See "Description of the Junior Subordinated
Debentures--Option to Extend Interest Payment Period" and "Material Federal
Income Tax Considerations--Interest Income and Original Issue Discount."
The Company and UFH Capital believe that, taken together, the obligations of
the Company under the Guarantee, the Trust Agreement, the Junior Subordinated
Debentures, the Indenture and the Expense Agreement (each as defined herein)
provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a
subordinated basis, of all of the obligations of UFH Capital under the Preferred
Securities. See "Relationship Among the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee-Full and Unconditional Guarantee." The
Guarantee of the Company guarantees the payment of Distributions and payments on
liquidation or redemption of the Preferred Securities but only in each case to
the extent of funds held by UFH Capital, as described herein. See "Description
of the Guarantee-General." If the Company does not make interest payments on the
Junior Subordinated Debentures held by UFH Capital, UFH Capital will have
insufficient funds to pay Distributions on the Preferred Securities. The
Guarantee does not cover payments of Distributions when UFH Capital does not
have sufficient funds to pay such Distributions. In such event, a holder of
Preferred Securities may in certain circumstances institute a legal proceeding
directly against the Company pursuant to the terms of the Indenture to enforce
payments of amounts equal to such Distributions to such holder. See "Description
of the Junior Subordinated Debentures-Enforcement of Certain Rights by Holders
of the Preferred Securities." The obligations of the Company under the Guarantee
with respect to the Preferred Securities are subordinate and junior in right of
payment to all Senior Debt and Subordinated Debt (each as defined herein) of the
Company. The Junior Subordinated Debentures are unsecured obligations of the
Company and are also subordinated to all Senior Debt and Subordinated Debt of
the Company. As of June 30, 1998, the Company had $2.4 million of Senior Debt
(which includes approximately $41,000 of debt of a subsidiary of the Company
that is guaranteed by the Company), of which $15,000 is repayable prior to June
30, 1999. Of the $2.4 million of Senior Debt, $2.3 million is to be repaid from
the proceeds of the Offerings . The Company also had $630 thousand of
Subordinated Debt outstanding at June 30, 1998. See "Use of Proceeds" and
"Description of the Junior Subordinated Debentures--Subordination."
The Preferred Securities have no stated maturity. They are subject to
mandatory redemption, in whole or in part, upon repayment of the Junior
Subordinated Debentures at maturity or their earlier redemption. Subject to
prior approval of the Federal Reserve, if then required under applicable Federal
Reserve capital guidelines or policies, the Junior Subordinated Debentures are
redeemable prior to maturity at the option of the Company (i) on or after
_________, 2003, in whole at any time or in part from time to time, or (ii) at
any time, in whole (but not in part), within 180 days following the occurrence
of a Tax Event, an Investment Company Event, or a Capital Treatment Event (each
as defined herein), in each case at a redemption price equal to the accrued and
unpaid interest on the Junior Subordinated Debentures so redeemed to the date
fixed for redemption, plus 100% of the principal amount thereof. See
"Description of the Preferred Securities--Redemption or Exchange."
The Company intends to take the position that the Junior Subordinated
Debentures will be classified under current law as indebtedness of the Company
for United States federal income tax purposes and, accordingly, the Company
intends to treat the interest payable by the Company on the Junior Subordinated
Debentures as deductible for United States federal income tax purposes. There is
no assurance that such position of the Company will not be challenged by the
Internal Revenue Service or, if challenged, that such a challenge will not be
successful. See "Risk Factors--Risk Factors Relating to the Preferred Securities
Offering--Redemption Due to Tax Event, Investment Company Event, or Capital
iii
<PAGE> 5
Treatment Event" and "Material Federal Income Tax Considerations-Classification
of the Junior Subordinated Debentures."
The Company, as the holder of the Common Securities, has the right at any
time to dissolve, wind-up or terminate UFH Capital subject to the Company having
received the prior approval of the Federal Reserve if then required under
applicable Federal Reserve capital guidelines or policies. In the event of the
voluntary or involuntary dissolution, winding up or termination of UFH Capital,
after satisfaction of liabilities to creditors of UFH Capital as required by
applicable law, the holders of Preferred Securities will be entitled to receive
a Liquidation Amount of $5 per Preferred Security, plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
Junior Subordinated Debenture, subject to certain exceptions. See "Description
of the Preferred Securities--Redemption or Exchange" and "--Liquidation
Distribution Upon Termination."
The Company will provide to the holders of the Preferred Securities
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial statements and annual reports containing financial
statements audited by the Company's independent auditors.
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALL-CAP MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
iv
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information in this Prospectus
assumes or gives effect to (i) a three-for-one split of the Common Stock
effected in the form of a stock dividend issued July 31, 1998, and (ii) no
exercise of the over-allotment option granted by the Company to the
Underwriters. Unless the context requires otherwise, the term "Company" refers
collectively to the Company and its subsidiaries, including the Bank.
The Company and the Bank
United Financial Holdings, Inc. (the "Company") is a registered bank holding
company formed in 1982, the principal subsidiary of which is United Bank and
Trust Company (the "Bank"), a Florida-chartered commercial bank headquartered in
St. Petersburg, Florida. The Bank was founded in 1979 and is a
community-oriented, full service commercial bank with four branch offices
serving the southern Pinellas County area of the State of Florida. The Bank
provides a broad range of traditional banking services with emphasis on
commercial loans and loans under the lending program of the U.S. Small Business
Administration (the "SBA"). The Company's operations include three business
segments: commercial banking, trust services, and investment advisory services,
which constituted 98.6%, (4.5%) and 5.9%, respectively, of the Company's 1997
net income before taxes and corporate overhead. At June 30, 1998, the Company
had consolidated total assets of $178.1 million, net loans of $97.1 million,
deposits of $157.7 million and stockholders' equity of $11.5 million.
The Company and the Bank are currently regulated by the Federal Reserve, and
the Bank also is regulated by the Florida Department of Banking and Finance (the
"Department") and, to a lesser extent, the Federal Deposit Insurance
Corporation ("FDIC"). The Bank's deposits are insured by the FDIC up to
applicable limits.
The Company's other operating subsidiaries are Eickhoff, Pieper, &
Willoughby, Inc., an investment advisory firm registered under the Investment
Advisers Act of 1940 ("EPW") headquartered in Tampa, Florida, with an office in
Jacksonville, Florida, and United Trust Company, a Florida-chartered trust
company ("United Trust") registered with the Department and located in St.
Petersburg, Florida. EPW offers investment management services to corporate,
municipal and high net worth individual clients throughout the State of Florida.
As of June 30, 1998, EPW had $312.3 million in assets under management. United
Trust is a wholesale provider of data processing, administrative and accounting
support and asset custody services to professionals holding assets in trust
(primarily legal and accounting firms). United Trust also provides retail trust
and investment management services to individual and corporate clients. As of
June 30, 1998, United Trust had $241.9 million in assets under trust.
In 1986 a group of investors, headed by Neil W. Savage, the Company's
President and Chief Executive Officer and the Bank's Chairman and Chief
Executive Officer, acquired control of the Company, then known as Pinellas
Bancshares Corporation. The Company's name was changed to its present name in
1995. In September 1995, the Company acquired Fiduciary Services Corp. ("FSC"),
a trust data processing and accounting service for professionals, and merged FSC
into the Company. In January, 1996, the Company acquired EPW. The Company
formed United Trust during the fourth quarter of 1997 and effective December 31,
1997, transferred all of the Bank's trust assets to United Trust.
The principal executive offices of the Company are located at 333 Third
Avenue North, St. Petersburg, Florida 33701, and its telephone number is (727)
898-2265.
1
<PAGE> 7
BUSINESS STRATEGY
The principal elements of the Company's business strategy are to increase
its market share in its existing business segments and to seek out niche
business segments in which the Company can compete effectively in order to
create new sources of non-interest income and increase traditional interest
income from new lending opportunities. The Company has sought to implement its
strategy of increasing its market share in its existing business segments by
expanding the Bank's market coverage through de novo branching, increasing the
Bank's emphasis on originating loans secured by real estate and other assets for
its own portfolio, originating secured and unsecured small business loans for
its own portfolio, and continuing to originate a high volume of SBA loans, both
for its own portfolio and for sale in the secondary market. A primary element of
the Company's business strategy as a community banking organization is to seek
to provide customers with a level of personalized service exceeding that
provided by its competitors, including the local banking operations of large
regional and national banking companies.
The Company has sought to add new sources of non-interest income through the
creation of United Trust, which receives fees for the wholesale trust services
it offers to legal and accounting firms and the retail trust and investment
management services it offers to other clients, and the acquisition of EPW,
which generates fee income from the investment management services it offers to
corporate, municipal and high net worth individual clients. By expanding the
range of trust and investment management services it offers, the Company seeks
to differentiate itself from other similarly sized community banking
organizations operating in the Company's market.
The results of the Company's business strategy have been substantial asset
and revenue growth. The Company's total assets have increased from approximately
$106.6 million at December 31, 1995 to $147.3 million at December 31, 1997. The
Company's consolidated revenues (net interest income plus non-interest income)
increased from $7.1 million for the year ended December 31, 1995 to $9.9 million
for the year ended December 31, 1997. During this period of asset and revenue
growth, the Company's net income decreased from $1.5 million for the year ended
December 31, 1995 to $1.4 million for the year ended December 31, 1997.
UFH CAPITAL TRUST I
UFH Capital is a statutory business trust formed under Delaware law pursuant
to (i) an initial trust agreement, dated as of July 30, 1998, executed by the
Company, as depositor, Wilmington Trust Company, as Property Trustee (the
"Property Trustee") and as Delaware Trustee (the "Delaware Trustee"), and the
administrative trustees (the "Administrative Trustees") named therein
(collectively, the "Trustees"), and (ii) a certificate of trust filed with the
Secretary of State of the State of Delaware on July 30, 1998. The initial trust
agreement will be amended and restated in its entirety (as so amended and
restated, the "Trust Agreement") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the purchasers thereof will own all of the Preferred Securities and
the Company will acquire all of the Common Securities, which will represent an
aggregate liquidation amount equal to at least 3.0% of the total capital of UFH
Capital. The Common Securities will rank pari passu, and payments will be made
thereon pro rata with the Preferred Securities, except that upon the occurrence
and during the continuance of an Event of Default (as defined herein) under the
Trust Agreement resulting from a Debenture Event of Default, the rights of the
Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of the Preferred Securities--Subordination of Common Securities."
UFH Capital exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests in the assets of UFH
Capital, (ii) investing the gross proceeds of the Trust Securities in an
equivalent amount of the Junior Subordinated Debentures issued by the Company,
and (iii) engaging in only those other activities necessary thereto. The Junior
Subordinated Debentures and payments thereunder will be the only assets of UFH
Capital, and payments under the Junior Subordinated
2
<PAGE> 8
Debentures will be the only revenue of UFH Capital. UFH Capital has a term of 31
years, but may terminate earlier as provided in the Trust Agreement.
The principal executive offices of UFH Capital are located at 333 Third
Avenue North, St. Petersburg, Florida 33701, and its telephone number is (727)
898-2265.
THE OFFERINGS
Common Stock Offering
Common Stock Offered............. 661,889 shares of Common Stock by the
Company and the Selling Stockholders.
Without the prior consent of the
Company, no investor may purchase more
than 100,000 shares of Common Stock in
the Common Stock Offering. The Company
has granted the Underwriter an option,
exercisable within 30 days after the
date of this Prospectus, to purchase up
to an additional 90,000 shares of Common
Stock on the same terms and conditions
as the initial offering, solely to cover
over-allotments, if any.
Company.......................... 600,000 shares.
Selling Stockholders............. 61,889 shares.
Offering Price................... Between $9 and $11 per share.
Common Stock to be outstanding
after the Common Stock Offering... 4,113,858 shares.
Nasdaq Small-Cap Market Symbol.... Application has been made to have the
Common Stock listed for quotation on The
Nasdaq Small Cap Market under the symbol
"UFHI."
PREFERRED SECURITIES OFFERING
Preferred Securities Offered....... 1,200,000 Preferred Securities having no
stated maturity and a Liquidation Amount
of $5 per Preferred Security. The
Preferred Securities represent preferred
undivided beneficial interests in the
assets of UFH Capital, which will
consist solely of the Junior
Subordinated Debentures and payments
thereunder. UFH Capital has granted the
Underwriter an option, exercisable
within 30 days after the date of this
Prospectus, to purchase up to an
additional 180,000 Preferred Securities
on the same terms and conditions as the
initial Preferred Securities Offering,
solely to cover over-allotments, if any.
3
<PAGE> 9
Offering Price..................... $5 per Preferred Security (Liquidation
Amount $5).
Distributions...................... The Distributions payable on each
Preferred Security will be fixed at a
rate per annum of ____% of the
Liquidation Amount of $5 per Preferred
Security, will be cumulative, will
accrue from the date of issuance of the
Preferred Securities, and will be
payable quarterly in arrears, on March
31, June 30, September 30 and December
31 of each year, commencing
_____________, 1998. See "Description of
the Preferred Securities--
Distributions--Payment of
Distributions."
Junior Subordinated Debentures..... UFH Capital will invest the gross
proceeds from the issuance of the
Preferred Securities and Common
Securities in an equivalent amount of
____% Junior Subordinated Debentures of
the Company. The Junior Subordinated
Debentures will mature on the Stated
Maturity. The Junior Subordinated
Debentures will rank subordinate and
junior in right of payment to all
existing and future Senior Debt and
Subordinated Debt of the Company. In
addition, the Company's obligations
under the Junior Subordinated Debentures
will be structurally subordinated to all
existing and future liabilities and
obligations of its subsidiaries.
Option to Extend Interest
Payment Period..................... The Company has the right, at any time,
so long as no Debenture Event of Default
has occurred and is continuing, to defer
payments of interest on the Junior
Subordinated Debentures for a period not
exceeding 20 consecutive quarters;
provided, that no Extended Interest
Payment Period may extend beyond the
Stated Maturity of the Junior
Subordinated Debentures. During an
Extended Interest Payment Period,
quarterly Distributions on the Preferred
Securities will be deferred, though such
Distributions would continue to accrue
with interest thereon compounded
quarterly just as interest will continue
to accrue and compound on the Junior
Subordinated Debentures.
During an Extended Interest Payment
Period, the Company and any subsidiary
will be prohibited, subject to certain
exceptions described herein, from
declaring or paying any cash
distributions with respect to its debt
securities that rank pari passu with or
junior to the Junior Subordinated
Debentures or with respect to its
capital stock. Upon the termination of
any Extended Interest Payment Period and
the payment of all amounts then due, the
Company may commence a new Extended
Interest Payment Period, subject to the
foregoing restrictions. See "Description
of the Preferred Securities--
Distributions--Extended Interest
4
<PAGE> 10
Payment Period" and "Description of the
Junior Subordinated Debentures--Option
to Extend Interest Payment Period."
Should an Extended Interest Payment
Period occur, holders of Preferred
Securities will be required to include
deferred interest income in their gross
income for United States federal income
tax purposes in advance of receipt of
the cash distributions with respect to
such deferred interest payments. See
"Material Federal Income Tax
Considerations--Interest Income and
Original Issue Discount." The Company
has no current intention of exercising
its right to defer payments of interest
by extending the interest payment period
on the Junior Subordinated Debentures.
Redemption......................... The Preferred Securities are subject to
mandatory redemption, in whole or in
part, upon repayment of the Junior
Subordinated Debentures at the Stated
Maturity or their earlier redemption.
Subject to Federal Reserve approval, if
then required under applicable Federal
Reserve capital guidelines or policies,
the Junior Subordinated Debentures are
redeemable prior to the Stated Maturity
at the option of the Company (i) on or
after _______, 2003, in whole at any
time or in part from time to time, or
(ii) at any time, in whole (but not in
part), within 180 days following the
occurrence of a Tax Event, an Investment
Company Event or a Capital Treatment
Event, in each case at a redemption
price equal to 100% of the principal
amount of the Junior Subordinated
Debentures so redeemed, together with
any accrued but unpaid interest to the
date fixed for redemption. See
"Description of the Junior Subordinated
Debentures--Redemption or Exchange."
Distribution of Junior Subordinated
Debentures......................... Subject to receipt of any required
Federal Reserve approvals, the Company,
as the holder of the Common Securities,
also has the right at any time to
terminate UFH Capital and cause the
Junior Subordinated Debentures to be
distributed to holders of Preferred
Securities in liquidation of UFH
Capital. See "Description of the
Preferred Securities--Redemption or
Exchange" and "--Liquidation
Distribution Upon Termination."
5
<PAGE> 11
Conditional Guarantee.............. Pursuant to the Guarantee, the Company
has guaranteed the payment of
Distributions and payments on
liquidation or redemption of the
Preferred securities; however, the
Company's obligations under the
Guarantee apply only to the extent of
the funds held by UFH Capital, as
described herein. If the Company does
not make principal or interest payments
on the Junior Subordinated Debentures,
UFH Capital will not have sufficient
funds to make distributions on the
Preferred Securities, in which event,
the Guarantee will not apply to such
distributions unless and until UFH
Capital has sufficient funds available
therefor. The obligations of the Company
under the Guarantee and the Preferred
Securities are subordinate and junior in
right of payment to all
6
<PAGE> 12
Senior Debt and Subordinated Debt of the
Company. See "Description of the
Guarantee."
Full, Irrevocable and
Unconditional Guarantee............ The Company and UFH Capital believe
that, taken together, the obligations of
the Company under the Guarantee, the
Trust Agreement, the Junior Subordinated
Debentures, the Indenture and the
Expense Agreement provide, in the
aggregate, have the effect of a full,
irrevocable and unconditional guarantee,
on a subordinated basis, of payment of
Distributions and other amounts due on
the Preferred Securities. No single
document standing alone or operating in
conjunction with fewer than all of the
other documents constitutes such
guarantee. It is only the combined
operation of these documents that has
the effect of providing a full,
irrevocable and unconditional guarantee
of the obligations of UFH Capital under
the Preferred Securities. See
"Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee."
Voting Rights...................... Except in limited circumstances, the
holders of the Preferred Securities will
have no voting rights in UFH Capital.
See "Description of the Preferred
Securities--Voting Rights; Amendment of
Trust Agreement."
Nasdaq Small-Cap Market Symbol...... Application has been made to have the
Preferred Securities listed for
quotation on The NASDAQ Small-Cap Market
under the symbol "UFHIP."
USE OF PROCEEDS FROM THE OFFERINGS
UFH Capital will use the gross proceeds received from the sale of the
Preferred Securities to purchase the Junior Subordinated Debentures from the
Company. The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders. The net proceeds to the Company from the sale of
the Junior Subordinated Debentures to the Bank and the sale of the Common Stock
by the Company (assuming an offering price of $10 per share of Common Stock)
will be approximately $11.0 million. A portion of such proceeds will be used to
repay the Company's indebtedness under its existing credit facility (which had
an outstanding balance of approximately $2.7 million on August 31, 1998, bears
interest at an annual rate of 8.5% and matures on November 1, 2007) and to
initially contribute $1 to $2 million to the capital of the Bank to support
future asset growth and fund the approximately $650,000 cost of establishing a
new branch. The remaining $6 to $7 million of proceeds will be used for general
corporate purposes, including working capital, with the anticipation that the
Company will use a portion of such proceeds to make additional capital
contributions to the Bank from time to time to support further growth and branch
expansion, and finance the Company's expansion into banking-related businesses
and additional financial services businesses. See "Use of Proceeds" and
"Business--Business Strategy."
7
<PAGE> 13
RISK FACTORS
Before making an investment decision, prospective investors should consider
all of the information contained in this Prospectus. In particular, prospective
investors should evaluate the factors discussed under "Risk Factors."
8
<PAGE> 14
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following summary historical financial data, insofar as it relates to
each of the five years ended December 31, 1997, and the six months ended June
30, 1998 and June 30, 1997 has been derived from Company- prepared financial
information and should be read in conjunction with the audited financial
statements, including the consolidated balance sheets at December 31, 1997 and
1996 and the related consolidated statements of operations, statement of change
in equity, and statements of cash flows for each of the years in the three-year
period ended December 31, 1997 and the notes thereto appearing elsewhere herein,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected financial ratios for the six months ended June 30,
1998 and 1997 have been annualized. Historical financial information is not
necessarily indicative of results of operations for any future period or
financial condition as of any future date.
SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
------------------ --------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income ........... $ 6,007 $ 5,147 $ 10,792 $ 9,595 $ 9,124 $ 6,941 5,665
Interest expense .......... 2,523 1,914 4,101 3,420 3,212 2,113 2,000
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net interest income ....... 3,484 3,233 6,691 6,175 5,912 4,828 3,665
Provision for loan loss ... 250 90 90 150 180 140 365
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net interest income
after provision
for loan losses.......... 3,234 3,143 6,601 6,025 5,732 4,688 3,300
Other noninterest income... 1,909 1,475 3,240 2,572 1,237 1,359 1,196
General and administrative
("G&A") expenses......... 3,810 3,433 7,112 6,115 4,500 3,793 3,200
Other noninterest expense.. -- 393 393 -- -- -- --
Amortization of goodwill... 35 31 66 111 121 116 116
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net income before taxes.... 1,298 761 2,270 2,371 2,348 2,138 1,180
Income tax expense ........ 512 291 860 891 871 774 421
---------- ---------- ---------- ---------- ---------- ----------- -----------
Net income ................ $ 786 $ 470 $ 1,410 $ 1,480 $ 1,477 $ 1,364 $ 759
========== ========== ========== ========== ========== =========== ===========
Per Share Data:
Earnings per share, basic. $ 0.22 $ 0.13 $ 0.41 $ 0.47 $ 0.64 $ 0.78 $ 0.45
Weighted average shares
outstanding, basic....... 3,481,947 3,430,818 3,432,768 3,026,619 2,163,117 1,578,471 1,419,393
Earnings per share,
diluted.................. $ 0.21 $ 0.13 $ 0.38 $ 0.40 $ 0.38 $ 0.43 $ 0.23
Weighted average shares
outstanding, diluted..... 3,864,879 3,795,738 3,785,712 3,761,406 3,442,245 3,603,549 3,477,555
</TABLE>
9
<PAGE> 15
<TABLE>
<CAPTION>
Six Months
Ended June 30, Years Ended December 31,
------------------ -----------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
(at end of period)
Total assets............. $ 178,148 $ 128,782 $ 147,319 $ 122,733 $ 106,594 $ 104,051 $ 81,178
Investment securities.... 29,888 22,753 21,569 18,706 17,957 18,508 19,982
Loans, net of unearned 98,872 83,192 96,469 80,872 75,534 65,097 52,326
income
Allowance for loan
losses.................. 1,759 1,678 1,647 1,610 1,527 1,335 875
Intangible assets ....... 1,396 1,409 1,336 1,440 919 604 719
Deposits ................ 157,686 112,940 130,219 108,145 93,252 94,103 72,659
Stockholders' equity..... 11,452 9,716 10,491 9,492 8,487 6,385 4,902
SELECTED FINANCIAL
RATIOS (annualized)
Return on average assets 1.01% 0.75% 1.08% 1.32% 1.45% 1.56% 1.00%
Return on average equity 14.07% 9.77% 14.25% 16.55% 20.84% 23.71% 16.29%
Equity to Assets ........ 7.21% 7.66% 7.56% 7.96% 6.95% 6.57% 6.15%
Dividend Payout ......... 30.71% 50.39% 33.65% 28.81% 25.69% 17.22% 21.97%
Net interest spread ..... 4.74% 5.27% 5.27% 5.58% 5.60% 5.64% 5.01%
Net interest margin ..... 5.25% 5.97% 5.95% 6.27% 6.38% 6.10% 5.53%
G&A expense to average
assets.................. 4.92% 5.47% 5.44% 5.44% 4.42% 4.34% 4.22%
G&A efficiency ratio .... 70.65% 72.91% 71.61% 69.90% 62.95% 61.31% 65.82%
Non-accrual loans to
total loans
(at period end)......... 3.97% 0.67% 0.41% 0.46% 0.02% -- .05%
Nonperforming assets to
total assets............. 2.38% 0.44% 0.27% 0.30% 0.02% 0.02% 0.41%
Loan loss allowance to
total loans............. 1.77% 2.01% 1.70% 1.98% 2.02% 2.04% 1.61%
Loan loss allowance to
nonperforming
loans................... 44.76% 299.11% 411.75% 432.80% 10,180.00% N/M 2.86%
OTHER DATA (at period end)
Number of branches ...... 4 4 4 4 3 3 3
Number of full-time
equivalent employees...... 88 86 89 74 63 47 43
</TABLE>
10
<PAGE> 16
RISK FACTORS
An investment in the Securities involves a high degree of risk. Prospective
investors should carefully consider, together with the other information
contained and incorporated by reference in this Prospectus, the following
factors in evaluating the Company, its business and UFH Capital before
purchasing the Securities offered hereby. Prospective investors should note, in
particular, that this Prospectus contains forward-looking statements that
involve substantial risks and uncertainties. When used in this Prospectus, or in
the documents incorporated by reference herein, the words "anticipate",
"believe", "estimate", "may", "intend" and "expect" and similar expressions
identify certain of such forward-looking statements. Actual results, performance
or achievements could differ materially from those contemplated, expressed or
implied by the forward-looking statements contained herein. The considerations
listed below represent certain important factors the Company believes could
cause such results to differ. These considerations are not intended to represent
a complete list of the general or specific risks that may affect the Company and
UFH Capital. It should be recognized that other risks, including general
economic factors and business strategies, may be significant, presently or in
the future, and the risks set forth below may affect the Company and UFH Capital
to a greater extent than indicated.
RISK FACTORS RELATING TO THE COMPANY
IMPACT OF CHANGES IN REAL ESTATE VALUES
A significant portion of the Company's loan portfolio consists of loans
secured by real estate. At June 30, 1998, 7.6% of the Company's loans were
secured by one-to-four family residential real estate, 53.9% were secured by
commercial real estate and multifamily residential, 3.4% were construction loans
and the Company had other real estate ("ORE") acquired through foreclosure
with a book value of $0.3 million. The properties securing these loans are
concentrated in Florida. Real estate values and real estate markets generally
are affected by, among other things, changes in national, regional or local
economic conditions, fluctuations in interest rates and the availability of
loans to potential purchasers, changes in the tax laws and other governmental
statutes, regulations and policies and acts of nature. Any decline in real
estate prices, particularly in Florida, could significantly reduce the value of
the real estate collateral securing the Company's real estate loans, increase
the level of the Company's nonperforming loans, require write-downs in the book
value of its ORE, and have a material negative impact on the Company's financial
performance.
NONPERFORMING ASSETS
The Company's ratio of nonperforming assets to total assets was 2.38% at
June 30, 1998, which is above the average level of other similarly-sized
financial institutions. While the Company carefully manages its loan portfolio
with a view to minimizing its nonperforming assets, there can be no assurance
that the Company's ratio of nonperforming assets to total assets will improve or
not increase, particularly if general economic conditions deteriorate.
ADEQUACY OF ALLOWANCE FOR LOAN LOSSES
Industry experience indicates that a portion of the Company's loans will
become delinquent and a portion of the loans will require partial or entire
charge-off. Regardless of the underwriting criteria utilized by the Company,
losses may be experienced as a result of various factors beyond the Company's
control, including, among other things, changes in market conditions affecting
the value of properties and problems affecting the credit of the borrower. The
Company's determination of the adequacy of its allowance for loan losses is
based on various considerations, including an analysis of the risk
characteristics of various classifications of loans, previous loan loss
experience, specific loans which would have loan loss potential, delinquency
trends, estimated fair value of the underlying collateral, current economic
conditions, the view of the Company's regulators, and geographic and industry
loan concentration. If, however, delinquency levels were to increase as a result
of adverse general economic conditions, especially in Florida, the loan loss
reserve so determined by the Company may not be adequate. To the extent that the
Company's loan losses exceed its allowance for loan losses, the Company's
results of operations would be adversely affected. There can be no assurance
that the Company's allowance
11
<PAGE> 17
for loan losses will be adequate to cover its loan losses or that the Company
will not experience losses in its loan portfolio which may require significant
increases to the allowance for loan losses in the future.
DISCRETION OF COMPANY CONCERNING USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock and the
Junior Subordinated Debentures will be approximately $11 million, of which
approximately $8.3 million, or 75.5% of the net proceeds, is not being used to
repay debt. Approximately $1 to $2 million of the estimated $8.3 million of net
proceeds that is not being used to repay debt is anticipated to be contributed
to the capital of the Bank to support growth and fund the cost of establishing a
new branch. The balance of such proceeds may be used by the Company to make
additional capital contributions to support further growth and branch expansion
to finance possible expansion into banking-related businesses and additional
financial services businesses. It is anticipated that pending such uses, such
proceeds will be invested by the Company in certain short-term obligations. The
net proceeds of the Offerings, together with the Company's existing working
capital, will make a significant amount of funds available to the Company. The
Company will have substantial discretion over the use of such funds. There can
be no assurance the Company will deploy such funds in a manner that will enhance
the financial condition or results of operations of the Company. See "Use of
Proceeds."
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Company's profitability is dependent to a large extent on its net
interest income, which is the difference between its interest income on
interest-earning assets and its interest expense on interest-bearing
liabilities. The Company, like most financial institutions, is affected by
changes in general interest rate levels, which are currently at relatively low
levels, and by other economic factors beyond its control. Interest rate risk
arises from mismatches (i.e., the interest sensitivity gap) between the dollar
amount of repricing or maturing assets and liabilities, and is measured in terms
of the ratio of the interest rate sensitivity gap to total assets. More assets
repricing or maturing than liabilities over a given time frame is considered
asset-sensitive and is reflected as a positive gap, and more liabilities
repricing or maturing than assets over a given time frame is considered
liability-sensitive and is reflected as a negative gap. An asset- sensitive
position (i.e., a positive gap) will generally enhance earnings in a rising
interest rate environment and will negatively impact earnings in a falling
interest rate environment, while a liability-sensitive position (i.e., a
negative gap) will generally enhance earnings in a falling interest rate
environment and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable or controllable.
The Company has attempted to structure its asset and liability management
strategies to mitigate the impact on net interest income of changes in market
interest rates. At June 30, 1998, the Company had a one year cumulative negative
gap of 17.8%. This negative one year gap position may, as noted above, have a
negative impact on earnings in a rising interest rate environment. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations ."
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and examination by
the Department as its chartering authority and primary regulator, by the Federal
Reserve as its federal regulator and by the FDIC as administrator of the
insurance fund that insures the Bank's deposits up to applicable limits. As the
holding company of the Bank, the Company is subject to regulation and oversight
by the Federal Reserve. Such regulation and supervision governs the activities
in which an institution may engage and is intended primarily for the protection
of the FDIC insurance funds and depositors. Regulatory authorities have been
granted extensive discretion in connection with their supervisory and
enforcement activities and regulations have been implemented which have
increased capital requirements, increased insurance premiums and have resulted
in increased administrative, professional and compensation expenses. Any change
in the regulatory structure or the applicable statutes or regulations could have
a material impact on the Company, the Bank and their operations. Additional
legislation and regulations may be enacted or adopted in the future which could
significantly affect the powers, authority and operations of the Bank and the
Bank's competitors which in turn could have a material adverse affect on the
Bank and its operations. See "Business--Supervision and Regulation."
12
<PAGE> 18
DEPENDENCE ON EXISTING MANAGEMENT
The Company's business depends in large part upon the availability of the
services of its senior management, including Neil W. Savage, Ward J. Curtis,
Jr., Harold J. Winner and William A. Eickhoff. If the services of any of such
senior management personnel were to become unavailable to the Company, the
Company's business and operating results could be adversely affected. While
the Company maintains key man life insurance policies on certain of its
senior management personnel, naming the Company as beneficiary, there can be
no assurance that the proceeds of any such policies would adequately
compensate the Company for the loss of the services of any of such persons.
Neither Mr. Savage nor Mr. Winner have entered into a non-competition
agreement with the Company or the Bank. Although both Mr. Eickhoff's and Mr.
Curtis's employment contracts contain non-competition clauses, the provisions
terminate under certain conditions. See "Management--Employment Contracts
with Officers."
CONTROL BY EXISTING STOCKHOLDERS
Upon the completion of the Common Stock Offering, the Company's
directors and executive officers (and their respective affiliates and immediate
family members) will own approximately 49.1% of the outstanding Common Stock
(or approximately 48.2% if the Underwriter's over-allotment is exercised in
full), assuming such directors and officers do not purchase any shares of Common
Stock in the Offerings. As a result of such ownership, these persons will
likely be able to effectively control the election of the Company's directors
and the outcome of matters requiring stockholder approval, and thereby control
the management and policies of the Company.
COMPETITION
The Company competes with various types of financial institutions, including
other commercial banks and savings institutions, and with finance companies,
mortgage banking companies, money market mutual funds, investment advisory firms
and companies and credit unions, many of which have substantially greater
financial resources than the Company and, in some cases, operate under fewer
regulatory constraints. See "Business--Competition" and "--Supervision and
Regulation."
YEAR 2000 CONSIDERATIONS
During the next two years, many businesses, including financial institutions
such as the Company, will face potentially serious issues associated with the
inability of existing data processing hardware and software to appropriately
recognize calendar dates beginning in the year 2000. Many computer programs that
can only distinguish the final two digits of the year entered may read entries
for the year 2000 as the year 1900 and compute payment, interest or delinquency
based on the wrong date, or are expected to be unable to compute payment,
interest or delinquency. If "Year 2000" problems were to develop, given the
reliance of the Company on data processing services to maintain customer
balances, service customer accounts and to perform other record keeping and
service oriented functions associated with the Company's three primary business
segments, the occurrence of such an event could have a material impact on the
Company's results of operations, liquidity, and financial condition. In 1997,
the Company began the process of identifying the many software applications and
hardware devices expected to be impacted by this issue. The Company outsources
its principal data processing activities to a third party and purchases most of
its software applications from third party vendors. The Company believes that
its vendors and its significant customers are actively addressing the potential
problems associated with the Year 2000 issue. There can be no assurance,
however, that the Company will not be adversely affected by the failure of third
party vendors or significant customers of the Bank to become Year 2000
compliant. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Considerations."
13
<PAGE> 19
SECURITIES ARE NOT INSURED
Neither the Common Stock, the Preferred Securities nor the Junior
Subordinated Debentures are insured by the Bank Insurance Fund ("BIF"), the
Savings Association Insurance Fund ("SAIF"), or the FDIC or by any other
insurer or government agency.
RISK FACTORS RELATING TO THE COMMON STOCK OFFERING
ABSENCE OF PRIOR PUBLIC MARKET FOR THE COMMON STOCK; DETERMINATION OF OFFERING
PRICE
Prior to the Common Stock Offering, there has been no public market for the
Common Stock. Application has been made to the National Association of
Securities Dealers, Inc. ("NASD") to have the Common Stock listed for quotation
on The Nasdaq Small Cap Market. One of the requirements for initial listing,
however, is the presence of three market makers for the Common Stock, and a
requirement for continued listing is the presence of two market makers for the
Common Stock. The Company has been advised that the Underwriter intends to make
a market in the Common Stock. The Underwriter is not obligated to do so,
however, and such market making may be discontinued at any time. Although the
Company has submitted an application to have the Common Stock approved for
quotation on The Nasdaq Small Cap Market, there can be no assurance that an
active public trading market for the Common Stock will develop or be sustained
after the Common Stock Offering. The initial public offering price for the
Common Stock has been determined by negotiations between the Company and the
Underwriter, based on several factors, and may not be indicative of the price at
which the Common Stock will trade after the Common Stock Offering. See
"Underwriting." There can be no assurance that the market price for the Common
Stock will not fall below the initial public offering price.
POSSIBLE VOLATILITY OF SHARE PRICE
The market price of the Common Stock may experience fluctuations that are
unrelated to the operating performance of the Company. The market price of the
Common Stock may be affected by conditions in the securities markets generally
as well as developments in the banking industry or the United States or world
economy. Any securities exchange on which the Common Stock may be traded, may
from time to time experience significant price and volume fluctuations that may
be unrelated to the operating performance of particular companies. The market
price of the Common Stock, like the stock prices of many publicly traded bank
holding companies, may prove to be highly volatile.
DILUTION
Purchasers of the Common Stock in the Common Stock Offering will pay a
significantly higher price per share than the prices paid to the Company for
substantially all of its currently outstanding shares of Common Stock, and
will be subject to additional dilution upon the exercise of outstanding
options to purchase Common Stock. See "Dilution."
RESTRICTIONS ON ABILITY TO PAY DIVIDENDS
The Company is primarily a holding company with no material business
operations, sources of income or assets of its own other than the shares of its
subsidiaries. Because substantially all of the Company's operations are
conducted through subsidiaries, the Company's cash flow and, consequently, its
ability to pay dividends or make other distributions is dependent upon either
third-party borrowings made by the Company or the cash flow of its subsidiaries
and the payment of funds by those subsidiaries, including the Bank, to the
Company in the form of loans, dividends, fees or otherwise. The Company's
subsidiaries are separate and distinct legal entities and will have no
obligation, contingent or otherwise, to make any funds available, whether in the
form of loans, dividends or otherwise. Regulatory limitations on the Bank
restrict its ability to make loans or distributions to the Company. In addition,
if the Company exercises its right to defer payment of interest on the Junior
Subordinated Debentures at any time or from time to time for a period not to
exceed 20 consecutive quarters with respect to each deferral period, the Company
will not be permitted to (i) declare or pay any cash
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<PAGE> 20
dividends or distributions with respect to its capital stock, including the
Common Stock or (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Junior Subordinated Debentures or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Junior Subordinated Debentures.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES OFFERING
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
The ability of UFH Capital to pay amounts due on the Preferred Securities is
entirely dependent upon the Company making payments on the Junior Subordinated
Debentures as and when required. The ability of the Company to pay interest on
the principal of the Junior Subordinated Debentures to UFH Capital (and
consequently, UFH Capital's ability to pay Distributions on the Preferred
Securities and the Company's ability to pay its obligations under the Guarantee)
will depend to a significant degree on the Bank's ability to pay dividends to
the Company in amounts sufficient to service the Company's obligations. The
Company is currently obligated to pay $251,900 in annual interest on
indebtedness which will rank senior to, or pari passu with, the Junior
Subordinated Debentures ($201,500 of which relates to indebtedness to be repaid
from the proceeds of the Offerings), and will be obligated to make any other
payments with respect to securities issued by the Company in the future which
are pari passu or have a preference over the Junior Subordinated Debentures
issued to UFH Capital with respect to the payment of principal, interest or
dividends. There is no restriction on the ability of the Company to issue, or
limitation on the amount of, securities which are pari passu or have a
preference over the Junior Subordinated Debentures issued to UFH Capital, nor is
there any restriction on the ability of the Company or the Bank to issue
additional capital stock or incur additional indebtedness.
The Bank's ability to pay dividends or make other capital distributions to
the Company is governed by both federal and Florida law and regulations
promulgated by the Federal Reserve and the Department, and is based on, among
other things, the Bank's regulatory capital levels and net income. Under the
Federal Reserve's capital regulations, the Bank is prohibited from making a
capital distribution that would cause it to become "undercapitalized" or if it
is already undercapitalized (i.e., has a risk-based capital ratio of less than
8.0%, a Tier 1 risk-based capital ratio of less than 4.0%, or a leverage ratio
of less than 3.0%). Under the Florida Financial Institutions Code, the prior
approval of the Department is required if the total of all dividends declared by
a bank in any calendar year will exceed the sum of the bank's net profits for
that year and its retained net profits for the preceding two years. Any
additional capital distributions would require prior Federal Reserve and
Department approval. As of June 30, 1998, the Bank was a well-capitalized
institution for purposes of the Federal Reserve's capital regulations and had
$2.8 million available for distribution as dividends to the Company. There is no
assurance that the Bank will remain a well-capitalized institution or that it
will be in a position to make dividend payments to the Company in an amount
sufficient for the Company to service the Junior Subordinated Debentures or for
UFH Capital to pay amounts due on the Preferred Securities. See
"Business--Supervision and Regulation."
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued for the benefit of
the holders of Preferred Securities and under the Junior Subordinated Debentures
issued to UFH Capital are unsecured and rank subordinate and junior in right of
payment to all existing and future Senior Debt and Subordinated Debt of the
Company. At June 30, 1998, the Company had $2.4 million of Senior Debt
outstanding ($2.3 million of which is to be repaid from the proceeds of the
Offerings) and $630 thousand of outstanding Subordinated Debt. Only the capital
stock of the Company is currently junior in right of payment to the Junior
Subordinated Debentures issued to UFH Capital. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of a subsidiary, including the Bank, upon a liquidation or reorganization or
otherwise of such subsidiary (and thus the ability of holders of the Preferred
Securities to benefit indirectly from such distribution) is subject to the prior
claims of creditors of the subsidiary (including depositors in the Bank), except
to the extent that the Company may itself be recognized as a creditor of the
subsidiary. If the Company is
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<PAGE> 21
a creditor of a subsidiary, the claims of the Company would be subject to any
prior security interest in the assets of the subsidiary and any indebtedness of
the subsidiary senior to that of the Company. The Junior Subordinated
Debentures, therefore, will be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, including the Bank. At June
30, 1998, the Bank had liabilities of $164.0 million (including $158.3 million
in deposits). Holders of Junior Subordinated Debentures and the Preferred
Securities should look only to the assets of the Company for payments on the
Junior Subordinated Debentures. Neither the Indenture, the Guarantee nor the
Trust Agreement places any limitation on the amount of secured or unsecured
debt, including Senior Debt and Subordinated Debt, that may be incurred by the
Company or any of its subsidiaries. See "Description of the Guarantee--Status of
the Guarantee" and "Description of the Junior Subordinated
Debentures--Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
The Company has the right under the Indenture, so long as no Debenture Event
of Default has occurred and is continuing, to defer the payment of interest on
the Junior Subordinated Debentures at any time or from time to time for a period
not exceeding 20 consecutive quarters with respect to each Extended Interest
Payment Period; provided that no Extended Interest Payment Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures. In the event
of any such deferral, quarterly Distributions on the Preferred Securities by UFH
Capital will be deferred (and the amount of Distributions to which holders of
the Preferred Securities are entitled will accumulate additional Distributions
thereon at the rate of ____% per annum, compounded quarterly from the relevant
payment date for such Distributions) during such Extended Interest Payment
Period. During any such Extended Interest Payment Period, the Company may not
and may not permit any subsidiary to (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (other than (a) the
reclassification of any class of the Company's capital stock into another class
of capital stock, (b) dividends or distributions payable in any class of the
Company's capital stock, (c) any declaration of a dividend in connection with
the implementation of a shareholder rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto and (d) purchases of the Company's capital stock related to the
rights under any of the Company's benefit plans for its or its subsidiaries'
directors, officers or employees), (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to the Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the Junior Subordinated Debentures
or any of the Preferred Securities. Prior to the termination of any such
Extended Interest Payment Period, the Company may further defer the payment of
interest; provided that no Extended Interest Payment Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any Extended Interest Payment
Period and the payment of all interest then accrued and unpaid (together with
interest thereon at the annual rate of ____% compounded quarterly, to the extent
permitted by applicable law), the Company may elect to begin a new Extended
Interest Payment Period, subject to the above restrictions. Subject only to
compliance with the foregoing, there is no limit on the number of times that the
Company may elect to begin an Extended Interest Payment Period so long as no
Debenture Event of Default has occurred and is continuing. See "Description of
the Preferred Securities-Distributions-Extended Interest Payment Period" and
"Description of the Junior Subordinated Debentures-Option to Extend Interest
Payment Period."
Should an Extended Interest Payment Period occur, each holder of Preferred
Securities will be required to accrue and recognize as income (in the form of
original issue discount) in respect of its pro rata share of the interest
accruing on the Junior Subordinated Debentures held by UFH Capital for United
States federal income tax purposes. A holder of Preferred Securities would, as a
result, be required to include such income in gross income for United States
federal income tax purposes in advance of the receipt of cash, and will not
receive the cash related to such income from UFH Capital if the holder disposes
of the Preferred Securities prior to the record date for the payment of the
related Distributions. See "--Absence of Prior Public Market for the Preferred
Securities; Trading Price and Tax Considerations "and "Material Federal Income
Tax Considerations--Interest Income and Original Issue Discount."
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<PAGE> 22
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. Should the Company elect to exercise such right in the
future, however, the market price of the Preferred Securities is likely to be
adversely affected. As a result of the existence of the Company's right to defer
interest payments, the market price of the Preferred Securities may be more
volatile than the market prices of other securities on which original issue
discount accrues that do not provide for such optional deferrals.
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT, OR CAPITAL TREATMENT
EVENT
The Company has the right to redeem the Junior Subordinated Debentures in
whole (but not in part) within 180 days following the occurrence of a Tax Event,
an Investment Company Event or a Capital Treatment Event (whether occurring
before or after _________, 2003), and, therefore, cause a mandatory redemption
of the Preferred Securities. The exercise of such right is subject to the
Company having received prior Federal Reserve approval to do so if then required
under applicable Federal Reserve capital guidelines or policies.
"Tax Event" means the receipt by the Company or UFH Capital of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change), in the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Preferred Securities, there is more than an insubstantial risk that (i) UFH
Capital is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, (ii) interest payable by the Company on the
Junior Subordinated Debentures is not, or, within 90 days of such opinion, will
not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) UFH Capital is, or will be within 90 days
of the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges. The Company must request and
receive an opinion with regard to such matters within a reasonable period of
time after it becomes aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by the Company or UFH Capital
of an opinion of counsel to the Company experienced in such matters to the
effect that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
UFH Capital is or will be considered an "investment company" that is required to
be registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which change or prospective change becomes effective
or would become effective, as the case may be, on or after the date of original
issuance of the Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of any amendment to, or change (including any proposed change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any Federal Reserve
or other official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such proposed change, pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred Securities,
there is more than an insubstantial risk that the Company will not be entitled
to treat an amount equal to the Liquidation Amount of the Preferred Securities
as "Tier 1 Capital" except as otherwise restricted under the 25% Capital
Limitation (as defined herein), for purposes of the risk-based capital adequacy
guidelines of the Federal Reserve as then in effect and applicable to the
Company.
Future legislation or administrative or judicial interpretations could give
rise to a Tax Event, which may permit the Company to cause a redemption of the
Preferred Securities prior to _________, 2003. See "Material Federal Income Tax
Considerations--Possible Legislative and Other Actions Affecting Tax
Consequences." For a discussion of possible tax consequences of a redemption,
see "--Exchange of Preferred Securities for Junior Subordinated Debentures;
Redemption and Tax Consequences."
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<PAGE> 23
POSSIBLE SHORTENING OF MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the Stated Maturity of
the Junior Subordinated Debentures to a date not earlier than ___________, 2003.
The exercise of such right is subject to the Company having received prior
Federal Reserve approval if then required under applicable capital guidelines or
regulatory policies. See "Description of the Junior Subordinated
Debentures-General."
LIMITED RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to the
extent not paid by UFH Capital, (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that UFH Capital
has funds available therefor at such time, (ii) the Redemption Price (as defined
herein) with respect to any Preferred Securities called for redemption, to the
extent that UFH Capital has funds available therefor at such time, and (iii)
upon a voluntary or involuntary dissolution, winding-up or liquidation of UFH
Capital (other than in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities or a redemption of all of the
Preferred Securities), the lesser of (a) the amount of the Liquidation
Distribution (as defined herein), to the extent UFH Capital has funds available
therefor at such time, and (b) the amount of assets of UFH Capital remaining
available for distribution to holders of the Preferred Securities upon
liquidation of UFH Capital. The holders of not less than a majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee (as defined in the Guarantee) in respect of the Guarantee
or to direct the exercise of any trust power conferred upon the Guarantee
Trustee under the Guarantee. Any holder of the Preferred Securities may
institute a legal proceeding directly against the Company to enforce its rights
under the Guarantee without first instituting a legal proceeding against UFH
Capital, the Guarantee Trustee or any other Person (as defined in the
Guarantee). If the Company were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, UFH Capital would lack funds
for the payment of Distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of Preferred
Securities would not be able to rely upon the Guarantee for such amounts. In the
event, however, that a Debenture Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest on
or principal of the Junior Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). The exercise by the Company of its right, as described herein, to
defer the payment of interest on the Junior Subordinated Debentures does not
constitute a Debenture Event of Default. In connection with such Direct Action,
the Company will have a right of set-off under the Indenture to the extent of
any payment made by the Company to such holder of Preferred Securities in the
Direct Action. Except as described herein, holders of Preferred Securities will
not be able to exercise directly any other remedy available to the holders of
the Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of the Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders of the
Preferred Securities," and "--Debenture Events of Default" and "Description of
the Guarantee." The Trust Agreement provides that each holder of the Preferred
Securities by acceptance thereof agrees to the provisions of the Guarantee and
the Indenture.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES;
REDEMPTION AND TAX CONSEQUENCES
The Company, as the holder of the Common Securities, has the right at any
time to dissolve, wind-up or terminate UFH Capital and cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities in exchange therefor upon liquidation of UFH Capital. The exercise of
such right is subject to the Company having received prior Federal Reserve
approval if then required under applicable capital guidelines or regulatory
policies. The Company will have the right, in certain circumstances, to redeem
the Junior Subordinated Debentures in whole or in part, in lieu of a
distribution of the Junior Subordinated Debentures by UFH Capital, in which
event UFH Capital will redeem the Trust Securities on a pro rata basis to the
same extent as the Junior Subordinated Debentures are redeemed by the Company.
Any such distribution or redemption prior to the Stated Maturity will be subject
to prior Federal Reserve approval if then
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<PAGE> 24
required under applicable Federal Reserve capital guidelines or regulatory
policies. See "Description of the Preferred Securities--Redemption or
Exchange--Tax Event Redemption, Investment Company Event Redemption or Capital
Treatment Event Redemption."
Under current United States federal income tax law, a distribution of Junior
Subordinated Debentures upon the dissolution of UFH Capital should not be a
taxable event to holders of the Preferred Securities. If, however, UFH Capital
is characterized as an association taxable as a corporation at the time of the
dissolution of UFH Capital, the distribution of the Junior Subordinated
Debentures would constitute a taxable event to holders of Preferred Securities.
Moreover, any redemption of the Preferred Securities for cash would be a taxable
event to such holders. See "Material Federal Income Tax Considerations--Receipt
of Junior Subordinated Debentures or Cash Upon Liquidation of UFH Capital."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities upon a dissolution or liquidation of UFH
Capital. The Preferred Securities or the Junior Subordinated Debentures may
trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby. Because holders of Preferred Securities may
receive Junior Subordinated Debentures, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the Junior
Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein.
While there is no assurance that listing will be achieved, if the Junior
Subordinated Debentures are distributed to the holders of Preferred Securities
upon the liquidation of UFH Capital, the Company will use all reasonable efforts
to list the Junior Subordinated Debentures on The Nasdaq Small Cap Market or
such stock exchanges, if any, on which the Preferred Securities are then listed.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have no voting rights in UFH Capital
except in limited circumstances relating only to the modification of the
Preferred Securities and the exercise of the rights of UFH Capital as holder of
the Junior Subordinated Debentures and the Guarantee. Holders of Preferred
Securities will not be entitled to vote to appoint, remove or replace the
Property Trustee or the Delaware Trustee, as such voting rights are vested
exclusively in the holder of the Common Securities (except upon the occurrence
of certain events described herein). The Property Trustee, the Delaware Trustee,
the Administrative Trustees and the Company may amend the Trust Agreement
without the consent of holders of Preferred Securities to ensure that UFH
Capital will be classified for United States federal income tax purposes as a
grantor trust even if such action adversely affects the interests of such
holders. See "Description of the Preferred Securities-Voting Rights; Amendment
of Trust Agreement" and "Description of the Preferred Securities--Removal of UFH
Capital Trustee."
LIMITED COVENANTS
The covenants in the Indenture are limited and there are no covenants in the
Trust Agreement. As a result, neither the Indenture nor the Trust Agreement
protects holders of Junior Subordinated Debentures or Preferred Securities,
respectively, in the event of a material adverse change in the Company's
financial condition or results of operations or limits the ability of the
Company or any subsidiary to incur or assume additional indebtedness or other
obligations. Additionally, neither the Indenture nor the Trust Agreement contain
any financial ratios or specified levels of liquidity to which the Company must
adhere. Therefore, the provisions of these governing instruments should not be
considered a significant factor in evaluating whether the Company will be able
to comply with its obligations under the Junior Subordinated Debentures or the
Guarantee.
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<PAGE> 25
ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND
TAX CONSIDERATIONS
The Preferred Securities are a new issue. Application has been made to the
National Association of Securities Dealers, Inc. ("NASD") to have the Preferred
Securities listed for quotation on The Nasdaq Small Cap Market. One of the
requirements for initial listing, however, is the presence of three market
makers for the Preferred Securities, and a requirement for continued listing is
the presence of two market makers for the Preferred Securities. The Company has
been advised that the Underwriter intends to make a market in the Preferred
Securities. The Underwriter is not obligated to do so, however, and such market
making may be discontinued at any time. Therefore, there is no assurance that
the Preferred Securities will be listed or will continue to be listed on The
Nasdaq Small Cap Market, that an active trading market will develop for the
Preferred Securities or, if such market develops, that it will be maintained or
that the market price will equal or exceed the public offering price set forth
on the cover page of this Prospectus. Accordingly, holders of the Preferred
Securities may experience difficulty reselling Preferred Securities or may be
unable to sell the Preferred Securities at all. The offering price and terms of
the Preferred Securities has been determined through negotiations between the
Company and the Underwriter. Future prices for the Preferred Securities will be
determined in the marketplace and may be influenced by many factors, including
prevailing interest rates, the liquidity of the market for the Preferred
Securities, investor perceptions of the Company and general industry and
economic conditions. See "Underwriting."
Further, should the Company exercise its option to defer any payment of
interest on the Junior Subordinated Debentures, the Preferred Securities may
trade at prices that do not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. In the
event of such a deferral, a holder of the Preferred Securities who disposes of
the Preferred Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from UFH Capital for the period
prior to such disposition) will nevertheless be required to include accrued but
unpaid interest on the Junior Subordinated Debentures through the date of
disposition in income as ordinary income and to add such amount to the adjusted
tax basis in the holder's pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. Such holder will recognize a capital loss to the
extent the selling price (which may not fully reflect the value of accrued but
unpaid interest) is less than its adjusted tax basis (which will include all
accrued but unpaid interest). Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes. See "Material Federal Income Tax Considerations--Sales of
Preferred Securities."
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<PAGE> 26
USE OF PROCEEDS
UFH Capital will use the gross proceeds received from the sale of the
Preferred Securities to purchase the Junior Subordinated Debentures from the
Company. Assuming an offering price of $10 per share of Common Stock, the net
proceeds to the Company from the sale of the Common Stock and the Junior
Subordinated Debentures are estimated to be approximately $11.0 million ($12.7
million if the Underwriter's over-allotment option is exercised in full) after
deduction of underwriting discounts and estimated expenses. The Company will not
receive any proceeds from the sale of Common Stock by the Selling Stockholders.
A portion of the net proceeds from the sale of the Preferred Securities and the
Common Stock offered hereby will be used to repay the Company's indebtedness
under its existing credit facility (which had outstanding balances of
approximately $2.3 million and $2.7 million on June 30, 1998 and August 31,
1998, respectively, bears interest at an annual rate of 8.5% and matures on
November 1, 2007 ) and to initially contribute $1 to $2 million to the capital
of the Bank to support future asset growth and fund the approximately $650,000
cost of establishing a new branch. The remaining $6 to $7 million of proceeds
will be used for general corporate purposes, including working capital. It is
anticipated that the Company will use such remaining net proceeds to make
additional capital contributions to the Bank from time to time to support
further growth and branch expansion and to finance the Company's expansion into
banking-related businesses or additional financial service businesses of the
types described below. The Company's current goal is to try and open one new
branch each year. However, there can be no assurance that such goal will be met.
The specific use of any proceeds, as well as the timing of such uses, will be a
function of the funding needs of the Company and the Bank and the availability
of other funds to the Company and the Bank. Initially, such proceeds will be
invested by the Company in short-term obligations.
The Company from time to time has explored expanding into other business
lines that might add to the Company's non-interest income and the acquisition or
development of other businesses that the Company considers complimentary to its
existing businesses. Such efforts previously lead to the Company establishing
United Trust and acquiring EPW. Similarly, the Company is currently
preliminarily exploring the feasibility of further expanding its branch network,
as well as making a minority investment in an existing or new casualty property
insurance company and expanding its trust and investment management businesses.
Consideration of whether to invest or engage in any one or more of these
additional activities will be ongoing. Depending upon the results of such
considerations, the Company may invest the proceeds from the Offerings in one or
more of these or other areas. However, there can be no assurance that the
Company will make any such investments, that any such investments it may make
will be profitable or that its investments will be limited to the aforementioned
areas. See "Risk Factors--Discretion of Company Concerning Use of Proceeds" and
"Business--Business Strategy."
MARKET FOR THE SECURITIES AND RELATED MATTERS
Application has been made to have the Common Stock and Preferred Securities
approved for quotation on The Nasdaq Small Cap Market under the symbols "UFHI"
and "UFHIP", respectively. One of the requirements for initial listing is the
presence of three market makers and a requirement of continued listing is the
presence of two market makers. Although the Underwriter has informed the Company
that it presently intends to make a market in the Common Stock and Preferred
Securities, the Underwriter is not obligated to do so and any such market making
may be discontinued at any time. Accordingly, there is no assurance that the
Common Stock or Preferred Securities will be listed or remain listed on The
Nasdaq Small Cap Market, that an active and liquid trading market will develop
or, if developed, that such a market will be sustained. The offering prices of
the Securities and the distribution rate of the Preferred Securities are
determined by negotiations among representatives of the Company and the
Underwriter and the offering price of the Securities may not be indicative of
the market price following the Offerings. See "Underwriting."
Since 1995, the Company has declared and paid quarterly cash dividends on
the Common Stock to record holders of the Common Stock at each calendar quarter
end, payable on the last day of the following month. Commencing with the first
quarter of 1997, such dividends have been paid at the rate of $0.031/3 per share
of Common Stock. The ability of the Company to continue paying dividends on the
outstanding Common Stock, including the Common Stock offered
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<PAGE> 27
hereby, is dependent upon its continuing to receive dividends from its
subsidiaries, primarily the Bank. Dividends paid by the Bank are restricted by
federal and state regulations. The Company also pays cash dividends on the
shares of preferred stock, par value $10.00 per share, bearing a dividend
commitment of 7% per annum (the "7% Preferred Stock") to holders of record on
March 31 and September 30 of each year, at the rate of 3.5% per semi-annual
period. See "Risk Factors--Restrictions on Ability to Pay Dividends."
ACCOUNTING TREATMENT
For financial reporting purposes, UFH Capital will be treated as a
subsidiary of the Company and, accordingly, the accounts of UFH Capital will be
included in the consolidated financial statements of the Company. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company under the caption "Company-obligated mandatorily redeemable
capital securities of subsidiary trust holding solely subordinated debentures of
the Company," and appropriate disclosures about the Preferred Securities, the
Guarantee and the Junior Subordinated Debentures will be included in the notes
to consolidated financial statements.
As long as any Preferred Securities remain outstanding, all future reports
of the Company filed under the Exchange Act of 1934, as amended (the"Exchange
Act") will (a) present the Trust Securities issued by UFH Capital on the balance
sheet as a separate line-item entitled "Company-obligated mandatorily redeemable
capital securities of subsidiary trust holding solely subordinated debentures of
the Company," (b) include in a footnote to the financial statements disclosure
that the sole assets of UFH Capital are the Junior Subordinated Debentures
(including the outstanding principal amount, interest rate and maturity date of
such Junior Subordinated Debentures), and (c) include in an audited footnote to
the financial statements disclosure that the Company owns all of the Common
Securities of UFH Capital, the sole assets of UFH Capital are the Junior
Subordinated Debentures, and the back-up obligations, in the aggregate,
constitute a full and unconditional guarantee by the Company of the obligations
of UFH Capital under the Preferred Securities.
22
<PAGE> 28
CAPITALIZATION
The following table sets forth the actual and as adjusted consolidated
capitalization of the Company at June 30, 1998 (dollars in thousands). The as
adjusted capitalization gives effect to the Offerings, assumes an offering price
for the Common Stock of $10 per share, and is net of underwriting discounts and
estimated offering expenses of $400 thousand. The information set forth below
should be read in conjunction with the Consolidated Financial Statements (and
the related notes) of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1998
-------------
As
Actual Adjusted
------ --------
<S> <C> <C>
Company-obligated mandatorily redeemable capital securities of subsidiary
trust holding solely junior subordinated debentures of the Company(1)....... $ -- $ 6,000
Stockholder Equity:
7% convertible preferred stock $10 par value: 61,889 shares
authorized; 20,850 shares issued and outstanding at
June 30, 1998; ......................................................... 209 209
Common Stock, $.01 par value; 20,000,000 shares authorized;
3,513,858 shares and 4,113,858 shares issued and outstanding at
June 30, 1998 Actual and As Adjusted, respectively ....................... 35 41
Paid-in Capital .......................................................... 6,214 11,208
Net unrealized gain on securities available for sale, net ................ 74 74
Retained Earnings ........................................................ 4,920 4,920
------- -------
Total stockholders' equity ............................................... 11,452 16,452
------- -------
Total Capitalization........................................................ $11,452 $22,452
======= =======
</TABLE>
- ------------------
(1) Represents beneficial interests in an aggregate amount of $6.0 million
of Junior Subordinated Debentures of the Company.
23
<PAGE> 29
DILUTION
Purchasers of the Common Stock in the Common Stock Offering will pay a
significantly higher price per share than the prices paid to the Company by
officers, directors and their affiliates for Common Stock purchased by them
during the past five years. The following table summarizes the total
consideration paid to the Company and the average price per share paid by
officers, directors and their affiliates for Common Stock purchased by them from
the Company since January 1, 1993, and by new investors purchasing shares of the
Common Stock in the Common Stock Offering.
<TABLE>
<CAPTION>
Average
Shares Total Price
Purchased Consideration Per Share
--------- ------------- ---------
<S> <C> <C> <C>
Existing Shareholders (1).................. 210,054 $ 680,923 $ 3.24
New Investors..............................
----------
Total................................. $
==========
</TABLE>
- --------------------
(1) Includes persons who are currently, or who were at the time of purchase
of Common Stock from the Company, officers or directors of the Company
or any of its subsidiaries or affiliates of any such persons.
The foregoing table excludes (i) 468,000 shares of Common Stock reserved for
issuance under the Company's existing stock option plans, (ii) up to 225,000
shares of Common Stock reserved for possible issuance upon the achievement of
certain performance criteria of the Company's trust operations entered into in
connection with the acquisition of FSC, (iii) 40,500 shares of Common Stock
reserved for issuance upon exercise of other outstanding options, and (iv)
919,650 shares of Common Stock issued since January 1, 1993, upon conversion of
shares of convertible preferred stock and convertible debentures issued and sold
prior to January 1, 1993, at an average conversion price of $1.26 per share.
Options to acquire an aggregate of 508,500 shares of Common Stock at a weighted
average exercise price of $7.88 per share, shares of 7% Preferred Stock
convertible into an aggregate of 175,210 shares of Common Stock at an average
conversion price of $1.19 per share, and 8% debentures convertible into an
aggregate of 152,913 shares of Common Stock at a conversion price of $4.12 per
share, were outstanding as of June 30, 1998, and held by persons that were
directors, officers or affiliates at the time such securities were issued.
24
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's balance sheets and
statements of operations should be read in conjunction with the Consolidated
Financial Statements and the related notes included elsewhere in this
Prospectus.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
COMPARISON OF BALANCE SHEETS AT JUNE 30, 1998 AND DECEMBER 31, 1997
Overview
At June 30, 1998, total assets of the Company were $178.1 million as
compared to $147.3 million at December 31, 1997, an increase of $30.8 million or
20.9%. This growth was primarily the result of an unusually high level of
interest bearing transaction account (NOW and money market accounts) deposits
from a single customer. As of June 30, 1998, the Bank had deposits from a
single customer of $36.1 million or 23.1% of the Bank's total deposits. As of
December 31, 1997, deposits from this customer amounted to $9.2 million or 7.1%
of the Bank's total deposits. The Company expects deposit balances maintained at
the Bank by this customer to continue to fluctuate and to generally be lower
than the amount of such deposits at June 30, 1998. For example, as of August 31,
1998, this customer's deposits totalled $11.3 million, which contributed to a
reduction in the Company's total assets to $156.3 million at August 31, 1998. At
June 30, 1998, the largest increase in earning assets was in Federal Funds
sold, a type of short term, overnight investment, which was attributable to an
increase in deposits occurring near the end of the quarter. The unusual activity
had little effect on average balances for the quarter ended June 30, 1998 and
therefore did not result in a significant impact upon earnings for that period.
Investment Securities
Investment securities, consisting of U.S. Treasury, federal agency,
obligations of state and political subdivisions, mortgage-backed, and corporate
debt securities, were $29.9 million at June 30, 1998, compared to $21.6 million
at December 31, 1997, an increase of $8.3 million or 38.4%. Included in
investment securities at June 30, 1998, were $17.2 million of securities
recorded at market value held as "available for sale" to provide the Bank
greater flexibility to respond to changes in interest rates.
Loans
Total loans were $99.4 million at June 30, 1998, compared to $97.0 million
at December 31, 1997, an increase of $2.4 million or 2.5%. Real estate
mortgage loans increased $3.9 million or 6.5%, commercial loans decreased
$1.2 million or 4.0%, and all other loans including consumer loans were
virtually unchanged. Loans net of allowance for loan losses were $97.1 million
at June 30, 1998, compared to $94.8 million at December 31, 1997.
Allowance for Loan Losses
The allowance for loan losses amounted to $1.8 million at June 30, 1998 or
1.78% of loans, compared to $1.6 million at December 31, 1997 or 1.71% of loans.
During the six months ended June 30, 1998, $146 thousand in loans were charged
off, $250 thousand was added to the allowance through a provision, which was
accounted for as an expense to reduce net income, and $8 thousand in loans were
recovered from loans previously charged off.
Nonperforming Assets
Nonperforming assets were $4.3 million at June 30, 1998, compared to $0.7
million at December 31, 1997. Nonperforming assets at June 30, 1998 consisted of
nonperforming loans of $3.9 million and other real estate owned of
25
<PAGE> 31
$0.3 million. Nonperforming loans included $1.0 million of the portion of
defaulted loans that is fully guaranteed by the SBA and the Bank expects to be
fully reimbursed by the SBA. A nonperforming loan of $1.1 million is in
foreclosure and management believes that the underlying collateral will be
sufficient to repay substantially all of the loan. Another of the nonperforming
loans in the amount of $1.3 million is being paid on a monthly basis on a
pre-judgment stipulation and interest and principal are being recorded on a cash
basis as received. ORE owned consisted of one property which has been listed for
sale. Management believes that this property is carried at a value which is
equal to its current market value.
Bank Premises and Equipment
Bank premises and equipment totaled $9.3 million at June 30, 1998, compared
to $9.5 million at December 31, 1997, a decrease of $0.2 million. This decrease
was primarily due to depreciation of buildings and equipment and amortization of
leasehold improvements.
Deposits
Total deposits were $ 157.7 million at June 30 1998, compared to $130.2
million at December 31, 1997, an increase of $27.5 million or 21.1%. From
December 31, 1997 to June 30, 1998 demand deposits decreased $2.8 million, NOW
and money market deposits increased $32.6 million, savings deposits decreased
$0.8 million, time deposits of $100 thousand or greater increased $0.2 million,
and other time deposits decreased $1.7 million.
Long-term Debt and Convertible Subordinated Debentures
Long-term debt outstanding was $2.4 million at June 30, 1998, compared to
$2.7 million at December 31, 1997, a decrease of $0.3 million. This decrease was
primarily due to a repayment on a line of credit secured by the Bank's Common
Stock.
Stockholders' Equity
Stockholders' equity was $11.5 million at June 30, 1998, or 6.43% of total
assets, compared to $10.5 million or 7.12% of total assets at December 31, 1997.
The increase in stockholders' equity was attributable to net income during the
period of $786 thousand and the issuance of $400 thousand of Common Stock,
partially offset by $241 thousand of dividend payments on Preferred and Common
Stock. At June 30, 1998, the Bank's Tier I (core) Capital ratio was 6.15%, its
Tier I Risk-based Capital ratio was 8.94%, and its Total Risk-based Capital
ratio was 10.19%. The capital ratios of the Bank at that date exceeded the
minimum regulatory guidelines for an institution to be considered "well
capitalized." See "Business--Supervision and Regulation."
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1997
Overview
Net income for the six months ended June 30, 1998 was $786 thousand or $0.21
per share, diluted, compared to $470 thousand or $0.13 per share, diluted, for
the same period in 1997. The increase of $316 thousand was primarily the result
of increases in interest income and non-interest income offset partially by
increases in the provision for loan losses, non-interest expenses, and income
taxes.
Business Segment Information
The Company's operations include three business segments, the Bank, EPW, and
United Trust. Each of these are a separate corporate entity and wholly owned
subsidiary of the Company. The following are the results of operations for these
three segments for the six months ended June 30, 1998 and 1997.
26
<PAGE> 32
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
--------------------------------------------- --------------------------------------------
(dollars in thousands)
Commercial United Company Commercial United Company
Banking Trust EPW Total Banking Trust EPW Total
------- ----- --- ----- ------- ----- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income ............... $ 5,958 $ 79 $ 0 $ 6,037 $ 5,146 $ 0 $ 0 $ 5,146
Interest expense .............. 2,425 0 2 2,427 1,856 0 3 1,859
------- ------- ------- ----- ------- ------- ------- -----
Net interest income 3,533 79 (2) 3,610 3,290 0 (3) 3,287
Loan loss provision ........... 250 0 0 250 90 0 0 90
------- ------- ------- ----- ------- ------- ------- -----
Net interest income after loan
loss provision ............. 3,283 79 (2) 3,360 3,200 0 (3) 3,197
Noninterest income ............ 771 442 720 1,933 599 310 590 1,499
General and administrative
("G&A") expenses ........... 2,710 467 646 3,823 2,461 430 523 3,414
Other noninterest expense ..... 0 0 0 0 393 0 0 393
Amortization of goodwill ...... 7 12 0 19 7 8 0 15
------- ------- ------- ----- ------- ------- ------- -----
Total noninterest expense ..... 2,717 479 646 3,842 2,861 438 523 3,822
------- ------- ------- ----- ------- ------- ------- -----
Net income before taxes ....... $ 1,337 $ 42 $ 72 1,451 $ 938 $ (128) $ 64 874
======= ======= ======= ======= ======== ======= =====
Net corporate overhead
expense .................... 153 114
Income tax expense ............ 512 290
--- ---
Net income .................... $ 786 $ 470
======= =======
</TABLE>
Commercial Banking Activities. Net interest income from commercial banking
activities were $3.5 million for the six months ended June 30, 1998, compared to
$3.3 million for the same period in 1997, a $0.2 million or 6.1% increase. The
loan loss provision was $250 thousand for the six months ended June 30, 1998,
compared to $90 thousand for the same period of 1997, a $160 thousand or 177.8%
increase. The increase in the provision was made to increase the Bank's
allowance for possible loan losses. The allowance was increased due to growth in
the loan portfolio of approximately $16 million and to an increase in
non-performing assets at June 30, 1998. See "Business-Asset Quality." The
Company believes that the allowance was adequate at June 30, 1998. Non-interest
income for the six months ended June 30, 1998 was $0.8 million, compared to $0.6
million for the same period of 1997, a $0.2 million or 33.4% increase. Total
non-interest expense was $2.7 million for the six months ended June 30, 1998,
compared to $2.9 million for the same period in 1997, a decrease of $0.2 million
or 6.9%. Net income before taxes was $1.3 million for the six months ended June
30, 1998, compared to $0.9 million for the same period in 1997, a $0.4 million
or 42.7% increase.
Trust Activities. United Trust reported net income before taxes of $42
thousand for the six months ended June 30, 1998, compared to a loss of $128
thousand for the same period in 1997, an improvement of $170 thousand. This
improvement was the result of additional fees generated by an increased volume
of trust accounts.
Investment Advisory Activities. Net income before taxes for EPW was $72
thousand for the six months ended June 30, 1998, compared to $65 thousand for
the same period in 1997, an increase of $7 thousand or 10.8%. This increase was
due to an increase in the volume of assets under management by EPW, due
primarily to appreciation in the market values of the portfolios under
management.
Analysis of Net Interest Income
Net interest income for the six months ended June 30, 1998 was $3.6 million
as compared to $3.2 million for the same period in 1997, a $0.4 million or 12.5%
increase. Interest income was $6.0 million for the six months ended June 30,
1998, compared to $5.1 million for the same period in 1997, a $0.9 million or
17.7% increase. Interest
27
<PAGE> 33
expense was $2.4 million for the six months ended June 30, 1998, compared to
$1.9 million for the same period in 1997, a $0.5 million or 26.4% increase.
The following table summarizes the average yields earned on interest-earning
assets and the average rates paid on interest-bearing liabilities for the six
months ended June 30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
--------------------------------- --------------------------------------
Summary of average Average Average Average Average
rates/interest earning assets: Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
Interest earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans, net(1) $95,801 $4,871 10.17% $80,033 $4,251 10.62%
Securities:
Investment securities -
taxable 24,666 798 6.47 22,601 746 6.60
Investment securities -
non-taxable 420 12 9.22 519 15 8.92
Federal funds sold 11,926 326 5.46 5,152 135 5.27
------ --- ----- ---
Total earning assets 132,813 6,007 9.05% 108,305 5,147 9.51%
Non-earning assets 22,190 17,338
------ ------
Total average assets $155,003 $125,643
======== ========
Interest bearing liabilities:
NOW & money market $44,242 651 2.94% $28,958 369 2.55%
Savings 4,958 50 2.02 4,693 47 2.02
Time, $100,000 & over 10,203 277 5.37 6,477 179 5.53
Time other 50,919 1,376 5.42 45,346 1,210 5.34
Convertible subordinated
debentures 630 25 8.00 630 25 8.00
Long-term debt 2,424 104 8.61 728 34 9.34
Other borrowings 3,467 40 2.30 3,249 50 3.10
----- -- ----- --
Total interest bearing
liabilities 116,843 2,523 4.32% 90,081 1,914 4.25%
Non-interest bearing
liabilities:
Deposits 25,522 24,530
Other 1,465 1,408
Stockholders' equity 11,173 9,624
------ -----
Total liabilities and
stockholders' equity $155,003 $125,643
======== ========
Net interest income & net interest $3,484 4.73% $3,233 5.26%
spread ====== ==== ====== ====
Net interest margin 5.25% 5.97%
==== ====
</TABLE>
(1) Includes non-accrual loans. See "Business--Asset Quality."
28
<PAGE> 34
The following table reflects the change in net interest income due to
changes in the volume and rate of the Company's assets and liabilities for the
six month period ended June 30, 1998:
<TABLE>
<CAPTION>
Increase
(Decrease)
Changes in net interest income -------------------------------------------------------
(dollars in thousands) Combination
Volume Rate Rate/Volume Total
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest earning assets:
Loans, net ............................... $ 837 $ (180) $ (37) $ 620
Securities:
Investment securities - taxable .......... 68 (14) (2) 52
Investment securities - non-taxable ...... (4) 1 1 (2)
Federal funds sold ....................... 178 5 7 190
------- ------- ------- -------
Total change in interest income .......... 1,079 (188) (31) 860
Interest-bearing liabilities:
NOW & money market ...................... 195 57 30 282
Savings .................................. 3 -- -- 3
Time, $100,000 & over .................... 103 (5) (3) 95
Time other ............................... 148 18 3 169
Convertible subordinated debentures ...... -- -- -- --
Long-term debt ........................... 76 (1) (3) 72
Other borrowings ......................... 3 (13) (1) (11)
------- ------- ------- -------
Total change in interest expense .......... 528 56 26 610
------- ------- ------- -------
Increase (decrease) in net interest income . $ 551 $ (244) $ (57) $ 250
======= ======= ======= =======
</TABLE>
Noninterest Income
Noninterest income for the six months ended June 30, 1998 was $1.9
million, compared to $1.5 million for the same period in 1997, an increase of
$0.4 million or 26.7%. The increase was primarily due to increased income from
EPW and United Trust whose combined income increased $294 thousand during this
same period. Service charge income on deposits also increased by $20 thousand
during this same period and other income increased $120 thousand during this
period.
The following table indicates the components of noninterest income for
the six months ended June 30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
------------------------------------
Increase/
1998 1997 (Decrease)
------ ------ ------
<S> <C> <C> <C>
Service charges on deposit Accounts ...... $ 347 $ 327 $ 20
Trust and investment management income ... 1,138 844 294
Loan servicing fees ...................... 72 97 (25)
Gain on sale of SBA loans ................ 129 88 41
Other service charges, fees, and income .. 223 119 104
------ ------ ------
Total noninterest income ............... $1,909 $1,475 $ 434
====== ====== ======
</TABLE>
29
<PAGE> 35
Noninterest Expense
Total noninterest expense for the six months ended June 30, 1998 was
$3.9 million, compared to $3.9 million for the same period in 1997, an increase
of less than $0.1 million.
The following table reflects the components of noninterest expense for
the six months ended June 30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
------------------------------------
Increase/
1998 1997 (Decrease)
------ ------ ------
<S> <C> <C> <C>
Salaries and employee benefits ........ $2,263 $1,941 $ 322
Occupancy expense .................... 291 204 87
Furniture and equipment expense ....... 256 217 39
Data processing expense ............... 221 211 10
Legal and professional fees ........... 85 63 22
Amortization of intangible assets ..... 35 32 3
Advertising ........................... 45 90 (45)
Relocation expense .................... -- 138 (138)
Stationery and Supplies ............... 79 79 --
Directors fees ........................ 82 111 (29)
Securities write-down ................. -- 255 (255)
Other operating expenses ............. 488 517 (29)
------ ------ ------
Total noninterest expense ........... $3,845 $3,858 $ (13)
====== ====== ======
</TABLE>
YEARS ENDED DECEMBER 31, 1997 AND 1996
COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1997 AND DECEMBER 31, 1996
Overview
Total assets of the Company were $147.3 million at December 31, 1997,
compared to $122.7 million at December 31, 1996, an increase of $24.6 million or
20.0%. This increase was primarily the result of the Company's internal growth
of earning assets (primarily loans) funded by an increase in deposits.
Investment Securities
Investment securities, consisting of U.S. Treasury and federal agency
securities, obligations of state and political subdivisions and mortgage-backed
and corporate debt securities, were $21.6 million at December 31, 1997, compared
to $18.7 million at December 31, 1996, an increase of $2.9 million or 15.3%. At
December 31, 1997, the Company held certain securities totaling $11.5 million as
"available for sale". These securities have been recorded at market value.
Loans
Total loans were $97.0 million at December 31, 1997, compared to $81.2
million at December 31, 1996, an increase of $15.8 million or 19.4%. For the
same period, real estate mortgage loans increased by $11.1 million or 22.5%,
commercial loans increased by $5.3 million or 21.0%, and all other loans
including consumer loans were virtually unchanged. Net loans were $94.8 million
at December 31, 1997, compared to $79.3 million at December 31, 1996.
30
<PAGE> 36
Allowance for Loan Losses
The allowance for loan losses amounted to $1.6 million at December 31,
1997, virtually unchanged from December 31, 1996. During 1997, $90.9 thousand in
loans were charged off, $90 thousand was added to the allowance for loan losses
through a provision, which was accounted for as an expense , reducing net
income, and $38 thousand was recovered from loans previously charged off.
Nonperforming Assets
Nonperforming assets were $651 thousand at December 31, 1997, compared
to $372 thousand at December 31, 1996, an increase of $279 thousand or 75.0%.
All nonperforming assets consisted of nonperforming loans.
Bank Premises and Equipment
Bank premises and equipment was $9.5 million at December 31, 1997,
compared to $6.0 million at December 31, 1996, an increase of $3.5 million or
58.3%. This increase was primarily due to the final funding of the building and
equipment related to the Company's new headquarters facility which opened in May
1997.
Deposits
Total deposits were $130.2 million at December 31, 1997, compared to
$108.1 million at December 31, 1996, an increase of $22.1 million or 20.4%. Of
the $22.1 million increase, $1.7 million was in demand deposits, $8.5 million
was in NOW and money market deposits, $0.6 million was in savings deposits, $4.9
million was in time deposits of $100,000 or greater, and $6.4 million was in
other time deposits.
Long-term Debt and Convertible Subordinated Debentures
Long-term debt outstanding was $2.7 million at December 31, 1997,
compared to $0.8 million at December 31, 1996, an increase of $1.9 million. This
increase was due primarily to borrowings from a non-affiliated bank secured by
the Bank's common stock to fund the capitalization of United Trust.
Stockholders' Equity
Stockholders' equity was $10.5 million at December 31, 1997, or 7.12%
of total assets, compared to $9.5 million, or 7.73% of total assets at December
31, 1996. At December 31, 1997, the Bank's Tier I (core) Capital ratio was
6.77%, its Tier I Risk-based Capital ratio was 8.90%, and its Total Risk-based
Capital ratio was 10.15%. The capital ratios of the Bank at that date all
exceeded the minimum regulatory guidelines for an institution to be considered
"well capitalized".
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1996
Overview
Net income for the year ended December 31, 1997 was $1.4 million or
$0.38 per share diluted, compared to $1.5 million or $0.40 per share diluted for
the same period in 1996. On a pre-tax basis, United Trust lost $114 thousand in
1997 and $421 thousand in 1996, EPW's pre-tax profits increased to $149 thousand
from $92 thousand during this period and the Bank's pre-tax profits declined to
$2.5 million from $2.8 million during this same period.
Business Segment Information
The Company's operations include three business segments: commercial
banking, trust services (operated through United Trust) and investment
management services (operated through EPW). The following are the results of
operations for these three segments for the years ended December 31, 1997 and
1996 (dollars in thousands).
31
<PAGE> 37
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------------
1997 1996
--------------------------------------------- -------------------------------------------
Commercial United Company Commercial United Company
Banking Trust EPW Total Banking Trust EPW (1) Total
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income .................... $10,785 $ 0 $ 0 $10,785 $ 9,577 $ 0 $ 0 $ 9,577
Interest Expense .................. 3,970 0 5 3,975 3,278 0 5 3,283
------- ------- ------- ------- ------- ------- ------- -------
Net Interest Income ................ 6,815 0 (5) 6,810 6,299 0 (5) 6,294
Loan Loss Provision ................ 90 0 0 90 150 0 0 150
------- ------- ------- ------- ------- ------- ------- -------
Net Interest Income after loan loss
provision ........................ 6,725 0 (5) 6,720 6,149 0 (5) 6,144
Noninterest Income ................. 1,286 765 1,238 3,289 1,251 381 936 2,568
General and Administrative
("G&A") expenses ................. 5,124 852 1,084 7,060 4,532 780 839 6,151
Other noninterest expense .......... 384 9 0 393 0 0 0 0
Amortization of goodwill ........... 15 18 0 33 14 22 0 36
------- ------- ------- ------- ------- ------- ------- -------
Total noninterest expense .......... 5,523 879 1,084 7,486 4,546 802 839 6,187
------- ------- ------- ------- ------- ------- ------- -------
Net Income before taxes ............ $ 2,488 $ (114) $ 149 $ 2,523 $ 2,854 $ (421) $ 92 $ 2,525
======= ======= ======= ======= ======= =======
Net Corporate Overhead expense ..... 253 154
Income tax expense ................. 860 891
------- -------
Net income ......................... $1,410 $1,480
======= =======
</TABLE>
- -------------------
(1) For the eleven months ended December 31, 1996
Commercial Banking Activities. The Company's commercial banking
activities are conducted through the Bank. Net interest income of the Bank for
the year ended December 31, 1997 was $6.8 million, compared to $6.3 million for
the same period in 1996, a $0.5 million or 7.9% increase. Based on the Company's
analysis of its loan portfolio and loan loss reserve, the loan loss provision
was reduced $90 thousand for 1997, compared to $150 thousand for 1996, a 40.0%
decrease. Non-interest income for 1997 was $1.3 million, compared to $1.3
million for 1996. Total non-interest expense was $5.5 million for 1997, compared
to $4.6 million for 1996, a 19.6% increase. Net income before taxes was $2.5
million for 1997, compared to $2.9 million for 1996, a 13.8% decrease.
The decline in the Bank's net income before taxes in 1997 compared to
1996 was mainly due to increases in noninterest expenses. The principal
components of this increase were an increase in Company general and
administrative expenses of $592 thousand, a one time write-down of $255 thousand
in the value of a security held in portfolio, and $138 thousand from the
write-off of leasehold improvements in a facility which was abandoned. Other
increases in general and administrative expenses were substantially due to the
full year impact from a new branch which was opened in September 1996, expenses
associated with moving into the new headquarters building, and additional
employees hired for accounting and credit administration functions and other
support operations.
Trust Activities. United Trust reported a net loss before taxes of $114
thousand for the year ended December 31, 1997, compared to a loss of $421
thousand for 1996, an improvement of $307 thousand. This improvement was the
result of the increased volume of trust accounts.
Investment Advisory Activities. Net income before taxes for EPW was
$149 thousand for the year ended December 31, 1997, compared to $92 thousand for
the same period of 1996, a $57 thousand or 61.9% increase. This increase was
primarily due to an increase in the volume of assets under management by EPW
resulting from higher market values of the assets under management.
32
<PAGE> 38
Analysis of Net Interest Income
Net interest income for the year ended December 31, 1997 was $6.7
million , compared to $6.2 million for the same period in 1996, a $0.5 million
or 8.2% increase. Interest income was $10.8 million for the year ended December
31, 1997, compared to $9.6 million for the same period in 1996, a $1.2 million
or 12.5% increase. Interest expense was $4.1 million for the year ended December
31, 1997, compared to $3.4 million for the same period in 1996, a $0.7 million
or 20.6% increase.
The following table summarizes the average yields earned on
interest-earning assets and the average rates paid on interest-bearing
liabilities for the years ended December 31, 1997 and 1996 (dollars in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------------
1997 1996
-------------------------------------- ------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------- -------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Summary of average rates/interest
earning assets:
Interest earning assets:
Loans, net(1) ......................... $ 83,614 $ 8,961 10.72% $75,590 $8,121 10.74%
Securities:
Investment securities - taxable ....... 22,995 1,508 6.56 18,168 1,216 6.69
Investment securities - non-taxable ... 494 29 9.09 659 38 9.22
Federal funds sold .................... 5,447 295 5.42 4,144 220 5.31
-------- -------- ------- ------
Total earning assets .................. 112,550 10,793 9.60% 98,561 9,595 9.76%
Non-earning assets .................... 18,230 13,774
-------- --------
Total average assets ................. $130,780 $112,335
======== ========
Interest bearing liabilities:
NOW & money market ................. $ 30,692 $ 795 2.59% $23,938 $ 542 2.26%
Savings ............................. 4,774 97 2.02 4,977 108 2.16
Time, $100,000 & over ............... 7,518 419 5.57 4,307 242 5.61
Time other .......................... 47,445 2,604 5.49 43,089 2,315 5.37
Convertible subordinated debentures . 630 50 8.00 578 46 7.96
Long-term debt ...................... 1,037 80 7.73 886 78 8.80
Other borrowings ................... 2,638 56 2.13 3,959 89 2.26
-------- -------- ------- ------
Total interest bearing liabilities .... 94,734 4,101 4.33 81,733 3,420 4.18
Non-Interest bearing liabilities:
Deposits ............................ 24,774 20,421
Other ............................... 1,380 1,235
Stockholders' equity ................ 9,892 8,945
--------- -------
Total liabilities and ............. $130,780 $112,335
stockholders' equity ========= ========
Net interest & net interest spread .. $ 6,692 5.27% $6,175 5.58%
======== ===== ====== =====
Net interest margin ................. 5.96% 6.27%
===== =====
</TABLE>
(1) Includes non-accrual loans. See "Business-Asset Quality."
33
<PAGE> 39
The following table reflects the change in net interest income due to
changes in the volume and rate of the Company's assets and liabilities for the
twelve month period ended December 31, 1997:
<TABLE>
<CAPTION>
Increase (Decrease)
-----------------------------------------------------------
Changes in net interest income (dollars in thousands) Combination
Volume Rate Rate/Volume Total
------- ----- ---- -------
<S> <C> <C> <C> <C>
Interest earning assets:
Loans, net .................................. $ 861 $ (24) $ 2 $ 839
Securities: .................................
Investment securities - taxable ............. 323 (24) (6) 293
Investment securities - non-taxable ......... (15) (1) 6 (10)
Federal funds sold .......................... 69 5 1 75
------- ----- ---- -------
Total change in interest income ............... 1,238 (44) 3 1,197
Interest bearing liabilities:
NOW & money market ......................... 153 78 22 253
Savings ..................................... (4) (7) -- (11)
Time, $100,000 & over ....................... 180 (2) (1) 177
Time other .................................. 234 50 5 289
Convertible subordinated debentures ......... 4 -- -- 4
Long-term debt .............................. 13 (9) (2) 2
Other Borrowings ............................ (30) (5) 2 (33)
------- ----- ---- -------
Total change in interest expense ............. 550 105 26 681
------- ----- ---- -------
Increase (decrease) in net interest income .... $ 688 $(149) $(23) $ 516
======= ===== ==== =======
</TABLE>
Noninterest Income
Noninterest income for the year ended December 31, 1997 was $3.2
million compared to $2.5 million for the same period in 1996, an increase of
$0.7 million or 28.0%. This increase was primarily due to increased revenues
from EPW and United Trust whose combined revenues increased $657 thousand during
this period. Service charge income on deposits also increased by $119 thousand
during this same period. Gain on sale of SBA loans declined $135 thousand during
this period.
The following table indicates the components of noninterest income for
the years ended December 31, 1997 and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------------
Increase/
1997 1996 (Decrease)
------ ------ -----
<S> <C> <C> <C>
Service charges on deposit accounts ...... $ 675 $ 556 $ 119
Trust and investment management income ... 1,886 1,229 657
Other service charges, fees, and income .. 225 209 16
Loan servicing fees ...................... 164 153 11
Gain on sale of SBA loans ................ 290 425 (135)
------ ------ -----
Total noninterest income ................. $3,240 $2,572 $ 668
====== ====== =====
</TABLE>
34
<PAGE> 40
Noninterest Expense
Total noninterest expense for the year ended December 31, 1997 was $7.6
million, compared to $6.2 million for the same period in 1996, an increase of
$1.3 million or 22.6%. The increase is mainly due to the inclusion of a full
year of EPW's operations and the St. Petersburg Beach branch in the 1997
results, versus the inclusion of only eleven and four months of operations,
respectively, in 1996, as well as the expansion of the Bank's facilities,
expansion of United Trust and EPW's operations and a one-time write-down of $255
thousand in the Bank's investment securities portfolio.
The following table reflects the components of noninterest expense for
the years ended December 31, 1997 and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------------
Increase/
1997 1996 (Decrease)
------ ------ -------
<S> <C> <C> <C>
Salaries and employee benefits ...... $4,048 $3,724 $ 324
Occupancy expense .................. 514 387 127
Furniture and equipment expense ..... 494 423 71
Data processing expense ............. 418 375 43
Legal and professional fees ......... 177 153 24
Amortization of intangible assets ... 67 111 (44)
Advertising ......................... 133 124 9
Relocation expense .................. 138 - 138
Stationery and supplies ............ 150 141 9
Directors fees ...................... 199 143 56
Securities write-down .............. 255 - 255
Other operating expenses ............ 979 645 334
------ ------ -------
Total noninterest expense ........... $7,572 $6,226 $ 1,346
====== ====== =======
</TABLE>
YEARS ENDED DECEMBER 31, 1996 AND 1995
COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1996 AND DECEMBER 31, 1995
Overview
Total assets of the Company were $122.7 million at December 31, 1996,
compared to $106.6 million at December 31, 1995, an increase of $16.1 million or
15.1%. This growth was primarily due to the Company's internal growth of earning
assets (primarily loans) funded by an increase in deposits.
Investment Securities
Investment securities, consisting of U.S. Treasury and federal agency
securities, obligations of state and political subdivisions and mortgage-backed
and corporate debt securities, were $19.0 million at December 31, 1996, compared
to $18.0 million at December 31, 1995, an increase of $1.1 million or 5.6%. At
December 31, 1996, the Company held certain securities totaling $9.5 million as
"available for sale". These securities have been recorded at market value.
Loans
Total loans were $81.2 million at December 31, 1996, compared to $75.8
million at December 31, 1995, an increase of $5.4 million or 7.1%. Commercial
loans increased $5.5 million or 28.1%, and real estate mortgage loans and
35
<PAGE> 41
all other loans including consumer loans were virtually unchanged. Net loans
(net of allowance for loan losses and unearned fees) were $79.3 million at
December 31, 1996, compared to $74.0 million at December 31, 1995.
Allowance for Loan Losses
The allowance for loan losses totaled $1.6 million at December 31,
1996, compared to $1.5 million at December 31, 1995, an increase of $0.1
million. During 1996, $68.5 thousand in loans were charged off, $150 thousand
was added to the allowance through a provision which was accounted for as an
expense , reducing net income, and $1.6 thousand was recovered from loans
previously charged off.
Nonperforming Assets
Nonperforming assets totaled $372 thousand at December 31, 1996,
compared to $21 thousand at December 31, 1995, an increase of $351 thousand. All
nonperforming assets consisted of nonperforming loans.
Bank Premises and Equipment
Bank premises and equipment totaled $6.0 million at December 31, 1996,
compared to $3.5 million at December 31, 1995, an increase of $2.5 million or
71.4%. This increase was primarily due to the purchase of the building and
equipment related to the Bank's St. Petersburg Beach branch office opened during
September 1996 and the construction in progress of the Company's new
headquarters facility.
Deposits
Total deposits were $108.1 million at December 31, 1996, compared to
$93.3 million at December 31, 1995, an increase of $14.9 million or 16.0%. Of
thre $14.9 million increase, $5.7 million was in demand deposits, $7.0 million
was in NOW and money market deposits, $0.3 million was in time deposits of
$100,000 or greater, and $2.0 million was in other time deposits. Regular
savings deposits decreased $0.1 million.
Long-term Debt and Convertible Subordinated Debentures
Long-term debt outstanding (excluding convertible subordinated
debentures) was $814 thousand at December 31, 1996, compared to $875 thousand at
December 31, 1995, a decrease of $61 thousand. This debt is payable to an
unrelated bank. In addition, $630 thousand in convertible subordinated
debentures were issued during 1996 to purchase EPW.
Stockholders' Equity
Stockholders' equity was $9.5 million at December 31, 1996, or 7.73% of
total assets, compared to $8.5 million, or 7.96% of total assets at December 31,
1995. At December 31, 1996, the Bank's Tier I (core) Capital ratio was 7.2%, its
Tier I Risk-based Capital ratio was 10.1%, and its Total Risk-based Capital
ratio was 11.3%. The capital ratios of the Bank at that date all exceeded the
minimum regulatory guidelines for an institution to be considered "well
capitalized." See "Business-Supervision and Regulation."
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996
AND 1995
Overview
Net income for the year ended December 31, 1996 was $1.48 million or
$0.40 per share diluted, compared to $1.48 million or $0.43 per share diluted
for the same period in 1995. Results for fiscal year 1996 included a full year
of operations of the Bank's trust department, versus three months of trust
operations in 1995, four months of operations of the Bank's St. Petersburg Beach
branch office, which opened during September 1996, and eleven months of
operations
36
<PAGE> 42
of EPW, which was acquired in January 1996. The effect of the inclusion of these
operations was to reduce the Company's net income for 1996 by approximately $319
thousand as a result of the losses these activities generated during their
initial periods of operation.
Analysis of Net Interest Income
Net interest income for the year ended December 31, 1996 was $6.2
million , compared to $5.9 million for the same period in 1995, a $0.3 million
or 4.5% increase. Interest income was $9.6 million for the year ended December
31, 1996, compared to $9.1 million for the same period in 1995, a $0.5 million
or 5.2% increase. Interest expense was $3.4 million for the year ended December
31, 1996, compared to $3.2 million for the same period in 1996, a $0.2 million
or 6.5% increase.
The following table summarizes the average yields earned on
interest-earning assets and the average rates paid on interest-bearing liabil-
ities for the years ended December 31, 1996 and 1995 (dollars in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------------------------------------
1996 1995
------------------------------------------- ----------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
--------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Summary of average rates/interest
earning assets:
Interest earning assets:
Loans, net(1) ......................... $ 75,590 $ 8,121 10.74% $69,525 $7,590 10.92%
Securities:
Investment securities - taxable ....... 18,167 1,216 6.69 17,808 1,220 6.85
Investment securities - non-taxable ... 659 38 9.22 658 38 9.22
Federal funds sold .................... 4,144 220 5.31 4,733 276 5.83
--------- -------- ------ -----
Total earning assets .................. 98,560 9,595 9.76% 92,724 9,124 9.86%
Non-earning assets .................... 13,774 9,198
-------- ------
Total average assets .................... $112,334 $101,922
======== ========
Interest bearing liabilities:
NOW & money market .................... $ 23,938 $ 542 2.26% $25,184 $ 665 2.64%
Savings ............................... 4,977 108 2.16 4,943 121 2.45
Time, $100,000 & over ................. 4,307 242 5.61 3,626 211 5.80
Time other ............................ 43,089 2,315 5.37 35,118 1,941 5.53
Convertible subordinated debentures ... 577 46 8.00 -- -- --
Long-term debt ........................ 886 78 8.84 901 86 9.58
Other borrowings ..................... 3,959 89 2.26 5,634 188 3.33
------- ------- -------- ------
Total interest bearing liabilities ...... 81,733 3,420 4.18 75,406 3,212 4.26
Non-Interest bearing liabilities:
Deposits .............................. 20,421 18,402
Other ................................. 1,236 1,029
Stockholders' equity ................. 8,944 7,085
-------- --------
Total liabilities and stockholders'
equity.......................... $112,334 $101,922
======== ========
Net interest & net interest spread .... $ 6,175 5.58% $5,912 5.60%
======== ==== ====== ====
Net interest margin ................... 6.26% 6.38%
==== ====
</TABLE>
(1) Includes non-accrual loans. See "Business--Asset Quality."
37
<PAGE> 43
The following table reflects the change in net interest income due to
changes in the volume and rate of the Company's assets and liabilities for the
twelve month period ended December, 1996:
<TABLE>
<CAPTION>
Increase (Decrease)
--------------------------------------------
Combination
Volume Rate Rate/Volume Total
------- ------- ----------- -------
<S> <C> <C> <C> <C>
Changes in Net Interest Income
(dollars in thousands)
Interest earning assets:
Loans, net ................................ $ 662 $(125) $ (6) $ 531
Securities:
Investment securities - taxable .......... 25 (28) (1) (4)
Investment securities - non-taxable ...... -- -- -- --
Federal funds sold ........................ (34) (25) 3 (56)
----- ----- ---- -----
Total earning assets ....................... 653 (178) (4) 471
Interest bearing liabilities:
NOW & money market ....................... (33) (95) 5 (123)
Savings ................................... 1 (15) -- (14)
Time, $100,000 & over ..................... 39 (7) (1) 31
Time other ................................ 441 (55) (14) 373
Convertible subordinated debentures ....... 46 -- -- 46
Long-term debt ............................ (1) (7) -- (8)
Other borrowings .......................... (56) (60) 19 (97)
----- ---- ---- -----
Total change in interest expense ........... 437 (239) 10 208
----- ---- ---- -----
Increase (decrease) in net interest income . $ 216 $ 61 $(13) $ 263
===== ===== ==== =====
</TABLE>
Noninterest Income
Noninterest income for the year ended December 31, 1996 was $2.6
million, compared to $1.2 million for the same period in 1995, an increase of
$1.3 million or 116.7%. This increase was primarily due to increased revenues
from EPW and the Bank's trust operations whose combined revenues increased $1.2
million during this period. Noninterest income for 1996 included a full year of
trust operations and eleven months of EPW's operations, compared with three
months of trust operations during 1995. Service charge income on deposits
decreased slightly during this same period. Gain on sale of SBA loans increased
$0.1 million during this period.
The following table indicates the components of noninterest income for
the years ended December 31, 1996 and 1995 (dollars in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
Increase/
1996 1995 (Decrease)
------ ------- ---------
<S> <C> <C> <C>
Services charges on deposit accounts ..... $ 556 $576 $ (20)
Trust and investment management income ... 1,229 58 1,171
Loan servicing fees ....................... 153 136 17
Gain on sale of SBA loans ................. 425 284 141
</TABLE>
38
<PAGE> 44
<TABLE>
<S> <C> <C> <C>
Other service charges, fees, and income ..... 209 183 26
------ ------- --------
Total noninterest income .................... $2,572 $ 1,237 $ 1,335
====== ======= ========
</TABLE>
Noninterest Expense
Total noninterest expense for the year ended December 31, 1996 was $6.2
million, compared to $4.6 million for the same period in 1995, representing an
increase of $1.6 million or 34.7% . The increase is mainly due to the inclusion
of a full year of trust operations and eleven months of EPW operations in 1996,
compared to three months of trust operations included in the 1995 results.
The following table reflects the components of noninterest expense for
the years ended December 31, 1996 and 1995 (dollars in thousands):
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------------
Increase/
1996 1995 (Decrease)
------- ------ --------
<S> <C> <C> <C>
Salaries and employee benefits ........... $3,724 $2,594 $ 1,130
Occupancy expense ....................... 387 280 107
Furniture and equipment expense .......... 423 280 143
Data processing expense .................. 375 315 60
Legal and professional fees .............. 153 122 31
Amortization of intangible assets ........ 111 120 (9)
Advertising .............................. 124 75 49
Stationery and supplies .................. 141 108 33
Directors fees ........................... 143 136 7
Other operating expenses ................. 645 590 55
------ ------ -------
Total noninterest expense ................ $6,226 $4,620 $ 1,606
====== ====== =======
</TABLE>
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
Liquidity
The Investment and Asset/Liability Committee of the Board of Directors
reviews the Company's liquidity, which is its ability to generate sufficient
cash to meet the funding needs of current loan demand, deposit withdrawals, and
other cash demands. The primary sources of funds consist of deposits,
amortization and prepayments of loans, sales of investments, other funds from
operations and the Company's capital. The Bank is a member of the Federal Home
Loan Bank of Atlanta ("FHLB") and has the ability to borrow to supplement its
liquidity needs.
When the Company's primary sources of funds are not sufficient to meet
deposit outflows, loan originations and purchases and other cash requirements,
the Company may supplementally borrow funds from the FHLB and from other
sources. The FHLB acts as an additional source of funding for banks and thrift
institutions that make residential mortgage loans.
39
<PAGE> 45
FHLB borrowings, known as "advances", are secured by the Bank's
mortgage loan portfolio, and the terms and rates charged for FHLB advances vary
in response to general economic conditions. As a shareholder of the FHLB, the
Bank is authorized to apply for advances from this bank. A wide variety of
borrowing plans are offered by the FHLB, each with its own maturity and interest
rate. The FHLB will consider various factors, including an institution's
regulatory capital position, net income, quality and composition of assets,
lending policies and practices, and level of current borrowings from all
sources, in determining the amount of credit to extend to an institution. As of
June 30, 1998, the Company had no FHLB advances outstanding. See
"Business-Supervision and Regulation-Liquidity."
A Florida chartered commercial bank is required to maintain a liquidity
reserve of at least 15% of its total transaction accounts and 8% of its total
nontransaction accounts less deposits of certain public funds. The liquidity
reserve may consist of cash on hand, cash on demand with other correspondent
banks and other investments and short-term marketable securities as determined
by the rules of the Department, such as federal funds sold and United States
securities or securities guaranteed by the United States or agencies thereof.
The Company complies with applicable liquidity reserve requirements. As of June
30, 1998, the Bank had liquidity of approximately $51.0 million or approximately
31.3% of total deposits combined with borrowings. The Company's primary sources
of funds consist of principal payments on loans and investment securities,
proceeds from sales and maturities of securities available for sale and net
increases in deposits. The Company uses its funds principally to purchase
investment securities and fund existing and continuing loan commitments. At June
30, 1998, the Company had commitments to originate loans totaling $18.1 million.
Scheduled maturities of certificates of deposit during the 12 months following
June 30, 1998 total $46.7 million as of June 30, 1998. Management believes the
Company has adequate resources to fund all its commitments, and, if so desired,
that it can adjust the rates on certificates of deposit to retain deposits in a
changing interest-rate environment.
Asset/Liability Management
One of the primary objectives of the Company is to reduce fluctuations
in net interest income caused by changes in interest rates. To manage interest
rate risk, the Board of Directors has established interest-rate risk policies
and procedures which delegate to the Investment and Asset/Liability Committee
the responsibility to monitor and report on interest-rate risk, devise
strategies to manage interest-rate risk, monitor loan originations and deposit
activity, and approve all pricing strategies.
The management of interest-rate risk is one of the most significant
factors affecting the ability to achieve future earnings. The measure of the
mismatch of assets maturing or repricing within certain periods, and liabilities
maturing or repricing within the same period, is commonly referred to as the
"gap" for such period. Controlling the maturity or repricing of an institution's
assets and liabilities in order to minimize interest rate risk is commonly
referred to as gap management. "Negative gap" occurs when, during a specific
time period, an institution's liabilities are scheduled to reprice more rapidly
than its assets, so that, barring other factors affecting interest income and
expense, in periods of rising interest rates the institution's interest expense
would increase more rapidly than its interest income, and in periods of falling
interest rates the institution's interest expense would decrease more rapidly
than its interest income. "Positive gap" occurs when an institution's assets are
scheduled to reprice more rapidly than its liabilities, so that, barring other
factors affecting interest income and expense, in periods of falling interest
rates , the institution's interest income would decrease more rapidly than its
interest expense, and in periods of rising interest rates, the institution's
interest income would increase more rapidly than its interest expense. It is
common to focus on the one-year gap, which is the difference between the dollar
amount of assets and the dollar amount of liabilities maturing or repricing
within the next 12 months.
To the extent market conditions permit, the Bank follows a strategy
intended to protect its net interest income from adverse changes in interest
rates by maintaining spreads through the adjustability of its interest earning
assets and its interest bearing liabilities. The Bank employs a number of
strategies designed to protect its net interest income. The Bank calculates its
net interest margin on a monthly basis and compares it to a quarterly national
peer group ratio. Historically, the Bank has enjoyed a higher than peer group
average net interest margin as well as a higher margin than most of the
community banks operating in Pinellas County.
40
<PAGE> 46
Additionally, the Investment and Asset/Liability Committee meets on a
quarterly basis to review the most recent margin analysis, the Bank's overall
pricing strategies, and a monthly gap report measuring its interest rate
sensitivity position.
The Bank is also a member of the FHLB. Member banks have access to a
variety of fixed and variable rate borrowings, ranging from overnight to up to
20 years or longer. Access to these instruments can permit the Bank to match
maturities of either specific groups of loans or larger, single loans.
Currently, the Bank has no FHLB advances outstanding.
The cumulative one-year gap at June 30, 1998 was a negative $31.8
million or a negative 17.8% (expressed as a percentage of total assets). The
exclusion of approximately $3.9 million of non-accrual loans increased the
negative gap by more than 2%. The Company performs an income simulation analysis
to measure net interest income volatility when the portfolio is subjected to a
200 basis point interest rate shock. Based on the results of this simulation and
the current interest rate environment (taking into account competitive pricing
and generally declining interest rates), the Company believes that its gap
position as of June 30, 1998 was appropriate, and currently anticipates that a
similar negative gap position will continue in the subsequent one year time
period.
As previously noted herein, the Bank had large deposits from a single
customer at June 30, 1998. These deposits are held in interest bearing demand
accounts. From an asset/liability management stand point, the Bank matches these
excess deposits with Federal Funds sold. See "Business)Sources of Funds." The
Bank earns a positive spread between the interest earned on the Federal Funds
sold and the interest paid on the respective deposit accounts.
The following table presents the maturities or repricing of
interest-earning assets and interest-bearing liabilities at June 30, 1998. The
balances shown have been derived based on the financial characteristics of the
various assets and liabilities. Adjustable and floating-rate assets are included
in the period in which interest rates are next scheduled to adjust rather than
their scheduled maturity dates. Fixed-rate loans are shown in the periods in
which they are scheduled to be repaid according to contractual amortization and,
where appropriate, prepayment assumptions based on the coupon rates in the
portfolio have been used to adjust the repayment amounts. Repricing of time
deposits is based on their scheduled maturities.
41
<PAGE> 47
INTEREST SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
0 to 3 4 to 6 7 to 12 13 to 60 60+
Months Months Months Months Months
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Assets:
Federal funds sold ........... $ 26,767 $ 0 $ 0 $ 0 $ 0
Securities ................... 1,864 215 2,720 15,029 10,060
Loans:(1)
Fixed ...................... 4,368 2,457 6,284 12,955 1,968
Variable .................... 34,897 1,490 3,639 26,096 1,429
-------- -------- -------- ------- -------
Total rate sensitive assets ... $ 67,896 $ 4,162 $ 12,643 $54,080 $13,457
======== ======== ======== ======= =======
Liabilities:
Interest demand ............. $ 57,312 $ 0 $ 0 $ 0 $ 0
Savings ...................... 4,449 0 0 0 0
Time deposits ................ 15,460 16,391 16,094 11,125 0
Other borrowings ............. 4,424 0 0 0 0
Long term debt ............... 2,333 4 8 26 630
-------- -------- -------- ------- -------
Total rate sensitive
liabilities............... $ 83,978 $ 16,395 $16,102 $11,151 $ 630
======== ======== ======== ======= =======
Dollar gap ..................... $(16,082) $(12,233) $ (3,459) $42,929 $12,827
Cumulative Dollar gap .......... $(16,082) $(28,315) $(31,774) $11,155 $23,982
Cumulative gap/total assets(2) . (9.03)% (15.89)% (17.83)% 6.26% 13.46%
</TABLE>
<TABLE>
<CAPTION>
Non-Rate
Sensitive
Assets/
Liabilities Total
--------- ---------
<S> <C> <C>
Assets:
Federal funds sold ........... N/A $ 26,767
Securities ................... N/A 29,888
Loans:(1)
Fixed ...................... N/A 28,032
Variable .................... N/A 67,551
--- --------
Total rate sensitive assets..... N/A $152,238
=== ========
Liabilities:
Interest demand ............. $ 11,293 $ 68,605
Savings ...................... 0 4,449
Time deposits ................ 0 59,070
Other borrowings ............. 0 4,424
Long term debt ............... 0 3,001
-------- ---------
Total rate sensitive
liabilities .............. $ 11,293 $139,549
========= ========
Dollar gap ..................... $(11,293) $ 12,689
Cumulative Dollar gap .......... $ 12,689 $ 12,689
Cumulative gap/total assets(2) . 7.12% 7.12%
</TABLE>
- -------------------
(1) Excludes nonaccrual loans of approximately $3.9 million.
(2) Calculated based on total assets of $178,148.
42
<PAGE> 48
YEAR 2000 CONSIDERATIONS
During the next two years, many businesses, including financial
institutions such as the Company, will face potentially serious issues
associated with the inability of certain existing data processing hardware and
software to appropriately recognize calendar dates beginning in the year 2000.
The "Year 2000" problem arose because many existing computer programs use only
the last two digits to refer to a year. Therefore, these computer programs may
not properly recognize a year that begins with "20" instead of "19."
Additionally, many computer programs that can only distinguish the final two
digits of the year may read entries for the year 2000 as the year 1900. For
example, computer systems may compute payment, interest , delinquency or other
figures important to the operations of financial institutions based on the wrong
date. If not corrected, many computer applications, including those owned by the
Company and third parties with whom the Company does business, could fail or
create erroneous results, thereby potentially impacting the operations and
financial performance of the Company. Although the Company is currently
addressing potential Year 2000 problems, there can be no assurance that its
efforts will prevent all potential adverse consequences to the Company resulting
from the Year 2000 problem.
In 1997, the Company began the process of evaluating its information
technology for Year 2000 readiness. In April 1998, the Company adopted a formal,
comprehensive Year 2000 Policy Statement designed to identify and address Year
2000 issues that might impact the Company (the "Year 2000 Plan"). The Company
has completed the "Awareness," "Inventory" and "Assessment" phases of its Year
2000 Plan, which are designed to appoint and train a group of employees to
oversee and implement the Year 2000 Plan, to provide for the inventory of the
software and hardware of the Company and others that should be assessed for Year
2000 problems, and to provide further assessment of the nature and size of the
Year 2000 issues that might effect the Company, respectively. The Company is
currently in the process of overseeing its internal efforts and the efforts of
third parties to timely and properly address the Year 2000 issues that have been
identified, as well as testing and validating the actions that have been taken
thus far to address those issues. It is expected that those testing and
validation efforts will be completed by June 30, 1999.
The Company outsources its principal data processing activities to a
third party and purchases most of its software applications from third party
vendors. Additionally, the Company outsources its trust business data processing
and custodial management activities to a third party. Each of the two foregoing
data processing servicers have orally advised the Company that it believes its
systems are Year 2000 compliant. The Company is in the process of testing and
validating those claims. Based on these efforts to date, the Company believes
that its vendors and significant customers are actively addressing the problems
associated with the Year 2000 issue and that the Company will be prepared to
respond to Year 2000 problems as they arise. The Company is in the process of
finalizing contingency plans to address the most reasonably likely worst case
scenario relating to the Year 2000 problem. The anticipated completion date for
those plans is by March 31, 1999. The Company's Year 2000 efforts are ongoing
and have not yet been completed. Accordingly, there can be no assurance that the
Company will be prepared to timely respond to all year 2000 issues that may
arise.
The Company is also in the process of identifying Year 2000 problems
stemming from non-information technology systems, such as microcontrollers used
to operate security systems and elevators and embedded systems in its buildings
and equipment and other infrastructure, and establishing a program for testing
these systems for Year 2000 compliance. However, the Company does not currently
anticipate that it will encounter any substantial Year 2000 problems with
respect to such non-information technology systems, and believes the cost to
remedy any such problems will not be material.
The Company has not incurred material testing, compliance or
replacement costs relating to its Year 2000 investigation to date. The Company
expects to spend approximately $255,000 and $280,000 in 1998 and 1999,
respectively, towards technology related expenses, including the updating of
software and hardware systems to ensure Year 2000 compliance. The Company does
not expect to incur additional material related testing, compliance or
replacement costs in the future and does not believe that the potential
non-compliance of its information and non-
43
<PAGE> 49
information technology systems and programs present a material risk to the
Company's financial condition or results of operations. However, non-material
costs may be incurred due to short-term disruptions resulting from Year 2000
compliance problems, testing and replacement costs.
Notwithstanding the foregoing, there can be no assurance that the
Company will be successful in implementing its Year 2000 Plan and that it will
not be adversely affected by the failure of third party vendors or significant
customers to become Year 2000 compliant. Although the Company is taking steps to
identify and address Year 2000 problems, if unexpected or unresolved Year 2000
problems develop, given the Company's reliance on data processing services to
maintain customer balances, service customer accounts and to perform other
record keeping and service oriented functions associated with the Company's
three primary business segments, the occurrence of any such events could have a
material impact on the Company's results of operations, liquidity and financial
condition.
44
<PAGE> 50
BUSINESS
THE COMPANY AND THE BANK
The Company is a registered bank holding company formed in 1982, the
principal subsidiary of which is the Bank, an FDIC-insured commercial bank
chartered under Florida law and headquartered in St. Petersburg, Florida. The
Company's other operating subsidiaries are EPW, an investment advisory firm
registered under the Investment Advisers Act of 1940 headquartered in Tampa,
Florida, with an office in Jacksonville, Florida, and United Trust, a
Florida-Chartered trust company registered with the Department and located in
St. Petersburg, Florida. At June 30, 1998, the Company had consolidated total
assets of $178.1 million, net loans of $97.1 million, deposits of $157.7 million
and stockholders' equity of $11.5 million.
The Bank is a community-oriented full service, commercial bank founded
in 1979 and currently operating from four branch offices serving the southern
Pinellas County area of the State of Florida. It offers consumer and commercial
loans, ATM cards, credit cards, and a full range of deposit account types
including demand deposits, NOW accounts, money market accounts, savings
accounts, and certificates of deposit. The primary focus of the Bank's
commercial lending activities is on loans to small and medium sized businesses
and professional firms. The Bank's commercial loans include loans secured by
real estate or other assets, loans made under the SBA's lending program and
secured and unsecured loans to small businesses. The Company believes the Bank
is one of the largest originators, among similarly sized financial institutions,
of SBA loans in the State of Florida (measured by dollar volume of loans
originated).
EPW is an investment advisory firm formed in 1983 which offers
investment management services to corporate, municipal and high net worth
individual clients throughout the State of Florida. As of June 30, 1998, EPW had
$312.3 million in assets under management. United Trust is a wholesale provider
of data processing, administrative and accounting support and asset custody
services to professionals holding assets in trust (primarily legal and
accounting firms). United Trust also provides retail trust and investment
management services to individual and corporate clients. As of June 30, 1998,
United Trust had $241.9 million in assets under trust.
The principal executive offices of the Company are located at 333 Third
Avenue North, St. Petersburg, Florida 33701, and its telephone number is (727)
898-2265.
BACKGROUND
In 1986 a group of investors, headed by Neil W. Savage, the Company's
President and Chief Executive Officer and the Bank's Chairman and Chief
Executive Officer, acquired control of the Company, then known as Pinellas
Bancshares Corporation. The Company's name was changed to its present name in
1995 and the Bank's name was changed from United Bank of Pinellas to its present
name that same year.
In September 1995 the Company purchased FSC, a trust data processing
and accounting service for professionals, and merged this entity into the
Company. In January 1996, the Company acquired EPW. The Company formed United
Trust during the fourth quarter of 1997 and effective December 31, 1997,
transferred all of the Bank's trust assets to United Trust.
BUSINESS STRATEGY
The principal elements of the Company's business strategy are to
increase its market share in its existing business segments and to seek out
niche business segments in which the Company can compete effectively in order to
create new sources of non-interest income and increase traditional interest
income from new lending opportunities. The Company has sought to implement its
strategy of increasing its market share in its existing business segments by
expanding the Bank's market coverage through de novo branching, increasing the
Bank's emphasis on originating loans secured by real estate and other assets for
its own portfolio, pursuing small business secured and unsecured lending for its
own portfolio, and
45
<PAGE> 51
continuing to originate a high volume of SBA loans, both for its own portfolio
and for sale in the secondary market. A primary element of the Company's
business strategy as a community banking organization is to seek to provide
customers with a level of personalized service exceeding that provided by its
competitors, including the local banking operations of large regional and
national banking companies.
The Company has sought to add new sources of non-interest income
through the creation of United Trust, which receives fees for the wholesale
trust services it offers to legal and accounting firms and the retail trust and
investment management services it offers to other clients, and the acquisition
of EPW, which generates fee income from the investment management services it
offers to corporate, municipal and high net worth individual clients. By
expanding the range of trust and investment management services it offers, the
Company seeks to differentiate itself from other similarly sized community
banking organizations operating in the Company's market. While pursuing these
strategies, management remains committed to improving asset quality, managing
interest rate risk, enhancing profitability and maintaining its status as a
well-capitalized institution for regulatory capital purposes.
The results of the Company's business strategy have been substantial
asset and revenue growth. The Company's total assets have increased from
approximately $106.6 million at December 31, 1995 to $147.3 million at December
31, 1997. The Company's consolidated revenues increased from $7.1 million for
the year ended December 31, 1995 to $9.9 million for the year ended December 31,
1997. During this period of asset and revenue growth, the Company's net income
decreased from $1.5 million for the year ended December 31, 1995 to $1.4 million
for the year ended December 31, 1997.
The Company intends to continue selectively adding branches in its
market area, and recently gave notice of its intent to exercise an option to
purchase a proposed branch site. It is anticipated that the Bank will spend
approximately $650,000 to open such branch. The Company has no current plans to
add Bank branches outside of the Pinellas County market. The Company's current
goal is to try and open one new branch each year. Accordingly, in the future,
the Company may consider strategic expansion though the acquisition of other
banks or bank branches or by de novo branching. Similar to the Company's
previous efforts that resulted in it establishing United Trust and acquiring
EPW, the Company may consider from time to time expansion opportunities into
other business lines that might add to the Company's non-interest income and the
acquisition or development of other businesses that the Company considers
complementary to its existing business. For example, the Company recently
commenced efforts to consider the feasibility of making a minority investment in
an existing or new property casualty insurance company. From time to time, the
Company may commence similar exploratory efforts to evaluate the possibility of
acquiring or establishing similar or additional lines of business. A substantial
portion of the net proceeds from the Offerings will be available to the Company
to finance any such efforts that the Company decides to pursue. The Company has
not, however, identified any acquisition candidates or made any commitments to
create any new business units, and there can be no assurance that the Company
will locate any suitable acquisition candidates, complete any new business
acquisitions, develop any new business lines or receive any needed regulatory
approvals to conduct such activities, or that any of such activities, if
conducted, will be profitable for the Company.
MARKET AREA
Currently, the Bank has four offices located in southern Pinellas
County, Florida, which is the Bank's primary market area. The population of
Pinellas County was estimated to be 888,000 on April 1, 1997 by the University
of Florida's Bureau of Economic and Business Research. This compares with a
population of 852,000 at the 1990 census and 729,000 at the 1980 census.
Pinellas County has been a retirement and tourism destination for many years,
and over 25% of its population is over 65 years of age, compared with a state
wide average of 18.6%.
According to information published by the Florida Bankers Association,
as of December 31, 1997, Pinellas County was the fourth largest county in
Florida in terms of bank and thrift deposits, with total deposits of $12.2
billion, or 6.49% of the state's total deposits. There is a significant seasonal
population increase during the months of November to April of each year;
seasonal residents are not included in the cited population statistics. The
Company believes that while the population of Pinellas County will continue to
grow, the rate of growth is likely to be lower than the population growth
46
<PAGE> 52
rate of the State of Florida as a whole, and is likely to slow due to the nature
of the market area. As a peninsula surrounded on the south, east and west by
water, Pinellas County has limited room for future development. The local
economy is dependent upon service industries, manufacturing, tourism, and
medical facilities as its major sources of employment and commerce.
United Trust"s primary market for retail business is also Pinellas
County. Its wholesale services are marketed more widely to the Tampa Bay Area,
consisting of Pinellas, Hillsborough, Pasco and Manatee Counties. EPW markets
its services to high net worth individuals and to commercial and governmental
clients throughout the State of Florida and secondarily in the Southeastern
United States.
Pinellas County is a highly competitive market for financial, trust and
investment services. The Bank faces competition for deposits from other
commercial banks, thrift institutions, money market funds and credit unions.
Competition for loans of the types originated by the Bank is also strong.
Management believes that Pinellas County is considered an attractive market by
financial institutions seeking to obtain deposits, as evidenced by the 293
offices of commercial banks and thrift institutions existing in Pinellas County
at December 31, 1997.
OPERATING STRATEGY
Management of the Company believes that the consolidation of the
banking industry and the emergence of large regional and national bank holding
companies has created opportunities for locally-owned and operated financial
institutions to effectively compete for customers who desire a level of
personalized banking services that the large banking organizations may not be
able to offer. The Bank was organized as a community financial institution owned
and managed by people who are actively involved in the Bank"s local market area
and committed to the area's economic growth and development. With local
ownership and management, the Company believes that the Bank can be more
responsive to the banking needs of the community it serves and can tailor its
services to meet its customers' needs rather than providing the standardized
services that larger bank holding companies tend to offer.
Local ownership and operation allows the Bank faster, more responsive
and flexible decision-making which may not be available at the branch offices of
the large bank holding companies which constitute the majority of the financial
institution offices located in the Bank's market area.
The principal business of the Bank is to attract deposits from the
general public and to invest those funds in various types of loans and other
interest-earning assets. The Bank's earnings depend primarily upon the
difference between (i) the interest and fees received by the Bank from loans,
the securities held in its investment portfolio, and other investments; and (ii)
expenses incurred by the Bank in connection with obtaining funds for lending
(including interest paid on deposits and other borrowings) and expenses relating
to day-to-day operations.
The Bank's customers are primarily individuals (including seasonal
residents), professionals and small and medium size businesses, located
predominantly in Pinellas County, Florida. The Bank seeks to develop new
business through an ongoing program of personal calls on both present and
potential customers. As a local independent bank, the Bank utilizes traditional
local advertising media as well as direct mailings, telephone contacts, and
brochures to promote the Bank and develop loans and deposits. In addition, the
Bank's directors all have worked or lived in or near the Bank's market area for
a number of years, contributing to the Bank's image as a locally-oriented
independent institution, which management believes is an important factor to its
targeted customer base.
SOURCES OF FUNDS
The primary source of funds for lending, investment and other general
business purposes is deposit accounts. Other sources of funds are loan
repayments, proceeds from the sale of loans and investment securities, and
borrowings. The Bank expects that loan repayments will be a relatively stable
source of funds, while levels of deposits maintained at the Bank will be
significantly influenced by general interest rate and money market conditions.
Generally, the Company may
47
<PAGE> 53
use short-term borrowings to compensate for reductions in sources of funds
normally available, while longer term borrowings may be used to support expanded
lending activities. Management believes that the Company's funding requirements
can be met through retail deposits in the Company's local market area without
reliance on brokered deposits. For additional discussion of asset and liability
management policies and strategies, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Asset/Liability
Management."
As of June 30, 1998, the scheduled maturities of deposits of $100,000
or more were as follows:
<TABLE>
<S> <C>
Three months or less .................................. $3,161,629
----------
Over three through six months ......................... 2,700,608
----------
Six through twelve months ............................. 2,394,879
----------
Over twelve months .................................... 1,317,670
----------
$9,574,786
==========
</TABLE>
The Bank offers a full range of deposit services, including checking
and other transaction accounts, savings accounts and time deposits. The
following table sets forth the deposit structure of the types of deposit
accounts offered by the Bank at June 30, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Weighted Percent
Average of Total
Interest Rate Amount Deposits
------------- ------ --------
<S> <C> <C> <C>
Non-interest bearing ..................... 00.0% $ 25,562 16.2%
NOW accounts ............................. 3.38 68,605 43.5
Savings .................................. 2.02 4,449 2.8
Time deposits with original maturities of:
One year or less 5.21 33,922 21.6
--------
Over 1 year through 5 years ........... 5.68 25,148 15.9
-------- --------
Total time deposits ................. 5.41 59,070 37.5
-------- --------
Total deposits ...................... 3.55% $157,686 100.0%
======== ========
</TABLE>
At June 30, 1998, scheduled maturities of time deposits were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Percent of
Time Time
Period Ended June 30, Deposits Deposits
-------- --------
<S> <C> <C>
1999 ................ $46,743 79.2%
2000-2001 ........... 6,642 11.2
2002-2006 ........... 5,685 9.6
------- -----
Total time deposits $59,070 100.0%
======= =====
</TABLE>
As of June 30, 1998, the Bank had deposits from a single customer of
$36.1 million or 23.1% of the Bank's total deposits. As of December 31, 1997,
deposits from this customer amounted to $9.2 million or 7.1% of the Bank's
total deposits. The Company expects deposit balances maintained at the Bank by
this customer to continue to fluctuate and to generally be lower than the amount
of such deposits at June 30, 1998. For example, as of August 31, 1998, this
48
<PAGE> 54
customer's deposits totalled $11.3 million, which contributed to a reduction in
the Company's total assets to $156.3 million at August 31, 1998. The funds from
this customer's unusual deposit activity were invested primarily in Federal
funds sold, which are short term, liquid investments. Because of the Company's
liquidity position, management does not expect that a material decline in the
deposit balances maintained at the Bank by this customer would have a materially
negative effect on the financial condition, including liquidity, or results of
operations of the Company or the Bank.
LENDING ACTIVITIES
The primary source of income generated by the Bank is interest earned
on loans held in the Bank's loan portfolio. The Bank's lending activities
include commercial, real estate and consumer loans. During 1997, the Bank's net
loans increased $19.3 million.
Commercial Loans. The Bank offers commercial loans for working capital
purposes, business expansion, seasonal needs, acquisition of equipment, and
other business needs. Collateral pledged to secure these loans may include
equipment, accounts receivable, or other assets. The Bank often requires
personal guarantees of these loans.
SBA Loans. The SBA lending program was established by Congress in 1953
to assist new and established small businesses in obtaining necessary capital.
Under this program, the SBA guarantees up to 90% of the principal balance of the
loan, subject to a maximum guarantee per loan of $750,000, thereby removing a
portion of the credit risk to the lending financial institution and generally
enabling lenders to offer loans under this program at more attractive interest
rates for borrowers than other available financing. The SBA loans originated by
the Company typically have SBA guarantees for 60% to 90% of the principal
balance of the loan. The existence of a secondary market for the guaranteed
portion of the SBA loans provides the Bank an opportunity to sell the guaranteed
portion of the loans and obtain additional liquidity and income. The Bank
typically services such loans and receives servicing fees with respect to such
loans.
The only loans sold by the Bank during 1996 and 1997 were SBA loans.
When the Bank sells an SBA loan and retains the servicing of the loan, a
servicing asset is recorded. The book value of such assets, which the Company
believes approximates the fair value of such assets, at June 30, 1997, December
31, 1997, and June 30, 1998 was $23 thousand, $78 thousand, and $107 thousand,
respectively. Amortization expense relating to such servicing assets of $2
thousand and $6 thousand was recorded for 1997 and 1998, respectively. The
Company periodically reviews these assets for impairment. No valuation for
impairment of these assets was deemed necessary for the periods presented.
At December 31, 1996, the Bank had $7.0 million of SBA loans, of which
approximately 27.0% was guaranteed by the SBA. During 1996, the Bank sold
guaranteed portions of its SBA loans totaling $5.2 million. At December 31,
1997, the Bank had $5.7 million of SBA loans, of which approximately 19.0% was
guaranteed by the SBA. During 1997, the Bank sold guaranteed portions of its SBA
loans totaling $3.7 million. The Bank had gains on the sale of SBA loans during
1996 and 1997 of $425 thousand and $290 thousand, respectively, and had loan
servicing fees on SBA loans during 1996 and 1997 of $153 thousand and $164
thousand, respectively.
Real Estate Loans. The Bank offers commercial and, on a limited basis,
residential real estate loans. Commercial real estate loans are made for general
corporate purposes, construction and expansion of facilities. Residential loans
are made in the form of fixed and variable rate mortgages and home equity loans.
The following tables set forth information concerning the loan
portfolio, based on total dollars and percent of portfolio, by collateral type
as of the dates indicated (dollars in thousands):
49
<PAGE> 55
<TABLE>
<CAPTION>
At At December 31,
June 30, -------------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Commercial real estate ....................... $ 47,476 $ 44,547 $ 38,074 $ 38,439
One-to-four family residential ............... 7,575 7,482 6,716 7,371
Multifamily residential ...................... 6,108 5,485 2,898 2,230
Construction and land development ............ 3,352 3,071 1,795 1,456
-------- -------- -------- --------
Total real estate mortgage loans ........... 64,511 60,585 49,483 49,496
Commercial loans ............................... 29,310 30,536 25,239 19,711
Consumer loans ................................. 3,896 3,998 3,831 3,199
Other Loans .................................... 1,731 1,871 2,661 3,409
-------- -------- -------- --------
Gross loans .................................. 99,448 96,990 81,214 75,815
Allowances for loan losses ..................... (1,759) (1,648) (1,610) (1,527)
Unearned Fees ................................. (577) (521) (341) (281)
-------- -------- -------- --------
Total loans net of allowance and unearned fees.. $ 97,112 $ 94,821 $ 79,263 $ 74,007
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
At At December 31,
June 30, ------------------------------------
1998 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Commercial real estate ............. 47.7% 45.9% 46.9% 50.7%
One-to-four family residential ..... 7.6 7.7 8.2 9.7
Multifamily residential ............ 6.2 5.7 3.6 3.0
Construction and land development... 3.4 3.2 2.2 1.9
------ ------ ------ ------
Total real estate mortgage loans.. 64.9 62.5 60.9 65.3
Commercial loans ..................... 29.5 31.5 31.1 26.0
Consumer loans ....................... 3.9 4.1 4.7 4.2
Other Loans .......................... 1.7 1.9 3.3 4.5
------ ------ ------ ------
Gross loans ........................ 100% 100% 100% 100%
====== ====== ====== ======
</TABLE>
The following table sets forth the contractual amortization of real estate
and commercial loans at June 30, 1998 and December 31, 1997. Loans having no
stated schedule of repayments and no stated maturity are reported as due in one
year or less. The table also sets forth the dollar amount of loans scheduled to
mature after one year, according to their interest rate characteristics (dollars
in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
--------------------------- ----------------------------
Real Real
Estate Commercial Estate Commercial
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Amounts due:
One year or less ............................... $29,621 $20,803 $29,645 $22,250
After one through five years ................... 32,220 7,751 30,409 7,518
More than five years ........................... 2,670 756 531 768
------- ------- ------- -------
Total ................................... $64,511 $29,310 $60,585 $30,536
======= ======= ======= =======
Interest rate terms on amounts due after one year:
Adjustable ..................................... $24,183 $ 3,620 $20,774 $ 3,489
Fixed .......................................... 10,707 4,887 10,166 4,797
------- ------- ------- -------
Total ................................... $34,890 $ 8,507 $30,940 $ 8,286
======= ======= ======= =======
</TABLE>
50
<PAGE> 56
INVESTMENT MANAGEMENT SERVICES
EPW offers investment management services to high net worth
individuals, corporate pension and profit sharing plans, charitable entities,
and state and local government pension plans. EPW receives fees for its services
which vary according to the amount of assets in the account under management.
EPW markets its services throughout the State of Florida.
TRUST SERVICES
United Trust offers wholesale trust services that include on-line trust
account information processing, asset custody and investment support services.
These services are offered to legal and accounting firms and to other
custodians. United Trust also offers retail trust services including investment
management, probate and custodian services which are marketed principally to
customers of the Bank and EPW and clients of local attorneys and accountants.
CREDIT ADMINISTRATION
The loan approval process consists of a combination of individual and
committee loan authority. Individual lending authority is based upon experience
and is broken down into secured and unsecured requests. The Officers' Loan
Committee (the "Officers' Loan Committee") is made up of commercial lenders and
credit administration personnel. The Officers" Loan Committee currently has
final approval on all unsecured credit for $50,000 to $500,000 and secured
credits for $150,000 to $500,000. The General Loan Committee (the "General Loan
Committee") is made up of four non-employee directors, the Chairman of the Board
of Directors of the Company ("Board of Directors") and the President of the
Bank. The General Loan Committee has final approval authority for all loans from
$500,000 to the legal lending limit of the Bank, except for loans involving
directors of the Bank which must be approved by a vote of the full Board of
Directors with the interested director not present during the loan discussion
and vote.
The Company has a policies and procedures manual which addresses the
specific underwriting guidelines for specific types of credits. Any deviation
from these guidelines is considered to be a policy exception which must be
outlined during the approval process and voted upon by the appropriate committee
or approved by a loan officer with sufficient lending authority. The guidelines
are reviewed and approved by the Board of Directors on an annual basis.
The Company's lending philosophy is to extend credit to businesses or
individuals in the Bank's market area who demonstrate sufficient cash flow to
repay the debt and whose track record indicate they are borrowers with whom the
Bank desires to establish an ongoing lending relationship.
The loan portfolio is under continued review in order to monitor
potential credit deterioration. Loans are graded at their inception by the loan
officers. Credit administration reviews existing credits on an on-going basis.
The Company also employs an independent third-party loan review company which
reviews specific larger size credits on a quarterly basis. This quarterly review
is presented to the General Loan Committee for its further review.
ASSET QUALITY
ALLOWANCE/PROVISION FOR LOAN LOSSES. The allowance for loan losses
represents management's estimate of an amount adequate to provide for potential
losses within the existing loan portfolio. The determination of the adequacy of
the loan loss reserve is based upon various considerations, including an
analysis of the risk involved in the various loan grades, historical loan
losses, review of larger classified loans, a review of the underlying collateral
on specific loans and current
51
<PAGE> 57
economic conditions. The reserve is reviewed internally on a quarterly basis and
is also reviewed by the appropriate regulatory agencies upon their examination
visit.
The following table sets forth information concerning the activity in
the allowance for loan losses during the periods indicated (dollars in
thousands):
<TABLE>
<CAPTION>
At June 30, At December 31,
------------ --------------------------------------------
1998 1997 1996 1995
------ ------ ------ -------
<S> <C> <C> <C> <C>
Allowance at beginning of period $1,648 $1,610 $1,527 $ 1,335
Charge-offs:
Real estate loans ............ -- -- -- --
Commercial loans ............. 131 52 38 --
Consumer loans ............... 16 39 31 1
------ ------ ------ -------
Total charge-offs ..... 147 91 69 1
Recoveries:
Real estate loans ............ -- -- -- 3
Commercial loans ............. 8 39 1 9
Consumer loans ............... -- -- 1 1
------ ------ ------ -------
Total recoveries ..... 8 39 2 13
Net charge-offs ................ 138 52 67 (12)
-------
Provision for loan losses ..... 250 90 150 180
------ ------ ------ -------
Allowance at end of period ..... $1,759 $1,648 $1,610 $ 1,527
====== ====== ====== =======
</TABLE>
The following table presents information regarding the Company's total
allowance for loan losses as well as its allocation of such amount to the
various loan categories based upon management's estimates (dollars in
thousands).
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 December 31, 1996
--------------------------- -------------------------- ------------------------
Percentage of Percentage of
Percentage of Loan Loan
Allowance Allocation Amount Loan Portfolio Amount Portfolio Amount Portfolio
- -------------------- ------ -------------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Performing/not classified:
Commercial Loans .......... $ 388 26% $ 368 31% $ 324 30%
Real Estate Loans ......... 485 57 459 53 406 55
Consumer Loans ............ 97 9 92 9 81 10
------ --- ------ --- ------ ---
Subtotal .................. 970 92 919 93 811 95
Non-performing/ classified:
Marginal .................. 46 3 2 5 -- 0
Substandard ............... 643 5 483 2 221 5
Doubtful ................. -- 0 -- 0 -- 0
Loss ...................... -- 0 -- 0 -- 0
------ --- ------ --- ------ ---
Subtotal .................. 689 8 485 7 221 5
Unallocated ............... 100 0 244 0 578 0
------ --- ------ --- ------ ---
Total ..................... $1,759 100% $1,648 100% $1,610 100%
====== === ====== === ====== ===
</TABLE>
NONPERFORMING ASSETS. Nonperforming assets include (i) loans which are 90 days
or more past due and have been placed into non-accrual status, (ii) accruing
loans that are 90 days or more delinquent that are deemed by management to be
adequately secured and in the process of collection, and (iii) ORE (i.e., real
estate acquired through foreclosure or deed in lieu of foreclosure). All
delinquent loans are reviewed on a regular basis and are placed on non-accrual
status when,
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<PAGE> 58
in the opinion of management, the possibility of collecting additional interest
is deemed insufficient to warrant further accrual. As a matter of policy,
interest is not accrued on loans past due 90 days or more unless the loan is
both well secured and in process of collection. When a loan is placed in
non-accrual status, interest accruals cease and uncollected accrued interest is
reversed and charged against current income. Additional interest income on such
loans is recognized only when received.
The following table sets forth information regarding the components of
nonperforming assets at the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
At At December 31,
June 30, ------------------------------------
1998 1997 1996 1995
------ ---- ---- ---
<S> <C> <C> <C> <C>
Real estate loans ............... $3,054 $374 $330 $15
Commercial loans ................ 876 26 42 --
Consumer loans .................. -- -- -- --
------ ---- ---- ---
Total non-accrual loans(1) ... 3,930 400 372 15
Other Real Estate ............... 283 -- -- --
Accruing Loans 90 days past due . 42 251 -- 6
------ ---- ---- ---
Total nonperforming assets ... $4,255 $651 $372 $21
====== ==== ==== ===
</TABLE>
- --------------------
(1) $1,006 of the non-accrual loans as of June 30, 1998 consist of the
portion of defaulted loans that is fully guaranteed by the SBA, for
which the Bank expects to be reimbursed by the SBA. $1,275 of the
non-accrual loans as of June 30, 1998 are being paid on a monthly basis
on a pre-judgment stipulation, and interest and principal are being
recorded as received on a cash basis.
COMPETITION
The banking industry in general, and the Bank's market area in
particular, are characterized by significant competition for both deposits and
lending opportunities. In its market area, the Bank competes with other
commercial banks, thrift institutions, credit unions, finance companies, mutual
funds, insurance companies, brokerage and investment banking firms, and various
other non-bank providers of financial services. Competition for deposits may
have the effect of increasing the rates of interest the Bank will pay on
deposits, which would increase the Bank's cost of funds and possibly reduce its
net earnings. Competition for loans may have the effect of lowering the rate of
interest the Bank will receive on its loans, which would lower the Bank's return
on invested assets and possibly reduce its net earnings. Many of the Bank's
competitors have been in existence for a significantly longer period of time
than the Bank, are larger and have greater financial and other resources and
lending limits than the Bank, and may offer certain services that the Bank does
not provide.
There are approximately 293 branch offices of commercial banks and
thrift institutions operating in Pinellas County. In order to compete
effectively, the Bank seeks to differentiate its services from those offered by
larger institutions, including the branch offices of large regional and national
bank holding companies. The Bank seeks to provide banking products and services
which are customized to its market area and target customers on a personalized
basis, which management believes cannot be matched by many of the larger
institutions THAT tend to offer many banking products and services on an
impersonal basis. Management believes that, as the banking industry has
undergone further consolidation, the opportunity to attract customers seeking
personalized service has been enhanced. The Bank seeks to tailor its products
and services to its specific geographic market and targeted customers, and to
thereby attract the business of professionals, entrepreneurs, and small to
medium sized commercial businesses while continuing to provide exceptional
banking services to all of its customers. The profitability of the Bank depends
upon its ability to compete effectively in its market area. While management
believes that the Bank's local ownership, community oriented operating
philosophy and personalized service enhances the Bank's ability to compete in
its market area, there can be no assurance that the Bank will be able
53
<PAGE> 59
to continue to compete effectively or that competitive factors will not have an
adverse effect on the Bank's operating results or financial condition.
EMPLOYEES
At June 30, 1998, the Company had 84 full-time and 10 part-time
employees, none of whom were represented by a union or subject to a collective
bargaining agreement. The Company believes its relations with its employees to
be good.
SUPERVISION AND REGULATION
The Company and the Bank are extensively regulated under both federal
and state law. The following is a brief summary of certain statutes, rules and
regulations affecting the Company and the Bank. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referenced below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the Company's business. Supervision,
regulation and examination of the Company and the Bank by the bank regulatory
agencies are intended primarily for the protection of depositors rather than
stockholders.
REGULATION OF THE COMPANY. The Company is a bank holding company registered with
the Federal Reserve under the Bank Holding Company Act of 1956, as amended ("BHC
Act"). As such, the Company is subject to the supervision, examination and
reporting requirements of the BHC Act and the regulations of the Federal
Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of the bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require bank holding companies and
other companies to obtain the prior approval of the office of thrift
supervision ("OTS") before acquiring ownership or control of a savings
association.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community served. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the communities
to be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977, as amended
(the "CRA").
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), authorizes (i) the Company, and any other bank
holding company located in Florida to acquire a bank located in any other state,
and (ii) any bank holding company located outside Florida to acquire any
Florida-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that national
and state-chartered banks may branch interstate through acquisitions of banks in
other states, unless a state has "opted out" of the interstate branching
provisions of the Interstate Banking Act prior to June 1, 1997. Neither Florida
nor any other state in the southeastern United States has "opted out".
Accordingly, the Company would have the ability to acquire a
54
<PAGE> 60
bank in a state in the Southeast and thereafter consolidate all of its bank
subsidiaries into a single bank with interstate branches.
The BHC Act generally prohibits the Company from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices. The
investment management, data processing, administrative and accounting support
and asset custody services offered by EPW and United Trust have been determined
by the Federal Reserve to be permissible activities of bank holding companies.
The BHC Act does not place territorial limitations on permissible nonbanking
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a bank holding company or its non-bank
subsidiaries to terminate any activity or to terminate its ownership or control
of any subsidiary when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of the holding
company.
Under Federal Reserve policy, bank holding companies are expected to
act as a source of financial strength and support to their subsidiary banks.
This support may be required at times when, absent such Federal Reserve policy,
the holding company may not be inclined to provide it. In addition, any capital
loans by a bank holding company to any bank subsidiary are subordinate in right
of payment to deposits and to certain other indebtedness of such subsidiary
bank. In the event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to maintain the capital
of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority payment.
REGULATION OF THE BANK. The Bank is organized as a Florida-chartered commercial
bank and is regulated and supervised by the Department. In addition, the Bank is
regulated and supervised by the Federal Reserve, which serves as its primary
federal regulator and, to a lesser extent, by the FDIC as the administrator of
the fund that insures the Bank's deposits. Accordingly, the Department and the
Federal Reserve conduct regular examinations of the Bank, reviewing the adequacy
of the loan loss reserves, quality of loans and investments, propriety of
management practices, compliance with laws and regulations, and other aspects of
the Bank's operations. In addition to these regular examinations, the Bank must
furnish to the Federal Reserve quarterly reports containing detailed financial
statements and schedules.
Federal and Florida banking laws and regulations govern all areas of
the operations of the Bank, including reserves, loans, mortgages, capital,
issuances of securities, payment of dividends, and establishment of branches. As
its primary federal regulator, the Federal Reserve has authority to impose
penalties, initiate civil and administrative actions and take other steps
intended to prevent the Bank from engaging in unsafe or unsound practices. The
Bank is a member of the BIF and, as such, deposits in the Bank are insured by
the FDIC to the maximum extent permissible by law.
The Bank is subject to the provisions of the CRA. Under the CRA, the
Bank has a continuing and affirmative obligation consistent with its safe and
sound operation to help meet the credit needs of its entire communities,
including low- and moderate-income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit the Bank's discretion to develop the types of products and services that
it believes are best suited to their particular communities, consistent with the
CRA. The CRA requires the appropriate federal bank regulatory agency (in the
case of the Bank, the Federal Reserve), in connection with their regular
examinations, to assess a financial institution's record in meeting the credit
needs of the community serviced by it, including low- and moderate-income
neighborhoods. A federal banking agency's assessment of a financial
institution's CRA record is made available to the public. Further, such
assessment is required whenever the institution applies to, among other things,
55
<PAGE> 61
establish a new branch that will accept deposits, relocate an existing office or
merge or consolidate with, or acquire the assets of or assume the liabilities
of, a federally-regulated financial institution. In the case where the Company
applies for approval to acquire a bank or other bank holding company, the
federal regulator approving the transaction will also assess the CRA records of
the Bank. The Bank received a "Satisfactory" CRA rating in its most recent
examination.
In April 1995, the federal banking agencies adopted amendments revising
their CRA regulations, with a phase-in schedule applicable to various
provisions. Among other things, the amended CRA regulations, which became fully
effective on July 1, 1997, substitute for the prior process-based assessment
factors a new evaluation system that will rate an institution based on its
actual performance in meeting community needs. In particular, the system now
focuses on three tests: (i) a lending test, to evaluate the institution's record
of making loans in its service areas; (ii) an investment test, to evaluate the
institution's record of investing in community development projects; and (iii) a
service test, to evaluate the institution's delivery of services through its
branches and other offices. The amended CRA regulations also clarify how an
institution's CRA performance will be considered in the application process. The
Company does not anticipate that the revised CRA regulations will have any
material impact on the Bank's operations or its CRA rating.
DEPOSIT INSURANCE. The Bank is subject to FDIC deposit insurance assessments.
The Bank is also subject to a risk-based assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. The system
assigns an institution to one of three capital categories: (i) well capitalized
(ii) adequately capitalized and (iii) undercapitalized. An institution is also
assigned, by the FDIC, to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the risk-based assessment system, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessment rates on deposits for an institution in the highest category (i.e.,
"well capitalized" and "healthy") are less than assessment rates on deposits for
an institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern").
In addition to FDIC insurance assessments, the Bank is also subject to
assessments used to pay interest on bonds issued by the Financing Corporation
(the "FICO") under the Deposit Insurance Funds Act (the "Funds Act"). Prior to
enactment of the Funds Act, only insurance payments by SAIF-member institutions
were available to satisfy FICO's interest payment obligations. Through the end
of 1999, the FICO assessment rate on BIF-assessable deposits is required by the
statute to be one-fifth of the SAIF rate. Thereafter, FICO assessment rates for
members of both insurance funds will presumably be equalized.
Currently, the FICO assessment rate for BIF-assessable deposits is
0.013 percent (or 1.3 basis points) and the FICO assessment rate for SAIF
assessable deposits is 0.0648 percent (or 6.48 basis points). In 1997, the
Bank's total FICO payment obligation was $12,500, all of which was attributable
to the BIF-assessable deposits. The Bank has no SAIF assessable deposits.
CAPITAL REQUIREMENTS. The Company and the Bank are required to comply with the
capital adequacy standards established by the Federal Reserve. There are three
basic measures of capital adequacy for banks that have been promulgated by the
Federal Reserve; two risk-based measures and a leverage measure. All applicable
capital standards must be satisfied for a bank holding company and a bank to be
considered in compliance.
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<PAGE> 62
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guidelines for the ratio of total capital ("Total Capital")
to risk-weighted assets (including certain off-balance-sheet items, such as
standby letters of credit) is 8.0%. At least half of Total Capital (i.e., 4% of
risk-weighted assets) must comprise common stock, minority interests in the
equity accounts of consolidated subsidiaries, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets ("Tier 1 Capital"). The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves ("Tier 2 Capital"). In addition, the Federal Reserve has
established minimum leverage ratio guidelines for bank holding companies. These
guidelines provide for a minimum ratio of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for banks that meet certain
specified criteria, including having the highest regulatory rating. All other
bank holding companies generally are required to maintain a leverage ratio of at
least 3%, plus an additional cushion of 100 to 200 basis points. The guidelines
also provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels, without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles) and other
indicators of capital strength in evaluating proposals for expansion or new
activities.
The FDIC Improvement Act of 1991 ("FDICIA") contains "prompt corrective
action" provisions pursuant to which banks are to be classified into one of the
five categories based upon capital adequacy, ranging from "well capitalized" to
"critically undercapitalized", and which require (subject to certain exceptions)
the appropriate federal banking agency to take prompt corrective action with
respect to an institution which becomes "significantly undercapitalized or
"critically undercapitalized".
The Federal Reserve has issued final regulations to implement the
"prompt corrective action" provisions of FDICIA. In general, the regulations
define the five capital categories as follows: (i) an institution is "well
capitalized" if it has a total risk-based capital ratio of 10% or greater, has a
Tier 1 risk-based capital ratio of 6% or greater, has a leverage ratio of 5% or
greater and is not subject to any written capital order or directive to meet and
maintain a specific capital level for any capital measures; (ii) an institution
is "adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, has a Tier 1 risk-based capital ratio of 4% or greater, and has a
leverage ratio of 4% or greater; (iii) an institution is "undercapitalized" if
it has a total risk-based capital ratio of less than 8%, has a Tier 1 risk-based
capital ratio that is less than 4% or has a leverage ratio that is less than 4%;
(iv) an institution is "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital ratio
that is less than 3% or a leverage ratio that is less than 3%; and (v) an
institution is "critically undercapitalized" if its "tangible equity" is equal
to or less than 2% of its total assets. The Federal Reserve also, after an
opportunity for a hearing, has authority to downgrade an institution from "well
capitalized" to "adequately capitalized" or to subject an "adequately
capitalized" or "undercapitalized" institution to the supervisory actions
applicable to the next lower category, for supervisory concerns. The degree of
regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, deposit
interest rates, and other activities; (iv) improve their management; (iv)
eliminate management fees; or (vi) divest themselves of all or part of their
operations. Bank holding companies controlling financial institutions can be
called upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans. While the
Company's capital levels have been in excess of those required to be maintained
by a "well capitalized" financial institution, rapid growth, poor loan portfolio
performance, or poor earnings performance, or a combination of these factors,
could change the Company's capital position in a relative short period of time,
making an additional capital infusion necessary.
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<PAGE> 63
As a condition of receiving approval from the Department to exceed
certain regulatory investment limitations in order to invest in its new
headquarters building, the Bank agreed to maintain a minimum Tier 1 Capital
ratio of 7% during the period of time that such investment limitations are
exceeded. If the Bank's Tier 1 Capital ratio falls below 7%, the Bank is
required to increase its capital by an amount sufficient to reach the 7% minimum
ratio within 90 days. As of June 30, 1998, the Bank's Tier 1 Capital ratio was
6.87%. Upon completion of the Offerings, the Bank's Tier 1 Capital ratio will
exceed 7%.
DIVIDENDS. As a Florida-chartered commercial bank, the Bank is subject to the
laws of Florida as to the payment of dividends. Under the Florida Financial
Institutions Code, the prior approval of the Department is required if the total
of all dividends declared by a bank in any calendar year will exceed the sum of
the bank's net profits for that year and its retained net profits for the
preceding two years.
Under Federal law, if, in the opinion of the federal banking regulator,
a bank or thrift under its jurisdiction is engaged in or is about to engage in
an unsafe or unsound practice (which, depending on the financial condition of
the depository institution, could include the payment of dividends), such
regulation may require, after notice and hearing, that such institution cease
and desist from such practice. The federal banking agencies have indicated that
paying dividends that deplete a depository institution's capital base to an
inadequate level would be an unsafe and unsound banking practice. Under the
Prompt Corrective Action regulations adopted by the federal banking agencies, a
depository institution may not pay any dividend to its holding company if
payment would cause it to become undercapitalized or if it already is
undercapitalized.
FEDERAL RESERVE SYSTEM. The Federal Reserve regulations require banks to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The new Federal Reserve
regulations, effective December 16, 1997, generally require that reserves be
maintained against aggregate transaction accounts as follows: (i) for accounts
aggregating $47.8 million or less (subject to adjustment by the Federal Reserve)
the reserve requirement is 3%; and (ii) for accounts greater than $47.8 million,
the reserve requirement is $1.434 million plus 10.0% (subject to adjustment by
the Federal Reserve between 8% and 14%) against that portion of total
transaction accounts in excess of $47.8 million. The first $4.7 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve)
are exempted from the reserve requirements. As of June 30, 1998, the Bank was in
compliance with the foregoing requirements. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve may be used to satisfy
liquidity requirements imposed by the Department. Because required reserves must
be maintained in the form of either vault cash, a noninterest-bearing account at
a Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve, the effect of this reserve requirement is to reduce the Bank's
interest-earning assets.
LIQUIDITY. Under Florida banking regulations, the Bank is required to maintain a
daily liquidity position equal to at least 15% of its total transaction accounts
and 8% of its total nontransaction accounts, less those deposits of public
funds for which security has been pledged as provided by law. The Bank may
satisfy its liquidity requirements with cash on hand (including cash items in
process of collection), deposits held with the Federal Reserve, demand deposits
due from correspondent banks, Federal funds sold, interest-bearing deposits
maturing in 31 days or less and the market value of certain unencumbered, rated,
investment-grade securities and securities issued by Florida or any county,
municipality or other political subdivision within the State. The Federal
Reserve also reviews the Bank's liquidity position as part of its examination
and imposes similar requirements on the Bank. Any Florida-chartered commercial
bank that fails to comply with its liquidity requirements generally may not
further diminish liquidity either by making any new loans (other than by
discounting or purchasing bills of exchange payable at sight) or by paying
dividends. At June 30, 1998, the Bank's net liquid assets exceeded the minimum
amount required under the applicable Florida regulations.
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<PAGE> 64
MONETARY POLICY AND ECONOMIC CONTROLS. The banking business is affected not only
by general economic conditions, but also by the monetary policies of the Federal
Reserve. Changes in the discount rate on member bank borrowing, availability of
borrowing at the "discount window", open market operations, the imposition of
changes in reserve requirements against bank deposits and the imposition of and
changes in reserve requirements against certain borrowings by banks and their
affiliates are some of the instruments of monetary policy available to the
Federal Reserve. The monetary policies have had a significant effect on the
operating results of commercial banks and are expected to continue to do so in
the future. The monetary policies of the Federal Reserve are influenced by
various factors, including inflation, unemployment and short- and long-term
changes in the international trade balance and in the fiscal policies of the
United States Government. Future monetary policies and the effect of such
policies on the future business and earnings of the Bank cannot be predicted.
FUTURE LEGISLATION. Various legislation, including proposals to overhaul the
bank regulatory system and expand the powers of bank holding companies, is from
time to time introduced in Congress. Such legislation may change banking
statutes and the operating environment of the Company and its bank and non-bank
subsidiaries in substantial and unpredictable ways. One such proposal, H.R. 10,
passed the U.S. House of Representatives on May 14, 1998. That bill would amend
the BHC Act to make insurance and securities underwriting and other non-banking
activities permissible for bank holding companies. However, there is no
assurance that such legislation as currently drafted, or any other legislation,
will ultimately be enacted and, if enacted, the ultimate effect that any such
potential legislation or implementing regulations would have upon the financial
condition or results of operations of the Company.
CHANGES IN ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") recently adopted or
issued proposals and guidelines that may have a significant impact on the
accounting practices of commercial enterprises in general and financial
institutions in particular.
During 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities," which was
effective for the Company's fiscal year beginning January 1, 1997. SFAS 125
provides standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. In addition to providing
further guidance related to the recording of mortgage servicing rights, SFAS No.
125 requires an entity to classify loans securitized which are retained in its
portfolio and excess spread related to mortgage servicing rights as trading
assets. SFAS No. 125 has not had a material impact on the Company's results of
operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which was effective for the Company's current fiscal year beginning
January 1, 1998. SFAS 130 establishes standards for reporting and display of
comprehensive income, its components and accumulated balances in the financial
statements. Comprehensive income is defined to include those revenues, expenses,
gains, and losses of a normal, recurring nature, as well as items which are
non-recurring, unusual and infrequent. The adoption of SFAS No. 130 did not have
a material effect on the Company's financial statements.
Also, in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which is effective for the
Company's current fiscal year beginning July 1, 1998. SFAS No. 131 establishes
standards for the way the Company reports information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements. Management has
implemented SFAS No. 131 in the year ended December 31, 1997 and believes its
trust operations and investment advisory activities are immaterial to the
consolidated financial statements in terms of their respective assets, revenues,
profit or loss and other operating data.
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<PAGE> 65
PROPERTIES
The principal executive offices of the Company, the Bank and United
Trust are located in an office building at 333 Third Avenue North, St.
Petersburg, Florida 33701. This facility was completed in late 1997, is owned by
the Company and has a total of five floors and approximately 47,400 square feet
of usable space. The Company and its subsidiaries occupy a total of
approximately 25,000 square feet on the first two floors and a portion of the
third floor of the building. As of June 30, 1998, the balance of the building
was leased to tenants. Adequate parking, lobby, safe deposit boxes, and
drive-thru facilities are provided to customers of the Bank at this location.
The Bank has additional branch locations at 5801 North 49th Street
(North Office), 5601 North Park Street (Five Towns Office), and 6500 Gulf
Boulevard (St. Pete Beach Office), all in St. Petersburg, Florida. Except for
the Five Towns Office, these facilities are owned by the Company and offer both
lobby and drive-thru banking facilities to the Bank's customers. The Five Towns
Office is leased for a term expiring October 31, 2001, with four renewal
options.
Additionally, the Bank has given notice of its intent to exercise an
option to purchase a bank branch site at 7490 Bryan Dairy Road in Pinellas Park
by 1998 year-end with an anticipated opening during the first quarter of 1999.
It will be the Bank's fifth banking branch office and will offer lobby,
drive-thru and safe deposit facilities to the Bank's customers.
EPW's main office is located in an office building in Tampa, Florida in
which EPW leases approximately 3,190 square feet of space pursuant to a lease
expiring February 28, 2003, with no renewal option. EPW's Jacksonville, Florida
office operates out of a private home owned by an officer of EPW.
LEGAL PROCEEDINGS
The Company is a party to various legal proceedings in the ordinary
course of its business. Based on information presently available, management
does not believe that the ultimate outcome of such proceedings, in the
aggregate, would have a material adverse effect on the Company's financial
position, results of operations or liquidity.
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<PAGE> 66
MANAGEMENT
Set forth below is certain information concerning the Company's
directors and executive officers. The Company's directors are elected for one
year terms.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Position with Position with the Bank,
Name Age the Company United Trust or EPW
- ---- --- ----------- -------------------
<S> <C> <C> <C>
Ronald E. Clampitt 53 Director
David K. Davis, M.D 74 Director Vice Chairman of the Bank
Edward D. Foreman 54 Director
Charles O. Lowe 60 Director Executive Vice President of
United Trust
John B. Norrie 55 Director, Chairman
Neil W. Savage 57 Director, President Chairman and CEO
and CEO of the Bank
Harold J. Winner 49 Director President of the Bank
Ward J. Curtis, Jr. 52 Director, Executive Chairman, CEO and President
Vice President of United Trust
Henry Esteva 79 Director, Chairman
Emeritus
Ian F. Irwin 48 Director
Jack A. MaCris, M.D. 73 Director
Ronald Petrini 53 Director
John B. Wier, Jr. 59 Director
William A. Eickhoff 51 Director, Executive Chairman and Chief Executive
Vice President Officer of EPW
</TABLE>
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<PAGE> 67
OTHER EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Position with Position with the Bank,
Name Age the Company United Trust or EPW
- ---- --- ----------- -------------------
<S> <C> <C> <C>
Cynthia A. Stokes 49 Senior Vice President Executive Vice President of
the Bank
C. Peter Bardin 40 Senior Vice President Senior Vice President and
and Chief Financial Chief Financial Officer of
Officer the Bank
Susan L. Blackburn 39 Senior Vice President of
the Bank
P. Dennis Barletta 46 Vice President Vice President of the Bank
John Pieper 54 President of EPW
</TABLE>
Ronald E. Clampitt, Director of the Company since 1985. Mr. Clampitt has
been a self-employed licensed mortgage broker, appraiser and contractor at
various times since 1975.
David K. Davis, M.D., Director of the Company and Vice Chairman of the
Bank since 1986. Dr. Davis is a retired pathologist.
Edward D. Foreman, Director of the Company since 1986. Mr. Foreman has
been a practicing attorney since 1972 in the St. Petersburg area.
Charles O. Lowe, Director since June 1995 and Executive Vice President of
United Trust since September 1995. Prior to joining the Company, Mr. Lowe served
as Senior Vice President at NationsBank (and predecessor companies) from 1973 to
1995.
John B. Norrie, Director of the Company since 1986 and Chairman since
1995. Mr. Norrie is co-founder and director of Precision Panel Products, Inc., a
producer of custom cabinetry, since 1992 and was Chief Executive Officer of New
Horizon Auto Body and Paint Supply Corp. until 1993.
Neil W. Savage, Director, President and Chief Executive Officer of the
Company since May 1986 and Chairman and Chief Executive Officer of the Bank
since May 1986. Prior to joining the Company and the Bank, Mr. Savage was
president and co-founder of the Bank of Florida Corporation, a St. Petersburg
bank holding company and has been a general partner of Hamilton Partners, Ltd.,
a private investment partnership since 1969.
Harold J. Winner, Director of the Company and President of the Bank since
1992. Prior to joining the Company and the Bank, Mr. Winner served as Senior
Vice President of Commercial Lending for Pioneer Savings Bank since 1987.
Ward J. Curtis, Jr., Director and Executive Vice President of the Company
since June 1995 and Chairman, Chief Executive Officer and President of United
Trust since December 1997. From 1992 to 1995, Mr. Curtis was Managing Director
of Trust and Investment Services for SEI Corporation. Mr. Curtis served as an
officer of NationsBank (and predecessor companies) from 1977 until 1992.
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<PAGE> 68
Henry Esteva, Director since 1982 and Chairman Emeritus of the Company
since 1995. Mr. Esteva was the founder of the Bank in 1980 and has served on the
Board of Directors in several capacities since that time. Mr. Esteva is a
retired municipal judge of Pinellas County and is a partner of the law firm of
Piper, Esteva, Karvonen & Lewis.
Ian F. Irwin, Director of the Company since 1986. Mr. Irwin is the Chief
Executive Officer of the Southeast Companies of Tampa Bay, Inc., a real estate
development company.
Jack A. MaCris, M.D., Director of the Company since 1986. Dr. MaCris is a
retired surgeon from the St. Petersburg area.
Ronald Petrini, Director of the Company since December 1995. Mr. Petrini
is President of Great Bay Distributors Inc., an Anheuser-Busch distributor in
Pinellas County.
John B. Wier, Jr., Director of the Company since 1986. Mr. Wier has been
the President of Jack Wier, Jr. & Associates since 1974, a textile manufacturer
representative firm.
William A. Eickhoff, Director and Executive Vice President of the Company
since 1996 and Chairman and Chief Executive Officer of EPW since 1984.
Cynthia A. Stokes, Senior Vice President of the Bank since April 1989 and
Executive Vice President of the Bank since 1992. Prior to joining the Bank, Ms.
Stokes was Senior Vice President of Product Development and Central Operations
with Florida Federal Savings & Loan in St. Petersburg.
C. Peter Bardin, Senior Vice President and Chief Financial Officer of the
Company and the Bank since 1996 and Assistant Vice President and Controller of
the Bank since 1989. Prior to joining the Company, Mr. Bardin was Vice President
in the Accounting Division with Florida Federal Savings & Loan in St.
Petersburg.
Susan L. Blackburn, Senior Vice President of the Bank since 1995. Prior to
joining the Bank, Ms. Blackburn was Vice President of NationsBank from October
1976 to November 1995.
P. Dennis Barletta, Vice President of the Company and the Bank since
September 1997. Prior to joining the Bank, Mr. Barletta was Director of Human
Resources for Bisk Publishing Company from May 1997 to September 1997 and Human
Resources Manager at Inest Financial Corp. from November 1996 to January 1997.
From March 1994 to September 1996, Mr. Barletta was Human Resources Director at
John Harland (formerly OKRA Marketing) and from May 1993 to March 1994 was the
Compensation and Benefits Manager at Fortune Bank.
John Pieper, President and Senior Portfolio Manager of EPW since 1983. Mr.
Pieper was also a Senior Vice President with First Florida Banks, Inc. until
1983.
DIRECTOR COMPENSATION
All directors are paid $250 for each Board of Directors meeting attended.
Non-employee directors are paid $200 for each committee meeting attended. Mr.
Norrie receives an additional $24,000 per year for services rendered as Chairman
of the Company and Mr. Davis receives an additional $10,000 per year for
services rendered as Vice Chairman of the Bank. Additionally, non-employee
directors are eligible for a bonus based on the profitability of the Company. No
other directors receive separate compensation for services rendered as a
director.
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<PAGE> 69
EXECUTIVE COMPENSATION
The following table summarizes the compensation during the fiscal years
ended December 31, 1997, 1996 and 1995, the Company's Chief Executive Officer
and the four highest paid executive officers of the Company (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ------------------------------------
AWARDS PAYOUTS
------------------------ -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($) ($)(2)
- ------------------ ---- --- --- ------ --- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Neil W. Savage, Chief 1997 136,000 73,600 3,595 0 102,000 0 26,077
Executive Officer and 1996 130,000 123,841 7,487 0 0 0 68,024
President 1995 110,321 102,600 4,496 0 0 0 22,861
Ward J. Curtis, Jr., 1997 129,395 0 1,536 0 0 0 8,983
Chairman, Chief 1996 128,466 0 6,477 0 0 0 6,439
Executive Officer and 1995 72,917 0 3,327 0 0 0 0
President of United
Trust(3)
William A. Eickhoff, 1997 115,000 9,000 451 0 0 0 8,725
Chairman and Chief 1996 106,767 0 2,627 0 0 0 8,088
Executive Officer of 1995 n/a n/a n/a 0 0 0 n/a
EPW (4)
Harold J. Winner, 1997 94,100 66,030 683 0 57,000 0 35,998
President of the Bank 1996 90,000 86,313 4,547 0 0 0 11,670
1995 82,441 81,225 259 0 0 0 12,354
Cynthia A. Stokes, 1997 65,823 51,120 1,095 0 37,500 0 7,294
Executive Vice 1996 64,218 67,550 0 0 0 0 7,390
President of the Bank 1995 61,748 64,125 0 0 0 0 10,323
</TABLE>
(1) Includes fringe benefits such as personal usage of company-leased auto,
personal usage of club membership or, board fees (each, if applicable).
(2) Represents the Bank's match of officer's 401(k) contribution, company
contribution to the ESOP and accrual for Salary Continuation Plan (if
applicable).
(3) Mr. Curtis' employment began on June 1, 1995.
(4) Mr. Eickhoff's employment began on February 1, 1996.
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<PAGE> 70
The following table contains information about stock option grants to
Named Executive Officers during the fiscal year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of % of Total Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted Year ($/share) Date
- ---- ------- ---- --------- ----
<S> <C> <C> <C> <C>
Neil Savage 102,000 32.7% $7.94 12/18/07
Ward J. Curtis -0- 0% - -
William A. Eickhoff -0- 0% - -
Harold Winner 57,000 18.7% $7.94 12/18/07
Cynthia A. Stokes 37,500 12.0% $7.94 12/18/07
</TABLE>
The following table provides information about the number and value of
options held by the Named Executive Officers during the fiscal year ended
December 31, 1997 regarding Option/SAR Exercises and Fiscal Year-End Option/SAR
Value:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Acquired Value Options at Options at
on Exercise Realized FY-Ended FY-End(1)
----------- -------- -------- ---------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ---- ------------- -------------
<S> <C> <C> <C> <C>
Neil Savage -0- -0- 102,000/0 $0/0
Ward J. Curtis -0- -0- -- --
William A. Eickhoff -0- -0- -- --
Harold Winner 6,000 $23,333 69,000/6,000 $0/0
Cynthia A. Stokes -0- -0- 37,500/0 $0/0
</TABLE>
(1) For purposes of determining the values of the options held by the Named
Executive Officers, the Company has assumed that the Common Stock had a
value of $7.94 per share on December 31, 1997, which is the estimated fair
market value the Board of Directors determined for the Common Stock on
December 18, 1997, in connection with certain grants of options under the
Company's stock option plan. The option value is based on the difference
between the fair market value of the shares on December 31, 1997 and the
option exercise price per share, multiplied by the number of shares of
Common Stock subject to the option.
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<PAGE> 71
EMPLOYMENT CONTRACTS WITH OFFICERS
Neil W. Savage. Mr. Savage is employed as President and Chief Executive
Officer of the Company pursuant to an employment agreement for a term that began
on October 17, 1997 and terminates as provided therein. Mr. Savage receives an
annual salary of $136,000 with annual salary increases, is eligible to receive
certain bonuses and certain other compensation as provided in the senior
management committee incentive schedule approved and adopted by the Company from
time to time, and is provided the use of an automobile for company duties.
Additionally, Mr. Savage is entitled to participate in any employee benefit plan
maintained by the Company and receive health and dental insurance. Mr. Savage's
employment may be terminated upon disability or attaining age 65, at the
election of Mr. Savage with 90 days notice, upon the dissolution and liquidation
of the Company (other than as part of a reorganization, merger, consolidation or
sale of all or substantially all of the assets of the Company whereby the
business is continued), by the Company for "just cause" and by the Company upon
six months notice with or without cause. If Mr. Savage's employment is
terminated by the Company (other than for "just cause"), he is entitled to
continue to receive compensation provided in his employment agreement for a
period of 12 months.
Harold J. Winner. Mr. Winner is employed as President of the Bank
pursuant to an employment agreement for a term that began on December 4, 1997
and terminates as provided therein. Mr. Winner receives an annual salary of
$94,100 with annual salary increases, is eligible to receive certain bonuses
and certain other compensation as provided in the senior management committee
incentive schedule approved and adopted by the Company from time to time, and is
provided the use of an automobile for company duties. Additionally, Mr. Winner
is entitled to participate in any employee benefit plan maintained by the
Company and receive health and dental insurance. Mr. Winner's employment may be
terminated upon disability or attaining age 65, at the election of Mr. Winner
with 90 days notice, upon the dissolution and liquidation of the Company (other
than as part of a reorganization, merger, consolidation or sale of all or
substantially all of the assets of the Company whereby the business is
continued), by the Company for "just cause" and by the Company upon six months
notice with or without cause. If Mr. Winner's employment is terminated by the
Company (other than for "just cause"), he is entitled to continue to receive
compensation provided in his employment agreement for a period of 12 months.
Cynthia A. Stokes. Ms. Stokes is employed as Director of Operations of
the Company pursuant to an employment agreement for a term that began on
December 5, 1997 and terminates as provided therein. Ms. Stokes receives an
annual Salary of $65,823 with annual increases, and is eligible to receive
certain bonuses and certain other compensation as provided in the senior
management committee incentive schedule approved and adopted by the Company from
time to time. Additionally, Ms. Stokes is entitled to participate in any
employee benefit plan maintained by the Company and receive health and dental
insurance. The agreement may be terminated upon disability or attaining age 65,
at the election of Ms. Stokes with 90 days notice, upon the dissolution and
liquidation of the Company (other than as part of a reorganization, merger,
consolidation or sale of all or substantially all of the assets of the Company
whereby the business is continued), by the Company for "just cause" and by the
Company upon six months notice with or without cause. If Ms. Stokes's employment
is terminated by the Company (other than for "just cause"), she is entitled to
continue to receive compensation provided in her employment agreement for a
period of 12 months.
Ward J. Curtis, Jr. Mr. Curtis is employed as Chairman, Chief
Executive Officer and President of United Trust pursuant to an employment
agreement, as amended, for a term that began September 29, 1995 and terminates
as provided therein. Mr. Curtis receives an annual salary of $129,395 with
annual salary increases, is eligible to receive certain bonuses and is provided
the use of an automobile for Company duties. Additionally, Mr. Curtis is
entitled to participate in employee benefit plan maintained by the Bank and is
entitled to receive benefits under the Trust Department Stock Option Plan, as
amended (the "Trust Plan"). Mr Curtis' employment agreement contains a
non-competition clause pursuant to which Mr. Curtis may not compete with or
solicit customers from the Bank in Pinellas County during his employment and for
a period of two years thereafter; provided, however, that such non-competition
clause shall terminate after 2001 and may under certain circumstances terminate
after 2000. Additionally, Mr. Curtis' employment agreement was amended on July
22, 1997, to provide that if a Change of Control (as defined in the FSC Right of
First Refusal Agreement dated September 25, 1995) occurs, the acquiror shall
have certain rights with
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<PAGE> 72
respect to Mr. Curtis' continued employment or termination thereof. Furthermore,
pursuant to such amendment, except in the event of a Change of Control, Mr.
Curtis shall have the right to buy out the last year of his non-compete
agreement in exchange for a cash payment of $125,000. Mr. Curtis' employment
agreement may be terminated upon disability, at the election of Mr. Curtis with
six months notice, by the Bank for "just cause" or on or after December 31, 2000
by either party under certain circumstances.
William A. Eickhoff. Mr. Eickhoff is employed as Chairman and Chief
Executive Officer of EPW pursuant to an employment agreement, as amended, with
EPW for a term that began on December 28, 1995 and terminates as provided
therein. Mr. Eickhoff's salary is a portion of a salary pool that is the
lesser of (i) $115,000 times three, or if less, times the number of original
shareholders of EPW at the time of the Company's acquisition who remain employed
by EPW for the particular year or (ii) 15.5% of EPW revenues times three, or if
less, times the number of original shareholders of EPW at the time of the
Company's acquisition who remain employed by EPW for the particular year; plus a
bonus that shall be not less than $5,000 times the number of original
shareholders of EPW at the time of the Company's acquisition who remain employed
on the last day of the calendar year. In addition, the agreement contains a
non-competition clause pursuant to which Mr. Eickhoff may not (i) compete with
EPW in EPW's Trade Area (as defined therein) during Mr. Eickhoff's employment
and for a period of two years thereafter or until January 1, 2000 or (ii)
solicit any customer of EPW during Mr. Eickhoff's employment and for a period of
three years thereafter or until January 1, 2000. Mr. Eickhoff's employment may
be terminated upon disability, at the election of Mr. Eickhoff with six months
notice, by EPW for "just cause", on December 31, 1999 if not renewed by July 1,
1999 and on or after December 31, 2002 by either party with three months notice.
In addition, Mr. Eickhoff is eligible to participate in any employee benefit
plan maintained by EPW and the Company and is eligible to receive benefits under
the EPW Stock Option Plan, as amended (the "EPW Plan"). EPW is required to
provide a minimum of $900,000 in life insurance to Mr. Eickhoff with a current
death benefit of $265,061. Furthermore, Mr. Eickhoff's employment agreement was
amended on July 22, 1997, to provide that if a Change of Control (as defined in
the EPW Right of First Refusal Agreement dated December 28, 1995) occurs prior
to December 31, 2000, Mr. Eickhoff shall be paid his unearned employment bonus
in an amount set forth in the amendment and such unearned bonus shall be paid in
cash. The amendment also provides that in the event of a Change of Control, the
acquiror shall have certain rights with respect to Mr. Eickhoff's continued
employment or termination thereof. Finally, the amendment to Mr. Eickhoff's
employment agreement provides that in the event he earns any bonus for the year
2000, such bonus shall be paid in cash or in the Company's stock (at the most
recent ESOP price) at the option of Mr. Eickhoff.
OTHER COMPENSATORY BENEFIT PLANS WITH OFFICERS
Neil W. Savage. The Bank has entered into a salary continuation
agreement with Mr. Savage dated December 8, 1997 pursuant to which certain
benefits will be paid to Mr. Savage, under certain situations following his
termination, out of the Bank's general assets. Mr. Savage is entitled to receive
a benefit in the amount of 60% of his final salary upon termination of his
employment either (i) on or after the Normal Retirement Age (as defined
therein), (ii) for Disability (as defined therein), or (iii) for Change of
Control (as defined therein), payable monthly for 239 additional months.
Alternatively, if Mr. Savage is terminated for reasons other than death,
disability, "for cause" or following a change of control, Mr. Savage shall be
paid 60% of his final salary multiplied by a vesting percentage set forth in Mr.
Savage's agreement payable monthly for a term of 239 additional months.
Harold J. Winner. The Bank has entered into a salary continuation
agreement with Mr. Winner dated December 5, 1997 pursuant to which certain
benefits will be paid to Mr. Winner, under certain situations following his
termination, out of the Bank's general assets. Mr. Winner shall be entitled to
receive benefits in the amount of 50% of his final salary upon termination of
his employment either (i) on or after the Normal Retirement Age (as defined
therein), (ii) for Disability (as defined therein), or (iii) for Change of
Control (as defined therein), payable monthly for 239 additional months.
Alternatively, if Mr. Winner is terminated for reasons other than death,
disability, "for cause" or following a change of control, Mr. Winner shall be
paid 50% of his final salary multiplied by a vesting percentage set forth in Mr.
Winner's agreement payable monthly for a term of 239 additional months.
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<PAGE> 73
Cynthia A. Stokes. The Bank has entered into a salary continuation
agreement with Ms. Stokes dated December 5, 1997 pursuant to which certain
benefits will be paid to Ms. Stokes, under certain situations following her
termination, out of the Bank's general assets. Ms. Stokes is entitled to receive
benefits in the amount of 40% of her final salary upon termination of her
employment either (i) on or after the Normal Retirement Age (as defined
therein), (ii) for Disability (as defined therein), or (iii) for Change of
Control (as defined therein), payable monthly for 239 additional months.
Alternatively, if Ms. Stokes is terminated for reasons other than death,
disability, "for cause" or following a change of control, Ms. Stokes shall be
paid 40% of her final salary multiplied by a vesting percentage set forth in Ms.
Stokes' agreement payable monthly for a term of 239 additional months.
EMPLOYEE BENEFIT PLANS
Profit Sharing Plan. The Company has a defined contribution
profit-sharing plan (the "Profit Sharing Plan") covering substantially all
employees. Contributions are determined annually by the Board of Directors. The
Company contributed $99,996, $75,000 and $75,000 for the years ended December
31, 1997, 1996 and 1995, respectively. The Profit Sharing Plan was amended in
1993 to include an Employee Stock Ownership Plan ("ESOP") provision. As of
December 31, 1997, the ESOP owned 85,863 shares of the Company's Common Stock.
During 1998, the ESOP purchased an additional 34,443 newly issued shares from
the Company and 15,300 shares from an existing shareholder. The purchase price
of the newly issued stock was $8.25 as determined by an outside independent
appraisal.
401K Plan. The Company sponsors a deferred compensation 401(k) plan
(the "401(k) Plan") for the benefit of eligible full-time employees. The 401(k)
Plan, which is voluntary, allows employees to contribute up to 10 percent of
their total compensation (or a maximum of $10,000 as limited by federal
regulations) on a pre-tax basis. The Company makes a matching contribution of
100 percent of the first $500 and 40 percent thereafter, up to the maximum
amount allowed by the 401(k) Plan.
STOCK OPTION PLAN
The Company adopted the United Financial Holdings, Inc. Stock Option
and Incentive Compensation Plan (the "Plan") on November 18, 1997. Under the
Plan, nonqualified stock options are granted to certain officers and directors
identified in the Plan (the "Nonqualified Options") and incentive stock
options are granted to certain officers named in the Plan (the "Incentive
Options", and with the Nonqualified Options, the "Options"). The Plan is
administered by a committee composed of members of the Strategic Review
Committee of the Company (the "Committee") which does not have the authority to
designate Eligible Persons (as defined in the Plan), Recipients (as defined in
the Plan), or award any Options. All Eligible Persons, Recipients and all
Options are designated in the Plan and its exhibits. The Committee has certain
authority only to interpret, adopt, amend and rescind the Plan. Nonqualified
Options are granted at a price equal to 100% of the Fair Market Value (as
defined in the Plan) of the Company's Common Stock on the date of grant.
Incentive Options are granted at a price equal to 100% of the Fair Market Value
of the Company's Common Stock, except that any individual who possesses more
than 10% of the combined voting power of all classes of stock of either the
Company or its subsidiaries shall be granted an exercise price of 110% of the
Fair Market Value on the date of the grant. All Options granted are subject to
dilution adjustment for any increase or decrease in number based on the payment
of a stock dividend, a subdivision or combination of shares or the
reclassification of the Company's Common Stock. Options to purchase a total of
468,000 shares of Common Stock may be granted under the Plan. Upon adoption of
the Plan, all of such Options were awarded, with directors receiving 156,000
Options and officers receiving 312,000 Options, all of which are still
outstanding. The Options are exercisable for ten years from the date of grant,
in accordance with a vesting schedule. Options granted to officers fully vest
upon death, total disability or retirement. Otherwise, such Options vest over a
seven year period. Options granted to directors fully vest upon grant.
Options are forfeited upon termination as defined in the Plan.
In addition to Options, cash awards may be granted to officers and
directors identified in the Plan upon a Change of Control ( as defined in the
Plan). The cash awards are allocated two-thirds to officers and one-third to
directors. The Plan establishes the maximum cash awards as 15% of the amount by
which the net sales proceeds payable
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<PAGE> 74
to the shareholders upon a Change of Control exceed the Return Amount (as
defined in the Plan), which is an investment return on the Company's capital of
16.5% compounded since the formation of the Company in 1982. The pool available
for cash awards, after the calculation, is allocated two-thirds to officers and
one-third to directors and is further reduced by the value of Options and
certain Salary Continuation Agreements (as defined in the Plan) in effect. The
Plan further provides that if, on any Change of Control, payments to
"disqualified persons" as defined in Sections 280G and 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), constitute "excess golden
parachute payments" within the meaning of such Code sections, no such payments
will be made until the matter is submitted to the shareholders for vote and,
before the Change of Control occurs, a sufficient percentage of the shareholders
vote to approve the excess payments.
OTHER COMPENSATORY PLANS
The Trust Plan was adopted in connection with the acquisition of
FSC to provide performance based stock awards to Mr. Curtis, Mr. Lowe and Susan
Mittermayr, the former shareholders of FSC who became employees of the Bank's
Trust Department following the acquisition. In connection with the acquisition,
225,000 shares of Common Stock were reserved for issuance to these persons as
awards of performance shares. The Trust Plan provides for the grant of nominally
priced options to purchase shares of Common Stock upon the achievement of
certain earnings performance criteria of the Bank's Trust Department, which may
be awarded only if all of such performance shares have been earned. Options may
only be exercised after December 31, 1999 and shall terminate and expire to the
extent not exercised, or otherwise terminated under the Trust Plan, upon the
earlier of midnight December 31, 2005, or six months following the participant's
death. The aggregate number of options that may be granted during calendar years
1997-2000 shall be determined in accordance with the following formula: the
Bank's Trust Department Net Earnings (as defined in the Trust Plan) for the
calendar year for which a determination is being made shall be divided by the
value of each outstanding share of the Company's Common Stock as of the end of
the calendar year to determine the number of performance shares. If all
available performance shares have been issued, options may be granted and the
number of options for the corresponding year shall be equal to 120% of the
number of performance shares determined by the same formula. In addition to
options, the participants may be entitled to an option exercise bonus based on
the tax deduction received by the Company upon exercise. The Trust Plan shall
terminate on March 31, 2002 or earlier as set forth therein. As of June 30,
1998, 9,108 performance shares and no option shares have been granted under the
Trust Plan.
The EPW Plan was adopted in January 1996 in connection with the
acquisition of EPW by the Company, and provides for the grant of nominally
priced options to purchase shares of Common Stock upon the achievement of
certain earnings performance criteria. The allocation ratio of options granted
under the EPW Plan is determined by EPW's board of directors after receiving
recommendations from the Compensation Committee (as defined in the EPW Plan).
Each Option may only be exercised after December 31, 1999 and shall terminate
and expire to the extent not exercised, or otherwise terminated under the EPW
Plan, upon the earlier of midnight December 31, 2005, or six months following
the participant's death. The aggregate number of options that may be granted to
participants for calendar years 1997-2000 shall be determined in accordance with
the following formula: the Trust Department Net Earnings (as defined in the
EPW Plan) for the calendar year for which a determination is being made shall be
divided by the value of each outstanding share of the Company's Common Stock as
of the end of the calendar year to determine the Total Shares (as defined in
the EPW Plan); Total Shares are then multiplied by 35% to determine the total
number of options which are to be granted to participants under the EPW Plan. In
addition to options, the participants may be entitled to an option exercise
bonus based on the tax deduction received by the Company upon exercise. The EPW
Plan shall terminate on March 31, 2002. As of June 30, 1998, 4,905 shares have
been granted under the EPW Plan.
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<PAGE> 75
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Southeast Realty Interests, Inc. On November 24, 1997, Southeast Realty
Interests, Inc. ("SERI"), an affiliate of Mr. Irwin, entered into an exclusive
right to lease agreement (the "Lease Agreement") with a subsidiary of the
Company that owns the building in which the Company's principal executive office
is located. Pursuant to the Lease Agreement, SERI was granted the exclusive
right to lease 17,918 square feet in the building located at 333 Third Avenue
North, St. Petersburg, Florida at stated terms. The Lease Agreement expired on
July 14, 1998. As of June 30, 1998, the space was 100% leased. Commissions of
$39,490 were paid to SERI during the term of the Lease Agreement.
The Southeast Companies of Tampa Bay, Inc. On March 18, 1997, The
Southeast Companies of Tampa Bay, Inc. (the "Manager"), also an affiliate of Mr.
Irwin, entered into a Property Management Agreement with a subsidiary of the
Company pursuant to which it was employed to act as the sole and exclusive
manager in the leasing, operation and management of the building in which the
Company's principal executive offices are located at 333 Third Avenue North, St.
Petersburg, Florida for total annual consideration of approximately $17,000 .
The agreement automatically renews each year unless either party terminates it
by providing notice of cancellation at least 60 days prior to March 31 of the
year that the agreement is in effect.
Certain Extensions of Credit. As of June 30, 1998, the following loans
in excess of $60,000 to the Company's directors, executive officers and
principal shareholders were outstanding: Mr. Clampitt, $303,052; Mr. Eickhoff,
$76,924; Mr. Irwin and affiliated entities, $1,507,944; Dr. MaCris, $65,874; Mr.
Norrie and affiliated entities, $633,850; and Mr. Wier and affiliated entities,
$971,327. Certain additional amounts are available to be borrowed by these
individuals and other officers and directors under existing lines of credit and
other arrangements. All of the foregoing extensions of credit were made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time made for comparable
transactions with others and did not involve more than the normal risk of
collectability or present other unfavorable features.
The Company may engage in additional transactions with affiliates of
the Company from time to time when it's board of directors determines it is in
the best interest of the Company to do so. The Company currently intends to
continue to make available the extensions of credit referenced above. The
Company believes that the transactions previously entered into by the Company
with its affiliates, as well as those that may be undertaken with its affiliates
in the future, have been and will continue to be on terms at least as favorable
as those that could have been negotiated with unaffiliated third parties.
70
<PAGE> 76
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of July 1, 1998, and as adjusted to
reflect the sale of 661,889 shares of Common Stock offered hereby, by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each Named
Executive Officer, (iv) all directors and officers as a group and (v) each
Selling Stockholder. Each of the holders listed below has sole voting power and
investment power over the shares beneficially owned.
<TABLE>
<CAPTION>
Percent of Voting
Shares
-----------------------
Shares Number of
Name of Selling Stockholders, Beneficially Shares Prior to the After the
Directors and Executive Officers Owned Offered Offerings Offerings
- -------------------------------- ----- ------- --------- ---------
<S> <C> <C> <C> <C>
Ronald E. Clampitt (1) ..................................... 174,503 0 4.8% 4.1%
David K. Davis, M.D.(2) .................................... 107,073 0 3.0% 2.6%
Henry Esteva(3) ............................................ 46,218 0 1.3% 1.1%
Edward D. Foreman(4) ....................................... 58,377 0 1.7% 1.4%
Charles O. Lowe(5) ......................................... 63,462 11,889 1.8% 1.3%
Jack A. MaCris, M.D.(6) .................................. 100,167 0 2.8% 2.4%
John B. Norrie(7) .......................................... 129,390 0 3.7% 3.1%
William Eickhoff(8) ........................................ 47,714 0 1.3% 1.1%
Ronald R. Petrini(9) ....................................... 10,776 0 * *
John B. Wier, Jr.(10) ...................................... 299,367 0 8.5% 7.2%
Ward J. Curtis, Jr ......................................... 137,667 50,000 3.9% 2.1%
Neil W. Savage(11) ......................................... 220,047 0 6.1% 5.2%
Harold J. Winner(12) ...................................... 80,295 0 2.2% 1.9%
Claude C. Focardi(13) ...................................... 446,115 0 12.7% 10.8%
Ian F. Irwin(14) ........................................... 287,775 0 8.1% 7.0%
Cynthia A. Stokes(15) ...................................... 53,274 0 1.5% 1.3%
All directors and principal officers as a group (19 persons) 2,361,771 61,889 57.9% 49.1%
(16)........................................................
</TABLE>
- --------------------
* Less than 1.0% of the shares of Common Stock outstanding.
(1) Includes 23,214 shares that may be acquired by exercise of options
exercisable within 60 days and 91,514 shares that may be acquired upon
conversion of the Company's 7% Preferred Stock.
(2) Includes 21,435 shares that may be acquired by exercise of options
exercisable within 60 days.
(3) Includes 5,631 shares that may be acquired by exercise of options
exercisable within 60 days.
(4) Includes 11,418 shares that may be acquired by exercise of options
exercisable within 60 days.
(5) Includes 16,666 shares held in Mr. Lowe's individual retirement
account.
(6) Consists of shares owned by Dr. MaCris' wife, as to which Dr. MaCris
disclaims beneficial ownership and includes 12,963 shares that may be
acquired by exercise of options exercisable within 60 days.
(7) Includes 19,371 shares that may be acquired by exercise of options
exercisable within 60 days.
(8) Includes 46,079 shares that may be acquired upon conversion of the
Company's 8% convertible subordinated debentures issued in conjunction
with the acquisition of EPW, which are held by a partnership for which
Mr. Eickhoff serves as a general partner.
(9) Includes 1,365 shares that may be acquired by exercise of options
exercisable within 60 days.
(10) Includes 24,165 shares that may be acquired by exercise of options
exercisable within 60 days.
(11) Includes 102,000 shares that may be acquired by exercise of options
exercisable within 60 days.
(12) Includes 57,000 shares that may be acquired by exercise of options
exercisable within 60 days and 2,705 shares held in Mr. Winner's
individual retirement account.
(13) Includes 3,458 shares that may be acquired by exercise of options
exercisable within 60 days.
(14) Includes 22,818 shares that may be acquired by exercise of options
exercisable within 60 days.
(15) Includes 37,500 shares that may be acquired by exercise of options
exercisable within 60 days.
(16) Includes an aggregate of 34,950 shares that may be acquired by exercise
of options exercisable within 60 days, 52,142 shares that may be
acquired upon conversion of the Company's 8% convertible subordinated
debentures issued in conjunction with the acquisition of EPW, 46,079 of
which are held by a partnership for which John Pieper serves as a
general partner, and shares owned by Susan A. Blackburn as Custodian
under Florida Gift to Minors Act for Andrea Michele Vest (2,322 shares)
and Roger Wayne Vest, Jr. (2,322 shares).
71
<PAGE> 77
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue up to 20,000,000 shares of Common
Stock, par value $.01 per share, up to 150,000 shares of preferred stock, par
value $10.00 per share, bearing a dividend commitment of 7% per annum (the "7%
Preferred Stock"), up to 100,000 shares of preferred stock, par value $10.00 per
share, bearing a dividend commitment of 6% per annum (the "6% Preferred Stock"
and with the 7% Preferred Stock, collectively, the "Preferred Stock"). As of
June 30, 1998, 3,513,858 shares of Common Stock and 20,850 shares of 7%
Preferred Stock were issued and outstanding. The 7% Preferred Stock is
noncallable and is convertible into Common Stock at the election of the holder
at a price of $1.1856013 per share of Common Stock. All of the 6% Preferred
Stock was converted in 1995 and 1996.
Unless otherwise required by law or the Company's Articles of
Incorporation (the "Articles"), holders of Common Stock vote together as a
single class on all matters presented to the Company's stockholders. In addition
to other voting rights as may be provided to the holders of the 7% Preferred
Stock, at any time an arrearage in interest payments shall have existed for at
least 30 days and be continuing, the number of directors shall be increased by
two and the holders of the 7% Preferred Stock shall have the exclusive right,
voting as a class, to elect two directors of the Company to fill the newly
created directorships. No cash dividend may be declared or paid on shares of
Common Stock unless, simultaneously therewith or prior thereto, there is or has
been declared or paid the semi-annual dividend payable on the Preferred Stock.
In any liquidation, dissolution, or winding-up of the Company, the
holders of Common Stock are entitled to share pro rata in all assets available
for distribution after payment in full to creditors and the holders of any
Preferred Stock. After the above preference amount has been paid to the holders
of Preferred Stock, such holders will not be entitled to any further
distributions.
The Company's Board of Directors may authorize the issuance of
additional authorized but unissued shares of the Company's Common and Preferred
Stock without further action by the Company's stockholders, unless such action
is required in a particular case by applicable laws or regulations or by any
stock exchange upon which the Company's capital stock may be listed. The
Articles do not provide any preemptive rights or cumulative voting for the
election of directors.
The authority to issue additional shares of the Company's Common Stock
provides the Company with the flexibility necessary to meet its future needs
without the delay resulting from seeking stockholder approval. The authorized
but unissued shares of Common and Preferred Stock will be issuable from time to
time for any corporate purpose, including, without limitation, stock splits,
stock dividends, employee benefit and compensation plans, acquisitions, and
public or private sales for cash as a means of raising capital.
72
<PAGE> 78
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Trust Agreement. The Trust Agreement will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee, Wilmington Trust Company, will act as
indenture trustee for the Preferred Securities under the Trust Agreement for
purposes of complying with the provisions of the Trust Indenture Act. The terms
of the Preferred Securities will include those stated in the Trust Agreement and
those made part of the Trust Agreement by the Trust Indenture Act. The following
summary of the material terms and provisions of the Preferred Securities and the
Trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Trust Agreement, the Delaware
Business Trust Act (the "Trust Act"), and the Trust Indenture Act. Wherever
particular defined terms of the Trust Agreement are referred to, but not defined
herein, such defined terms are incorporated herein by reference. The form of the
Trust Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf
of UFH Capital, will issue the Trust Securities. All of the Common Securities
will be owned by the Company. The Preferred Securities will represent preferred
undivided beneficial interests in the assets of UFH Capital and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities, as well as other benefits as described in the Trust
Agreement. The Trust Agreement does not permit the issuance by UFH Capital of
any securities other than the Trust Securities or the incurrence of any
indebtedness by UFH Capital.
The Preferred Securities will rank pari passu, and payments will be
made thereon pro rata, with the Common Securities, except as described under
"--Subordination of Common Securities." Legal title to the Junior Subordinated
Debentures will be held by the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The Guarantee executed by the Company for the
benefit of the holders of the Preferred Securities will be a guarantee on a
subordinated basis with respect to the Preferred Securities, but will not
guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Preferred Securities when UFH Capital does not have funds on
hand available to make such payments. Wilmington Trust Company, as Guarantee
Trustee, will hold the Guarantee for the benefit of the holders of the Preferred
Securities. See "Description of the Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on each Preferred Security will
be payable at the annual rate of ____% of the stated Liquidation Amount of $5,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, to the holders of the Preferred Securities on the relevant record
dates (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). The record date will be the 15th day of the
month in which the relevant Distribution Date occurs. Distributions will
accumulate from the date of original issuance. The first Distribution Date for
the Preferred Securities will be December 31, 1998. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which Distributions are payable on
the Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any additional Distributions, interest or other
payment in respect of any such delay) with the same force and effect as if made
on the date such payment was originally due and payable. "Business Day" means
any day other than a Saturday or a Sunday, a day on which banking institutions
in the City of New York are authorized or required by law or executive order to
remain closed or a day on which the corporate trust office of the Property
Trustee or the Debenture Trustee is closed for business. In the event UFH
Capital does not have sufficient funds to pay Distributions, the remedy of a
holder of Preferred Securities is to institute a legal proceeding directly
against the Company for enforcement of payment of such Distributions to such
holder. See "Relationship Among the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee."
73
<PAGE> 79
Extended Interest Payment Period. The Company has the right under the
Indenture, so long as no Debenture Event of Default has occurred and is
continuing, to defer the payment of interest on the Junior Subordinated
Debentures at any time, or from time to time (each, an "Extended Interest
Payment Period"), which, if exercised, would result in quarterly Distributions
on the Preferred Securities also being deferred during any such Extended
Interest Payment Period. Distributions to which holders of the Preferred
Securities are entitled will accumulate additional Distributions thereon at the
rate per annum of ____% thereof, compounded quarterly from the relevant
Distribution Date. The term "Distributions," as used herein, includes any such
additional Distributions. The right to defer the payment of interest on the
Junior Subordinated Debentures is limited, however, to a period, in each
instance, not exceeding 20 consecutive quarters and no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. During any such Extended Interest Payment Period, the Company may
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock (other than (a) the reclassification of any class of the Company's
capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's Common Stock, (c) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (d) purchases
of the Company's Common Stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Junior Subordinated Debentures (other than
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the Junior Subordinated Debentures or any of the Preferred Securities.
Prior to the termination of any such Extended Interest Payment Period, the
Company may further defer the payment of interest; provided that such Extended
Interest Payment Period may not exceed 20 consecutive quarters or extend beyond
the Stated Maturity of the Junior Subordinated Debentures. Upon the termination
of any such Extended Interest Payment Period and the payment of all amounts then
due, the Company may elect to begin a new Extended Interest Payment Period,
subject to the above requirements. Subject to the foregoing, there is no
limitation on the number of times that the Company may elect to begin an
Extended Interest Payment Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
Source of Distribution. The funds of UFH Capital available for
distribution to holders of its Preferred Securities will be limited to payments
received from the Junior Subordinated Debentures in which UFH Capital will
invest the proceeds from the issuance and sale of its Trust Securities. See
"Description of the Junior Subordinated Debentures." Distributions will be paid
through the Property Trustee who will hold amounts received in respect of the
Junior Subordinated Debentures in the Property Account for the benefit of the
holders of the Trust Securities. If the Company does not make interest payments
on the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (but only if and to the extent UFH Capital has funds legally
available for the payment of such Distributions and cash sufficient to make such
payments) is guaranteed by the Company. See "Description of the Guarantee."
Distributions on the Preferred Securities will be payable to the holders thereof
as they appear on the register of holders of the Preferred Securities on the
relevant record dates, which will be the 15th day of the month in which the
relevant Distribution Date occurs.
Redemption or Exchange
General. The Junior Subordinated Debentures will mature on the Stated
Maturity. The Company will have the right to redeem the Junior Subordinated
Debentures (i) on or after _______, 2003, in whole at any time or in part from
time to time, or (ii) at any time, in whole (but not in part), within 180 days
following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event, in each case subject to prior Federal Reserve approval,
if then required under applicable Federal Reserve capital guidelines or
policies. Subject to the foregoing events, the Company will
74
<PAGE> 80
not have the right to purchase the Junior Subordinated Debentures, in whole or
in part, from UFH Capital until after _______, 2003. See "Description of the
Junior Subordinated Debentures--General."
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Junior Subordinated Debentures, whether at the Stated Maturity or
upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption will be applied by the Property Trustee to redeem a Like
Amount (as defined herein) of the Trust Securities, upon not less than 30 nor
more than 60 days notice, at a redemption price (the "Redemption Price") equal
to the aggregate Liquidation Amount of such Trust Securities plus accumulated
but unpaid Distributions thereon to the date of redemption (the "Redemption
Date"). See "Description of the Junior Subordinated Debentures--Redemption or
Exchange." If less than all of the Junior Subordinated Debentures are to be
repaid or redeemed on a Redemption Date, then the proceeds from such repayment
or redemption will be allocated to the redemption of the Trust Securities pro
rata.
Distribution of Junior Subordinated Debentures. Subject to the Company
having received prior Federal Reserve approval, if then required under
applicable Federal Reserve capital guidelines or policies, the Company, as
holder of the Common Securities, will have the right at any time to dissolve,
wind-up or terminate UFH Capital and, after satisfaction of the liabilities of
creditors of UFH Capital as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of Trust Securities in
liquidation of UFH Capital. See "--Liquidation Distribution Upon Termination."
Tax Event Redemption, Investment Company Event Redemption or Capital
Treatment Event Redemption. If a Tax Event, an Investment Company Event or a
Capital Treatment Event occurs and is continuing, the Company has the right to
redeem the Junior Subordinated Debentures in whole (but not in part) and thereby
cause a mandatory redemption of the Trust Securities in whole (but not in part)
at the Redemption Price within 180 days following the occurrence of such Tax
Event, Investment Company Event or Capital Treatment Event. In the event a Tax
Event, an Investment Company Event or a Capital Treatment Event in respect of
the Trust Securities has occurred and the Company does not elect to redeem the
Junior Subordinated Debentures and thereby cause a mandatory redemption of the
Trust Securities or to liquidate UFH Capital and cause the Junior Subordinated
Debentures to be distributed to holders of such Trust Securities in liquidation
of UFH Capital as described below under "--Liquidation Distribution Upon
Termination," such Preferred Securities will remain outstanding and Additional
Interest (as defined herein) may be payable on the Junior Subordinated
Debentures.
"Additional Interest" means the additional amounts as may be necessary
in order that the amount of Distributions then due and payable by UFH Capital on
the outstanding Trust Securities will not be reduced as a result of any
additional taxes, duties and other governmental charges to which UFH Capital has
become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to that portion
of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, which will be used
to pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of UFH Capital, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed. Each Junior Subordinated Debenture distributed pursuant to clause
(ii) above will carry with it accumulated interest in an amount equal to the
accumulated and unpaid interest then due on such Junior Subordinated Debentures.
"Liquidation Amount" means the stated amount of $5 per Trust Security.
There can be no assurance as to the market prices of the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of UFH
Capital were to occur. The Preferred Securities that an investor may purchase,
or the Junior Subordinated Debentures that an investor may receive on
dissolution and liquidation of UFH Capital, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
75
<PAGE> 81
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of
the Preferred Securities will be made and the Redemption Price will be payable
on each Redemption Date only to the extent that UFH Capital has funds on hand
available for the payment of such Redemption Price. See "--Subordination of
Common Securities."
If UFH Capital gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date,
to the extent funds are available, the Property Trustee will irrevocably deposit
with the paying agent for the Preferred Securities funds sufficient to pay the
aggregate Redemption Price and will give the paying agent for the Preferred
Securities irrevocable instructions and authority to pay the Redemption Price to
the holders thereof upon surrender of their certificates evidencing such
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Preferred Securities called for redemption
will be payable to the holders of such Preferred Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Preferred Securities will cease to be outstanding. In
the event that any date fixed for redemption of Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day which is a Business Day (and without any
additional Distribution, interest or other payment in respect of any such delay)
with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in respect of Preferred Securities called for
redemption is improperly withheld or refused and not paid either by UFH Capital
or by the Company pursuant to the Guarantee, Distributions on such Preferred
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by UFH Capital for such Preferred
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price. See "Description of the
Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law) and, further provided, that the Company has not and is
not continuing to exercise its right to defer interest payments, the Company or
its subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Preferred
Securities will be made to the applicable recordholders thereof as they appear
on the register for the Preferred Securities on the relevant record date, which
date will be the date 15 days prior to the Redemption Date or liquidation date,
as applicable.
If less than all of the Trust Securities are to be redeemed on a
Redemption Date, then the aggregate Liquidation Amount of such Trust Securities
to be redeemed will be allocated pro rata to the Trust Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed will be selected by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee deems fair and appropriate and which may provide
for the selection for redemption of portions (equal to $5 or an integral
multiple of $5 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $5. The Property Trustee will promptly
notify the registrar for the Preferred Securities in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of the Trust Agreement, unless the context otherwise requires,
all provisions relating to the redemption of Preferred Securities will relate to
the portion of the aggregate Liquidation Amount of Preferred Securities which
has been or is to be redeemed.
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<PAGE> 82
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on such Junior Subordinated
Debentures or portions thereof (and Distributions will cease to accrue on the
related Preferred Securities or portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the
Preferred Securities and Common Securities, as applicable, will be made pro rata
based on the Liquidation Amount of the Preferred Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default has occurred and is continuing, no payment of
any Distribution on, or Redemption Price of, any of the Common Securities, and
no other payment on account of the redemption, liquidation or other acquisition
of such Common Securities, will be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Preferred
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all of the outstanding Preferred Securities then called for redemption,
will have been made or provided for, and all funds available to the Property
Trustee will first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Preferred Securities then due and
payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will be deemed to have
waived any right to act with respect to any such Event of Default under the
Trust Agreement until the effect of all such Events of Default with respect to
the Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee will act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Company, as holder of the Common Securities,
and only the holders of the Preferred Securities will have the right to direct
the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
The Company will have the right at any time to dissolve, wind-up or
terminate UFH Capital and cause the Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities. Such right is subject,
however, to the Company having received prior Federal Reserve approval, if then
required under applicable Federal Reserve capital guidelines or policies.
Pursuant to the Trust Agreement, UFH Capital will automatically
terminate upon expiration of its term and will terminate earlier on the first to
occur of (i) certain events of bankruptcy, dissolution or liquidation of the
Company, (ii) the distribution of a Like Amount of the Junior Subordinated
Debentures to the holders of its Trust Securities, if the Company, as depositor,
has given written direction to the Property Trustee to terminate UFH Capital
(which direction is optional and wholly within the discretion of the Company, as
depositor), (iii) redemption of all of the Preferred Securities as described
under "Description of the Preferred Securities--Redemption or
Exchange--Mandatory Redemption," or (iv) the entry of an order for the
dissolution of UFH Capital by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
of the preceding paragraph, UFH Capital will be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of UFH Capital as provided by
applicable law, to the holders of such Trust Securities a Like Amount of the
Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practical, in which event such holders will be
entitled to receive out of the assets of UFH Capital available for distribution
to holders, after satisfaction of liabilities to creditors of UFH Capital as
provided by applicable law, an amount equal to, in the case of holders of
Preferred Securities, the aggregate of the Liquidation Amount plus accrued and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because UFH Capital has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then
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the amounts payable directly by UFH Capital on the Preferred Securities will be
paid on a pro rata basis. The Company, as the holder of the Common Securities,
will be entitled to receive distributions upon any such liquidation pro rata
with the holders of the Preferred Securities, except that, if a Debenture Event
of Default has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities. See "--Subordination of Common Securities."
After the liquidation date fixed for any distribution of Junior
Subordinated Debentures (i) the Preferred Securities will no longer be deemed to
be outstanding, (ii) DTC or its nominee, as the registered holder of Preferred
Securities, will receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution with respect to Preferred Securities held by DTC or its nominee and
(iii) any certificates representing the Preferred Securities not held by DTC or
its nominee will be deemed to represent the Junior Subordinated Debentures
having a principal amount equal to the stated Liquidation Amount of the
Preferred Securities and bearing accrued and unpaid interest in an amount equal
to the accumulated and unpaid Distributions on the Preferred Securities until
such certificates are presented to the security registrar for the Trust
Securities for transfer or reissuance.
Under current United States federal income tax law and interpretations
and assuming, as expected, that UFH Capital is treated as a grantor trust, a
distribution of the Junior Subordinated Debentures should not be a taxable event
to holders of the Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Material Federal Income Tax Considerations--Receipt of Junior Subordinated
Debentures or Cash Upon Liquidation of UFH Capital."
If the Company elects neither to redeem the Junior Subordinated
Debentures prior to maturity nor to liquidate UFH Capital and distribute the
Junior Subordinated Debentures to holders of the Preferred Securities, the
Preferred Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures. If the Company elects to liquidate UFH Capital and
thereby causes the Junior Subordinated Debentures to be distributed to holders
of the Preferred Securities in liquidation of UFH Capital, the Company will
continue to have the right to shorten the maturity of such Junior Subordinated
Debentures, subject to certain conditions. See "Description of the Junior
Subordinated Debentures--General."
LIQUIDATION VALUE
The amount of the Liquidation Distribution payable on the Preferred
Securities in the event of any liquidation of UFH Capital is $10 per Preferred
Security plus accrued and unpaid Distributions thereon to the date of payment,
which may be in the form of a distribution of such amount in Junior Subordinated
Debentures with a like amount of accrued interest, subject to certain
exceptions. See "--Liquidation Distribution Upon Termination."
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under
the Trust Agreement (an "Event of Default") with respect to the Preferred
Securities (whatever the reason for such Event of Default and whether voluntary
or involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of
the Junior Subordinated Debentures--Debenture Events of Default"); or
(ii) default by UFH Capital in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days; or
(iii) default by UFH Capital in the payment of any Redemption Price of any
Trust Security when it becomes due and payable: or
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(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustee(s) in the Trust Agreement (other
than a covenant or warranty, a default in the performance of which or the
breach of which is dealt with in clauses (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the Trustee(s) by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Preferred Securities, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" under the Trust Agreement: or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint
a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such Event of
Default has been cured or waived. The Company, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of UFH Capital. See "--Liquidation Distribution Upon Termination."
The existence of an Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
REMOVAL OF UFH CAPITAL TRUSTEE
Unless a Debenture Event of Default has occurred and is continuing,
any Trustee may be removed at any time by the holder of the Common Securities.
If a Debenture Event of Default has occurred and is continuing, the Property
Trustee and the Delaware Trustee may be removed by the holders of a majority in
Liquidation Amount of the outstanding Preferred Securities. In no event,
however, will the holders of the Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustees, which voting rights are
vested exclusively in the Company as the holder of the Common Securities. No
resignation or removal of a Trustee and no appointment of a successor trustee
will be effective until the acceptance of appointment by the successor trustee
in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property (as
defined in the Trust Agreement) may at the time be located, the Company, as the
holder of the Common Securities, will have the power to appoint one or more
Persons (as defined in the Trust Agreement) either to act as a co-trustee,
jointly with the Property Trustee, of all or any part of such Trust Property, or
to act as separate trustee of any such Trust Property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in such capacity any property, title, right or power deemed
necessary or desirable, subject to the provisions of the Trust Agreement. In
case a Debenture Event of Default has occurred and is continuing, the Property
Trustee alone will have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Trustee is a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, will be the successor of such Trustee under the Trust Agreement,
provided such Person is otherwise qualified and eligible.
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MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF UFH CAPITAL
UFH Capital may not merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described below. UFH
Capital may, at the request of the Company, with the consent of the
Administrative Trustees, which consent may not be unreasonably withheld and
without the consent of the holders of the Preferred Securities, the Property
Trustee or the Delaware Trustee, merge with or into, consolidate, amalgamate, or
be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (a) expressly assumes all
of the obligations of UFH Capital with respect to the Preferred Securities, or
(b) substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Preferred
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee in its capacity as the holder of the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed (including, if applicable, The Nasdaq Small Cap Market), if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect, (v) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Company has received an opinion
from independent counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither UFH Capital nor such successor entity will be
required to register as an "investment company" under the Investment Company
Act, and (vi) the Company owns all of the common securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, UFH Capital will not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other Person or
permit any other Person to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause UFH Capital or the successor entity to be
classified as other than a grantor trust for United States federal income tax
purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by the Trust Act
and the Trust Agreement, the holders of the Preferred Securities will have no
voting rights.
The Trust Agreement may be amended from time to time by the Company,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) with respect to acceptance of
appointment by a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement (provided such amendment is not
inconsistent with the other provisions of the Trust Agreement), or (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as is necessary to ensure that UFH Capital will be classified for United States
federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that UFH Capital will not be required to
register as an "investment company" under the Investment Company Act; provided,
however, that in the case of clause (ii), such action may not adversely affect
in any material respect the interests of any holder of Trust Securities, and any
amendments of such Trust Agreement will become effective when notice thereof is
given to the holders of Trust Securities. The Trust Agreement may otherwise be
amended by the Trustees and the Company with (i) the consent of holders
representing not less than a majority in the aggregate Liquidation Amount of the
outstanding Trust Securities, and (ii) receipt by the Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Trustees in
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accordance with such amendment will not affect UFH Capital's status as a grantor
trust for United States federal income tax purposes or UFH Capital's exemption
from status as an "investment company" under the Investment Company Act.
Notwithstanding anything in this paragraph to the contrary, without the consent
of each holder of Trust Securities, the Trust Agreement may not be amended to
(a) change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made in
respect of the Trust Securities as of a specified date, or (b) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
The Trustees will not, so long as any Junior Subordinated Debentures
are held by the Property Trustee, (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is waivable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Junior Subordinated Debentures will be due and
payable, or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent is required,
without, in each case, obtaining the prior approval of the holders of a majority
in aggregate Liquidation Amount of all outstanding Preferred Securities;
provided, however, that where a consent under the Indenture requires the consent
of each holder of Junior Subordinated Debentures affected thereby, no such
consent will be given by the Property Trustee without the prior consent of each
holder of the Preferred Securities. The Trustees may not revoke any action
previously authorized or approved by a vote of the holders of the Preferred
Securities except by subsequent vote of the holders of the Preferred
Securities. The Trustee will notify each holder of Preferred Securities of any
notice of default with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of the holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Trustees must
obtain an opinion of counsel experienced in such matters to the effect that UFH
Capital will not be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given
at a meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Preferred Securities in the manner set
forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be
required for UFH Capital to redeem and cancel its Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities that are owned by the Company, the Trustees or any
affiliate of the Company or any Trustee, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
BOOK ENTRY, DELIVERY AND FORM
The Preferred Securities will be issued in the form of one or more
fully registered global securities which will be deposited with, or on behalf
of, DTC and registered in the name of DTC's nominee. Unless and until it is
exchangeable in whole or in part for the Preferred Securities in definitive
form, a global security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC
or any such nominee to a successor of such Depository or a nominee of such
successor.
Ownership of beneficial interests in a global security will be limited
to persons that have accounts with DTC or its nominee ("Participants") or
persons that may hold interests through Participants. The Company expects that,
upon the issuance of a global security, DTC will credit, on its book-entry
registration and transfer system, the Participants' accounts with their
respective principal amounts of the Preferred Securities represented by such
global security. Ownership of beneficial interests in such global security will
be shown on, and the transfer of such ownership interest will be effected
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only through, records maintained by DTC (with respect to interests of
Participants). Beneficial owners will not receive written confirmation from DTC
of their purchase, but are expected to receive written confirmations from the
Participants through which the beneficial owner entered into the transaction.
Transfers of ownership interests will be accomplished by entries on the books of
Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a global
security, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such global security
for all purposes under the Indenture governing such Preferred Securities.
Except as provided below, owners of beneficial interests in a global security
will not be entitled to receive physical delivery of the Preferred Securities
in definitive form and will not be considered the owners or holders thereof
under the Indenture. Accordingly, each person owning a beneficial interest in
such a global security must rely on the procedures of DTC and, if such person is
not a Participant, on the procedures of the Participant through which such
person owns its interest, to exercise any rights of a holder of Preferred
Securities under the Junior Subordinated Indenture. The Company understands
that, under DTC's existing practices, in the event that the Company requests any
action of holders, or an owner of a beneficial interest in such a global
security desires to take any action which a holder is entitled to take under the
Indenture, DTC would authorize the Participants holding the relevant
beneficial interest to take such action, and such Participants would authorize
beneficial owners owning through such Participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Redemption notices will also be sent to DTC. If less than all of the Preferred
Securities are being redeemed, the Company understands that it is DTC's existing
practice to determine by lot the amount of the interest of each Participant to
be redeemed.
Distributions on the Preferred Securities registered in the name of DTC
or its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the global security representing such Preferred Securities.
None of the Company, the Trustees, the Administrators, any Paying Agent or any
other agent of the Company or the Trustees will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interest in the global security for such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. Disbursements of Distributions to
Participants shall be the responsibility of DTC. DTC's practice is to credit
Participants' accounts on a payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to beneficial
owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC, the Company, the Trustees, the Paying Agent or any other agent
of the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time.
DTC may discontinue providing its services as securities depository
with respect to the Preferred Securities at any time by giving reasonable notice
to the Company or the Trustees. If DTC notifies the Company that it is unwilling
to continue as such, or if it is unable to continue or ceases to be a clearing
agency registered under the Exchange Act and a successor depository is not
appointed by the Company within ninety days after receiving such notice or
becoming aware that DTC is no longer so registered, the Company will issue the
Preferred Securities in definitive form upon registration of transfer , or in
exchange for, such global security. In addition, the Company may at any time and
in its sole discretion determine not to have the Preferred Securities
represented by one or more global securities and, in such event, will issue
Preferred Securities in definitive form in exchange for all of the global
securities representing such Preferred Securities.
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its Participants
and to facilitate the clearance and settlement of securities transactions
between Participants through electronic book entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Certain of such Participants (or their representatives), together with other
entities,
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own DTC. Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a custodial
relationship with a Participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Preferred Securities will be made by the Underwriter
in immediately available funds.
Secondary trading in preferred securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Preferred
Securities will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in the Preferred Securities will therefore be required
by DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Preferred Securities.
PAYMENT AND PAYING AGENT
Payments in respect of the Preferred Securities will be made to DTC,
which will credit the relevant accounts at DTC on the applicable Distribution
Dates or, if the Preferred Securities are not held by DTC, such payments will be
made by check mailed to the address of the holder entitled thereto as such
address appears on the securities register for the Trust Securities. The paying
agent (the "Paying Agent") will initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees. The Paying Agent will be permitted to resign as Paying
Agent upon 30 days' written notice to the Property Trustee and the
Administrative Trustees. If the Property Trustee is no longer the Paying Agent,
the Property Trustee will appoint a successor (which must be a bank or trust
company reasonably acceptable to the Administrative Trustees) to act as Paying
Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent
for the Preferred Securities. Registration of transfers of Preferred Securities
will be effected without charge by or on behalf of UFH Capital, except for the
payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. In the event of any redemption, UFH
Capital will not be required to (i) issue, register the transfer of, or exchange
any Preferred Securities during a period beginning at the opening of business 15
days before the date of mailing of a notice of redemption of any Preferred
Securities called for redemption and ending at the close of business on the day
of such mailing; or (ii) register the transfer of or exchange any Preferred
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of Preferred
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee will take such action as is directed by the Company and if not so
directed, will take such action as it deems advisable and in the best interests
of the holders of the Trust Securities and will have no liability except for its
own bad faith, negligence or willful misconduct.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct
the affairs of and to operate UFH Capital in such a way that UFH Capital will
not be deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Company and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of UFH Capital or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar
rights.
The Trust Agreement and the Preferred Securities will be governed by,
and construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, UFH Capital
will invest the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Junior Subordinated Debentures issued
by the Company. The Junior Subordinated Debentures will be issued as unsecured
debt under the Indenture, to be dated as of _______, 1998 (the "Indenture"),
between the Company and Wilmington Trust Company, as trustee (the "Debenture
Trustee"). The Indenture will be qualified as an indenture under the Trust
Indenture Act. The following summary of the material terms and provisions of the
Junior Subordinated Debentures and the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture and to the Trust Indenture Act. Wherever particular defined terms of
the Indenture are referred to, but not defined herein, such defined terms are
incorporated herein by reference. The form of the Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Junior Subordinated Debentures will be limited in aggregate
principal amount to approximately $6,000,000 (or $6,900,000 if the Underwriter's
over-allotment option is exercised in full by the Underwriter), such amount
being the sum of the aggregate stated Liquidation Amount of the Trust
Securities. The Junior Subordinated Debentures will bear interest at the annual
rate of ____% of the principal amount thereof, payable quarterly in arrears on
March 31, June 30, September 30, and December 31 of each year (each, an
"Interest Payment Date") beginning December 31, 1998, to the Person (as defined
in the Indenture) in whose name each Junior Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of UFH Capital, the Junior Subordinated
Debentures will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Preferred Securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on the
Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) with the same force and effect as if made on the date such payment was
originally due and payable. Accrued interest that is not paid on the applicable
Interest Payment Date will bear additional interest on the amount thereof (to
the extent permitted by law) at the rate per annum of ____% thereof, compounded
quarterly. The term "interest", as used herein, includes quarterly interest
payments, interest on quarterly interest payments not paid on the applicable
Interest Payment Date and Additional Interest, as applicable.
The Junior Subordinated Debentures will mature on _______, 2028, the
Stated Maturity. Such date may be shortened at any time by the Company to any
date not earlier than _______, 2003, subject to the Company having received
prior regulatory approval if then required under applicable capital guidelines
or regulatory policies. In the event that the Company elects to shorten the
Stated Maturity of the Junior Subordinated Debentures, it will give notice
thereof to the Debenture
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Trustee, UFH Capital and to the holders of the Junior Subordinated Debentures no
more than 180 days and no less than 90 days prior to the effectiveness thereof.
The Junior Subordinated Debentures will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Debt and
Subordinated Debt of the Company. Because the Company is a holding company, the
right of the Company to participate in any distribution of assets of a
subsidiary, including the Bank, upon any liquidation or reorganization or
otherwise of such subsidiary (and thus the ability of holders of the Junior
Subordinated Debentures to benefit indirectly from such distribution), is
subject to the prior claim of creditors of the subsidiary (including depositors
in the Bank), except to the extent that the Company may itself be recognized as
a creditor of the subsidiary. The Junior Subordinated Debentures will,
therefore, be effectively subordinated to all existing and future liabilities of
the Company's subsidiaries, including the Bank, and holders of Junior
Subordinated Debentures should look only to the assets of the Company for
payments on the Junior Subordinated Debentures. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Debt and Subordinated Debt, whether under the Indenture or any
existing indenture or other indenture that the Company or any of its
subsidiaries may enter into in the future or otherwise. See "--Subordination."
The Indenture does not contain provisions that afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture at any time during the
term of the Junior Subordinated Debentures, so long as no Debenture Event of
Default has occurred and is continuing, to defer the payment of interest at any
time, or from time to time. The right to defer the payment of interest on the
Junior Subordinated Debentures is limited, however, to a period, in each
instance, not exceeding 20 consecutive quarters and no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. At the end of each Extended Interest Payment Period, the Company
must pay all interest then accrued and unpaid (together with interest thereon at
the annual rate of ____%, compounded quarterly, to the extent permitted by
applicable law). During an Extended Interest Payment Period, interest will
continue to accrue and holders of Junior Subordinated Debentures (or the holders
of Preferred Securities if such securities are then outstanding) will be
required to accrue and recognize income for United States federal income tax
purposes. See "Material Federal Income Tax Considerations)Interest Income and
Original Issue Discount."
During any such Extended Interest Payment Period, the Company may not
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock (other than (a) the reclassification of any class of the Company's
capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's Common Stock, (c) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (d) purchases
of the Company's common stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
or junior in interest to the Junior Subordinated Debentures (other than payments
under the Guarantee), or (iii) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extended Interest Payment Period, the Company may
further defer the payment of interest; provided that no Extended Interest
Payment Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any such
Extended Interest Payment Period and the payment of all amounts then due on any
Interest Payment Date, the Company may elect to begin a new Extended Interest
Payment Period subject to the above requirements. No interest will be due and
payable during an Extended Interest Payment Period, except at the end thereof.
The Company must give the Property Trustee, the
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Administrative Trustees and the Debenture Trustee notice of its election of such
Extended Interest Payment Period at least two Business Days prior to the earlier
of (i) the next succeeding date on which Distributions on the Trust Securities
would have been payable except for the election to begin such Extended Interest
Payment Period, or (ii) the date the Trust is required to give notice of the
record date, or the date such Distributions are payable, to The Nasdaq Small Cap
Market (or other applicable self-regulatory organization) or to holders of the
Preferred Securities, but in any event at least one Business Day before such
record date. Subject to the foregoing, there is no limitation on the number of
times that the Company may elect to begin an Extended Interest Payment Period.
ADDITIONAL SUMS
If UFH Capital or the Property Trustee is required to pay any
additional taxes, duties or other governmental charges as a result of the
occurrence of a Tax Event, the Company will pay as additional amounts (referred
to herein as "Additional Interest") on the Junior Subordinated Debentures such
additional amounts as may be required so that the net amounts received and
retained by UFH Capital after paying any such additional taxes, duties or other
governmental charges will not be less than the amounts UFH Capital would have
received had such additional taxes, duties or other governmental charges not
been imposed.
REDEMPTION OR EXCHANGE
The Company will have the right to redeem the Junior Subordinated
Debentures prior to maturity (i) on or after ________________, 2003, in whole
at any time or in part from time to time, or (ii) at any time in whole (but not
in part), within 180 days following the occurrence of a Tax Event, an Investment
Company Event or a Capital Treatment Event, in each case at a Redemption Price
equal to the accrued and unpaid interest on the Junior Subordinated Debentures
so redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof. Any such redemption prior to the Stated Maturity will be subject to
prior regulatory approval if then required under applicable capital guidelines
or regulatory policies.
"Tax Event" means the receipt by UFH Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) interest payable by the Company on the Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, (ii) UFH Capital is, or will be within 90 days
after the date of such opinion of counsel, subject to United States federal
income tax with respect to income received or accrued on the Junior Subordinated
Debentures, or (iii) UFH Capital is, or will be within 90 days after the date of
such opinion of counsel, subject to more than a de minimis amount of other
taxes, duties, assessments or other governmental charges. The Company must
request and receive an opinion with regard to such matters within a reasonable
period of time after it becomes aware of the possible occurrence of any of the
events described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by UFH Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, UFH Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change becomes effective on or after the date of original
issuance of the Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any proposed
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial
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decision interpreting or applying such laws or regulations, which amendment or
change is effective or such proposed change pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred Securities,
there is more than an insubstantial risk that the Company will not be entitled
to treat an amount equal to the Liquidation Amount of the Preferred Securities
as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve (or any successor regulatory
authority with jurisdiction over bank holding companies), or any capital
adequacy guidelines as then in effect and applicable to the Company.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company defaults
in payment of the Redemption Price for the Junior Subordinated Debentures, on
and after the redemption date interest ceases to accrue on such Junior
Subordinated Debentures or portions thereof called for redemption.
The Junior Subordinated Debentures will not be subject to any sinking
fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred
Securities--Liquidation Distribution Upon Termination," under certain
circumstances involving the termination of UFH Capital, the Junior Subordinated
Debentures may be distributed to the holders of the Preferred Securities in
liquidation of UFH Capital after satisfaction of liabilities to creditors of UFH
Capital as provided by applicable law. Any such distribution will be subject to
receipt of prior regulatory approval if then required under applicable
regulatory policies or guidelines. If the Junior Subordinated Debentures are
distributed to the holders of Preferred Securities upon the liquidation of UFH
Capital, the Company will use its best efforts to list the Junior Subordinated
Debentures on The Nasdaq Small Cap Market or such stock exchanges, if any,
on which the Preferred Securities are then listed. There can be no assurance as
to the market price of any Junior Subordinated Debentures that may be
distributed to the holders of Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred a Debenture Event of Default,
(ii) the Company is in default with respect to its obligations under the
Guarantee, or (iii) the Company has given notice of its election of an Extended
Interest Payment Period as provided in the Indenture with respect to the Junior
Subordinated Debentures and has not rescinded such notice, or such Extended
Interest Payment Period, or any extension thereof, is continuing, the Company
will not (1) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (other than (a) the reclassification of any class of the
Company's capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's Common Stock, (c) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (d) purchases
of the Company's Common Stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
(2) make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
or junior in interest to the Junior Subordinated Debentures (other than payments
under the Guarantee), or (3) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Debt and Subordinated
Debt of the Company. Upon any payment or distribution of assets to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any insolvency or
bankruptcy
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proceedings of the Company, the holders of Senior Debt and Subordinated Debt of
the Company will first be entitled to receive payment in full of principal of
(and premium, if any) and interest, if any, on such Senior Debt and Subordinated
Debt of the Company before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect of the principal of or
interest on the Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior
Subordinated Debentures, the holders of all Senior Debt and Subordinated Debt of
the Company outstanding at the time of such acceleration will first be entitled
to receive payment in full of all amounts due thereon (including any amounts due
upon acceleration) before the holders of the Junior Subordinated Debentures will
be entitled to receive or retain any payment in respect of the principal of or
interest on the Junior Subordinated Debentures.
No payments on account of principal or interest in respect of the
Junior Subordinated Debentures may be made if there has occurred and is
continuing a default in any payment with respect to Senior Debt and Subordinated
Debt of the Company or an event of default with respect to any Senior Debt and
Subordinated Debt of the Company resulting in the acceleration of the maturity
thereof, or if any judicial proceeding is pending with respect to any such
default.
"Debt" means, with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every capital lease obligation of such Person, and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means, with respect to the Company, the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior Debt will not be
deemed to include (i) any Debt of the Company which when incurred and without
respect to any election under Section 1111(b) of the United States Bankruptcy
Code of 1978, as amended, was without recourse to the Company, (ii) any Debt of
the Company to any of its subsidiaries, (iii) any Debt to any employee of the
Company, (iv) any Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debt by the holders of the
Junior Subordinated Debentures as a result of the subordination provisions of
the Indenture would be greater than they otherwise would have been as a result
of any obligation of such holders to pay amounts over to the obligees on such
trade accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject,
and (v) Debt which constitutes Subordinated Debt.
"Subordinated Debt" means, with respect to the Company, the principal
of (and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
the Company whether or not such claim for post-petition interest is allowed in
such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, which is by its terms expressly provided to be
junior and subordinate to other Debt of the Company (other than the Junior
Subordinated Debentures).
The Indenture places no limitation on the amount of additional Senior
Debt and Subordinated Debt that may be issued or incurred by the Company. The
Company may from time to time issue or incur additional indebtedness
constituting
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Senior Debt and Subordinated Debt. As of June 30, 1998, the Company had
aggregate Senior Debt and Subordinated Debt of $3.0 million. Because the Company
is a holding company, the Junior Subordinated Debentures are effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, including obligations to depositors of the Bank.
REGISTRATION, DENOMINATION AND TRANSFER
The Junior Subordinated Debentures will initially be registered in
the name of UFH Capital. If the Junior Subordinated Debentures are distributed
to holders of Preferred Securities, it is anticipated that the depositary
arrangements for the Junior Subordinated Debentures will be substantially
identical to those in effect for the Preferred Securities. See "Description of
Preferred Securities)Book Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Junior Subordinated Debentures to be issued in definitive
form.
Payments on Junior Subordinated Debentures represented by a global
security will be made to Cede & Co., the nominee for DTC, as the registered
holder of the Junior Subordinated Debentures, as described under "Description of
Preferred Securities--Book Entry, Delivery and Form." If Junior Subordinated
Debentures are issued in certificated form, principal and interest will be
payable, the transfer of the Junior Subordinated Debentures will be registrable,
and Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures of other authorized denominations of a like aggregate principal
amount, at the corporate trust office of the Debenture Trustee in Wilmington,
Delaware or at the offices of any Paying Agent or transfer agent appointed by
the Company, provided that payments of interest may be made at the option of the
Company by check mailed to the address of the persons entitled thereto. However,
a holder of $1 million or more in aggregate principal amount of Junior
Subordinated Debentures may receive payments of interest (other than interest
payable at the Stated Maturity) by wire transfer of immediately available funds
upon written request to the Debenture Trustee not later than 15 calendar days
prior to the date on which the interest is payable. Any monies deposited with
the Debenture Trustee or any paying agent, or then held by the Company in trust,
for the payment of the principal of (and premium, if any) or interest on any
Junior Subordinated Debenture and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall, at
the request of the Company, be repaid to the Company and the holder of such
Junior Subordinated Debenture shall thereafter look, as a general unsecured
creditor, only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer
agent for the Junior Subordinated Debentures. Junior Subordinated Debentures may
be presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed) at the
office of the registrar. The Company may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts; provided, that the Company maintains a transfer agent
in the place of payment. The Company may at any time designate additional
transfer agents with respect to the Junior Subordinated Debentures. In the event
of any redemption, neither the Company nor the Debenture Trustee will be
required to (i) issue, register the transfer of or exchange Junior Subordinated
Debentures during a period beginning at the opening of business 15 days before
the day of selection for redemption of Junior Subordinated Debentures and ending
at the close of business on the day of mailing of the relevant notice of
redemption, or (ii) transfer or exchange any Junior Subordinated Debentures so
selected for redemption, except, in the case of any Junior Subordinated
Debentures being redeemed in part, any portion thereof not to be redeemed.
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MODIFICATION OF INDENTURE
The Company and the Debenture Trustee may, from time to time without
the consent of the holders of the Junior Subordinated Debentures, amend, waive
or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture also contains provisions permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Junior Subordinated Debentures, to modify
the Indenture; provided, that no such modification may, without the consent of
the holder of each outstanding Junior Subordinated Debenture affected by such
proposed modification, (i) extend the fixed maturity of the Junior Subordinated
Debentures, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or (ii) reduce the percentage of
principal amount of Junior Subordinated Debentures, the holders of which are
required to consent to any such modification of the Indenture; provided that so
long as any of the Preferred Securities remain outstanding, no such modification
may be made that requires the consent of the holders of the Junior Subordinated
Debentures, and no termination of the Indenture may occur, and no waiver of any
Debenture Event of Default may be effective, without the prior consent of the
holders of at least a majority of the aggregate Liquidation Amount of the
Preferred Securities and that if the consent of the holder of each Junior
Subordinated Debenture is required, such modification will not be effective
until each holder of Trust Securities has consented thereto.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following
described events with respect to the Junior Subordinated Debentures that has
occurred and is continuing constitutes an event of default (each, a "Debenture
Event of Default") with respect to the Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due (subject to the deferral of any due date in the
case of an Extended Interest Payment Period); or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at the Stated Maturity, upon redemption by declaration
or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written
notice to the Company from the Debenture Trustee or the holders of at
least 25% in aggregate outstanding principal amount of the Junior
Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee, or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures, may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of the Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Preferred Securities will have such right.
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Junior Subordinated Debentures, and any other amounts payable
under the
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Indenture, to be forthwith due and payable and to enforce its other rights as a
creditor with respect to such Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest on or
the principal of the Junior Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Company will have a right
of set-off under the Indenture to the extent of any payment made by the Company
to such holder of Preferred Securities in the Direct Action. The Company may not
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Preferred
Securities. If the right to bring a Direct Action is removed, UFH Capital may
become subject to the reporting obligations under the Exchange Act.
The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Junior Subordinated Debentures unless there has
been an Event of Default under the Trust Agreement. See "Description of the
Preferred Securities)Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Company may not consolidate with or merge into any other Person
or convey or transfer its properties and assets substantially as an entirety to
any Person, and any Person may not consolidate with or merge into the Company or
sell, convey, transfer or otherwise dispose of its properties and assets
substantially as an entirety to the Company, unless (i) in the event the Company
consolidates with or merges into another Person or conveys or transfers its
properties and assets substantially as an entirety to any Person, the successor
Person is organized under the laws of the United States or any State or the
District of Columbia, and such successor Person expressly assumes by
supplemental indenture the Company's obligations on the Junior Subordinated
Debentures issued under the Indenture, (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, has occurred
and is continuing, and (iii) certain other conditions as prescribed in the
Indenture are met.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to the
Company's obligations to pay certain sums due pursuant to the Indenture and to
provide certain officers' certificates and opinions of counsel described
therein) and the Company will be deemed to have satisfied and discharged the
Indenture when, among other things, all Junior Subordinated Debentures not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable, or (ii) will become due and payable at their Stated Maturity
within one year or are to be called for redemption within one year, and the
Company deposits or causes to be deposited with the Debenture Trustee funds, in
trust, for the purpose and in an amount sufficient to pay and discharge the
entire indebtedness on the Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal and
interest to the date of the deposit or to the Stated Maturity or redemption
date, as the case may be.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of Florida.
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INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
The Company has agreed, pursuant to the Indenture, for so long as the
Trust Securities remain outstanding, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of UFH Capital (provided that certain
successors which are permitted pursuant to the Indenture may succeed to the
Company's ownership of the Common Securities), (ii) not to voluntarily
terminate, wind up or liquidate UFH Capital without prior regulatory approval if
then so required under applicable Federal Reserve capital guidelines or
policies and use its reasonable efforts to cause UFH Capital to remain a
business trust, except in connection with a distribution of Junior Subordinated
Debentures to the holders of the Preferred Securities, the redemption of all of
the Preferred Securities, or certain mergers, consolidations or amalgamations
permitted by the Trust Agreement, and (iii) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause UFH
Capital to remain classified as a grantor trust and not as an association
taxable as a corporation for United States federal income tax purposes.
DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will be
executed and delivered by the Company concurrently with the issuance of the
Preferred Securities for the benefit of the holders of the Preferred Securities.
The Guarantee will be qualified as an indenture under the Trust Indenture Act.
The Guarantee Trustee will act as indenture trustee under the Guarantee for
purposes of complying with the provisions of the Trust Indenture Act. The
Guarantee Trustee, Wilmington Trust Company, will hold the Guarantee for the
benefit of the holders of the Preferred Securities. The following summary of the
material terms and provisions of the Guarantee does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of the Guarantee and the Trust Indenture Act. Wherever particular
defined terms of the Guarantee are referred to, but not defined herein, such
defined terms are incorporated herein by reference. The form of the Guarantee
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated
basis of UFH Capital's obligations under the Preferred Securities, but will
apply only to the extent that UFH Capital has funds sufficient to make such
payments. The Company will, pursuant to the Guarantee, irrevocably agree to pay
in full on a subordinated basis, to the extent set forth therein, the Guarantee
Payments (as defined below) to the holders of the Preferred Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that UFH
Capital may have or assert other than the defense of payment. The following
payments with respect to the Preferred Securities, to the extent not paid by or
on behalf of UFH Capital (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accrued and unpaid Distributions required to be paid on the
Preferred Securities, to the extent that UFH Capital has funds available
therefor at such time, (ii) the Redemption Price with respect to any Preferred
Securities called for redemption to the extent that UFH Capital has funds
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of UFH Capital (other than in connection
with the distribution of Junior Subordinated Debentures to the holders of
Preferred Securities or a redemption of all of the Preferred Securities), the
lesser of (a) the amount of the Liquidation Distribution, to the extent UFH
Capital has funds available therefor at such time, and (b) the amount of assets
of UFH Capital remaining available for distribution to holders of Preferred
Securities in liquidation of UFH Capital. The obligation of the Company to make
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a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of the Preferred Securities or by causing UFH
Capital to pay such amounts to such holders.
The Guarantee will not apply to any payment of Distributions except to
the extent UFH Capital has funds available therefor. If the Company does not
make interest payments on the Junior Subordinated Debentures held by UFH
Capital, UFH Capital will not pay Distributions on the Preferred Securities and
will not have funds legally available therefor.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior Debt and
Subordinated Debt of the Company in the same manner as the Junior Subordinated
Debentures. The Guarantee does not place a limitation on the amount of
additional Senior Debt and Subordinated Debt that may be incurred by the
Company. The Company expects from time to time to incur additional indebtedness
constituting Senior Debt and Subordinated Debt. The Guarantee will constitute a
guarantee of payment and not of collection (that is, the guaranteed party may
institute a legal proceeding directly against the Company to enforce its rights
under the Guarantee without first instituting a legal proceeding against any
other Person). The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by UFH Capital or upon
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of a subsidiary, including
the Bank, upon a liquidation or reorganization or otherwise is subject to the
prior claims of creditors of the subsidiary, except to the extent the Company
may itself be recognized as a creditor of the subsidiary. The Company's
obligations under the Guarantee, therefore, will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, including the
Bank, and claimants should look only to the assets of the Company for payments
thereunder.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Preferred Securities (in which case no vote
will be required), the Guarantee may not be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of the outstanding Preferred Securities. See "Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement." All guarantees and
agreements contained in the Guarantee will bind the successors, assigns,
receivers, trustees and representatives of the Company and will inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure
of the Company to perform any of its payment or other obligations thereunder.
The holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against UFH Capital, the Guarantee Trustee
or any other Person.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
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INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and
continuance of a default by the Company in performance of the Guarantee,
undertakes to perform only such duties as are specifically set forth in the
Guarantee and, after default with respect to the Guarantee, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to such provisions, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of any Preferred Securities, unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect
upon (i) full payment of the Redemption Price of the Preferred Securities, (ii)
full payment of the amounts payable upon liquidation of UFH Capital, or (iii)
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with
the laws of the State of Florida.
EXPENSE AGREEMENT
The Company will, pursuant to the Agreement as to Expenses and
Liabilities entered into by it under the Trust Agreement (the "Expense
Agreement"), irrevocably and unconditionally guarantee to each person or entity
to whom UFH Capital becomes indebted or liable, the full payment of any costs,
expenses or liabilities of UFH Capital, other than obligations of UFH Capital to
pay to the holders of the Preferred Securities or other similar interests in UFH
Capital of the amounts due such holders pursuant to the terms of the Preferred
Securities or such other similar interests, as the case may be. Third party
creditors of UFH Capital may proceed directly against the Company under the
Expense Agreement, regardless of whether such creditors had notice of the
Expense Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent UFH Capital has funds available for the payment of
such Distributions) are irrevocably guaranteed by the Company as and to the
extent set forth under "Description of the Guarantee." The Company and UFH
Capital believe that, taken together, the obligations of the Company under the
Junior Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement, and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment of Distributions
and other amounts due on the Preferred Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the obligations of UFH Capital under the Preferred Securities. However, if
and to the extent that the Company does not make payments on the Junior
Subordinated Debentures, UFH Capital will not pay Distributions or other amounts
due on the Preferred Securities and the Guarantee does not cover payment of
Distributions when UFH Capital does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of Preferred Securities is
to institute a legal proceeding directly against the Company for enforcement of
payment of such Distributions to such holder. The obligations of the Company
under the Guarantee are subordinate and junior in right of payment to all Senior
Debt and Subordinated Debt of the Company.
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SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due
on the Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated Debentures
will be equal to the sum of the aggregate stated Liquidation Amount of the Trust
Securities, (ii) the interest rate and interest and other payment dates on the
Junior Subordinated Debentures will match the Distribution rate and Distribution
and other payment dates for the Preferred Securities, (iii) the Company will pay
for all and any costs, expenses and liabilities of UFH Capital (except the
obligations of UFH Capital to the holders of the Preferred Securities), and (iv)
the Trust Agreement further provides that UFH Capital will not engage in any
activity that is not consistent with the limited purposes of UFH Capital.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, UFH Capital
or any other Person. A default or event of default under any Senior Debt and
Subordinated Debt of the Company would not constitute a default or Event of
Default. In the event, however, of payment defaults under, or acceleration of,
Senior Debt and Subordinated Debt of the Company, the subordination provisions
of the Indenture provide that no payments may be made in respect of the Junior
Subordinated Debentures until such Senior Debt and Subordinated Debt has been
paid in full or any payment default thereunder has been cured or waived. Failure
to make required payments on the Junior Subordinated Debentures would constitute
an Event of Default.
LIMITED PURPOSE OF UFH CAPITAL
The Preferred Securities evidence preferred undivided beneficial
interests in the assets of UFH Capital. UFH Capital exists for the sole purpose
of issuing the Trust Securities and investing the proceeds thereof in Junior
Subordinated Debentures. A principal difference between the rights of a holder
of a Preferred Security and the rights of a holder of a Junior Subordinated
Debenture is that a holder of a Junior Subordinated Debenture is entitled to
receive from the Company the principal amount of and interest accrued on Junior
Subordinated Debentures held, while a holder of Preferred Securities is entitled
to receive Distributions from UFH Capital (or from the Company under the
Guarantee) if and to the extent UFH Capital has funds available for the payment
of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or
liquidation of UFH Capital involving the liquidation of the Junior Subordinated
Debentures, the holders of the Preferred Securities will be entitled to receive,
out of assets held by UFH Capital, the Liquidation Distribution in cash. See
"Description of the Preferred Securities--Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Junior Subordinated Debentures,
would be a subordinated creditor of the Company, subordinated in right of
payment to all Senior Debt and Subordinated Debt of the Company (as set forth in
the Indenture), but entitled to receive payment in full of principal and
interest before any shareholders of the Company receive payments or
distributions. Since the Company is the guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of UFH Capital (other than
the obligations of UFH Capital to the holders of its Preferred Securities), the
positions of a holder of the Preferred Securities and a holder of the Junior
Subordinated Debentures relative to other creditors and to shareholders of the
Company in the event of liquidation or bankruptcy of the Company are expected to
be substantially the same.
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MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of the material United States federal
income tax considerations that may be relevant to a person that purchases
Preferred Securities on their original issue at their original offering price
and constitutes the opinion of Holland & Knight LLP ("Holland & Knight"),
counsel to the Company and UFH Capital insofar as it relates to statements of
law or legal conclusions. The conclusions expressed herein are based upon
current provisions of the Code , regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change
at any time, with possible retroactive effect. Subsequent changes to these
authorities may cause tax consequences to vary substantially from the
consequences described below. Furthermore, the authorities on which the
following summary is based are subject to various interpretations, and it is
therefore possible that the United States federal income tax treatment of the
purchase, ownership, and disposition of Preferred Securities may differ from the
treatment described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion generally focuses on holders of Preferred
Securities who are individual citizens or residents of the United States and who
acquire Preferred Securities on their original issue at their offering price and
hold Preferred Securities as capital assets within the meaning of Section 1221
of the Code. The discussion has only limited application to dealers in
securities, corporations, estates, trusts or nonresident aliens and does not
address all the tax consequences that may be relevant to holders who may be
subject to special tax treatment, such as, for example, banks, thrifts, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that will
hold the Preferred Securities as a position in a "straddle," as part of a
"synthetic security" or "hedge," as part of a "conversion transaction" or other
integrated investment, or as other than a capital asset. The following summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Preferred Securities. Further, it does
not include any description of any alternative minimum tax consequences or the
tax laws of any state or local government or of any foreign government that may
be applicable to the Preferred Securities. Accordingly, each prospective
investor should consult, and should rely exclusively on, such investor's own tax
advisors in analyzing the federal, state, local and foreign tax consequences of
the purchase, ownership or disposition of Preferred Securities.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a Preferred
Security, each holder covenants to treat the Junior Subordinated Debentures as
indebtedness and the Preferred Securities as evidence of an indirect beneficial
ownership interest in the Junior Subordinated Debentures. There can be no
assurance that a contrary position will not be taken by the Internal Revenue
Service, or that any court considering the issues would not hold contrary to
such position. This summary assumes that the Junior Subordinated Debentures
will be classified for United States federal income tax purposes as indebtedness
of the Company.
CLASSIFICATION OF UFH CAPITAL
Under current law and assuming full compliance with the terms of the
Trust Agreement and Indenture (and certain other documents described herein),
UFH Capital will be classified for United States federal income tax purposes as
a grantor trust and not as an association taxable as a corporation. As a result,
each beneficial owner of Preferred Securities will be treated for federal income
tax purposes as a holder of its pro rata share of Junior Subordinated Debentures
held by UFH Capital. Accordingly, for United States federal income tax purposes,
each holder of Preferred Securities generally will be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures, and each
holder will be required to include in its gross income its pro rata share of
interest income, including any original issue discount ("OID"), paid or accrued
with respect to its allocable share of the Junior Subordinated Debentures.
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INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the "Regulations"), a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Company believes
that the likelihood of its exercising its option to defer payments of interest
is remote. Based on the foregoing, the Company intends to take the position that
the Junior Subordinated Debentures are not considered to be issued with OID at
the time of their original issuance and, accordingly, except as set forth below,
a holder should include in gross income such holder's allocable share of
interest on the Junior Subordinated Debentures at the time it is paid or accrued
in accordance with such holder's method of tax accounting.
Under the Regulations, however, if the Company exercised its option to
defer any payment of interest, the Junior Subordinated Debentures would at that
time and at all times thereafter be treated as OID instruments, and all stated
interest (and de minimis OID, if any) on the Junior Subordinated Debentures
would thereafter be treated as OID as long as the Junior Subordinated Debentures
remained outstanding. In such event, the taxable interest income of all holders
with respect to the Junior Subordinated Debentures would be determined on a
daily economic accrual basis regardless of such holder's method of tax
accounting, and actual distributions of stated interest would not be reported as
taxable income. Consequently, a holder would be required to include OID in gross
income even though the Company would not make any actual cash payments during an
Extended Interest Payment Period and even through some holders may use the cash
method of tax accounting.
The Regulations have not been addressed in any published rulings or
other published interpretations by the Internal Revenue Service, and it is
possible, however, that the Internal Revenue Service could take a position
contrary to the interpretation herein.
Because income on the Preferred Securities will constitute interest or
OID, corporate holders will not be entitled to a dividends-received deduction
with respect to any income recognized with respect to the Preferred Securities.
Subsequent uses of the term "interest" in this summary include income
in the form of OID.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Junior Subordinated Debentures with "market
discount" or "acquisition premium" as such phrases are defined for United States
federal income tax purposes. Such holders are advised to consult their tax
advisors as to the income tax consequences of the acquisition, ownership and
disposition of the Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF UFH
CAPITAL
Under certain circumstances, as described under "Description of the
Preferred Securities)Redemption or Exchange" and ")Liquidation Distribution Upon
Termination," the Junior Subordinated Debentures may be distributed to holders
of Preferred Securities upon a liquidation of UFH Capital. Under current United
States federal income tax law, such a distribution would be treated as a
nontaxable event to each such holder in which each holder is deemed to receive
directly its pro rata share of Junior Subordinated Debentures previously held
indirectly through this Trust. A holder's aggregate tax basis in the Junior
Subordinated Debentures received in the liquidation will be equal to such
holder's aggregate tax basis in the Preferred Securities immediately before the
distribution. A holder's holding period in the Junior Subordinated Debentures so
received in liquidation of UFH Capital would include the period for which such
holder held the Preferred Securities.
If, however, a Tax Event occurs which results in UFH Capital being
treated as an association taxable as a corporation, the distribution would
constitute a taxable event to UFH Capital and the holders of the Preferred
Securities, and each holder of Preferred Securities would recognize gain or loss
as if the holder had exchanged its Preferred Securities for Junior Subordinated
Debentures, and the holder's holding period in the Junior Subordinated
Debentures would not
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include the period for which such holder held the Preferred Securities. Under
certain circumstances described herein, the Junior Subordinated Debentures may
be redeemed for cash and the proceeds of such redemption distributed to holders
in redemption of their Preferred Securities. Under current law, such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the redeemed Preferred Securities, and a holder would
recognize gain or loss as if the holder sold such Preferred Securities for cash.
See "Description of the Preferred Securities)Redemption or Exchange" and
"--Liquidation Distribution Upon Termination."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss
equal to the difference between its adjusted tax basis in the Preferred
Securities and the amount realized on the sale of such Preferred Securities.
Assuming that the Company does not exercise its option to defer payment of
interest on the Junior Subordinated Debentures, and the Preferred Securities are
not considered issued with OID, a holder's adjusted tax basis in the Preferred
Securities generally will be its initial purchase price. If the Junior
Subordinated Debentures are deemed to be issued with OID as a result of the
Company's deferral of any interest payment, or otherwise, a holder's tax basis
in the Preferred Securities generally will be its initial purchase price,
increased by OID previously includible in such holder's gross income to the date
of disposition and decreased by distributions or other payments received on the
Preferred Securities since and including the date of commencement of the first
Extended Interest Payment Period. Such gain or loss generally will be a capital
gain or loss (except to the extent of any accrued interest with respect to such
holder's pro rata share of the Junior Subordinated Debentures required to be
included in income) and generally will be a long-term capital gain or loss if
the Preferred Securities have been held for more than one year.
Should the Company exercise its option to defer any payment of interest
on the Junior Subordinated Debentures, the Preferred Securities may trade at a
price that does not accurately reflect the value of accrued but unpaid interest
with respect to the underlying Junior Subordinated Debentures. In the event of
such a deferral, a holder that disposes of its Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Junior Subordinated Debentures to the date of
disposition as OID, but may not receive the cash related thereto. However, such
Security holder will add such amount to its adjusted tax basis in the Preferred
Securities. To the extent the selling price is less than the holder's adjusted
tax basis in the Preferred Securities, such holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES
Prospective purchasers of Preferred Securities should recognize that
the present federal income tax treatment of the Company and UFH Capital and an
investment in the Preferred Securities may be modified by legislative, judicial
or administrative action at any time, and that any such action may affect the
Company and investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the Internal Revenue Service and Treasury Department,
resulting in revisions of regulations and revised interpretations of established
concepts as well as statutory changes. Revisions in federal tax laws and the
interpretations thereof could adversely affect the tax consequences to the
Company, UFH Capital or of an investment in the Preferred Securities. There can
be no assurance that future legislative proposals or final legislation will not
affect the ability of the Company to deduct interest on the Junior Subordinated
Debentures. Such a change would give rise to a Tax Event. A Tax Event would
permit the Company, upon prior regulatory approval if then required under
applicable capital guidelines or regulatory policies, to cause a redemption of
the Preferred Securities before, as well as after, _______, 2003. See
"Description of the Junior Subordinated Debentures--Redemption or Exchange" and
"Description of the Preferred Securities--Redemption or Exchange--Tax Event
Redemption, Investment Company Event Redemptions or Capital Treatment Event
Redemptions."
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BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of OID accrued on the Preferred Securities held of record
by individual citizens or residents of the United States, or certain trusts,
estates, and partnerships, will be reported to the Internal Revenue Service on
Forms 1099, which forms should be mailed to such holders of Preferred Securities
by January 31 following each calendar year. Payments made on, and proceeds from
the sale of, the Preferred Securities may be subject to a "backup" withholding
tax (currently at 31%) unless the holder complies with certain identification
and other requirements. Any amounts withheld under the backup withholding rules
will be allowed as a credit against the holder's United States federal income
tax liability, provided the required information is provided to the Internal
Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE PARTICULAR
SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED SECURITIES
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
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ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("ERISA Plans"), generally may purchase Preferred Securities, subject to the
investing fiduciary's determination that the investment in Preferred Securities
satisfies ERISA's fiduciary standards and other requirements applicable to
investments by the ERISA Plan.
In any case, the Company and/or any of its affiliates may be considered
a "party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain plans
(generally, ERISA Plans maintained or sponsored by, or contributed to by, any
such persons with respect to which the Company or an affiliate is a fiduciary or
ERISA Plans for which the Company or an affiliate provides services). The
acquisition and ownership of Preferred Securities by an ERISA Plan (or by an
individual retirement arrangement or other ERISA Plans described in Section
4975(e)(1) of the Code) with respect to which the Company or any of its
affiliates is considered a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, ERISA Plans with respect to which the Company or any of
its affiliates is a party in interest or a disqualified person should not
acquire Preferred Securities unless such Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any other ERISA
Plans or other entities whose assets include ERISA Plan assets subject to ERISA
or Section 4975 of the Code proposing to acquire Preferred Securities should
consult with their own counsel.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriter, William R. Hough & Co., has agreed to purchase from
the Company the number of shares of Common Stock and from UFH Capital the number
of Preferred Securities set forth below. The Underwriter is committed to
purchase and pay for all Preferred Securities if any Preferred Securities are
purchased and has agreed to purchase the shares of Common Stock at the initial
offering price less the underwriting discounts and commission set forth on the
cover page of this Prospectus.
<TABLE>
<CAPTION>
Number of
Shares of Number of
Preferred Shares of
Underwriter Securities Common Stock
- ----------- ---------- ------------
<S> <C> <C>
William R. Hough & Co.............................
</TABLE>
The Underwriter proposes to offer the shares of Common Stock directly
to the public at the initial offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $___ per share. The Underwriter may allow and such dealers may re-allow a
concession not in excess of $ per share to certain other dealers. The
Underwriter has informed the Company that it does not intend to confirm sales to
any accounts over which they exercise discretionary authority. After the initial
public offering of the shares, the offering price and other selling terms may
from time to time be varied by the Underwriter. Without the prior consent of the
Company, no investor may purchase more than 100,000 shares of Common Stock in
the Common Stock Offering.
The Company has been advised by the Underwriter that the Underwriter
proposes initially to offer the Preferred Securities to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $____ per Preferred
Security. The Underwriter may allow and such dealers may re-allow a concession
not in excess of $____ per Preferred Security to certain other dealers. After
the Offerings, the price to the public and other selling terms may be changed by
the Underwriter.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Company, the Underwriting Agreement provides that the Company will pay as
compensation an amount of $______ per Preferred Security for the Underwriter's
arranging the investment therein of such proceeds.
The Company has granted to the Underwriter an option, exercisable no
later than 30 days after the date of this Prospectus, to purchase up to 90,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus, to cover
over-allotments, if any. If the Underwriter exercises its over-allotment option,
the Underwriter has agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares of Common
Stock to be purchased by it shown in the foregoing table bears to the total
number of shares of Common Stock offered hereby. The Underwriter may exercise
such option only to cover over-allotments made in connection with the sale of
share of Common Stock offered hereby.
The Company and UFH Capital have granted to the Underwriter an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional $900,000 aggregate liquidation amount of the Preferred Securities on
the terms set forth on the cover page hereof less underwriting discounts. The
Underwriter may exercise such option to purchase additional Preferred Securities
solely for the purpose of covering over-allotments, if any, incurred in the sale
of the Preferred Securities. To the extent that the Underwriter exercises its
option to purchase additional Preferred Securities, UFH Capital will issue and
sell to the Company additional Common Securities and the Company will issue and
sell to UFH Capital Junior Subordinated Debentures in an aggregate principal
amount equal to the total aggregate
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Liquidation Amount of the additional Preferred Securities being purchased
pursuant to the option and the additional Common Securities.
In connection with the Common Stock Offering, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Common Stock. Specifically, the Underwriter may overallot. In addition, the
Underwriter may bid for, and purchase, shares of Common Stock in the open market
to cover syndicate short positions created in connection with the Common Stock
Offering or to stabilize the price of the Common Stock. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Common Stock in the Common Stock Offering, if the syndicate repurchases
previously distributed Common Stock in syndicate covering transactions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriter is not required to engage in these activities, and may
end any of these activities at anytime.
Prior to the Common Stock Offering, there has been no public market for
the Common Stock. The initial public offering price for the Common Stock will be
determined by negotiation among the Company and the Representatives. The factors
to be considered in determining the initial public offering price will be
prevailing market and economic conditions, the revenues and earnings of the
Company, market valuations of other companies engaged in activities similar to
the Company, estimates of the business potential and prospects of the Company,
the present state of the Company's business operations and the Company's
management.
Because the NASD is expected to view the Preferred Securities as
interests in a direct participation program, the offering of the Preferred
Securities is being made in compliance with the applicable provisions of Rule
2810 of the NASD's Conduct Rules.
The Preferred Securities are a new issue of securities having no
trading market. Application has been made to have the Preferred Securities
listed for quotation on The Nasdaq Small Cap Market. The Underwriter has
advised UFH Capital that it presently intends to make a market in the Preferred
Securities after the commencement of trading, but no assurances can be made as
to the liquidity of such Preferred Securities or that an active and liquid
trading market will develop or, if developed, that it will be sustained. The
Underwriter will have no obligation to make a market in the Preferred
Securities, however, and may cease market-making activities, if commenced, at
any time.
The Company and UFH Capital have agreed to indemnify the Underwriter
against and contribute toward certain liabilities, including liabilities under
the Securities Act. The Company has agreed to reimburse the Underwriter for
certain expenses and legal fees related to the sale of the Securities.
As of July 1, 1998, William R. Hough, a controlling stockholder of
William R. Hough & Co., owned 169,374 shares or 4.8% of the Company's issued and
outstanding Common Stock (4.1% after giving effect to the Common Stock
Offering).
102
<PAGE> 108
LEGAL MATTERS
Certain legal matters for the Company and UFH Capital, including the
validity of the shares of Common Stock, the Guarantee and the Junior
Subordinated Debentures will be passed upon for the Company and UFH Capital by
Holland & Knight , counsel to the Company and UFH Capital. Certain legal
matters will be passed upon for the Underwriter by Smith Mackinnon Greeley
Bowdoin & Edwards, P.A. ("Smith Mackinnon"). Certain matters of Delaware law
relating to the validity of the Preferred Securities, the enforceability of the
Trust Agreement and the formation of UFH Capital will be passed upon by
Richards, Layton & Finger ("RL&F"), special Delaware counsel to the Company and
UFH Capital. Holland & Knight and Smith Mackinnon will rely on the opinion of
RL&F as to matters of Delaware law. Certain matters relating to United States
federal income tax considerations will be passed upon for the Company by Holland
& Knight.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997
and 1996 and the consolidated statements of earnings, comprehensive income,
stockholders' equity, and cash flows of the Company for each of the three years
in the period ended December 31, 1997 included in this Prospectus have been
audited by Grant Thornton LLP, independent certified public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance and upon the authority of said firm as experts in accounting and
auditing.
103
<PAGE> 109
AVAILABLE INFORMATION
The Company and UFH Capital have filed with the Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to the
Common Stock offered hereby and the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee (together with all amendments thereto,
the "Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Securities offered hereby,
reference is made to the Registration Statement and to the exhibits and
schedules thereto. While descriptions in this Prospectus of contracts,
agreements or other documents referred to herein are not necessarily complete,
such contracts, agreements and other documents are described herein in all
material respects. 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 is qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the public reference facilities maintained by the Commission
at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at 7 World Trade Center,
Suite 1300, New York, New York 10048 and the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained at prescribed rates by writing to the Public Reference Section of the
Commission located at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission with a Web site address
of http://www.sec.gov.
FOLLOWING THE OFFERINGS, THE COMPANY WILL BE SUBJECT TO THE INFORMATION
REPORTING REQUIREMENTS OF THE EXCHANGE ACT. The Company intends to furnish its
shareholders with annual reports containing financial statements audited by the
Company's independent accountants and to make available to its shareholders
quarterly reports for the first three quarters of each fiscal year containing
unaudited interim financial information.
No separate financial statements of UFH Capital have been included
herein. The Company does not consider that such financial statements would be
material to holders of Preferred Securities because (i) all of the voting
securities of UFH Capital will be owned by the Company, which after completion
of the Common Stock Offering will become subject to the informational and
reporting requirements of the Exchange Act (ii) UFH Capital has no
independent operations but exists for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of UFH Capital and
investing the proceeds thereof in Junior Subordinated Debentures issued by the
Company, and (iii) the obligations of the Company described herein to provide
certain indemnities in respect of and be responsible for certain costs,
expenses, debts and liabilities of UFH Capital under the Indenture and pursuant
to the Trust Agreement, the Guarantee issued by the Company with respect to the
Preferred Securities, the Junior Subordinated Debentures purchased by UFH
Capital, the related Indenture and the Expense Agreement, taken together,
constitute, in the belief of the Company and UFH Capital, a full and
unconditional guarantee of payments due on the Preferred Securities. See
"Description of the Junior Subordinated Debentures" and "Description of the
Guarantee."
UFH Capital is not currently subject to the information reporting
requirements of the Exchange Act and the Company does not expect that UFH
Capital will file reports, proxy statements and other information under the
Exchange Act with the Commission.
104
<PAGE> 110
UNITED FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Six Months Ended June 30, 1998 and 1997
Years Ended December 31, 1997, 1996 and 1995
<PAGE> 111
UNITED FINANCIAL HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at June 30, 1998 (unaudited),
December 31, 1997 and 1996 F-3
Consolidated Statements of Earnings for the six months ended June 30, 1998
and 1997 (unaudited) and for the years ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Comprehensive Income for the six months ended
June 30, 1998 and 1997 (unaudited) and the years ended December 31, 1997,
1996 and 1995 F-6
Consolidated Statement of Stockholders' Equity for the six months ended
June 30, 1998 (unaudited) and for the years ended December 31, 1997,
1996 and 1995 F-7
Consolidated Statements of Cash Flows for the six months ended June 30, 1998
and 1997 (unaudited) and for the years ended December 31, 1997, 1996 and 1995 F-8
Notes to Consolidated Financial Statements F-11
</TABLE>
F-1
<PAGE> 112
Report of Independent Certified Public Accountants
Board of Directors
United Financial Holdings, Inc.
St. Petersburg, Florida
We have audited the consolidated balance sheets of United Financial Holdings,
Inc. and Subsidiaries (the "Company") as of December 31, 1997 and 1996, and the
related consolidated statements of earnings, comprehensive income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of United
Financial Holdings, Inc. and Subsidiaries as of December 31, 1997 and 1996, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
/s/ Grant Thornton LLP
- ----------------------
Tampa, Florida
January 29, 1998 (except for Note S as to which
the date is July 23, 1998)
F-2
<PAGE> 113
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------
ASSETS 1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 7,820,439 $ 7,336,809 $ 7,902,388
Federal funds sold 26,767,000 7,441,000 7,061,000
Securities held to maturity, market value of
$12,805,968, $10,212,426 and $9,007,905, respectively 12,707,218 10,097,258 9,195,963
Securities available for sale, at market 17,180,997 11,472,052 9,510,205
Loans, net 97,111,855 94,821,324 79,262,508
Premises and equipment, net 9,290,916 9,541,801 5,987,428
Federal Home Loan Bank stock 433,500 364,900 318,800
Federal Reserve Bank stock 158,800 153,750 153,750
Accrued interest receivable 993,878 950,042 778,555
Intangible assets, less accumulated amortization of $1,615,688,
$1,570,288 and $1,506,977, respectively 1,396,235 1,336,494 1,440,141
Other assets 4,286,734 3,803,254 1,122,554
------------ ------------ ------------
Total assets $178,147,572 $147,318,684 $122,733,292
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand $ 25,562,276 28,384,616 $ 26,646,609
NOW and money market 68,604,527 36,031,184 27,571,149
Savings 4,448,969 5,245,222 4,688,430
Time, $100,000 and over 9,574,786 9,692,130 4,734,628
Other time 49,495,244 50,865,952 44,504,101
------------ ------------ ------------
Total deposits 157,685,802 130,219,104 108,144,917
Securities sold under agreements to repurchase 4,168,418 1,080,745 1,768,859
Accrued interest payable 399,160 396,184 336,785
Convertible subordinated debentures 630,000 630,000 630,000
Long-term debt 2,370,652 2,678,152 813,950
Other liabilities 1,441,943 1,823,337 1,547,126
------------ ------------ ------------
Total liabilities 166,695,975 136,827,522 113,241,637
COMMITMENTS AND CONTINGENCIES -- -- --
STOCKHOLDERS' EQUITY
7% convertible preferred stock, $10 par value; 150,000 shares
authorized; 20,850 shares issued and outstanding at June 30,
1998 and 23,350 shares issued and outstanding at December 31,
1997 and 1996 208,500 233,500 233,500
Common stock, $.01 par value; 20,000,000 shares authorized;
3,513,858 shares issued and outstanding at June 30, 1998;
3,444,318 and 3,431,004 shares issued and outstanding at
December 31, 1997 and 1996, respectively 35,138 34,443 34,308
Paid-in Capital 6,213,977 5,789,932 5,737,567
Accumulated other comprehensive income 73,507 57,499 45,872
Retained earnings 4,920,475 4,375,788 3,440,408
------------ ------------ ------------
Total stockholders' equity 11,451,597 10,491,162 9,491,655
------------ ------------ ------------
Total liabilities and stockholders' equity $178,147,572 $147,318,684 $122,733,292
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 114
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Interest income
Loans and loan fees $ 4,870,947 $ 4,251,306 $ 8,960,703 $ 8,121,249 $ 7,590,367
Securities
U.S. Treasury 293,562 277,513 598,549 316,369 288,782
Obligations of other U.S.
Government agencies and corporations 411,110 385,392 746,786 702,235 662,531
Obligations of states and political 39,570 54,670 86,868
subdivisions 36,578 20,551
Other 69,393 76,904 151,612 180,517 219,489
Federal funds sold and securities
purchased under reverse
repurchase agreements 325,620 135,691 295,297 220,028 276,165
----------- ----------- ----------- ----------- -----------
Total interest income 6,007,210 5,147,357 10,792,517 9,595,068 9,124,202
Interest expense
NOW and money market 650,990 368,818 794,997 541,882 665,270
Savings 50,174 47,448 96,656 107,523 121,262
Time deposits, $100,000 and over 277,247 179,210 419,007 241,685 210,474
Other time 1,375,734 1,210,339 2,603,631 2,314,600 1,941,403
Long-term debt 129,586 57,797 130,547 124,544 86,331
Federal funds purchased and
securities sold under agreements
to repurchase 39,835 50,391 56,248 89,338 187,509
----------- ----------- ----------- ----------- -----------
Total interest expense 2,523,566 1,914,003 4,101,086 3,419,572 3,212,249
----------- ----------- ----------- ----------- -----------
Net interest income 3,483,644 3,233,354 6,691,431 6,175,496 5,911,953
Provision for loan losses 250,000 90,000 90,000 150,000 180,000
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 3,233,644 3,143,354 6,601,431 6,025,496 5,731,953
Other income
Service charges on deposit accounts 347,093 327,187 674,637 555,747 576,656
Trust and investment management
income 1,137,978 843,965 1,886,534 1,229,136 57,869
Other service charges, fees and income 424,405 304,237 679,081 787,210 602,695
----------- ----------- ----------- ----------- -----------
Total other income 1,909,476 1,475,389 3,240,252 2,572,093 1,237,220
</TABLE>
(continued)
F-4
<PAGE> 115
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS - CONTINUED
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Other expense
Salaries and employee benefits $ 2,262,606 $ 1,941,665 $ 4,047,859 $ 3,723,903 $ 2,593,728
Occupancy expense 290,858 203,828 514,374 387,256 280,286
Furniture and equipment expense 255,755 216,958 494,360 423,224 279,596
Data processing expense 221,308 211,453 417,522 375,339 315,553
Legal and professional fees 85,035 62,743 176,778 152,766 122,426
Amortization of intangible assets 34,624 31,831 66,802 111,208 121,048
Other operating expenses 694,421 1,189,671 1,854,300 1,052,426 908,754
----------- ----------- ----------- ----------- -----------
3,844,607 3,858,149 7,571,995 6,226,122 4,621,391
----------- ----------- ----------- ----------- -----------
Earnings before income taxes 1,298,513 760,594 2,269,688 2,371,467 2,347,782
Income tax expense (benefit)
Current 563,400 339,450 957,932 952,448 981,272
Deferred (51,000) (49,000) (97,986) (61,000) (110,000)
----------- ----------- ----------- ----------- -----------
512,400 290,450 859,946 891,448 871,272
----------- ----------- ----------- ----------- -----------
NET EARNINGS $ 786,113 $ 470,144 $ 1,409,742 $ 1,480,019 $ 1,476,510
=========== =========== =========== =========== ===========
Earnings Per Share:
Basic $ .22 $ .13 $ .41 $ .47 $ .64
Diluted $ .21 $ .13 $ .38 $ .40 $ .43
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 116
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Net earnings $ 786,113 $ 470,144 $ 1,409,742 $ 1,480,019 $ 1,476,510
Other comprehensive income:
Unrealized holding gains
(losses) 25,666 (14,040) 18,642 (103,639) 277,398
Income tax (expense)
benefit related to items of
other comprehensive income (9,658) 5,283 (7,015) 38,999 (104,385)
----------- ----------- ----------- ----------- -----------
Comprehensive income $ 802,121 $ 461,387 $ 1,421,369 $ 1,415,379 $ 1,649,523
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 117
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
7% 6%
Convertible Convertible
Common Preferred Preferred Paid-In
Stock Stock Stock Capital
----- ----- ----- -------
<S> <C> <C> <C> <C>
Balance December 31, 1994 $16,242 $ 982,500 $1,000,000 $2,736,923
Net Earnings -- -- -- --
2% Common Stock dividend 516 -- -- 154,113
Conversion of 6% Preferred to Common Stock 6,828 -- (874,860) 867,908
Dividends on Common Stock -- -- -- --
Dividends on Preferred Stock -- -- -- --
Accumulated other comprehensive income -- -- -- --
Issuance of Common Stock for cash 1,275 -- -- 381,225
Contribution by Parent to Fiduciary Services Corporation 1,500 -- -- 448,500
------- --------- ---------- ----------
Balance at December 31, 1995 26,361 982,500 125,140 4,588,669
Net Earnings -- -- -- --
2% Common Stock dividend 669 -- -- 265,230
Conversion of 6% Preferred to Common Stock 996 -- (125,140) 124,098
Conversion of 7% Preferred to Common Stock 6,192 (749,000) -- 742,698
Dividends on Common Stock -- -- -- --
Dividends on Preferred Stock -- -- -- --
Accumulated other comprehensive income -- -- -- --
Issuance of Common Stock for cash 90 -- -- 16,872
------- --------- ---------- ----------
Balance at December 31, 1996 34,308 233,500 -- 5,737,567
Net Earnings -- -- -- --
Dividends on Common Stock -- -- -- --
Dividends on Preferred Stock -- -- -- --
Accumulated other comprehensive income -- -- -- --
Issuance of Common Stock for cash 135 -- -- 52,365
------- --------- ---------- ----------
Balance at December 31, 1997 34,443 233,500 -- 5,789,932
Net Earnings (unaudited) -- -- -- --
Dividends on Common Stock (unaudited) -- -- -- --
Dividends on Preferred Stock (unaudited) -- -- -- --
Accumulated other comprehensive income (unaudited) -- -- -- --
Issuance of Common Stock (unaudited) 485 -- -- 399,276
Conversion of 7% Preferred to Common Stock (unaudited) 210 (25,000) -- 24,769
------- --------- ---------- ----------
Balance at June 30, 1998 (unaudited) $35,138 $ 208,500 $ -- $6,213,977
======= ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Retained
Income Earnings Total
------------- -------- -----
<S> <C> <C> <C>
Balance December 31, 1994 $(62,501) $1,711,722 $ 6,384,886
Net Earnings -- 1,476,510 1,476,510
2% Common Stock dividend -- (155,194) (565)
Conversion of 6% Preferred to Common Stock -- -- (124)
Dividends on Common Stock -- (276,809) (276,809)
Dividends on Preferred Stock -- (102,529) (102,529)
Accumulated other comprehensive income 173,013 -- 173,013
Issuance of Common Stock for cash -- -- 382,500
Contribution by Parent to Fiduciary Services Corporation -- -- 450,000
-------- ---------- -----------
Balance at December 31, 1995 110,512 2,653,700 8,486,882
Net Earnings -- 1,480,019 1,480,019
2% Common Stock dividend -- (266,858) (959)
Conversion of 6% Preferred to Common Stock -- -- (46)
Conversion of 7% Preferred to Common Stock -- -- (110)
Dividends on Common Stock -- (383,018) (383,018)
Dividends on Preferred Stock -- (43,435) (43,435)
Accumulated other comprehensive income (64,640) -- (64,640)
Issuance of Common Stock for cash -- -- 16,962
-------- ---------- -----------
Balance at December 31, 1996 45,872 3,440,408 9,491,655
Net Earnings -- 1,409,742 1,409,742
Dividends on Common Stock -- (458,017) (458,017)
Dividends on Preferred Stock -- (16,345) (16,345)
Accumulated other comprehensive income 11,627 -- 11,627
Issuance of Common Stock for cash -- -- 52,500
-------- ---------- -----------
Balance at December 31, 1997 57,499 4,375,788 10,491,162
Net Earnings (unaudited) -- 786,113 786,113
Dividends on Common Stock (unaudited) -- (233,254) (233,254)
Dividends on Preferred Stock (unaudited) -- (8,172) (8,172)
Accumulated other comprehensive income (unaudited) 16,008 -- 16,008
Issuance of Common Stock (unaudited) -- -- 399,761
Conversion of 7% Preferred to Common Stock (unaudited) -- -- (21)
-------- ---------- -----------
Balance at June 30, 1998 (unaudited) $ 73,507 $4,920,475 $11,451,597
======== ========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE> 118
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 786,113 $ 470,144 $ 1,409,742 $ 1,480,019 $ 1,476,510
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities
Provision for loan losses 250,000 90,000 90,000 150,000 180,000
Provision for depreciation
and amortization 320,814 379,594 566,344 500,994 370,421
Gain on sale of equipment -- -- -- -- (2,703)
Writedown of investment
security -- 255,000 255,000 -- --
Write-off of leasehold
improvements -- 130,065 130,065 -- --
Accretion of securities (25,368) (20,473) (44,317) (35,062) (46,438)
discount
Amortization of unearned
loan fees (41,530) (68,990) (64,941) (104,663) (193,969)
Amortization of securities
premiums 12,637 16,329 38,874 58,804 57,168
Gain on sales of loans (197,659) (109,999) (289,720) (424,611) (339,153)
Decrease (increase) in
interest receivable 43,836 (159,414) (171,487) (25,317) (35,428)
Increase in interest payable 2,977 25,058 59,399 37,793 66,784
Increase in other assets (200,465) (534,134) (2,641,922) (118,290) (445,845)
Decrease (increase) in other
liabilities (381,394) 563,645 276,211 211,633 98,494
------------ ----------- ------------ ------------ ------------
Net cash provided by
(used in) operating
activities 569,961 1,036,825 (386,752) 1,731,300 1,185,841
Cash flows from investing activities:
Purchase of Federal Reserve Bank
stock and FHLB stock (73,650) (46,100) (46,100) (13,500) --
Net increase (decrease) in
Federal funds sold (19,326,000) 1,680,000 (380,000) (4,665,000) 10,234,000
Principal repayments of held
to maturity securities 340,484 224,201 388,715 678,419 1,395,107
Principal repayments of available
for sale securities 416,147 285,346 494,729 1,106,893 1,775,590
Proceeds from maturities of
available for sale securities 500,000 2,500,000 4,491,876 1,199,781 --
Proceeds from maturities of held
to maturity securities 2,025,761 1,190,000 4,987,969 2,840,219 975,000
Purchases of available for sale
securities (5,648,595) (3,488,828) (6,937,869) (3,518,560) (1,902,396)
Purchases of held to maturity
securities (5,915,075) (4,995,312) (6,526,492) (3,588,175) (1,369,698)
Proceeds from sales of loans 1,649,324 1,220,364 3,969,174 5,598,856 4,426,770
Net increase in loans (4,309,027) (3,495,844) (19,263,329) (10,384,509) (14,319,006)
Capital expenditures (35,300) (3,429,676) (4,185,913) (2,836,673) (2,168,104)
Proceeds from sales of fixed assets -- -- -- -- 5,406
------------ ----------- ------------ ------------ ------------
Net cash used in
investing activities (30,375,931) (8,355,849) (23,007,240) (13,582,249) (947,331)
</TABLE>
(continued)
F-8
<PAGE> 119
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Six Month Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Acquisition of Fiduciary
Services Corporation $ -- $ -- $ -- $ -- $ (38,782)
Acquisition of Eickhoff,
Pieper & Willoughby -- -- -- (62,819) --
Cash paid in lieu of fractional shares
- 2% stock dividend -- -- -- (565) (222)
Cash paid in lieu of fractional shares
- 6% preferred stock conversion -- -- -- (46) (124)
Net increase (decrease) in
demand deposits, NOW
accounts, money market
accounts and savings
accounts 28,954,750 (5,778,944) 10,754,834 12,994,380 (13,631,078)
Net decrease (increase) in
certificates of deposit (1,488,052) 10,574,090 11,319,353 2,316,607 12,780,217
Net increase (decrease) in
securities sold under
agreements to repurchase 3,087,673 673,134 (688,114) (995,537) 1,178,218
Increase in borrowings -- -- 2,004,202 75,000 --
Repayment of long-term debt (307,500) (132,500) (140,000) (136,250) (52,000)
Issuance of common stock 284,155 -- 52,500 16,962 382,500
Dividend paid on preferred
stock (8,172) (8,169) (16,345) (43,435) (102,529)
Dividend paid on common stock (233,254) (228,721) (458,017) (383,018) (276,809)
----------- ----------- ----------- ----------- ------------
Net cash provided by
financing activities 30,289,600 5,098,890 22,828,413 13,781,279 239,391
----------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash
and cash equivalents 483,630 (2,220,134) (565,579) 1,930,330 477,901
Cash and cash equivalents at
beginning of year 7,336,809 7,902,388 7,902,388 5,972,058 5,494,157
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end
of year $ 7,820,439 $ 5,682,254 $ 7,336,809 $ 7,902,388 $ 5,972,058
=========== =========== =========== =========== ============
Supplemental Disclosures of Cash
Flow Information
Cash paid during the year for:
Interest $ 2,520,590 $ 1,888,945 $ 4,041,687 $ 3,381,780 $ 3,174,457
Income taxes $ 391,251 $ 504,400 $ 927,817 $ 961,579 $ 1,102,764
</TABLE>
(continued)
F-9
<PAGE> 120
United Financial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Six Month Ended June 30, For the Years Ended December 31,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Supplemental Disclosure of Non-Cash Activity
Reclassification of loans to
foreclosed real estate $283,015 $284,428 $408,113 $541,085 $ --
======== ======== ======== ======== ----------
Non-cash portion of the
acquisition price of Eickhoff, Pieper &
Willoughby was the issuance of
convertible subordinated
debentures $ -- $ -- $630,000 $ -- $ --
======== ======== ======== ======== ==========
Non-cash common stock issued $115,607 $ -- $ -- $ -- $ --
======== ======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-10
<PAGE> 121
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of the significant accounting policies that have been
consistently applied in the preparation of the consolidated financial statements
of United Financial Holdings, Inc. and Subsidiaries.
1. Principles of Consolidation
The consolidated financial statements include the accounts of United Financial
Holdings, Inc. (the "Company") and its Subsidiaries, United Bank and Trust
Company (the "Bank"), Eickhoff, Pieper & Willoughby ("EPW"), and United Trust
Company ("Trust"), after all significant intercompany accounts and transactions
have been eliminated. United Trust was formed on November 30, 1997. On December
31, 1997, the Bank transferred all assets of the trust division to the newly
formed United Trust Company.
2. Unaudited Financial Statements
The interim financial statements and related notes thereto for June 30, 1998
and 1997, include all normal and recurring adjustments which, in the opinion of
management, are necessary for a fair presentation and are prepared on the same
basis as the annual statements. The interim results are not necessarily
indicative of the results that may be expected for the full year.
3. Cash and Cash Equivalents
For the purpose of presentation in the Consolidated Statements of Cash Flows,
cash and cash equivalents includes cash on hand and non-interest bearing amounts
due from correspondent banks.
4. Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
5. Securities
The Company's investment securities are classified in the following categories
and accounted for as follows:
- - Trading Securities. Government and corporate bonds held principally for
resale in the near term are classified as trading securities and recorded at
their fair values. Unrealized gains and losses on trading securities are
included in other income. The Company had no trading securities for the six
months ended June 30, 1998 and 1997 and the years ended December 31, 1997,
1996 and 1995.
F-11
<PAGE> 122
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
- - Securities Held to Maturity. Bonds, notes and debentures for which the
Company has the positive intent and ability to hold to maturity are reported
at cost, adjusted for amortization of premiums and accretion of discounts
which are recognized in interest income using the interest method over the
period to maturity. Such securities may be sold or transferred to the
available for sale or trading securities classification only as a result of
isolated, non-recurring, or unusual changes in circumstances which the
Company could not have reasonably anticipated, such as a change in statutory
or regulatory requirements regarding investment limitations or a significant
deterioration in a security issuer's credit-worthiness.
- - Securities Available for Sale. Securities available for sale consist of
bonds, notes, debentures, and certain equity securities not classified as
trading securities nor as securities held to maturity, which may be sold
prior to maturity as part of asset/liability management or in response to
other factors, are carried at fair value with any valuation adjustment
reported in a separate component of stockholders' equity, net of the tax
effect.
Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their cost that are other than temporary are recognized as
writedowns of the individual securities to their fair value. Such writedowns are
included in earnings as realized losses. The Company had a writedown of one
investment security totaling $255,000 for the year ended December 31, 1997.
There were no such writedowns during 1996 and 1995.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
6. Loans and Allowance for Loan Losses
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal balance. These receivables are adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or costs on
originated loans and un-amortized premiums or discounts on purchased loans.
Loan origination fees and certain direct origination costs are capitalized and
recognized as an adjustment to the related loan's yield, generally over the
contractual life of the loan.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received.
F-12
<PAGE> 123
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Bank's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
7. Accounting for Impairment of Loans
The Company's measurement of impaired loans includes those loans which are
nonperforming and have been placed on non-accrual status and those loans which
are performing according to all contractual terms of the loan agreement but may
have substantive indication of potential credit weakness.
Residential mortgages and consumer loans and leases outside the scope of SFAS
No. 114 are collectively evaluated for impairment.
8. Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives. Leasehold improvements are amortized over the lives of
the respective leases or the service lives of the improvements, whichever is
shorter. The straight-line method of depreciation is followed for substantially
all assets for financial reporting purposes, but accelerated methods are used
for tax purposes.
9. Other Real Estate Owned (ORE)
Other real estate owned is initially recorded at fair value at the date of
foreclosure, less estimated selling costs. Costs relating to development and
improvement of property are capitalized, whereas costs relating to the holding
of property are expensed.
Valuations are periodically performed by management, or obtained from
independent appraisers, and an allowance for loss is established by a charge to
operations if the value of the property declines below its original estimated
fair value.
F-13
<PAGE> 124
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
If a sale of real estate owned results in a gain, the gain is accounted for in
accordance with FASB Statement No. 66, Accounting for Sales of Real Estate.
Accordingly, gains may be deferred or recognized currently depending on the
terms of the sale. Losses are charged to operations as incurred.
10. Intangible Assets
Intangible assets include core deposit premiums paid to acquire certain customer
deposit bases and the remaining excess of cost over net tangible assets
acquired. These assets are being amortized on a straight-line basis over their
estimated lives of 10-40 years.
11. Income Taxes
Deferred income tax assets and liabilities are computed annually for differences
between the consolidated financial statements and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in net deferred assets and
liabilities.
12. Stock Based Compensation
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
Effective in 1996, the Company adopted the disclosure option of SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123), which requires that
companies not electing to account for stock-based compensation as prescribed by
the statement, disclose the pro forma effects on earnings, and earnings per
share as if SFAS No. 123 had been adopted. Additionally, certain other
disclosures are required with respect to stock compensation and the assumptions
used are to determine the pro forma effects of SFAS No.
123.
13. Loan Fees
Net loan fees and processing costs are deferred and amortized over the lives of
the loans using the interest method of amortization.
F-14
<PAGE> 125
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
14. Accounting for Impairment of Long-Lived Assets
The Company periodically reviews its long-lived assets for impairment.
Impairment losses on long-lived assets are recognized when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. The Company did not
record any impairment losses during the six-months ended June 30, 1998 and 1997,
and the years ended December 31, 1997 and 1996.
15. Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities
The FASB has issued SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, which was effective for the
Company's fiscal year beginning January 1, 1997. SFAS No. 125 provides standards
for distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings.
16. Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes standards for reporting and display of comprehensive income.
A specific reporting format is not required, provided the financial statements
show the amount of total comprehensive income for the period. Those items which
are not included in net income are required to be shown in the financial
statements with appropriate footnote disclosure and the aggregate balance of
such items must be shown separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods is required. The Company adopted
SFAS No. 130 effective January 1, 1998.
F-15
<PAGE> 126
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
17. Disclosures About Business Segments
In June 1997, the FASB adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way the Company reports information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial reports. SFAS No. 131 is effective for periods
beginning after December 15, 1997. Management has implemented SFAS No. 131 in
the year ended December 31, 1997 and believes its trust operations and
investment advisory activities are immaterial to the consolidated financial
statements in terms of their respective assets, revenues, profit or loss and
other operating data.
18. Earnings per Share
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. SFAS No. 128
simplified the method for computing and presenting earnings per share ("EPS")
previously required by APB Opinion No. 15, Earnings Per Share, and makes them
comparable to international EPS standards. SFAS No. 128 is effective for periods
ending after December 15, 1997, and requires restatement of all prior period EPS
data and has been implemented by the Company. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
19. Reclassifications
Certain reclassifications have been made to the June 30, 1998 balances to
conform to the December 31, 1997, 1996 and 1995 presentation.
NOTE B - ACQUISITIONS
On September 30, 1995, the Company purchased 100% of the stock of Fiduciary
Services Corp. ("FSC") for $450,000, issuing 150,000 shares at $3.00 per share
of common stock of the Company plus a contingent payment of up to 225,000
performance shares based upon net earnings of the trust department through 2001.
The acquisition of FSC was accounted for as a purchase. The purchase price was
allocated to net tangible assets acquired based upon their estimated fair market
values. The performance shares will be recorded as additional purchase price.
Included in intangible assets is $395,706 of excess of cost over net tangible
assets acquired. Pro forma information is not presented, as the effect of the
acquisition is immaterial to the financial statements.
The Company has reserved from its authorized but unissued Common Stock, 225,000
shares as performance shares and 14,013 shares have been paid out as of June 30,
1998.
F-16
<PAGE> 127
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - ACQUISITIONS - Continued
On January 31, 1996, the Company completed the acquisition of EPW, an
independent investment management firm. The acquisition was facilitated by the
issuance of $630,000, 8% convertible subordinated debentures.
NOTE C - UNITED FINANCIAL HOLDINGS, INC. (Parent Only) CONDENSED FINANCIAL
INFORMATION
The Bank, EPW and Trust are wholly owned subsidiaries of United Financial
Holdings, Inc. The majority of the Company's assets are represented by its
investment in the Bank and its primary source of income is dividends from the
Bank.
During 1989, the Company authorized the issuance of 150,000 shares of $10 par
value cumulative, convertible, 7% preferred stock. The shares are convertible
into common shares at $1.19 per share.
Following is condensed financial information of the Company.
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997 1996 1995
---- ---- ---- ----
Balance Sheets (unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 49,162 $ 203,278 $ 245,940 $ 356,494
Due from subsidiaries Bank 150,588 197,014 144,886 151,409
Investment in Bank 11,268,972 10,428,370 9,881,984 8,911,085
Investment in EPW 129,727 102,723 70,360 --
Investment in United Trust 2,456,845 2,360,985 -- --
Goodwill 567,125 561,063 631,886 --
Other assets 154,346 125,291 83,676 87,474
----------- ----------- ----------- -----------
$14,776,765 $13,978,724 $11,058,732 $ 9,506,462
=========== =========== =========== ===========
Note payable $ 2,329,402 $ 2,629,402 $ 750,200 $ 875,200
Convertible subordinated
debentures 630,000 630,000 630,000 --
Other liabilities 365,766 228,160 186,877 144,380
Stockholders' equity 11,451,597 10,491,162 9,491,655 8,486,882
----------- ----------- ----------- -----------
$14,776,765 $13,978,724 $11,058,732 $ 9,506,462
=========== =========== =========== ===========
</TABLE>
F-17
<PAGE> 128
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - UNITED FINANCIAL HOLDINGS, INC. (Parent Only) CONDENSED FINANCIAL
INFORMATION - Continued
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
1998 1997 1996 1995
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Statements of Earnings
Equity in earnings of Bank $ 828,840 $ 1,492,207 $ 1,535,539 $ 1,528,574
Equity in earnings of EPW 42,004 107,363 65,553 --
Equity in earnings of United
Trust 19,171 -- -- --
Other income 49,525 26,611 1,470 4,837
Interest expense (127,654) (125,699) (119,407) (86,331)
Other expense (74,846) (156,235) (34,991) (1,613)
----------- ----------- ----------- -----------
Earnings before income taxes 737,040 1,344,247 1,448,164 1,445,467
Income tax benefit 49,073 65,495 31,855 31,043
----------- ----------- ----------- -----------
Net earnings $ 786,113 $ 1,409,742 $ 1,480,019 $ 1,476,510
=========== =========== =========== ===========
</TABLE>
F-18
<PAGE> 129
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES
At June 30, 1998, the carrying value and estimated market value of investments
in debt and equity securities were as follows:
<TABLE>
<CAPTION>
Carrying
Value Gross Gross
(Amortized Unrealized Unrealized Estimated
Cost) Gains Losses Market Value
----- ----- ------ ------------
JUNE 30, 1998 (unaudited)
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 9,380,554 $ 109,772 $ 37,714 $ 9,452,612
Obligations of State and political
subdivisions 569,188 13,033 -- 582,221
Mortgage-backed securities 1,154,816 12,584 535 1,166,865
Corporate obligations 1,502,660 1,610 -- 1,504,270
Other 100,000 -- -- 100,000
----------- ----------- ----------- -----------
Total $12,707,218 $ 136,999 $ 38,249 $12,805,968
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Historical Gross Gross Carrying
Amortized Unrealized Unrealized Value
Cost Gains Losses (Market Value)
---- ----- ------ --------------
Securities available for sale: (unaudited)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $12,602,109 $ 112,329 $ 9,405 $12,705,033
Obligations of State and political
subdivisions 1,444,647 6,945 -- 1,451,592
Mortgage-backed securities 1,866,724 15,807 4,299 1,878,232
Equity securities 1,156,140 -- 10,000 1,146,140
----------- ----------- ----------- -----------
Total $17,069,620 $ 135,081 $ 23,704 $17,180,997
=========== =========== =========== ===========
</TABLE>
F-19
<PAGE> 130
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES - Continued
At December 31, 1997 and 1996, the carrying value and estimated market value of
investments in debt and equity securities were as follows:
<TABLE>
<CAPTION>
Carrying
Value Gross Gross
(Amortized Unrealized Unrealized Estimated
Cost) Gains Losses Market Value
----- ----- ------ ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 6,903,071 $ 57,023 $ 39,655 $ 6,920,439
Obligations of State and political
subdivisions 628,967 17,987 464 646,490
Mortgage-backed securities 1,428,889 9,016 1,588 1,436,317
Corporate obligations 1,036,331 72,849 -- 1,109,180
Other 100,000 -- -- 100,000
----------- ----------- ----------- -----------
Total $10,097,258 $ 156,875 $ 41,707 $10,212,426
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Historical Gross Gross
Amortized Unrealized Unrealized Carrying Value
Cost Gains Losses (Market Value)
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 9,436,599 $ 76,140 $ 1,714 $ 9,511,025
Mortgage-backed securities 1,792,192 13,899 1,204 1,804,887
Equity securities 156,140 -- -- 156,140
----------- ----------- ----------- -----------
Total $11,384,931 $ 90,039 $ 2,918 $11,472,052
=========== =========== =========== ===========
</TABLE>
F-20
<PAGE> 131
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES - Continued
<TABLE>
<CAPTION>
Carrying
Value Gross Gross Estimated
(Amortized Unrealized Unrealized Market
Cost) Gains Losses Value
----- ----- ------ -----
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $5,166,949 $ 21,811 $ 59,995 $5,128,765
Obligations of state and political
subdivisions 833,526 20,006 851 852,681
Mortgage-backed securities 1,781,848 4,698 4,482 1,782,064
Corporate obligations 1,313,640 3,224 172,469 1,144,395
Other 100,000 -- -- 100,000
---------- ---------- ---------- ----------
Total $9,195,963 $ 49,739 $ 237,797 $9,007,905
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Historical Gross Gross
Amortized Unrealized Unrealized Carrying Value
Cost Gains Losses (Market Value)
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $6,422,592 $ 64,977 $ 4,056 $6,483,513
Mortgage-backed securities 2,861,970 26,612 18,030 2,870,552
Equity securities 156,140 -- -- 156,140
---------- ---------- ---------- ----------
Total $9,440,702 $ 91,589 $ 22,086 $9,510,205
========== ========== ========== ==========
</TABLE>
There were no proceeds from sales of investments in debt securities for the six
months ended June 30, 1998 and 1997, and the years ended December 31, 1997,
1996, and 1995.
The amortized cost and estimated market value of debt securities at June 30,
1998, by contractual maturity, are shown below. Actual maturities may differ
from contractual maturities due to borrowers having the right to call or prepay
obligations with or without call or prepayment penalties.
F-21
<PAGE> 132
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - SECURITIES - Continued
<TABLE>
<CAPTION>
Securities held to maturity Securities available for sale
Carrying Carrying
Value Estimated Historical Value
(Amortized Market Average Amortized (Market Average
Cost) Value Yield Cost Value) Yield
----- ----- ----- ---- ------ -----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Due in one year
or less $ 749,407 $ 749,552 5.80% $ 2,988,584 $ 3,005,435 6.51%
Due after one
year through
five years 4,429,271 4,475,639 6.41% 6,935,753 7,018,039 6.49%
Due after five
years through
ten years 4,467,497 4,508,127 6.34% 2,940,929 2,943,468 6.40%
Due after ten
years 1,906,226 1,905,785 7.40% 1,181,491 1,189,683 6.45%
Mortgage-
backed
securities 1,154,817 1,166,865 7.07% 1,866,723 1,878,232 7.16%
Equity securities -- -- -- 1,156,140 1,146,140 --
----------- ----------- ----------- -----------
Total $12,707,218 $12,805,968 $17,069,620 $17,180,997
=========== =========== =========== ===========
</TABLE>
Investment securities with a carrying value (which approximates market value) of
approximately $4,282,000, $2,809,000 and $4,226,000 at June 30, 1998, December
31, 1997 and 1996, respectively, were pledged to secure public funds and
securities sold under agreements to repurchase.
F-22
<PAGE> 133
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - LOANS
Major classifications of loans were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------- ------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Real estate mortgage $64,511,021 $60,583,746 $49,483,289
Commercial 29,310,461 30,536,261 25,239,534
Installment and other 5,626,244 5,869,534 6,490,909
----------- ----------- -----------
99,447,726 96,989,541 81,213,732
Less: Allowance for loan losses 1,759,340 1,647,355 1,609,785
Unearned fees 576,531 520,862 341,439
----------- ----------- -----------
Loans, net $97,111,855 $94,821,324 $79,262,508
=========== =========== ===========
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, For the Years Ended December 31,
----------------------------- -----------------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 1,647,355 $ 1,609,785 $ 1,609,785 $ 1,526,695 $ 1,335,154
Provision charged to operating
expenses 250,000 90,000 90,000 150,000 180,000
Recoveries on loans previously
charged off 8,446 12,034 38,510 1,600 13,001
Loans charged off (146,461) (34,093) (90,940) (68,510) (1,460)
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 1,759,340 $ 1,677,726 $ 1,647,355 $ 1,609,785 $ 1,526,695
=========== =========== =========== =========== ===========
Changes in unearned fees were as follows:
Balance at beginning of year $ 520,862 $ 341,439 $ 341,439 $ 279,206 $ 304,972
Points deferred on loans 97,199 94,558 244,364 166,896 168,202
Points recognized in income (41,530) (68,991) (64,941) (104,663) (193,968)
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 576,531 $ 367,006 $ 520,862 $ 341,439 $ 279,206
=========== =========== =========== =========== ===========
</TABLE>
F-23
<PAGE> 134
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - LOANS - Continued
Impaired loans were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
---------- ----------------------
1998 1997 1996
---------- -------- --------
(unaudited)
<S> <C> <C> <C>
Balance at end of period $3,929,618 $400,049 $372,352
Average balance during period 2,368,174 440,927 224,119
Total related allowance for losses 374,000 13,000 --
Interest income recognized on impaired loans 13,359 -- --
</TABLE>
Loans converted to ORE through foreclosure proceedings totaled approximately
$283,000, $408,000 and $541,000 for the six months ended June 30, 1998 and the
years ended December 31, 1997 and 1996, respectively. Sales of ORE that were
financed by the Company totaled $-0-, $124,000 and $369,000 for the six months
ended June 30, 1998 and the years ended December 31, 1997 and 1996,
respectively.
NOTE F - PREMISES AND EQUIPMENT
Major classifications of premises and equipment are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------- ---------------------------
1998 1997 1996
----------- ----------- ----------
(unaudited)
<S> <C> <C> <C>
Land $ 1,396,779 $ 1,396,779 $1,380,272
Land improvements 59,673 59,673 59,673
Leasehold improvements 117,713 113,998 359,839
Building and building improvements 7,404,878 7,392,139 1,573,206
Furniture, fixtures and equipment 2,426,252 2,460,523 1,942,550
Construction in progress -- 1,294 2,351,755
----------- ----------- ----------
11,405,295 11,424,406 7,667,295
Less accumulated depreciation and amortization 2,114,379 1,882,605 1,679,867
----------- ----------- ----------
$ 9,290,916 $ 9,541,801 $5,987,428
=========== =========== ==========
</TABLE>
Depreciation of premises and equipment and amortization of leaseholds was
$286,188 and $215,717 for the six-months ended June 30, 1998 and 1997, and
$501,475, $390,680 and $249,373 for the years ended December 31, 1997, 1996 and
1995, respectively.
F-24
<PAGE> 135
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - INCOME TAXES
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities, consist of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ----------------------
1998 1997 1996
-------- -------- --------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets
Allowance for loan losses $629,000 $543,000 $527,000
Deferred loan fees 139,000 120,000 85,000
Deferred compensation 97,000 75,000 59,000
Net operating loss carryforward (1) 42,000 59,000 36,000
-------- -------- --------
907,000 797,000 707,000
Deferred tax liabilities
Fixed assets 143,000 36,000 79,000
Securities available for sale 39,000 30,000 24,000
-------- -------- --------
182,000 66,000 103,000
-------- -------- --------
Net deferred tax asset, included with other assets $725,000 $731,000 $604,000
======== ======== ========
</TABLE>
(1) Relates to approximately $95,000 of net operating losses of two acquired
subsidiaries. The acquisitions resulted in ownership changes for
purposes of Section 382 of the Internal Revenue Code of 1986, as
amended. Consequently, the net operating loss carryforwards are subject
to a yearly limitation on their utilization and can only be applied
against future income of the acquired subsidiaries. The net operating
loss carryforwards at June 30, 1998 are approximately $110,000 and begin
to expire in 2010. The Company believes that it will obtain the future
income to fully utilize the net operating loss carryforwards, thus no
valuation allowance has been recorded.
Management believes that it is more likely than not that the net deferred tax
asset will be realized and, therefore, a valuation allowance has not been
recorded against the deferred asset at June 30, 1998, December 31, 1997 and
1996.
F-25
<PAGE> 136
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - INCOME TAXES - Continued
The Company's effective tax rate varies from the statutory rate of 34%. The
reasons for this difference are as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, For the Years Ended December 31,
------------------------- -----------------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Computed "expected" tax
provision $ 441,500 $ 258,600 $ 771,700 $ 806,300 $ 798,200
Tax exempt interest income (4,300) (2,500) (7,500) (9,300) (9,100)
Goodwill amortization 11,700 7,400 22,100 23,100 6,900
State taxes net of federal
benefit 39,900 19,600 58,600 60,100 68,100
Other, net 23,600 7,350 15,046 11,248 7,172
--------- --------- --------- --------- ---------
Total $ 512,400 $ 290,450 $ 859,946 $ 891,448 $ 871,272
========= ========= ========= ========= =========
</TABLE>
NOTE H - DEPOSITS
At December 31, 1997, the scheduled maturities of time deposits are as follows:
<TABLE>
<S> <C>
1998 $47,298,764
1999 9,027,361
2000 1,269,587
2001 423,196
2002 2,539,174
-----------
$60,558,082
===========
</TABLE>
NOTE I - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company enters into retail repurchase agreements with certain of its
customers. These agreements mature daily. All securities collateralizing these
agreements were under the Company's control for each respective time period.
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
--------------------------- --------------------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Average balance $3,102,880 $2,495,938 $2,029,453 $3,291,662 $6,451,536
Average interest rate 3.53% 2.46% 2.49% 2.62% 2.80%
Maximum month-end balance $4,267,204 $2,686,595 $2,860,141 $6,977,300 $6,977,300
</TABLE>
F-26
<PAGE> 137
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE I - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Continued
The average rate was determined by dividing the total interest paid by the
average outstanding borrowings.
Securities underlying the agreements are as follows:
<TABLE>
<CAPTION>
At December 31,
At June 30 ------------------------------
1998 1997 1996
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Carrying value $4,242,000 $2,809,000 $4,226,000
Estimated fair value 4,242,000 2,809,000 4,226,000
</TABLE>
NOTE J - LONG-TERM DEBT
Long-term debt of the Company consists of the following:
<TABLE>
<CAPTION>
December 31,
June 30, ------------------------
1998 1997 1996
---------- ---------- --------
(unaudited)
<S> <C> <C> <C>
Note payable to an unrelated bank providing for quarterly principal
payments of $3,750 and quarterly interest payments at 8.5% fixed, due in
2001. The note is collateralized by certain pieces of data processing
equipment. $ 41,250 $ 48,750 $ 63,750
Note payable to an unrelated bank providing for monthly interest payments
at prime (8.5% at June 30, 1998 and December 31, 1997) and ninety-five
(95) consecutive monthly principal payments are due beginning on December
1, 1999. The loan agreement requires a security interest in the Bank's
common stock and contains certain restrictive covenants. The Company may
borrow a maximum of $3 million under this note payable. 2,329,402 2,629,402 750,200
</TABLE>
F-27
<PAGE> 138
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - LONG-TERM DEBT - Continued
<TABLE>
<CAPTION>
December 31,
June 30, -------------------------
1998 1997 1996
---------- ---------- --------
(unaudited)
<S> <C> <C> <C>
8% Convertible Subordinated Debentures issued in conjunction with
the acquisition of EPW. The holder can convert to common stock at
$4.12 per share at any time. Interest is payable semi-annually and
the debentures mature January 31, 2006. The debentures are callable
by the Company, in whole or part, as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Price
---- -----
<S> <C> <C> <C> <C>
2001 103%
2002 102%
2003 101%
2004 and thereafter 100% 630,000 630,000 630,000
---------- ---------- ----------
$3,000,652 $3,308,152 $1,443,950
========== ========== ==========
</TABLE>
The annual principal reductions of the long-term debt during each of the next
five years ended December 31, are as follows:
<TABLE>
<S> <C>
1998 $ 15,000
1999 46,250
2000 390,000
2001 378,750
2002 375,000
Thereafter 2,103,152
----------
$3,308,152
==========
</TABLE>
NOTE K - 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 a 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 weighting, and
other factors.
F-28
<PAGE> 139
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - REGULATORY MATTERS - Continued
In addition to the minimum capital requirement detailed above, the Bank has
committed to maintain a minimum Tier One Leverage Ratio (as defined) of 7% in
exchange for permission to exceed the Office of Comptroller's (the "Department")
maximum investment in land and buildings as expressed as a percentage of
capital. As of June 30, 1998, the Bank's Tier One Leverage Ratio was 6.87%,
slightly below the minimum agreed to by the Department. The Bank has ninety days
to increase its Tier One Ratio back to the 7% minimum. The Company intends to
contribute a portion of the proceeds of the public offering as additional Bank
Capital or, in the event that the offering is delayed, the Bank has several
viable alternatives to correct the deficiency.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) to 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 June 30, 1998, that the Bank
meets all capital adequacy requirements to which it is subject.
As of June 30, 1998 and December 31, 1997, the most recent notification from the
Federal Reserve 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.
F-29
<PAGE> 140
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - REGULATORY MATTERS - Continued
The Bank's actual capital amounts and ratios as of June 30, 1998 are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity and
ratio to total assets $ 11,269 6.43%
Intangible assets (411)
---------
Tangible capital and ratio
to adjusted total assets $ 10,858 6.20% $2,628 1.5%
========= ======
Tier I (core) capital and
ratio to adjusted total
assets $ 10,779 6.15% $5,256 3.0% $ 8,761 5.0%
========= ====== =======
Tier I capital and ratio to
risk-weighted assets $ 10,779 8.94% $3,619 3.0% $ 7,238 6.0%
====== =======
Tier II capital - allowance
for loan and lease losses 1,511
---------
Total risk-based capital and
ratio to risk-weighted
assets $ 12,290 10.19% $9,650 8.0% $12,063 10.0%
========= ====== =======
Total assets $ 175,242
=========
Adjusted total assets $ 175,221
=========
Risk-weighted assets $ 120,626
=========
</TABLE>
F-30
<PAGE> 141
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - REGULATORY MATTERS - Continued
The Bank's actual capital amounts and ratios as of December 31, 1997 are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity and
ratio to total assets $ 10,428 7.22%
Intangible assets (418)
---------
Tangible capital and ratio
to adjusted total assets $ 10,010 6.80% $2,206 1.5%
========= ======
Tier I (core) capital and
ratio to adjusted total
assets $ 9,953 6.77% $4,412 3.0% $ 7,354 5.0%
========= ====== =======
Tier I capital and ratio to
risk-weighted assets $ 9,953 8.90% $3,356 3.0% $ 6,713 6.0%
====== =======
Tier II capital - allowance
for loan and lease losses 1,402
---------
Total risk-based capital and
ratio to risk-weighted
assets $ 11,355 10.15% $8,950 8.0% $11,187 10.0%
========= ====== =======
Total assets $ 144,482
=========
Adjusted total assets $ 147,074
=========
Risk-weighted assets $ 111,878
=========
</TABLE>
F-31
<PAGE> 142
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - REGULATORY MATTERS - Continued
The Bank's actual capital amounts and ratios as of December 31, 1996 are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity and
ratio to total assets $ 9,882 8.11%
Intangible assets (808)
---------
Tangible capital and ratio
to adjusted total assets $ 9,074 $1,886 1.5%
========= ======
Tier I (core) capital and
ratio to adjusted total
assets $ 9,028 7.18% $3,772 3.0% $6,286 5.0%
========= ====== ======
Tier I capital and ratio to
risk-weighted assets $ 9,028 10.07% $2,689 3.0% $5,379 6.0%
====== ======
Tier II capital - allowance
for loan and lease losses 1,126
---------
Total risk-based capital and
ratio to risk-weighted
assets $ 10,154 11.33% $7,172 8.0% $8,965 10.0%
========= ====== =======
Total assets $ 121,887
=========
Adjusted total assets $ 125,736
=========
Risk-weighted assets $ 89,645
=========
</TABLE>
F-32
<PAGE> 143
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - CONCENTRATIONS OF RISK
All of the Company's loans, commitments, and commercial and standby letters of
credit have been granted to customers who are substantially all located in the
Company's market area. The majority of customers are depositors of the Company.
The concentrations of credit by type of loan are set forth in Note D. The
distribution of commitments to extend credit approximates the distribution of
loans outstanding. Commercial and standby letters of credit were granted
primarily to commercial borrowers. The Company, as a matter of policy, does not
extend credit to any single borrower or group of related borrowers in excess of
its legal lending limit. At June 30, 1998 and December 31, 1997, less than 3% of
the Company's loans are unsecured.
At June 30, 1998, the Company held deposits for a customer equal to
approximately 23% of total deposits. Such deposits were invested in short-term
investments. At December 31, 1997 and 1996, no single customer represented more
than 10% of total deposits.
NOTE M - COMMITMENTS AND CONTINGENT LIABILITIES
Off balance-sheet risk
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they become payable. Those instruments involve, to varying
degrees, elements of credit and interest rate risks in excess of the amount
recognized in the balance sheet. The contract or notional amounts of those
instruments reflect the extent of involvement the Company has in particular
classes of financial instruments.
The Company's exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual or notional amount
of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
Unless noted otherwise, the Company does not require collateral or other
security to support financial instruments with off-balance-sheet credit risk.
The contract or notional amounts are as follows:
<TABLE>
<CAPTION>
December 31,
June 30, -------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Commitments to extend credit $18,142,093 $16,644,892 $14,939,490
Standby letters of credit and financial guarantees
written $ 1,396,078 $ 1,663,578 $ 2,334,992
</TABLE>
F-33
<PAGE> 144
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENT LIABILITIES - Continued
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
credit-worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Company generally holds
residential or commercial real estate, accounts receivable, inventory and
equipment as collateral supporting those commitments for which collateral is
deemed necessary.
Litigation
The Company is party to certain litigation encountered in the course of its
normal operations, a portion of which involves actions brought against
borrowers, generally involving foreclosure proceedings. In some instances,
borrowers or interested parties have filed or threatened suit in retaliation.
Management, after consulting with legal counsel, believes that it has valid
defenses and intends to vigorously defend these matters. Management is of the
opinion that an unfavorable outcome, if any, would not have a material effect
upon the consolidated financial statements.
Operating Leases
The Company also has operating leases covering certain office equipment and
office facilities expiring at various times through 2002.
The minimum annual rentals under these leases as of December 31, 1997, are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 70,686
1999 71,592
2000 64,499
2001 65,478
2002 66,500
Thereafter 29,568
--------
Total minimum lease payments $368,323
========
</TABLE>
F-34
<PAGE> 145
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENT LIABILITIES - Continued
The Company's rent expense was $77,343, $112,500, $189,096, $232,325 and
$143,891 for the six months ended June 30, 1998 and 1997 and the years ended
December 31, 1997, 1996 and 1995, respectively.
NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS
The assumptions used in the estimation of the fair value of the Company's
financial instruments are detailed below. Where quoted prices are not available,
fair values are based on estimates using discounted cash flows and other
valuation techniques. The use of discounted cash flows can be significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. The following disclosures should not be considered a
surrogate of the liquidation value of the Company, but rather represent a
good-faith estimate of the increase or decrease in value of financial
instruments held by the Company since purchase, origination or issuance.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
Cash and due from banks and interest bearing deposits with other banks: Fair
value equals the carrying value of such assets.
Investment securities and investment securities available for sale: Fair
values for investment securities are based on quoted market prices.
Federal funds sold: Due to the short-term nature of these assets, the
carrying values of these assets approximate their fair value.
Loans: For variable rate loans, those repricing within six months or less,
fair values are based on carrying values. Fixed rate commercial loans, other
installment loans, and certain real estate mortgage loans were valued using
discounted cash flows. The discount rate used to determine the present value
of these loans was based on interest rates currently being charged by the
Company on comparable loans as to credit risk and term.
Off-balance-sheet instruments: The Company's loan commitments, which
approximate $19,500,000, $18,300,000, and $17,300,000 at June 30, 1998,
December 31, 1997 and 1996, respectively, are negotiated at current market
rates and are relatively short-term in nature and, as a matter of policy,
the Company generally makes commitments for fixed rate loans for relatively
short periods of time. Therefore, the estimated value of the Company's loan
commitments approximates the fees charged for entering into the commitments.
F-35
<PAGE> 146
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
Deposit liabilities: The fair values of demand deposits are, as required by
SFAS 107, equal to the carrying value of such deposits. Demand deposits
include non-interest-bearing demand deposits, savings accounts, NOW accounts
and money market demand accounts. Discounted cash flows have been used to
value fixed rate term deposits. The discount rate used is based on interest
rates currently being offered by the Company on comparable deposits as to
amount and term.
Short-term borrowings: The carrying value of Federal funds purchased,
securities sold under agreements to repurchase and other short-term
borrowings approximate their carrying values.
Long-term debt: The carrying value of the Company's long-term debt
approximates its fair value since the interest rates on these instruments
approximate market interest rates.
<TABLE>
<CAPTION>
Financial Instruments June 30, 1998 December 31, 1997 December 31, 1996
---------------------- ---------------------- ----------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Assets: Amount Fair Value Amount Fair Value Amount Fair Value
(in thousands) (in thousands) (in thousands)
---------------------- ---------------------- ----------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 7,820 $ 7,820 $ 7,337 $ 7,337 $ 7,902 $ 7,902
Federal funds sold 26,767 26,767 7,441 7,441 7,061 7,061
Securities held to maturity 12,707 12,806 10,097 10,212 9,196 9,196
Securities available for sale 17,181 17,181 11,472 11,472 9,759 9,759
Loans 99,455 99,511 96,989 97,042 81,214 81,300
Federal Home Loan Bank stock 434 434 365 365 - -
Federal Reserve Bank stock 159 159 154 154 154 154
Liabilities:
Demand deposits 25,562 25,562 28,385 28,385 26,647 26,647
NOW and money market 68,605 68,605 36,031 36,031 27,990 27,990
Savings 4,449 4,449 5,245 5,245 4,688 4,688
Time, $100,000 and over 9,925 9,986 9,692 9,752 4,735 4,771
Other time 49,145 49,346 50,866 51,074 44,504 44,731
Securities sold under
agreements to repurchase 4,168 4,168 1,081 1,081 1,769 1,769
Long-term debt 2,371 2,371 2,678 2,678 1,444 1,444
Off balance sheet items - 195 - 183 - 173
</TABLE>
F-36
<PAGE> 147
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE O - RELATED PARTIES
The Bank has entered into transactions with its directors, significant
stockholders and their affiliates ("related parties"). Such transactions were
made in the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at the
same time for comparable transactions with other customers and did not, in the
opinion of management, involve more than normal credit risk or present other
unfavorable features. The aggregate amount of loans to such related parties
approximated $5,015,000, at June 30, 1998 and $4,462,400 and $4,952,000 at
December 31, 1997 and 1996, respectively.
During November 1997, an affiliate of one of the Company's directors entered
into an exclusive right to a lease agreement (the "Lease Agreement") with
Imaginative Investments, Inc., a subsidiary of the Company and the owner of the
real property covering the Company's principal executive office (the "Owner").
Pursuant to the Lease Agreement, the Owner granted to such entity the exclusive
right to lease 17,918 square feet of the Company's principal executive office
for a total of $246,373 or $13.75 per rental square foot with annual escalations
of 3%, and three to five year lease terms in return for a commission of 3% if no
outside broker is used and 6% in the event an outside broker is used. The Lease
Agreement commenced July 14, 1997 and terminated at midnight on July 14, 1998.
As of June 30, 1998, the space was 100% leased.
During March 1997, an affiliate of one of the Company's directors (the
"Manager") entered into a property Management Agreement with Imaginative
Investments, Inc., a subsidiary of the Company, pursuant to which the Manager is
employed to act as the sole and exclusive manager in the leasing, operation and
management of the Company's principal executive offices for total consideration
of approximately $17,000. The Owner is required to maintain comprehensive
general public liability insurance in the amount of $2,000,000 naming as insured
parties the Owner, Manager and such other parties as the Owner may direct. The
Manager must maintain its own insurance to protect itself from any and all
claims under any workers' compensation laws or other employer's liability laws.
NOTE P - PROFIT-SHARING PLAN
The Company has a defined contribution profit-sharing plan covering
substantially all employees. Contributions are determined annually by the Board
of Directors. The Company contributed $53,202 and $49,998 during the six months
ended June 30, 1998 and 1997, respectively, and $99,996, $75,000 and $75,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. The plan was
amended in 1993 to include an Employee Stock Ownership Plan (ESOP) provision. As
of December 31, 1997, the ESOP owned 85,863 shares of the Company's common
stock. During 1998, the ESOP purchased an additional 34,443 newly issued shares
from the Company and 15,300 shares from existing shareholders. The purchase
price of the newly issued stock was $8.25 as determined by an outside
independent appraisal.
F-37
<PAGE> 148
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE P - PROFIT-SHARING PLAN - Continued
The Company sponsors a deferred compensation 401(k) Plan for the benefit of
eligible full-time employees. The 401(k) Plan, which is voluntary, allows
employees to contribute up to 10 percent of their total compensation (or a
maximum of $10,000 as limited by federal regulations) on a pre-tax basis. The
Company makes a matching contribution of 100 percent of the first $500 and 40
percent thereafter, up to the maximum amount allowed by the 401(k) Plan.
Employee contributions to the 401(k) Plan were $92,139 and $86,871 for the six
months ended June 30, 1998 and 1997, respectively, and $173,262, $135,472 and
$79,503 for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company's matching contribution was $52,968 and $49,997 for the six months ended
June 30, 1998 and 1997, respectively, and $86,927, $74,207 and $42,514 for the
years ended December 31, 1997, 1996 and 1995, respectively.
NOTE Q - STOCKHOLDERS' EQUITY
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share (EPS) computations. Options to purchase
13,500 shares of common stock at $8.25 a share at June 30, 1997 and 495,000
shares at $7.96 and 27,000 shares at $4.49 at December 31, 1997 and 1996,
respectively, were not included in the computation of diluted EPS because the
options exercise price was not less than the value of the common shares based on
an independent appraisal. These options expire during 1999, 2007 and 2000,
respectively.
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-------------------------------------------------------------------------------------
1998 1997
--------------------------------------- -----------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Earnings Shares Amount Earnings Shares Amount
-------- --------- ------ -------- --------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net earnings available to
common stockholders $777,941 3,481,947 $ .22 $461,972 3,430,818 $ .13
====== =======
Effective of dilutive securities
Incremental shares from
assumed exercise or
conversion of:
Convertible debt 15,717 152,790 15,717 152,790
Preferred Stock 8,172 195,318 8,172 196,947
Stock options -- 34,824 -- 15,183
-------- --------- -------- ---------
Diluted EPS
Net earnings available to
common stockholders and
assumed conversions $801,830 3,864,879 $ .21 $485,861 3,795,738 $ .13
======== ========= ====== ======== ========= =======
</TABLE>
F-38
<PAGE> 149
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE Q - STOCKHOLDERS' EQUITY - Continued
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------ ------------------------------- ------------------------------
Weighted Per Weighted Per Weighted Per
Average Share Average Share Average Share
Earnings Shares Amount Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net earnings
available to
common
stockholders $1,393,397 3,432,768 $ .41 $1,436,584 3,026,619 $ .47 $1,373,981 2,163,117 $ .64
====== ======= ======
Effect of dilutive
securities
Incremental
shares from
assumed
exercise or
conversion of:
Convertible
debt 31,434 152,790 28,815 140,652 -- --
Preferred
stock 16,345 196,947 43,435 592,236 102,529 1,275,192
Stock
options -- 3,207 -- 1,899 -- 3,936
---------- --------- ---------- --------- ---------- ---------
Diluted EPS
Net earnings
available to
common
stockholders
and assumed
conversions $1,441,176 3,785,712 $ .38 $1,508,834 3,761,406 $ .40 $1,476,510 3,442,245 $ .43
========== ========= ====== ========== ========= ======= ========== ========= ======
</TABLE>
During the year ended December 31, 1997, the Company adopted the United
Financial Holdings, Inc. Stock Option and Incentive Compensation Plan ("Plan")
under which 468,000 shares of common stock were reserved. Under the Plan, the
Company may grant its Board of Directors and certain officers incentive stock
options or non-qualified stock options to purchase a specified number of shares
of common stock at a price not less than fair market value on the date of grant
and for a term not to exceed 10 years. The options granted to the Board of
Directors are 100% vested and the remaining options vest and become exercisable
at 20% increments after each anniversary date beginning after the second
anniversary date. During 1997, 156,000 and 312,000 options were granted to the
Company's Board of Directors and eligible executive officers, respectively, at
$7.94 per share, the estimated fair value of the Company's common stock at the
grant date. As such, no compensation expense was recorded in connection with the
grant of such options. No options under this plan were granted during the six
months ended June 30, 1998.
F-39
<PAGE> 150
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE Q - STOCKHOLDERS' EQUITY - Continued
<TABLE>
<CAPTION>
Range
of Per Weighted
Share Average Aggregate
Number of Option Per Share Option
Shares Price Price Price
------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Outstanding at December 31, 1995
and 1994 9,000 $ 1.96 $ 1.96 $ 17,640
Options granted 54,000 3.89-8.25 6.37 343,980
Options exercised (9,000) - (1.96) (17,640)
------- ---------- ------ ----------
Outstanding at December 31, 1996 54,000 3.89-8.25 6.37 343,980
Options granted 468,000 7.94 7.94 3,715,920
Options exercised (13,500) - (3.89) (52,515)
Options forfeited - - - -
------- ---------- ------ ----------
Outstanding at December 31, 1997 508,500 3.89-8.25 7.88 4,007,385
Options granted - - - -
Options exercised - - - -
Options forfeited - - - -
------- ---------- ------ ----------
Outstanding at June 30, 1998 508,500 $3.89-8.25 $ 7.88 $4,007,385
======= ========== ===== ==========
</TABLE>
The weighted-average remaining contractual life of the outstanding stock options
at June 30, 1998, December 31, 1997, 1996 and 1995 was 171 months, 177 months,
30 months and 13 months, respectively.
These options are exercisable as follows:
<TABLE>
<CAPTION>
Weighted
Average
Year Ending Number of Exercise
December 31, Shares Price
------------ ------- -----
<S> <C> <C>
1998 466,200 $ 7.86
1999 18,600 8.16
2000 18,600 8.16
2001 4,200 7.94
2002 900 7.94
------- --------
508,500 $ 7.88
======= ========
</TABLE>
F-40
<PAGE> 151
United Financial Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE Q - STOCKHOLDERS' EQUITY - Continued
In order to calculate the fair value of the options, it was assumed that the
risk-free interest rate was 6.0%, the dividend yield would be 1.68% over the
exercise period, the expected life of the options would be the entire exercise
period and stock volatility would be zero due to the lack of an active market
for the stock. The following information pertains to the fair value of the
options at June 30, 1998 and 1997, and December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Six Months Ended
June 30, For the Years Ended December 31,
---------------------------- -------------------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------- ------------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Weighted average-grant-date
Fair value of options
issued during the year $ -- $ -- $ 705,120 $ NIL $ --
=========== ============ ============= ============= ============
Pro forma net earnings $ 741,637 $ 470,144 $ 1,402,329 $ 1,480,019 $ 1,476,510
=========== ============ ============= ============= ============
Pro forma basic earnings per
share $ .21 $ .13 $ .41 $ .47 $ .64
=========== ============ ============= ============= ============
</TABLE>
NOTE R - EXECUTIVE COMPENSATION
The Company has employment contracts with certain executive officers of the
Company, providing for a total annual payment equal to their annual base salary
plus bonuses. These contracts are in effect until termination (as defined) of
the related employee. If the Company, for other than just cause (as defined)
terminates the employee, the affected employee shall receive, for a period of
twelve months, continuing compensation equal to his compensation for the twelve
month period immediately prior to termination.
The Company has established a non-qualified defined benefit plan covering
certain executive employees. The Plan specifies that upon reaching age 65, the
employee will receive an annual benefit (paid monthly) ranging from 40 percent
to 60 percent of their annual salary, for 240 months. The Company will accrue
the present value of the estimated future retirement payments over the period
from the date of each agreement to the retirement date of the respective
executive officer. To fund these benefit plans, the Company purchased single
premium cash value life insurance policies with cash surrender values of $2.32
million, which have been capitalized and included in other assets.
NOTE S - SUBSEQUENT EVENT
The Board of Directors declared a three-for-one common stock split effective
July 1, 1998 to be issued on July 31, 1998. All amounts have been restated to
reflect this stock split.
F-41
<PAGE> 152
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company, UFH Capital or the Underwriter. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
security other than the Common Stock and the Preferred Securities offered by
this Prospectus, nor does it constitute an offer to sell or a solicitation of an
offer to buy the Common Stock or the Preferred Securities by anyone in any
jurisdiction in which such an offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary ................................................................ 1
Risk Factors ........................................................... 9
Use of Proceeds ........................................................ 19
Market for the Securities and Related Matters .......................... 19
Accounting Treatment ................................................... 20
Capitalization ......................................................... 21
Dilution ............................................................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ........................................................... 23
Business ............................................................... 43
Management ............................................................. 58
Certain Relationships and Related
Transactions ......................................................... 67
Principal and Selling STOCKHOLDERS .................................... 68
Description of the Capital Stock ....................................... 70
Description of the Preferred Securities ................................ 71
Description of the Junior Subordinated Debentures ...................... 82
Description of the Guarantee ........................................... 90
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee ......................................... 92
Material Federal Income Tax Considerations ............................. 93
ERISA Considerations ................................................... 98
Underwriting ........................................................... 99
Legal Matters .......................................................... 101
Experts ................................................................ 101
Available Information .................................................. 102
Index to Consolidated Financial Statements ............................. F-1
</TABLE>
Until _________, 1998, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
661,889 SHARES
UNITED FINANCIAL
HOLDINGS, INC.
COMMON STOCK
$6,000,000
UFH CAPITAL TRUST I
1,200,000 Shares of ____%
Cumulative Trust Preferred Securities
(Liquidation Amount $5 per Preferred Security)
guaranteed, as described herein, by
UNITED FINANCIAL HOLDINGS, INC.
---------------------
PROSPECTUS
---------------------
William R. Hough & Co.
__________ ___, 1998
<PAGE> 153
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850 of the Florida Business Corporation Act and the Articles
of Incorporation and Bylaws of United Financial Holdings, Inc. (the "Company")
provide for indemnification of the Company's directors and officers against
claims, liabilities, amounts paid in settlement and expenses in a variety of
circumstances, which may include liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). In addition, the Company carries insurance
permitted by the laws of the State of Florida on behalf of Directors, officers,
employees or agents which may cover liabilities under the Securities Act.
Under the Trust Agreement of UFH Capital Trust I ("UFH Capital"), the
Company will agree to indemnify each of the Trustees of UFH Capital or any
predecessor Trustee for UFH Capital, and to hold each Trustee harmless against,
any loss, damage, claim, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with he acceptance or
administration of the Trust Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under the Trust Agreement.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee ........................... $ 4,762.00
---------------------
NASD Filing Fee ................................ +
---------------------
NASDAQ Small-Cap Market Listing Fee ............ +
---------------------
Legal Fees and Expenses ........................ +
---------------------
Trustee Fees and Expenses ...................... +
---------------------
Accounting Fees and Expenses ................... +
---------------------
Printing and Mailing Expenses .................. +
---------------------
Blue Sky Fees and Expenses ..................... +
---------------------
Miscellaneous Expenses ......................... +
---------------------
Total Fees and Expenses ..................... $ 400,000.00
=====================
</TABLE>
- -----------------
+ To be filed by amendment.
The Company is paying all of the foregoing expenses. None are being paid
by the Selling Stockholders.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The securities issued or sold by the Company from June 1995 through June
1998, which were not registered under the Securities Act, are listed below:
(i) The sale of 42,500 shares of Common Stock to Ward J. Curtis, Jr.
and Charles O. Lowe to join the board of directors for a total of
$382,500;
(ii) The issuance of 50,000 shares to the stockholders of FSC, which
include Mr. Curtis, Mr. Lowe, and Susan S. Mittermayr, pursuant to the
acquisition of FSC;
(iii)The distribution of 17,161 shares of Common Stock representing
a 2% stock dividend to various stockholders;
II-1
<PAGE> 154
(iv) The conversion of previously issued 6% Preferred Stock for
33,196 shares of Common Stock;
(v) The conversion of previously issued 7% Preferred Stock for
199,554 shares of Common Stock;
(vi) The conversion of previously issued 7% Preferred Stock for
6,890 shares of Common Stock;
(vii)The distribution of 22,362 shares of Common Stock representing
a 2% stock dividend to various stockholders;
(viii)The issuance of 3,000 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $16,961.80;
(ix) The issuance of 1,250 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $14,583.75;
(x) The issuance of 2,000 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $23,333.33;
(xi) The issuance of 1,250 shares of Common Stock pursuant to the
exercise of stock options for total cash consideration of $14,583.75;
(xii)The issuance of 11,481 shares of Common Stock to the ESOP trust
for total cash consideration of $264,154.75;
(xiii)The issuance of 1,671 shares of Common Stock to former
employees of FSC and EPW for achieving profit goals under the FSC and EPW
earnout provisions;
(xiv)The issuance of 3,000 shares issued to former employees of FSC
and EPW for achieving revenue goals under the FSC and EPW earnout
provisions; and
(xv) The conversion of previously issued 7% Preferred Stock for
7,028 shares of Common Stock.
The shares of capital stock issued in the above transactions were offered
and sold in reliance upon the exemption from registration under Section 4(2) as
transactions by an issuer not involving any public offering or were otherwise
exempt from a requirement to be registered under the Securities Act. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were affixed
to the share certificates issued in such transaction.
II-2
<PAGE> 155
ITEM 27. EXHIBITS
The following exhibits either are filed herewith or incorporated by
reference to documents previously filed or will be filed by amendment, as
indicated below:
<TABLE>
<CAPTION>
Exhibits Description
- -------- -----------
<S> <C>
1 Form of Underwriting Agreement+
3.1 Amended and Restated Articles of Incorporation of the Company+
3.2 Bylaws of the Company+
4.1 Form of Indenture with respect to the Company's __% Junior
Subordinated Debentures
4.2 Form of Specimen Junior Subordinated Debenture+
4.3 Certificate of Trust of UFH Capital Trust I
4.4 Trust Agreement of UFH Capital Trust I
4.5 Form of Amended and Restated Trust Agreement of UFH Capital
Trust I+
4.6 Form of Certificate for Cumulative Trust Preferred Security of
UFH Capital Trust I+
4.7 Form of Guarantee Agreement for UFH Capital Trust I
4.8 Form of Agreement as to Expenses and Liabilities
5.1 Opinion of Holland & Knight LLP regarding the Junior Subordinated
Debentures+
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel,
regarding the Cumulative Trust Preferred Securities to be issued
by UFH Capital Trust I+
8.1 Tax Opinion of Holland & Knight LLP
11 Statement regarding computation of earnings to fixed charges+
21 List of Subsidiaries+
23.1 Consent of Holland & Knight LLP (included in Exhibit 5.1)+
23.2 Consent of Richards, Layton & Finger (included in Exhibit 5.2)+
23.3 Consent of Grant Thornton LLP
23.4 Consent of Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
24 Power of Attorney (included with signature pages to this
Registration Statement)+
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to
act as Trustee+
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company
to act as Trustee and Restated Trust Agreement+
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to
act as Trustee and Agreement for UFH Capital Trust I+
27.1 Financial Data Schedule (FDS use only)
27.2 Financial Data Schedule (FDS use only)
</TABLE>
- -----------------------
+ To be filed by amendment.
ITEM 28. UNDERTAKINGS
Each of the undersigned Registrants hereby undertake:
(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 foregoing provisions, 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 the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to
II-3
<PAGE> 156
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 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, the information omitted from
the form of prospectus filed as part of a 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 shall be
deemed to be a part of this Registration Statement as of the time it was
declared effective.
(2) for the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
<PAGE> 157
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
of the requirements of filing on Form SB-2 and authorized this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of St. Petersburg, State of Florida on September 14, 1998.
UNITED FINANCIAL HOLDINGS, INC.
By: /s/ Neil W. Savage
---------------------------------------
Neil W. Savage, Chief Executive Officer
and President
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
of the requirements of filing on Form SB-2 and has authorized this Amendment No.
1 to the Registration Statement to be signed on its behalf by the undersigned,
in the City of St. Petersburg, State of Florida on September 14, 1998.
UFH CAPITAL TRUST, INC.
By: /s/ Neil W. Savage
----------------------------------------
Neil W. Savage, Trustee
By: /s/ C. Peter Bardin
----------------------------------------
C. Peter Bardin, Trustee
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 DATE TITLE
- --------- ---- -----
<S> <C> <C>
/s/ Neil W. Savage September 14, 1998 Chief Executive Officer, President and
- ----------------------------------------- Director (principal executive officer)
Neil W. Savage
/s/ C. Peter Bardin September 14, 1998 Chief Financial Officer (principal
- ----------------------------------------- financial and accounting officer)
C. Peter Bardin
* September 14, 1998 Director
- -----------------------------------------
Ronald E. Clampitt
* September 14, 1998 Director
- -----------------------------------------
David K. Davis, M.D.
September 14, 1998 Director
*
- -----------------------------------------
Edward D. Foreman
Director
- -----------------------------------------
Charles O. Lowe
Director
* September 14, 1998
- -----------------------------------------
John B. Norrie
Director
- -----------------------------------------
Harold J. Winner
</TABLE>
<PAGE> 158
* September 14, 1998 Director
- -----------------------------------------
Ward J. Curtis, Jr.
Director
- -----------------------------------------
Jack A. MaCris, M.D.
* September 14, 1998 Director
- -----------------------------------------
Ronald R. Petrini
* September 14, 1998 Director
- -----------------------------------------
John B. Wier, Jr.
Director
- -----------------------------------------
Henry Esteva
* September 14, 1998 Director
- -----------------------------------------
Ian F. Irwin
Director
- -----------------------------------------
William A. Eickhoff
*BY: /S/ NEIL W. SAVAGE
- -----------------------------------------
NEIL W. SAVAGE
ATTORNEY-IN-FACT
<PAGE> 159
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits Description
- -------- -----------
<S> <C>
1 Form of Underwriting Agreement+
3.1 Amended and Restated Articles of Incorporation of the Company+
3.2 Bylaws of the Company+
4.1 Form of Indenture with respect to the Company's __% Junior
Subordinated Debentures
4.2 Form of Specimen Junior Subordinated Debenture+
4.3 Certificate of Trust of UFH Capital Trust I
4.4 Trust Agreement of UFH Capital Trust I
4.5 Form of Amended and Restated Trust Agreement of UFH Capital
Trust I+
4.6 Form of Certificate for Cumulative Trust Preferred Security of
UFH Capital Trust I+
4.7 Form of Guarantee Agreement for UFH Capital Trust I
4.8 Form of Agreement as to Expenses and Liabilities
5.1 Opinion of Holland & Knight LLP regarding the Junior Subordinated
Debentures+
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel,
regarding the Cumulative Trust Preferred Securities to be issued
by UFH Capital Trust I+
8.1 Tax Opinion of Holland & Knight LLP
11 Statement regarding computation of earnings to fixed charges+
21 List of Subsidiaries+
23.1 Consent of Holland & Knight LLP (included in Exhibit 5.1)+
23.2 Consent of Richards, Layton & Finger (included in Exhibit 5.2)+
23.3 Consent of Grant Thornton LLP
23.4 Consent of Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
24 Power of Attorney (included with signature pages to this
Registration Statement)+
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to
act as Trustee+
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company
to act as Trustee and Restated Trust Agreement+
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to
act as Trustee and Agreement for UFH Capital Trust I+
27.1 Financial Data Schedule (FDS use only)
27.2 Financial Data Schedule (FDS use only)
</TABLE>
- -----------------------
+ To be filed by amendment.
<PAGE> 1
EXHIBIT 4.1
[FORM OF INDENTURE]
UNITED FINANCIAL HOLDINGS, INC.
AND
WILMINGTON TRUST COMPANY,
AS TRUSTEE
INDENTURE
_______% JUNIOR SUBORDINATED DEBENTURES DUE 2028
DATED AS OF ______________ ____, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article I Definitions.......................................................................... 2
Section 1.1 Definitions of Terms................................................ 2
Article II Issue, Description, Terms, Conditions, Registration and
Exchange of the Debentures........................................................... 12
Section 2.1 Designation and Principal Amount.................................... 12
Section 2.2 Maturity............................................................ 12
Section 2.3 Form and Payment.................................................... 12
Section 2.4 Interest............................................................ 13
Section 2.5 Execution and Authentications....................................... 14
Section 2.6 Registration of Transfer and Exchange............................... 15
Section 2.7 Temporary Debentures................................................ 16
Section 2.8 Mutilated, Destroyed, Lost or Stolen Debentures..................... 17
Section 2.9 Cancellation........................................................ 18
Section 2.10 Benefit of Indenture................................................ 18
Section 2.11 Authentication Agent................................................ 18
Section 2.12 Right of Set-Off.................................................... 19
Article III Redemption of Debentures............................................................. 20
Section 3.1 Redemption.......................................................... 20
Section 3.2 Special Event Redemption............................................ 20
Section 3.3 Optional Redemption by Company...................................... 20
Section 3.4 Notice of Redemption................................................ 21
Section 3.5 Payment upon Redemption............................................. 22
Section 3.6 No Sinking Fund..................................................... 23
Article IV Extension of Interest Payment Period................................................. 23
Section 4.1 Extension of Interest Payment Period................................ 23
Section 4.2 Notice of Extension................................................. 24
Section 4.3 Limitation on Transactions.......................................... 24
Article V Particular Covenants of the Company.................................................. 25
Section 5.1 Payment of Principal and Interest................................... 25
Section 5.2 Maintenance of Agency............................................... 25
Section 5.3 Paying Agents....................................................... 26
Section 5.4 Appointment to Fill Vacancy in Office of Trustee.................... 27
Section 5.5 Compliance with Consolidation Provisions............................ 27
Section 5.6 Limitation on Transactions.......................................... 27
Section 5.7 Covenants as to the Trust........................................... 28
Section 5.8 Covenants as to Purchases........................................... 28
Article VI Debentureholders' Lists and Reports by the Company and the
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Trustee.............................................................................. 29
Section 6.1 Company to Furnish Trustee Names and Addresses
of Debentureholders................................................. 29
Section 6.2 Preservation of Information; Communications with
Debentureholders.................................................... 29
Section 6.3 Reports by the Company.............................................. 29
Section 6.4 Reports by the Trustee.............................................. 30
Article VII Remedies of the Trustee and Debentureholders on Event of
Default.............................................................................. 31
Section 7.1 Events of Default................................................... 31
Section 7.2 Collection of Indebtedness and Suits for
Enforcement by Trustee.............................................. 33
Section 7.3 Application of Moneys Collected..................................... 35
Section 7.4 Limitation on Suits................................................. 35
Section 7.5 Rights and Remedies Cumulative; Delay or
Omission not Waiver................................................. 36
Section 7.6 Control by Debentureholders......................................... 37
Section 7.7 Undertaking to Pay Costs............................................ 38
Article VIII Form of Debenture and Original issue................................................. 38
Section 8.1 Form of Debenture................................................... 38
Section 8.2 Original Issue of Debentures........................................ 38
Section 8.3 Global Debentures................................................... 38
Article IX Concerning the Trustee............................................................... 40
Section 9.1 Certain Duties and Responsibilities................................. 40
Section 9.2 Notice of Defaults.................................................. 42
Section 9.3 CERTAIN RIGHTS OF TRUSTEE................................................... 42
Section 9.4 Trustee not Responsible for Recitals, etc........................... 43
Section 9.5 May Hold Debentures................................................. 44
Section 9.6 Moneys Held in Trust................................................ 44
Section 9.7 Compensation and Reimbursement...................................... 44
Section 9.8 Reliance on Officers' Certificate................................... 45
Section 9.9 Disqualification: Conflicting Interests............................. 45
Section 9.10 Corporate Trustee Required; Eligibility............................. 45
Section 9.11 Resignation and Removal; Appointment of
Successor........................................................... 46
Section 9.12 Acceptance of Appointment by Successor.............................. 47
Section 9.13 Merger, Conversion, Consolidation or Succession to
Business............................................................ 48
Section 9.14 Preferential Collection of Claims Against the
Company............................................................. 48
Article X Concerning the Debentureholders...................................................... 49
Section 10.1 Evidence of Action by Holders....................................... 49
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 10.2 Proof of Execution by Debentureholders.............................. 49
Section 10.3 Who may be Deemed Owners............................................ 50
Section 10.4 Certain Debentures Owned by Company
Disregarded......................................................... 50
Section 10.5 Actions Binding on Future Debentureholders.......................... 51
Article XI Supplemental Indentures.............................................................. 51
Section 11.1 Supplemental Indentures without the Consent of
Debentureholders.................................................... 51
Section 11.2 Supplemental Indentures with Consent of
Debentureholders.................................................... 53
Section 11.3 Effect of Supplemental Indentures................................... 53
Section 11.4 Debentures Affected by Supplemental Indentures...................... 54
Section 11.5 Execution of Supplemental Indentures................................ 54
Article XII Successor Corporation................................................................ 55
Section 12.1 Company may Consolidate, etc........................................ 55
Section 12.2 Successor Corporation Substituted................................... 55
Section 12.3 Evidence of Consolidation, etc. to Trustee.......................... 56
Article XIII Satisfaction and Discharge........................................................... 56
Section 13.1 Satisfaction and Discharge of Indenture............................. 56
Section 13.2 Discharge of Obligations............................................ 57
Section 13.3 Deposited Moneys to be Held in Trust................................ 57
Section 13.4 Payment of Monies Held by Paying Agents............................. 57
Section 13.5 Repayment to Company................................................ 58
Article XIV Immunity of Incorporators, Stockholders, Officers and Directors...................... 58
Section 14.1 No Recourse......................................................... 58
Article XV Miscellaneous Provisions............................................................. 59
Section 15.1 Effect on Successors and Assigns.................................... 59
Section 15.2 Actions by Successor................................................ 59
Section 15.3 Surrender of Company Powers......................................... 59
Section 15.4 Notices............................................................. 59
Section 15.5 Governing Law....................................................... 59
Section 15.6 Treatment of Debentures as Debt..................................... 60
Section 15.7 Compliance Certificates and Opinions................................ 60
Section 15.8 Payments on Business Days........................................... 60
Section 15.9 Conflict with Trust Indenture Act................................... 61
Section 15.10 Counterparts........................................................ 61
Section 15.11 Separability........................................................ 61
Section 15.12 Assignment.......................................................... 61
Section 15.13 Acknowledgment of Rights............................................ 61
Article XVI Subordination of Debentures.......................................................... 62
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 16.1 Agreement to Subordinate............................................ 62
Section 16.2 Default on Senior Debt or Subordinated Debt......................... 62
Section 16.3 Liquidation; Dissolution; Bankruptcy................................ 63
Section 16.4 Subrogation......................................................... 64
Section 16.5 Trustee to Effectuate Subordination................................. 66
Section 16.6 Notice by the Company............................................... 66
Section 16.7 Rights of the Trustee; Holders of Senior
Indebtedness........................................................ 67
Section 16.8 Subordination may not be Impaired................................... 67
</TABLE>
<PAGE> 6
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of
Trust Indenture
Act of 1939, Section of
as amended Indenture
--------------- ----------
<S> <C>
310(a) 9.10
310(b) 9.9
9.11
310(c) N/A
311(a) 9.14
311(b) 9.14
311(c) N/A
312(a) 6.1
6.2(a)
312(b) 6.2(c)
312(c) 6.2(c)
313(a) 6.4(a)
313(b) 6.4(b)
313(c) 6.4(a)
6.4(b)
313(d) 6.4(c)
314(a) 6.3(a)
314(b) N/A
314(c) 15.7
314(d) N/A
314(e) 15.7
314(f) N/A
315(a) 9.1(a)
9.3
315(b) 9.2
315(c) 9.1(a)
315(d) 9.1(b)
315(e) 7.7
316(a) 1.1
7.6
316(b) 7.4(b)
316(c) 10.1(b)
317(a) 7.2
317(b) 5.3
318(a) 15.9
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Indenture
and shall not affect the interpretation of any of its terms or provisions.
<PAGE> 7
INDENTURE
INDENTURE, dated as of _________, 1997, between United Financial
Holdings, Inc., a Florida corporation (the "Company"), and Wilmington Trust
Company, a banking corporation duly organized and existing under the laws of the
State of Delaware, as trustee (the "Trustee").
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of unsecured securities to be known as its _____% Junior Subordinated
Debentures due 2028 (hereinafter referred to as the "Debentures"), the form and
substance of such Debentures and the terms, provisions and conditions thereof to
be set forth as provided in this Indenture; and
WHEREAS, UFH Capital Trust I, a Delaware statutory business trust (the
"Trust"), has offered to the public $_______ million aggregate liquidation
amount of its Preferred Securities (as defined herein) and proposes to invest
the proceeds from such offering, together with the proceeds of the issuance and
sale by the Trust to the Company of $_______ million aggregate liquidation
amount of its Common Securities (as defined herein), in $_________ million
aggregate principal amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid
instrument in accordance with its terms, and to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been performed, and the execution and
delivery of this Indenture have been duly authorized in all respects; and
WHEREAS, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Debentures by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of the Debentures and
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<PAGE> 8
intending to be legally bound hereby:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions of Terms
The terms defined in this Section 1.1 (except as in this Indenture otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.1 and shall include the plural
as well as the singular. All other terms used in this Indenture that are defined
in the Trust Indenture Act, or that are by reference in the Trust Indenture Act
defined in the Securities Act (except as herein otherwise expressly provided or
unless the context otherwise requires), shall have the meanings assigned to such
terms in the Trust Indenture Act and in the Securities Act as in force at the
date of the execution of this instrument. All accounting terms used herein and
not expressly defined shall have the meanings assigned to such terms in
accordance with Generally Accepted Accounting Principles as in effect at the
time of computation.
"25% Capital Limitation" means the limitation imposed by the Federal
Reserve that the proceeds of certain qualifying securities like the Trust
Securities will qualify as Tier 1 capital of the issuer up to an amount not to
exceed 25% of the issuer's Tier 1 capital, or any subsequent limitation adopted
by the Federal Reserve.
"Accelerated Maturity Date" means if the Company elects to accelerate
the Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is prior to the Scheduled Maturity Date, but is after
_____________, 2003.
"Additional Interest" shall have the meaning set forth in Section 2.4.
"Administrative Trustees" shall have the meaning set forth in the Trust
Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the
specified Person; and (f) if the specified Person is an individual, any entity
of which
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<PAGE> 9
the specified Person is an officer, director or general partner.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Debenture or beneficial interest therein, the
rules and procedures of the Depositary for such Global Debenture, in each case
to the extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means an authenticating agent with respect to
the Debentures appointed by the Trustee pursuant to Section 2.11.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means, with respect to the Debentures, any day other
than a Saturday or a Sunday or a day on which federal or state banking
institutions in the Borough of Manhattan, The City of New York, or the State of
Florida are authorized or required by law, executive order or regulation to
close, or a day on which the Corporate Trust Office of the Trustee or the
Property Trustee is closed for business.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any proposed
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change pronouncement, action or decision is announced on or after
the date of original issuance of the Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk that the Company will not be
entitled to treat an amount equal to the Liquidation Amount (as defined in the
Trust Agreement) of such Preferred Securities as "Tier 1 Capital" (or the then
equivalent thereof), except as otherwise restricted under the 25% Capital
Limitation, for purposes of the risk-based capital adequacy guidelines of the
Federal Reserve (or any successor regulatory authority with jurisdiction over
bank holding companies), as then in effect and applicable to the Company.
3
<PAGE> 10
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer, the principal accounting officer, the
treasurer or any vice president of the Company. The Certificate need not comply
with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act.
"Common Securities" means undivided beneficial interests in the assets
of the Trust which rank pari passu with the Preferred Securities; provided,
however, that upon the occurrence of an Event of Default, the rights of holders
of Common Securities to payment in respect of (i) distributions, and (ii)
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Company" means Republic Bancshares, Inc., a corporation duly organized
and existing under the laws of the State of Florida, and, subject to the
provisions of Article XII, shall also include its successors and assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office " means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administrator.
"Coupon Rate" shall have the meaning set forth in Section 2.4.
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder, " or
other similar term, means the Person or Persons in whose name or names a
particular Debenture shall be registered on the books of the Company or the
Trustee kept for that purpose in accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in Section
2.6(b).
"Debt" means with respect to any Person, whether recourse is to all or
a
4
<PAGE> 11
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Depositary" means, with respect to the Debentures issuable or issued
in whole or in part in the form of one or more Global Debentures, the Person
designated as Depositary by the Company.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Trust Agreement and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Trust Agreement.
"Event of Default" means, with respect to the Debentures, any event
specified in Section 7.1 , which has continued for the period of time, if any,
and after the giving of the notice, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, and any
statute successor thereto, in each case as amended from time to time.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Generally Accepted Accounting Principles" means such accounting
principles as are generally accepted at the time of any computation required
hereunder.
5
<PAGE> 12
"Global Debenture" means a Debenture in the form prescribed in Exhibit
A hereto evidencing all or part of the Debentures, issued to the Depositary or
its nominee, and registered in the name of such Depositary or its nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depositary receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar import,
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of
interest on the Debentures, means the date specified in the Debenture or in a
Board Resolution or in an indenture supplemental hereto with respect to the
Debentures as the fixed date on which an installment of interest with respect to
the Debentures is due and payable.
"Investment Company Act" means the Investment Company Act of 1940, and
any statute successor thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Trust of an Opinion
of Counsel, rendered by a law firm experienced in such matters, to the effect
that, as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
the Trust is or shall be considered an "investment company" that is required to
be
6
<PAGE> 13
registered under the Investment Company Act, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional Interest,
if any.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary
to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be an employee of or counsel for the Company, that is delivered to the
Trustee in accordance with the terms hereof.
"Outstanding," when used with reference to the Debentures, means,
subject to the provisions of Section 10.4, as of any particular time, all
Debentures theretofore authenticated and delivered by the Trustee under this
Indenture, except (a) Debentures theretofore canceled by the Trustee or any
paying agent, or delivered to the Trustee or any paying agent for cancellation
or that have previously been canceled; (b) Debentures or portions thereof for
the payment or redemption of which moneys or Governmental Obligations in the
necessary amount shall have been deposited in trust with the Trustee or with any
paying agent (other than the
7
<PAGE> 14
Company) or shall have been set aside and segregated in trust by the Company (if
the Company shall act as its own paying agent); provided, however, that if such
Debentures or portions of such Debentures are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as provided in
Article III or provision satisfactory to the Trustee shall have been made for
giving such notice; and (c) Debentures in lieu of or in substitution for which
other Debentures shall have been authenticated and delivered pursuant to the
terms of Section 2.6.
"Person" means any individual, corporation, partnership, joint-venture,
trust, joint-stock company, unincorporated organization or government or any
agency or political subdivision thereof.
"Place of Payment" means the place or places where the principal of and
interest on the Debentures are payable in accordance with the terms of this
Indenture.
"Predecessor Debenture" means every previous Debenture evidencing all
or a portion of the same debt as that evidenced by such particular Debenture;
and, for the purposes of this definition, any Debenture authenticated and
delivered under Section 2.8 in lieu of a lost, destroyed or stolen Debenture
shall be deemed to evidence the same debt as the lost, destroyed or stolen
Debenture.
"Preferred Securities" means undivided beneficial interests in the
assets of the Trust which rank pari passu with Common Securities issued by the
Trust; provided, however, that upon the occurrence of an Event of Default, the
rights of holders of Common Securities to payment in respect of distributions
and payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the Company
may enter into with the Trustee or other Persons that operate directly or
indirectly for the benefit of holders of Preferred Securities.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Responsible Officer" when used with respect to the Trustee means the
Chairman of the Board of Directors, the President, any Vice President, the
Secretary, the Treasurer, any trust officer, any corporate trust officer or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means _____________, 2028.
8
<PAGE> 15
"Securities Act," means the Securities Act of 1933, and any statute
successor thereto, in each case as amended from time to time.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under Section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to the Company;
(ii) any Debt of the Company to any of its subsidiaries; (iii) any Debt to any
employee of the Company; (iv) any Debt which by its terms is subordinated to
trade accounts payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of such Debt by the
holders of the Debentures as a result of the subordination provisions of this
Indenture would be greater than they otherwise would have been as a result of
any obligation of such holders to pay amounts over to the obligees on such trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject;
and (v) any Debt which constitutes Subordinated Debt.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
"Special Event" means a Tax Event, an Investment Company Event or a
Capital Treatment Event.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Debentures).
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries; (ii) any general
partnership, joint venture, trust or similar entity, at least a majority of
whose outstanding partnership or similar interests shall at the time be owned by
such Person, or by one or more of its
9
<PAGE> 16
Subsidiaries, or by such Person and one or more of its Subsidiaries; and (iii)
any limited partnership of which such Person or any of its Subsidiaries is a
general partner.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel,
rendered by a law firm experienced in such matters, to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or shall be within 90 days after the
date of such Opinion of Counsel, subject to United States federal income tax
with respect to income received or accrued on the Debentures; (ii) interest
payable by the Company on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, shall not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes; or (iii) the
Trust is, or shall be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges. The Trust or the Company shall request and receive
such Opinion of Counsel with regard to such matters within a reasonable period
of time after the Trust or the Company shall have become aware of the possible
occurrence of any of the events described in clauses (i) through (iii) above.
"Trust" means UFH Capital Trust I, a Delaware statutory business trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
______________, 1998, of the Trust, as amended, modified or supplemented from
time to time, among the trustees of the trust named therein, the Company, as
depositor, and the holders from time to time of undivided beneficial ownership
interests in the assets of the Trust.
"Trustee" means Wilmington Trust Company and, subject to the provisions
of Article IX, shall also include its successors and assigns, and, if at any
time there is more than one Person acting in such capacity hereunder, "Trustee"
shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939, as
amended, subject to the provisions of Sections 11.1, 11.2, and 12.1 and any
statute successor thereto, in each case as amended from time to time.
"Trust Securities" means the Common Securities and Preferred
Securities,
10
<PAGE> 17
collectively.
"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
11
<PAGE> 18
ARTICLE II
ISSUE, DESCRIPTION, TERMS, CONDITIONS
REGISTRATION AND EXCHANGE OF THE DEBENTURES
Section 2.1 Designation and Principal Amount
There is hereby authorized Debentures designated the "____% Junior Subordinated
Debentures due 2028," limited in aggregate principal amount to $_____________
million, which amount shall be as set forth in any written order of the Company
for the authentication and delivery of Debentures pursuant to Section 2.5.
Section 2.2 Maturity
(a) The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date
to be a date prior to the Scheduled Maturity Date in
accordance with Section 2.2(b), the Accelerated
Maturity Date.
(b) The Company may at any time before the day which is 90 days
before the Scheduled Maturity Date and after ______________,
2003, elect to shorten the Maturity Date only once to the
Accelerated Maturity Date provided that the Company has
received the prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of
the Federal Reserve.
(c) If the Company elects to accelerate the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice
to the registered holders of the Debentures, the Property
Trustee and the Trust of the acceleration of the Maturity Date
and the Accelerated Maturity Date at least 90 days and no more
than 180 days before the Accelerated Maturity Date.
Section 2.3 Form and Payment
The Debentures shall be issued in fully registered certificated form
without interest coupons. Principal and interest on the Debentures issued in
certificated form shall be payable, the transfer of such Debentures shall be
registrable and such Debentures shall be exchangeable for Debentures bearing
identical terms and provisions at the office or agency of the Trustee; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the holder at such address as shall appear in the Debenture
Register or by wire transfer to an
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account maintained by the holder as specified in the Debenture Register,
provided that the holder provides proper transfer instructions by the regular
record date. Notwithstanding the foregoing, so long as the holder of any
Debentures is the Property Trustee, the payment of the principal of and interest
(including Compounded Interest and Additional Interest, if any) on such
Debentures held by the Property Trustee shall be made at such place and to such
account as may be designated by the Property Trustee.
Section 2.4 Interest
(a) Each Debenture shall bear interest at the rate of ____% per
annum (the "Coupon Rate") from the original date of issuance
until the principal thereof becomes due and payable, and on
any overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) on any overdue
installment of interest at the Coupon Rate, compounded
quarterly, payable (subject to the provisions of Article IV)
quarterly in arrears on March 31, June 30, September 30, and
December 31 of each year (each, an "Interest Payment Date,"
commencing on __________, 1998), to the Person in whose name
such Debenture or any Predecessor Debenture is registered, at
the close of business on the regular record date for such
interest installment, which shall be the fifteenth day of the
last month of the calendar quarter.
(b) The amount of interest payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day
months. Except as provided in the following sentence, the
amount of interest payable for any period shorter than a full
quarterly period for which interest is computed, shall be
computed on the basis of the actual number of days elapsed in
such a 30-day period. In the event that any date on which
interest is payable on the Debentures is not a Business Day,
then payment of interest payable on such date shall be made on
the next succeeding day which is a Business Day (and without
any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally
payable.
(c) If, at any time while the Property Trustee is the holder of
any Debentures, the Trust or the Property Trustee is required
to pay any taxes, duties, assessments or governmental charges
of whatever nature (other than withholding taxes) imposed by
the United States, or any other taxing authority, then, in any
case, the Company shall pay as additional interest
("Additional Interest") on the Debentures held by
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the Property Trustee, such additional amounts as shall be
required so that the net amounts received and retained by the
Trust and the Property Trustee after paying such taxes,
duties, assessments Or other governmental charges shall be
equal to the amounts the Trust and the Property Trustee would
have received had no such taxes, duties, assessments or other
governmental charges been imposed.
Section 2.5 Execution and Authentications
(a) The Debentures shall be signed on behalf of the Company by its
Chief Executive Officer, President or one of its Vice
Presidents, under its corporate seal attested by its Secretary
or one of its Assistant Secretaries. Signatures may be in the
form of a manual, imprinted or facsimile signature. The
Company may use the imprinted or facsimile signature of any
Person who shall have been a Chief Executive Officer,
President or Vice President thereof, or of any Person who
shall have been a Secretary or Assistant Secretary thereof,
notwithstanding the fact that at the time the Debentures shall
be authenticated and delivered or disposed of such Person
shall have ceased to be the Chief Executive Officer, President
or a Vice President, or the Secretary or an Assistant
Secretary, of the Company. The seal of the Company may be in
the form of a facsimile of such seal and may be impressed,
affixed, imprinted or otherwise reproduced on the Debentures.
The Debentures may contain such notations, legends or
endorsements required by law, stock exchange rule or usage.
Each Debenture shall be dated the date of its authentication
by the Trustee.
(b) A Debenture shall not be valid until authenticated manually by
an authorized signatory of the Trustee, or by an
Authenticating Agent. Such signature shall be conclusive
evidence that the Debenture so authenticated has been duly
authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture.
(c) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Debentures
executed by the Company to the Trustee for authentication,
together with a written order of the Company for the
authentication and delivery of such Debentures signed by its
Chief Executive Officer, President or any Vice President and
its Secretary or any Assistant Secretary, and the Trustee in
accordance with such written order shall authenticate and
deliver such Debentures.
(d) In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such
Debentures,
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the Trustee shall be entitled to receive, and (subject to
Section 9.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the form and terms thereof
have been established in conformity with the provisions of
this Indenture.
(e) The Trustee shall not be required to authenticate such
Debentures if the issue of such Debentures pursuant to this
Indenture shall affect the Trustee's own rights, duties or
immunities under the Debentures and this Indenture or
otherwise in a manner that is not reasonably acceptable to the
Trustee.
(f) Debentures distributed to holders of Global Preferred
Securities (as defined in the Trust Agreement) upon the
dissolution of the Trust shall be distributed in the form of
one or more Global Debentures registered in the name of a
Depositary or its nominee, and deposited with the Debenture
Registrar, as custodian for such Depositary, or with such
Depositary, for credit by the Depositary to the respective
accounts of the beneficial owners of the Debentures
represented thereby (or such other accounts as they may
direct). Debentures distributed to holders of Preferred
Securities other than Global Preferred Securities upon the
dissolution of the Trust shall not be issued in the form of a
Global Debenture or any other form intended to facilitate
book-entry trading in beneficial interests in such Debentures.
Section 2.6 Registration of Transfer and Exchange
(a) Debentures may be exchanged upon presentation thereof at the
office or agency of the Company designated for such purpose,
for other Debentures and for a like aggregate principal
amount, upon payment of a sum sufficient to cover any tax or
other governmental charge in relation thereto, all as provided
in this Section 2.6. In respect of any Debentures so
surrendered for exchange, the Company shall execute, the
Trustee shall authenticate and such office or agency shall
deliver in exchange therefor the Debenture or Debentures that
the Debenture holder making the exchange shall be entitled to
receive, bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose or such other location
designated by the Company a register or registers (herein
referred to as the "Debenture Register") in which, subject to
such reasonable regulations as it may prescribe, the Company
shall register the Debentures and the transfers of Debentures
as in this Article II provided and which at all reasonable
times shall be open for inspection by the Trustee. The
registrar for the
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purpose of registering Debentures and transfer of Debentures
as herein provided shall be appointed as authorized by Board
Resolution (the "Debenture Registrar"). Upon surrender for
transfer of any Debenture at the office or agency of the
Company designated for such purpose, the Company shall
execute, the Trustee shall authenticate and such office or
agency shall deliver in the name of the transferee or
transferees a new Debenture or Debentures for a like aggregate
principal amount. All Debentures presented or surrendered for
exchange or registration of transfer, as provided in this
Section 2.6, shall be accompanied (if so required by the
Company or the Debenture Registrar) by a written instrument or
instruments of transfer, in form satisfactory to the Company
or the Debenture Registrar, duly executed by the registered
holder or by such holder's duly authorized attorney in
writing.
(c) No service charge shall be made for any exchange or
registration of transfer of Debentures, or issue of new
Debentures in case of partial redemption, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge in relation thereto, other than exchanges
pursuant to Section 2.7, Section 3.5(b) and Section 11.4 not
involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period
beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of less than all the
Outstanding Debentures and ending at the close of business on
the day of such mailing; nor (ii) to register the transfer of
or exchange any Debentures or portions thereof called for
redemption.
Section 2.7 Temporary Debentures
Pending the preparation of definitive Debentures, the Company may
execute, and the Trustee shall authenticate and deliver, temporary Debentures
(printed, lithographed, or typewritten). Such temporary Debentures shall be
substantially in the form of the definitive Debentures in lieu of which they are
issued, but with such omissions, insertions and variations as may be appropriate
for temporary Debentures, all as may be determined by the Company. Every
temporary Debenture shall be executed by the Company and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Debentures. Without unnecessary delay the Company
shall execute and shall furnish definitive Debentures and thereupon any or all
temporary Debentures may be surrendered in exchange therefor (without charge to
the holders), at the office or agency of the Company designated for such
purpose, and the Trustee shall authenticate and such office or agency shall
deliver in exchange for such temporary
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Debentures an equal aggregate principal amount of definitive Debentures, unless
the Company advises the Trustee to the effect that definitive Debentures need
not be executed and furnished until further notice from the Company. Until so
exchanged, the temporary Debentures shall be entitled to the same benefits under
this Indenture as definitive Debentures authenticated and delivered hereunder.
Section 2.8 Mutilated, Destroyed, Lost or Stolen Debentures
(a) In case any temporary or definitive Debenture shall become
mutilated or be destroyed, lost or stolen, the Company
(subject to the next succeeding sentence) shall execute, and
upon the Company's request the Trustee (subject as aforesaid)
shall authenticate and deliver, a new Debenture bearing a
number not contemporaneously outstanding, in exchange and
substitution for the mutilated Debenture, or in lieu of and in
substitution for the Debenture so destroyed, lost or stolen.
In every case the applicant for a substituted Debenture shall
furnish to the Company and the Trustee such security or
indemnity as may be required by them to save each of them
harmless, and, in every case of destruction, loss or theft,
the applicant shall also furnish to the Company and the
Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Debenture and of the
ownership thereof. The Trustee may authenticate any such
substituted Debenture and deliver the same upon the written
request or authorization of any officer of the Company. Upon
the issuance of any substituted Debenture, the Company may
require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith. In case any
Debenture that has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Debenture, pay or authorize
the payment of the same (without surrender thereof except in
the case of a mutilated Debenture) if the applicant for such
payment shall furnish to the Company and the Trustee such
security or indemnity as they may require to save them
harmless, and, in case of destruction, loss or theft, evidence
to the satisfaction of the Company and the Trustee of the
destruction, loss or theft of such Debenture and of the
ownership thereof.
(b) Every replacement Debenture issued pursuant to the provisions
of this Section 2.8 shall constitute an additional contractual
obligation of the Company whether or not the mutilated,
destroyed, lost or stolen Debenture shall be found at any
time, or be enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and
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proportionately with any and all other Debentures duly issued
hereunder. All Debentures shall be held and owned upon the
express condition that the foregoing provisions are exclusive
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Debentures, and shall preclude (to
the extent lawful) any and all other rights or remedies,
notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or
payment of negotiable instruments or other securities without
their surrender.
Section 2.9 Cancellation
All Debentures surrendered for the purpose of payment, redemption,
exchange or registration of transfer shall, if surrendered to the Company or any
paying agent, be delivered to the Trustee for cancellation, or, if surrendered
to the Trustee, shall be canceled by it, and no Debentures shall be issued in
lieu thereof except as expressly required or permitted by any of the provisions
of this Indenture. On request of the Company at the time of such surrender, the
Trustee shall deliver to the Company canceled Debentures held by the Trustee. In
the absence of such request the Trustee may dispose of canceled Debentures in
accordance with its standard procedures and deliver a certificate of disposition
to the Company. If the Company shall otherwise acquire any of the Debentures,
however, such acquisition shall not operate as a redemption or satisfaction of
the indebtedness represented by such Debentures unless and until the same are
delivered to the Trustee for cancellation.
Section 2.10 Benefit of Indenture
Nothing in this Indenture or in the Debentures, express or implied,
shall give or be construed to give to any Person, other than the parties hereto
and the holders of the Debentures (and, with respect to the provisions of
Article XVI, the holders of Senior Indebtedness) any legal or equitable right,
remedy or claim under or in respect of this Indenture, or under any covenant,
condition or provision herein contained; all such covenants, conditions, and
provisions being for the sole benefit of the parties hereto and of the holders
of the Debentures (and, with respect to the provisions of Article XVI, the
holders of Senior Indebtedness).
Section 2.11 Authentication Agent
(a) So long as any of the Debentures remain Outstanding there may
be an Authenticating Agent for any or all such Debentures,
which the Trustee shall have the right to appoint. Said
Authenticating Agent shall be authorized to act on behalf of
the Trustee to authenticate Debentures issued upon exchange,
transfer or partial redemption thereof, and
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Debentures so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. All
references in this Indenture to the authentication of
Debentures by the Trustee shall be deemed to include
authentication by an Authenticating Agent. Each Authenticating
Agent shall be acceptable to the Company and shall be a
corporation that has a combined capital and surplus, as most
recently reported or determined by it, sufficient under the
laws of any jurisdiction under which it is organized or in
which it is doing business to conduct a trust business, and
that is otherwise authorized under such laws to conduct such
business and is subject to supervision or examination by
federal or state authorities. If at any time any
Authenticating Agent shall cease to be eligible in accordance
with these provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the
Company. The Trustee may at any time (and upon request by the
Company shall) terminate the agency of any Authenticating
Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation,
termination or cessation of eligibility of any Authenticating
Agent, the Trustee may appoint an eligible successor
Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment
hereunder, shall become vested with all the rights, powers and
duties of its predecessor hereunder as if originally named as
an Authenticating Agent pursuant hereto.
Section 2.12 Right of Set-Off
With respect to the Debentures initially issued to the Trust,
notwithstanding anything to the contrary herein, the Company shall have the
right to set off any payment it is otherwise required to make in respect of any
such Debenture to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Preferred
Securities Guarantee relating to such Debenture or to a holder of Preferred
Securities pursuant to an action undertaken under Section 15.13 of this
Indenture.
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ARTICLE III
REDEMPTION OF DEBENTURES
Section 3.1 Redemption
Subject to the Company having received prior approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of the
Federal Reserve, the Company may redeem the Debentures issued hereunder on and
after the dates set forth in and in accordance with the terms of this Article
III.
Section 3.2 Special Event Redemption
Subject to the Company having received prior approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of the
Federal Reserve, if a Special Event has occurred and is continuing, then,
notwithstanding Section 3.3(a), the Company shall have the right upon not less
than 30 days nor more than 60 days notice to the holders of the Debentures to
redeem the Debentures, in whole but not in part, for cash within 180 days
following the occurrence of such Special Event (the "180-Day Period") at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest thereon to the date of such redemption (the
"Redemption Price"), provided that if at the time there is available to the
Company the opportunity to eliminate, within the 180-Day Period, a Tax Event by
taking some ministerial action (a "Ministerial Action"), such as filing a form
or making an election, or pursuing some other similar reasonable measure which
has no adverse effect on the Company, the Trust or the holders of the Trust
Securities issued by the Trust, the Company shall pursue such Ministerial Action
in lieu of redemption, and, provided further, that the Company shall have no
right to redeem the Debentures while the Trust is pursuing any Ministerial
Action pursuant to its obligations under the Trust Agreement. The Redemption
Price shall be paid prior to 12:00 noon, New York time, on the date of such
redemption or such earlier time as the Company determines, provided that the
Company shall deposit with the Trustee an amount sufficient to pay the
Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price
is to be paid.
Section 3.3 Optional Redemption by Company
(a) Subject to the provisions of Section 3.3(b), except as
otherwise may be specified in this Indenture, the Company
shall have the right to redeem the Debentures, in whole or in
part, from time to time, on or after ____________, 2003, at a
Redemption Price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest thereon to the
date of such redemption. Any redemption pursuant to this
Section 3.3(a) shall be made upon not less than 30 days nor
more
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than 60 days notice to the holder of the Debentures, at the
Redemption Price. If the Debentures are only partially
redeemed pursuant to this Section 3.3, the Debentures shall be
redeemed pro rata or by lot or in such other manner as the
Trustee shall deem appropriate and fair in its discretion. The
Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or at such earlier time
as the Company determines provided that the Company shall
deposit with the Trustee an amount sufficient to pay the
Redemption Price by 10:00 a.m., New York time, on the date
such Redemption Price is to be paid.
(b) If a partial redemption of the Debentures would result in the
delisting of the Preferred Securities issued by the Trust from
The Nasdaq Stock Market's Small Cap Market or any national
securities exchange or other organization on which the
Preferred Securities are then listed, the Company shall not be
permitted to effect such partial redemption and may only
redeem the Debentures in whole.
Section 3.4 Notice of Redemption
(a) In case the Company shall desire to exercise such right to
redeem all or a portion of the Debentures in accordance with
the right reserved so to do, the Company shall, or shall cause
the Trustee to upon receipt of 45 days' written notice from
the Company, give notice of such redemption to holders of the
Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and
not more than 60 days before the date fixed for redemption to
such holders at their last addresses as they shall appear upon
the Debenture Register unless a shorter period is specified in
the Debentures to be redeemed. Any notice that is mailed in
the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the registered holder
receives the notice. In any case, failure duly to give such
notice to the holder of any Debenture designated for
redemption in whole or in part, or any defect in the notice,
shall not affect the validity of the proceedings for the
redemption of any other Debentures. In the case of any
redemption of Debentures prior to the expiration of any
restriction on such redemption provided in the terms of such
Debentures or elsewhere in this Indenture, the Company shall
furnish the Trustee with an Officers' Certificate evidencing
compliance with any such restriction. Each such notice of
redemption shall specify the date fixed for redemption and the
Redemption Price and shall state that payment of the
Redemption Price shall be made at the office or agency of the
Company or at the Corporate Trust Office, upon presentation
and surrender of such Debentures, that interest accrued to
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the date fixed for redemption shall be paid as specified in
said notice and that from and after said date interest shall
cease to accrue. If less than all the Debentures are to be
redeemed, the notice to the holders of the Debentures shall
specify the particular Debentures to be redeemed. If the
Debentures are to be redeemed in part only, the notice shall
state the portion of the principal amount thereof to be
redeemed and shall state that on and after the redemption
date, upon surrender of such Debenture, a new Debenture or
Debentures in principal amount equal to the unredeemed portion
thereof shall be issued.
(b) If less than all the Debentures are to be redeemed, the
Company shall give the Trustee at least 45 days' notice in
advance of the date fixed for redemption as to the aggregate
principal amount of Debentures to be redeemed, and thereupon
the Trustee shall select, by lot or in such other manner as it
shall deem appropriate and fair in its discretion, the portion
or portions (equal to $5 or any integral multiple thereof) of
the Debentures to be redeemed and shall thereafter promptly
notify the Company in writing of the numbers of the Debentures
to be redeemed, in whole or in part. The Company may, if and
whenever it shall so elect pursuant to the terms hereof, by
delivery of instructions signed on its behalf by its President
or any Vice President, instruct the Trustee or any paying
agent to call all or any part of the Debentures for redemption
and to give notice of redemption in the manner set forth in
this Section 3.4, such notice to be in the name of the Company
or its own name as the Trustee or such paying agent may deem
advisable. In any case in which notice of redemption is to be
given by the Trustee or any such paying agent, the Company
shall deliver or cause to be delivered to, or permit to remain
with, the Trustee or such paying agent, as the case may be,
such Debenture Register, transfer books or other records, or
suitable copies or extracts therefrom, sufficient to enable
the Trustee or such paying agent to give any notice by mail
that may be required under the provisions of this Section 3.4.
Section 3.5 Payment upon Redemption
(a) If the giving of notice of redemption shall have been
completed as above provided, the Debentures or portions of
Debentures to be redeemed specified in such notice shall
become due and payable on the date and at the place stated in
such notice at the applicable Redemption Price, and interest
on such Debentures or portions of Debentures shall cease to
accrue on and after the date fixed for redemption, unless the
Company shall default in the payment of such Redemption Price
with respect to any such Debenture or portion thereof. On
presentation and surrender of such Debentures on or after
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the date fixed for redemption at the place of payment
specified in the notice, said Debentures shall be paid and
redeemed at the Redemption Price (but if the date fixed for
redemption is an interest payment date, the interest
installment payable on such date shall be payable to the
registered holder at the close of business on the applicable
record date pursuant to Section 2.4).
(b) Upon presentation of any Debenture that is to be redeemed in
part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debenture is
presented shall deliver to the holder thereof, at the expense
of the Company, a new Debenture of authorized denomination in
principal amount equal to the unredeemed portion of the
Debenture so presented.
Section 3.6 No Sinking Fund
The Debentures are not entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.1 Extension of Interest Payment Period
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time and from time to time during the term
of the Debentures, to defer payments of interest by extending the interest
payment period of such Debentures for a period not exceeding 20 consecutive
quarters (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; provided that no
Extended Interest Payment Period may extend beyond the Maturity Date. Interest,
the payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 4.1, shall bear interest thereon at the
Coupon Rate compounded quarterly for each quarter of the Extended Interest
Payment Period ("Compounded Interest"). At the end of the Extended Interest
Payment Period, the Company shall calculate (and deliver such calculation to the
Trustee) and pay all interest accrued and unpaid on the Debentures, including
any Additional Interest and Compounded Interest (together, "Deferred Interest")
that shall be payable to the holders of the Debentures in whose names the
Debentures are registered in the Debenture Register on the first record date
after the end of the Extended Interest Payment Period. Before the termination of
any Extended Interest Payment Period, the Company may further extend such
period, provided that such period together with all such further extensions
thereof shall not exceed 20 consecutive quarters, or extend beyond the Maturity
Date of the Debentures. Upon the termination of any
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Extended Interest Payment Period and upon the payment of all Deferred Interest
then due, the Company may commence a new Extended Interest Payment Period,
subject to the foregoing requirements. No interest shall be due and payable
during an Extended Interest Payment Period, except at the end thereof, but the
Company may prepay at any time all or any portion of the interest accrued during
an Extended Interest Payment Period.
Section 4.2 Notice of Extension
(a) If the Property Trustee is the only registered holder of the
Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give written notice
to the Administrative Trustees, the Property Trustee and the
Trustee of its selection of such Extended Interest Payment
Period one Business Day before the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities
issued by the Trust are payable; or (ii) the date the Trust is
required to give notice of the record date or the date such
Distributions are payable, to The Nasdaq Stock Market's Small
Cap Market or other applicable self-regulatory organization or
to holders of the Preferred Securities issued by the Trust,
but in any event at least one Business Day before such record
date.
(b) If the Property Trustee is not the only holder of the
Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give the holders of
the Debentures and the Trustee written notice of its selection
of such Extended Interest Payment Period at least one Business
Day before the earlier of (i) the next succeeding Interest
Payment Date; or (ii) the date the Company is required to give
notice of the record or payment date of such interest payment
to The Nasdaq Stock Market's Small Cap Market or other
applicable self-regulatory organization or to holders of the
Debentures.
(c) The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as
one of the 20 quarters permitted in the Extended Interest
Payment Period permitted under Section 4.1.
Section 4.3 Limitation on Transactions
If (i) the Company shall exercise its right to defer payment of
interest as provided in Section 4.1; or (ii) there shall have occurred any Event
of Default, then (a) the Company shall not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (1)
the reclassification of any class of
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its capital stock for another class of its capital stock; (2) dividends or
distributions payable in any class of the Company's common stock, (3) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (4) purchases
of the Company's common stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees);
(b) the Company shall not make any payment of interest, principal or premium, if
any, or repay, repurchase or redeem any debt securities issued by the Company
which rank pari passu with or junior to the Debentures or make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any Subsidiary of the Company if such guarantee ranks pari passu with or junior
to the Debentures; provided, however, that notwithstanding the foregoing the
Company may make payments pursuant to its obligations under the Preferred
Securities Guarantee; and (c) the Company shall not redeem, purchase or acquire
less than all of the outstanding Debentures or any of the Preferred Securities.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal and Interest
The Company shall duly and punctually pay or cause to be paid the
principal of and interest on the Debentures at the time and place and in the
manner provided herein.
Section 5.2 Maintenance of Agency
So long as any of the Debentures remain Outstanding, the Company shall
maintain an office or agency in the Place of Payment where (i) Debentures may be
presented for payment; (ii) Debentures may be presented as hereinabove
authorized for registration of transfer and exchange; and (iii) notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be given or served, such designation to continue with respect to such office
or agency until the Company shall, by written notice signed by its President or
a Vice President and delivered to the Trustee, designate some other office or
agency for such purposes or any of them. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
notices and demands. In addition to any such office or agency, the Company may
from time to time designate one or more offices or agencies where the Debentures
may be presented for registration or transfer and for
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exchange in the manner provided herein, and the Company may from time to time
rescind such designation as the Company may deem desirable or expedient;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain any such office or agency in
the Place of Payment for such purposes. The Company shall give the Trustee
prompt written notice of any such designation or rescission thereof.
Section 5.3 Paying Agents
(a) If the Company shall appoint one or more paying agents for the
Debentures, other than the Trustee, the Company shall cause
each such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent
for the payment of the principal of or interest on
the Debentures (whether such sums have been paid to
it by the Company or by any other obligor of such
Debentures) in trust for the benefit of the Persons
entitled thereto;
(ii) that it shall give the Trustee notice of any failure
Company (or by any other obligor of such Debentures)
to make any payment of the principal of interest on
the Debentures when the same shall be due and
payable;
(iii) that it shall, at any time during the continuance of
referred to in the preceding paragraph (a)(ii) above,
upon the written request of the forthwith pay to the
Trustee all sums so held in trust by such paying
agent; and
(iv) that it shall perform all other duties of paying
agent as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect
Debentures, it shall on or before each due date of the
principal of or interest on such Debentures, set aside,
segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay such principal or
interest so becoming due on Debentures until such sums shall
be paid to such Persons or otherwise disposed of as herein
provided and shall promptly notify the Trustee of such action,
or any failure (by it or any other obligor on such Debentures)
to take such action. Whenever the Company shall have one or
more paying agents for the Debentures, it shall, prior to each
date of the principal of or
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interest on any Debentures, deposit with the paying agent a
sum sufficient to pay the principal or interest so becoming
due, such sum to be held in trust for the benefit of the
Persons entitled to such principal or interest, and (unless
such paying agent is the Trustee) the Company shall promptly
notify the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the contrary,
agreement to hold sums in trust as provided in this Section
5.3 is subject to the provisions of Section 13.3 and 13.4; and
(ii) the Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any
other purpose, pay, or direct any paying agent to pay, to the
Trustee all sums held in trust by the Company or such paying
agent, such sums to be held by the Trustee upon the same terms
and conditions as those upon which such sums were held by the
Company or such paying agent; and, upon such payment by any
paying agent to the Trustee, such paying agent shall be
released from all further liability with respect to such
money.
Section 5.4 Appointment to Fill Vacancy in Office of Trustee
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, shall appoint, in the manner provided in Section 9.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
Section 5.5 Compliance with Consolidation Provisions
The Company shall not, while any of the Debentures remain outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to any other company unless the provisions of
Article XII hereof are complied with.
Section 5.6 Limitation on Transactions
If Debentures are issued to the Trust or a trustee of the Trust in
connection with the issuance of Trust Securities by the Trust and (i) there
shall have occurred any event that would constitute an Event of Default; (ii)
the Company shall be in default with respect to its payment of any obligations
under the Preferred Securities Guarantee relating to the Trust; or (iii) the
Company shall have given notice of its election to defer payments of interest on
such Debentures by extending the interest payment period as provided in this
Indenture and such period, or any extension thereof, shall be continuing, then
(a) the Company shall not declare or pay any dividend on, make any distributions
with respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than (1) the reclassification of any
class of the Company's capital stock into another class of
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capital stock, (2) dividends or distributions payable in any class of the
Company's common stock, (3) any declaration of a dividend in connection with the
implementation of a shareholder rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto and (4) purchases of the Company's common stock related to the
rights under any of the Company's benefit plans for its or its subsidiaries'
directors, officers or employees); (b) the Company shall not make any payment of
interest, principal or premium, if any, or repay, repurchase or redeem any debt
securities issued by the Company which rank pari passu with or junior to the
Debentures; provided, however, that the Company may make payments pursuant to
its obligations under the Preferred Securities Guarantee; and (c) the Company
shall not redeem, purchase or acquire less than all of the outstanding
Debentures or any of the Preferred Securities.
Section 5.7 Covenants as to the Trust
For so long as such Trust Securities of the Trust remain outstanding,
the Company shall (i) maintain 100% direct or indirect ownership of the Common
Securities of the Trust; provided, however, that any permitted successor of the
Company under this Indenture may succeed to the Company's ownership of the
Common Securities; (ii) not voluntarily terminate, wind up or liquidate the
Trust, except upon prior regulatory approval if then so required under
applicable capital guidelines or regulatory policies and use its reasonable
efforts to cause the Trust (a) to remain a business trust, except in connection
with a distribution of Debentures, the redemption of all of the Trust Securities
of the Trust or certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement; and (b) to otherwise continue not to be
treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; and (iii) use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an individual
beneficial interest in the Debentures. In connection with the distribution of
the Debentures to the holders of the Preferred Securities issued by the Trust
upon a Dissolution Event, the Company shall use its best efforts to list such
Debentures on The Nasdaq Stock Market's Small Cap Market or on such other
exchange as the Preferred Securities are then listed.
Section 5.8 Covenants as to Purchases
Prior to _________, 2003, the Company shall not purchase any
Debentures, in whole or in part, from the Trust.
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ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 6.1 Company to Furnish Trustee Names and Addresses of
Debentureholders
The Company shall furnish or cause to be furnished to the Trustee (a)
on a monthly basis on each regular record date (as described in Section 2.4) a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the holders of the Debentures as of such regular record date,
provided that the Company shall not be obligated to furnish or cause to furnish
such list at any time that the list shall not differ in any respect from the
most recent list furnished to the Trustee by the Company; and (b) at such other
times as the Trustee may request in writing within 30 days after the receipt by
the Company of any such request, a list of similar form and content as of a date
not more than 15 days prior to the time such list is furnished; provided,
however, that, in either case, no such list need be furnished if the Trustee
shall be the Debenture Registrar.
Section 6.2 Preservation of Information; Communications with
Debentureholders
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and
addresses of the holders of Debentures contained in the most
recent list furnished to it as provided in Section 6.1 and as
to the names and addresses of holders of Debentures received
by the Trustee in its capacity as registrar for the Debentures
(if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided
in Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Debentureholders with
respect to their rights under this Indenture or under the
Debentures.
Section 6.3 Reports by the Company
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the Company is required to file the same
with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) that the
Company may be required to file with
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the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such
sections, then to file with the Trustee and the Commission, in
accordance with the rules and regulations prescribed from time
to time by the Commission, such of the supplementary and
periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act in respect
of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules
and regulations.
(b) The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such
additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants
provided for in this Indenture as may be required from time to
time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail, first
class postage prepaid, or reputable over-night delivery
service that provides for evidence of receipt, to the
Debentureholders, as their names and addresses appear upon the
Debenture Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to
subsections (a) and (b) of this Section 6.3 as may be required
by rules and regulations prescribed from time to time by the
Commission.
(d) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company ending after
the date hereof, an Officers' Certificate covering the
preceding calendar year, stating whether or not, to the best
knowledge of the signers thereof, the Company is in default in
the performance, observance or fulfillment of or compliance
with any of the terms, provisions, covenants and conditions of
this Indenture, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof
of which they may have knowledge. For the purpose of this
Section 6.3(d), compliance shall be determined without regard
to any grace period or requirement of notice provided pursuant
to the terms of this Indenture.
Section 6.4 Reports by the Trustee
(a) On or before July 15 in each year in which any of the
Debentures are Outstanding, the Trustee shall transmit by
mail, first class postage prepaid, to the Debentureholders, as
their names and addresses appear
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upon the Debenture Register, a report dated as of the
preceding May 15, if and to the extent required under Section
313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Debentureholders, be filed by the Trustee with
the Company, with each stock exchange upon which any
Debentures are listed (if so listed) and also with the
Commission. The Company agrees to notify the Trustee when any
Debentures become listed on any stock exchange.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
Section 7.1 Events of Default
(a) Whenever used herein with respect to the Debentures, "Event of
Default" means any one or more of the following events that
has occurred and is continuing:
(i) the Company defaults in the payment of any
installment of interest upon any of the Debentures,
as and when the same shall become due and payable,
and continuance of such default for a period of 30
days; provided, however, that a valid extension of an
interest payment period by the Company in accordance
with the terms of this Indenture shall not constitute
a default in the payment of interest for this
purpose;
(ii) the Company defaults in the payment of the principal
on the Debentures as and when the same shall become
due and payable whether at maturity, upon redemption,
by declaration or otherwise;
(iii) the Company fails to observe or perform any other of
its covenants or agreements with respect to the
Debentures for a period of 90 days after the date on
which written notice of such failure, requiring the
same to be remedied and stating that such notice is a
"Notice of Default" hereunder, shall have been given
to the Company by the Trustee, by registered or
certified mail, or to the Company and the Trustee by
the holders of at least
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25% in principal amount of the Debentures at the time
Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (i) commences a voluntary case; (ii)
consents to the entry of an order for relief against
it in an involuntary case; (iii) consents to the
appointment of a Custodian of it or for all or
substantially all of its property; or (iv) makes a
general assignment for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order
under any Bankruptcy Law that (i) is for relief
against the Company in an involuntary case; (ii)
appoints a Custodian of the Company for all or
substantially all of its property; or (iii) orders
the liquidation of the Company, and the order or
decree remains unstayed and in effect for 90 days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise
terminated its existence except in connection with
(i) the distribution of Debentures to holders of
Trust Securities in liquidation of their interests in
the Trust; (ii) the redemption of all of the
outstanding Trust Securities of the Trust; or (iii)
certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the
Debentures shall have already become due and payable, either
the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then Outstanding hereunder,
by notice in writing to the Company (and to the Trustee if
given by such Debentureholders) may declare the principal of
all the Debentures to be due and payable immediately, and upon
any such declaration the same shall become and shall be
immediately due and payable, notwithstanding anything
contained in this Indenture or in the Debentures.
(c) At any time after the principal of the Debentures shall have
been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the holders of a
majority in aggregate principal amount of the Debentures then
Outstanding hereunder, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its
consequences if: (i) the Company has paid or deposited with
the Trustee a sum sufficient to pay all matured installments
of interest upon all the Debentures and the principal of
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any and all Debentures that shall have become due otherwise
than by acceleration (with interest upon such principal, and
upon overdue installments of interest, at the rate per annum
expressed in the Debentures to the date of such payment or
deposit) and the amount payable to the Trustee under Section
9.6; and (ii) any and all Events of Default under this
Indenture, other than the nonpayment of principal on
Debentures that shall not have become due by their terms,
shall have been remedied or waived as provided in Section 7.6.
No such rescission and annulment shall extend to or shall
affect any subsequent default or impair any right consequent
thereon.
(d) In case the Trustee shall have proceeded to enforce any right
with respect to Debentures under this Indenture and such
proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and
in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company
and the Trustee shall continue as though no such proceedings
had been taken.
Section 7.2 Collection of Indebtedness and Suits for Enforcement
by Trustee
(a) The Company covenants that (1) in case it shall default in the
payment of any installment of interest on any of the
Debentures, and such default shall have continued for a period
of 90 Business Days; or (2) in case it shall default in the
payment of the principal of any of the Debentures when the
same shall have become due and payable, whether upon maturity
of the Debentures or upon redemption or upon declaration or
otherwise, then, upon demand of the Trustee, the Company shall
pay to the Trustee, for the benefit of the holders of the
Debentures, the whole amount that then shall have become due
and payable on all such Debentures for principal or interest,
or both, as the case may be, with interest upon the overdue
principal and (if the Debentures are held by the Trust or a
trustee of the Trust, without duplication of any other amounts
paid by the Trust or trustee in respect thereof) upon overdue
installments of interest at the rate per annum expressed in
the Debentures; and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of
collection, and the amount payable to the Trustee under
Section 9.7.
(b) If the Company shall fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute
any action or
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proceedings at law or in equity for the collection of the sums
so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or other
obligor upon the Debentures and collect the moneys adjudged or
decreed to be payable in the manner provided by law out of the
property of the Company or other obligor upon the Debentures,
wherever situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement,
composition or judicial proceedings affecting the Company or
the creditors or property of either, the Trustee shall have
power to intervene in such proceedings and take any action
therein that may be permitted by the court and shall (except
as may be otherwise provided by law) be entitled to file such
proofs of claim and other papers and documents as may be
necessary or advisable in order to have the claims of the
Trustee and of the holders of the Debentures allowed for the
entire amount due and payable by the Company under this
Indenture at the date of institution of such proceedings and
for any additional amount that may become due and payable by
the Company after such date, and to collect and receive any
moneys or other property payable or deliverable on any such
claim, and to distribute the same after the deduction of the
amount payable to the Trustee under Section 9.7; and any
receiver, assignee or trustee in bankruptcy or reorganization
is hereby authorized by each of the holders of the Debentures
to make such payments to the Trustee, and, in the event that
the Trustee shall consent to the making of such payments
directly to such Debentureholders, to pay to the Trustee any
amount due it under Section 9.7.
(d) All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect
to Debentures, may be enforced by the Trustee without the
possession of any of such Debentures, or the production
thereof at any trial or other proceeding relating thereto, and
any such suit or proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for payment to
the Trustee of any amounts due under Section 9.7, be for the
ratable benefit of the holders of the Debentures. In case of
an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in
it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and
enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement
of any
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covenant or agreement contained in this Indenture or in aid of
the exercise of any power granted in this Indenture, or to
enforce any other legal or equitable right vested in the
Trustee by this Indenture or by law. Nothing contained herein
shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Debentureholder
any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any
holder thereof or to authorize the Trustee to vote in respect
of the claim of any Debentureholder in any such proceeding.
Section 7.3 Application of Moneys Collected
Any moneys collected by the Trustee pursuant to this Article VII with
respect to the Debentures shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such moneys on
account of principal or interest, upon presentation of the Debentures, and
notation thereon the payment, if only partially paid, and upon surrender thereof
if fully paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the Company if and
to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon the
Debentures for principal and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Debentures for principal and interest, respectively.
Section 7.4 Limitation on Suits
(a) No holder of any Debenture shall have any right by virtue or
by availing of any provision of this Indenture to institute
any suit, action or proceeding in equity or at law upon or
under or with respect to this Indenture or for the appointment
of a receiver or trustee, or for any other remedy hereunder,
unless (i) such holder previously shall have given to the
Trustee written notice of an Event of Default and of the
continuance thereof with respect to the Debentures specifying
such Event of Default, as hereinbefore provided; (ii) the
holders of not less than 25% in aggregate principal amount of
the Debentures then Outstanding shall have made written
request upon the Trustee to institute such action, suit or
proceeding in its own name as trustee hereunder; (iii) such
holder or holders shall have offered to the Trustee
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such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity, shall have failed to institute
any such action, suit or proceeding; and (v) during such 60
day period, the holders of a majority in principal amount of
the Debentures do not give the Trustee a direction
inconsistent with the request.
(b) Notwithstanding anything contained herein to the contrary or
any other provisions of this Indenture, the right of any
holder of the Debentures to receive payment of the principal
of and interest on the Debentures, as therein provided, on or
after the respective due dates expressed in such Debenture (or
in the case of redemption, on the redemption date), or to
institute suit for the enforcement of any such payment on or
after such respective dates or redemption date, shall not be
impaired or affected without the consent of such holder and by
accepting a Debenture hereunder it is expressly understood,
intended and covenanted by the taker and holder of every
Debenture with every other such taker and holder and the
Trustee, that no one or more holders of Debentures shall have
any right in any manner whatsoever by virtue or by availing of
any provision of this Indenture to affect, disturb or
prejudice the rights of the holders of any other of such
Debentures, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right
under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all holders of
Debentures. For the protection and enforcement of the
provisions of this Section 7.4, each and every Debentureholder
and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 7.5 Rights and Remedies Cumulative; Delay or Omission not
Waiver
(a) Except as otherwise provided in Section 2.8, all powers and
remedies given by this Article VII to the Trustee or to the
Debentureholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers and
remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements
contained in this Indenture or otherwise established with
respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder of any of
the Debentures to exercise any right or power accruing upon
any Event of Default occurring and continuing as aforesaid
shall impair any such
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right or power, or shall be construed to be a waiver of any
such default or an acquiescence therein; and, subject to the
provisions of Section 7.4, every power and remedy given by
this Article VII or by law to the Trustee or the
Debentureholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
Section 7.6 Control by Debentureholders
The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding, determined in accordance with Section 10.4,
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided, however, that such direction shall not
be in conflict with any rule of law or with this Indenture. Subject to the
provisions of Section 9.1, the Trustee shall have the right to decline to follow
any such direction if the Trustee in good faith shall, by a Responsible Officer
or Officers of the Trustee, determine that the proceeding so directed would
involve the Trustee in personal liability. The holders of a majority in
aggregate principal amount of the Debentures at the time Outstanding affected
thereby, determined in accordance with Section 10.4, may on behalf of the
holders of all of the Debentures waive any past default in the performance of
any of the covenants contained herein and its consequences, except (i) a default
in the payment of the principal of or interest on, any of the Debentures as and
when the same shall become due by the terms of such Debentures otherwise than by
acceleration (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal has been deposited with the
Trustee (in accordance with Section 7.l(c))); (ii) a default in the covenants
contained in Section 5.6; or (iii) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the holder of each
Outstanding Debenture affected; provided, however, that if the Debentures are
held by the Trust or a trustee of the Trust, such waiver or modification to such
waiver shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the Trust shall have consented to such waiver
or modification to such waiver; provided further, that if the consent of the
holder of each Outstanding Debenture is required, such waiver shall not be
effective until each holder of the Trust Securities of the Trust shall have
consented to such waiver. Upon any such waiver, the default covered thereby
shall be deemed to be cured for all purposes of this Indenture and the Company,
the Trustee and the holders of the Debentures shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
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Section 7.7 Undertaking to Pay Costs
All parties to this Indenture agree, and each holder of any Debentures
by such holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 7.7 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders holding more than 10% in aggregate principal amount of the
Outstanding Debentures, or to any suit instituted by any Debentureholder for the
enforcement of the payment of the principal of or interest on the Debentures, on
or after the respective due dates expressed in such Debenture or established
pursuant to this Indenture.
ARTICLE VIII
FORM OF DEBENTURE AND ORIGINAL ISSUE
Section 8.1 Form of Debenture
The Debenture and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the forms contained as Exhibit A
attached hereto and incorporated herein by reference.
Section 8.2 Original Issue of Debentures
Debentures in the aggregate principal amount of $_______________ may,
upon execution of this Indenture, be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Debentures to or upon the written order of the Company, signed by
its Chairman, its Vice Chairman, its President, or any Vice President and its
Secretary or an Assistant Secretary, without any further action by the Company.
Section 8.3 Global Debentures
(a) Each Global Debenture issued under this Indenture shall be
registered in the name of the Depositary designated by the
company for such Global Debenture or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian
thereof, and each such Global Debenture shall constitute a
single Debenture for all purposes of
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this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Debenture may be exchanged in whole or in part for
Debentures registered, and no transfer of a Global Debenture
in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Debenture or
a nominee thereof unless (i) such Depositary advises the
Trustee in writing that such Depositary is no longer willing
or able to properly discharge its responsibilities as
Depositary with respect to such Global Debenture, and the
Company is unable to locate a qualified successor, (ii) the
Company executes and delivers to the Trustee an Officers'
Certificate stating that the Company elects to terminate the
book-entry system through the Depositary, or (iii) there shall
have occurred and be continuing an Event of Default.
(c) If any Global Debenture is to be exchanged for other
Debentures or cancelled in whole, it shall be surrendered by
or on behalf of the Depositary or its nominee to the Debenture
Registrar for exchange or cancellation as provided in this
Indenture. If any Global Debenture is to be exchanged for
other Debentures or cancelled in part, or if another Debenture
is to be exchanged in whole or in part for a beneficial
interest in any Global Debenture, then either (i) such Global
Debenture shall be so surrendered for exchange or cancellation
as provided in this Indenture or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to
the portion thereof to be so exchanged or cancelled, or equal
to the principal amount of such other Debenture to be so
exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records
of the Debenture Registrar, whereupon the Trustee, in
accordance with the Applicable Procedures, shall instruct the
Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Debenture by the
Depositary, accompanied by registration instructions, the
Trustee shall, subject to the other provisions of this
Indenture, authenticate and deliver any Debentures issuable in
exchange for such Global Debenture (or any portion thereof) in
accordance with the instructions of the Depositary. The
Trustee shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.
(d) Every Debenture authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global
Debenture or any portion thereof, whether pursuant to this
Article VIII, Sections 2.5, 3.5
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or 11.4 or otherwise, shall be authenticated and delivered in
the form of, and shall be, a Global Debenture, unless such
Debenture is registered in the name of a Person other than the
Depositary for such Global Debenture or a nominee thereof.
(e) The Depositary or its nominee, as the registered owner of a
Global Debenture, shall be the Holder of such Global Debenture
for all purposes under this Indenture and the Debentures, and
owners of beneficial interests in a Global Debenture shall
hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global
Debenture shall be shown only on, and the transfer of such
interest shall be effected only through, records maintained by
the Depositary or its nominee or agent. Neither the Trustee
nor the Debenture Registrar shall have any liability in
respect of any transfers effected by the Depositary.
(f) The rights of owners of beneficial interests in a Global
Debenture shall be exercised only through the Depositary and
shall be limited to those established by law and agreements
between such owners and the Depositary and/or its Agent
Members.
ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.1 Certain Duties and Responsibilities
(a) The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default that may have
occurred, shall undertake to perform with respect to the
Debentures such duties and only such duties as are
specifically set forth in this Indenture, and no implied
covenants shall be read into this Indenture against the
Trustee. In case an Event of Default has occurred that has not
been cured or waived, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the
same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct,
except that:
(1) prior to the occurrence of an Event of Default and
after the curing or waiving of all Events of Default
that may have
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occurred:
(i) the duties and obligations of the Trustee
shall, with respect to the Debentures, be
determined solely by the express provisions
of this Indenture, and the Trustee shall not
be liable with respect to the Debentures
except for the performance of such duties
and obligations as are specifically set
forth in this Indenture, and no implied
covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of
the Trustee, the Trustee may with respect to
the Debentures conclusively rely, as to the
truth of the statements and the correctness
of the opinions expressed therein, upon any
certificates or opinions furnish to the
Trustee and conforming to the requirements
of this Indenture; but in the case of any
such certificates or opinions that by any
provision hereof are specifically required
to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Indenture;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer
or Responsible Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good
faith in accordance with the direction of the holders
of not less than a majority in principal amount of
the Debentures at the time outstanding relating to
the time, method and place of conducting any
proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the
Trustee under this Indenture with respect to the
Debentures; and
(4) none of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own
funds or otherwise incur personal financial liability
in the performance of any of its duties or in the
exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of
such funds or liability is not reasonably assured to
it under the terms of this Indenture or adequate
indemnity against such risk is not
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reasonably assured to it.
Section 9.2 Notice of Defaults
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Debentures, the Trustee shall transmit by mail to all holders of the Debentures,
as their names and addresses appear in the Debenture Register, notice of such
default, unless such default shall have been cured or waived; provided, however,
that, except in the case of any default in the payment of the principal or
interest (including any Additional Interest) on any Debenture, the Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of the directors and/or
Responsible Officers of the Trustee determines in good faith that the
withholding of such notice is in the interests of the holders of such
Debentures; and provided, further, that in the case of any default of the
character specified in section 7.l(a)(iii), no such notice to holders of
Debentures need be sent until at least 30 days after the occurrence thereof. For
the purposes of this Section 9.2, the term "default" means any event which is,
or after notice or lapse of time or both, would become, an Event of Default with
respect to the Debentures.
Section 9.3 CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 9.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, security or other paper or
document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board
Resolution or an instrument signed in the name of the Company
by the President or any Vice President and by the Secretary or
an Assistant Secretary or the Treasurer or an Assistant
Treasurer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a default
or an Event of Default, other than an Event of Default
specified in Section 7.1(a)(i) or (ii), unless and until it
receives notification of such Event of Default from the
Company or by holders of at least 25% of the aggregate
principal amount of the Debentures at the time Outstanding;
(d) The Trustee may consult with counsel and the written advice of
such
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counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action
taken or suffered or omitted hereunder in good faith and in
reliance thereon;
(e) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Debentureholders,
pursuant to the provisions of this Indenture, unless such
Debentureholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default (that
has not been cured or waived) to exercise with respect to the
Debentures such of the rights and powers vested in it by this
Indenture, and to use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs;
(f) The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and believed by it to
be authorized or within the discretion or rights or powers
conferred upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, security, or other papers or
documents, but the Trustee in its discretion may make such
inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such
inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by
agent or attorney; and
(h) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
Section 9.4 Trustee not Responsible for Recitals, etc.
(a) The Recitals contained herein and in the Debentures, except
the certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency
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of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or
application by the Company of any of the Debentures or of the
proceeds of such Debentures, or for the use or application of
any moneys paid over by the Trustee in accordance with any
provision of this Indenture, or for the use or application of
any moneys received by any paying agent other than the
Trustee.
Section 9.5 May Hold Debentures
The Trustee or any paying agent or registrar for the Debentures, in its
individual or any other capacity, may become the owner or pledgee of Debentures
and, subject to Sections 9.9 and 9.14, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, paying agent or Debenture
Registrar.
Section 9.6 Moneys Held in Trust
Subject to the provisions of Section 13.5, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree with the Company to pay thereon.
Section 9.7 Compensation and Reimbursement
The Company covenants and agrees to pay to the Trustee, and the Trustee
shall be entitled to, such reasonable compensation (which shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust), as the Company and the Trustee may from time to time agree in writing,
for all services rendered by it in the execution of the trusts hereby created
and in the exercise and performance of any of the powers and duties hereunder of
the Trustee, and, except as otherwise expressly provided herein, the Company
shall pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all Persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company also covenants to indemnify
the Trustee (and its officers, agents, directors and employees) for, and to hold
it harmless against, any loss, liability or expense incurred without negligence
or bad faith on the part of the Trustee and arising out of or in connection with
the acceptance or administration of
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this trust, including the costs and expenses of defending itself against any
claim of liability in the premises.
Section 9.8 Reliance on Officers' Certificate
Except as otherwise provided in Section 9.1, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting to take any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee and such certificate, in the absence of negligence or bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action taken,
suffered or omitted to be taken by it under the provisions of this Indenture
upon the faith thereof.
Section 9.9 Disqualification: Conflicting Interests
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
Section 9.10 Corporate Trustee Required; Eligibility
There shall at all times be a Trustee with respect to the Debentures
issued hereunder which shall at all times be a corporation organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by federal, state,
territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 9.10, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. The Company may not, nor may any Person
directly or indirectly controlling, controlled by, or under common control with
the Company, serve as Trustee. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.10, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.11.
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Section 9.11 Resignation and Removal; Appointment of Successor
(a) The Trustee or any successor hereafter appointed, may at any
time resign by giving written notice thereof to the Company
and by transmitting notice of resignation by mail, first class
postage prepaid, to the Debentureholders, as their names and
addresses appear upon the Debenture Register. Upon receiving
such notice of resignation, the Company shall promptly appoint
a successor trustee with respect to Debentures by written
instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee.
If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the mailing of such
notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a
successor trustee with respect to Debentures, or any
Debentureholder who has been a bona fide holder of a Debenture
or Debentures for at least six months may, subject to the
provisions of Section 9.9, on behalf of himself and all others
similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon
after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the
provisions of Section 9.9 after written
request therefor by the Company or by any
Debentureholder who has been a bona fide
holder of a Debenture or Debentures for at
least six months; or
(ii) the Trustee shall cease to be eligible in
accordance with the provisions of Section
9.10 and shall fail to resign after written
request therefor by the Company or by any
such Debentureholder; or
(iii) the Trustee shall become incapable of
acting, or shall be adjudged a bankrupt or
insolvent, or commence a voluntary
bankruptcy proceeding, or a receiver of the
Trustee or of its property shall be
appointed or consented to, or any public
officer shall take charge or control of the
Trustee or of its property or affairs for
the purpose of rehabilitation, conservation
or liquidation, then, in any such case, the
Company may remove the Trustee with respect
to all Debentures and appoint a successor
trustee by written instrument, in duplicate,
executed by order of the Board of Directors,
one copy of which instrument shall
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be delivered to the Trustee so removed and
one copy to the successor trustee, or,
subject to the provisions of Section 9.9,
unless the Trustee's duty to resign is
stayed as provided herein, any
Debentureholder who has been a bona fide
holder of a Debenture or Debentures for at
least six months may, on behalf of that
holder and all others similarly situated,
petition any court of competent jurisdiction
for the removal of the Trustee and the
appointment of a successor trustee. Such
court may thereupon after such notice, if
any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding may at any time remove the
Trustee by so notifying the Trustee and the Company and may
appoint a successor Trustee with the consent of the Company.
(d) No resignation or removal of the Trustee and no appointment of
a successor trustee with respect to the Debentures pursuant to
any of the provisions of this Section 9.11 shall become
effective until acceptance of appointment by the successor
trustee as provided in Section 9.12.
Section 9.12 Acceptance of Appointment by Successor
(a) In case of the appointment hereunder of a successor trustee
with respect to the Debentures, every successor trustee so
appointed shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of
the retiring Trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Company or
the successor trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument
transferring to such successor trustee all the rights, powers,
and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor trustee all property
and money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor trustee all such
rights, powers and trusts referred to in paragraph (a) of this
Section 9.12.
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(c) No successor trustee shall accept its appointment unless at
the time of such acceptance such successor trustee shall be
qualified and eligible under this Article IX.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section 9.12, the Company shall transmit
notice of the succession of such trustee hereunder by mail,
first class postage prepaid, to the Debentureholders, as their
names and addresses appear upon the Debenture Register. If the
Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be transmitted at
the expense of the Company.
Section 9.13 Merger, Conversion, Consolidation or Succession to
Business
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified under the provisions of Section 9.9 and eligible under the provisions
of Section 9.10, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. In case any Debentures shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Debentures so authenticated with the same effect as if such
successor Trustee had itself authenticated such Debentures.
Section 9.14 Preferential Collection of Claims Against the Company
The Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship described in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent included therein.
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ARTICLE X
CONCERNING THE DEBENTUREHOLDERS
Section 10.1 Evidence of Action by Holders
(a) Whenever in this Indenture it is provided that the holders of
a majority or specified percentage in aggregate principal
amount of the Debentures may take any action (including the
making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact
that at the time of taking any such action the holders of such
majority or specified percentage have joined therein may be
evidenced by any instrument or any number of instruments of
similar tenor executed by such holders of Debentures in Person
or by agent or proxy appointed in writing.
(b) If the Company shall solicit from the Debentureholders any
request, demand, authorization, direction, notice, consent,
waiver or other action, the Company may, at its option, as
evidenced by an Officers' Certificate, fix in advance a record
date for the determination of Debentureholders entitled to
give such request, demand, authorization, direction, notice,
consent, waiver or other action, but the Company shall have no
obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record
date, but only the Debentureholders of record at the close of
business on the record date shall be computed to be
Debentureholders for the purposes of determining whether
Debentureholders of the requisite proportion of Outstanding
Debentures have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding
Debentures shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by
such Debentureholders on the record date shall be deemed
effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after
the record date.
Section 10.2 Proof of Execution by Debentureholders
Subject to the provisions of Section 9.1, proof of the execution of any
instrument by a Debentureholder (such proof shall not require notarization) or
his agent or proxy and proof of the holding by any Person of any of the
Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
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instrument may be proved in any reasonable manner acceptable
to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the
Debenture Registrar thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section 10.2 as it shall deem necessary.
Section 10.3 Who may be Deemed Owners
Prior to the due presentment for registration of transfer of any
Debenture, the Company, the Trustee, any paying agent, any Authenticating Agent
and any Debenture Registrar may deem and treat the Person in whose name such
Debenture shall be registered upon the books of the Company as the absolute
owner of such Debenture (whether or not such Debenture shall be overdue and
notwithstanding any notice of ownership or writing thereon made by anyone other
than the Debenture Registrar) for the purpose of receiving payment of or on
account of the principal of and interest on such Debenture (subject to Section
2.3) and for all other purposes; and neither the Company nor the Trustee nor any
paying agent nor any Authenticating Agent nor any Debenture Registrar shall be
affected by any notice to the contrary.
No holder of any beneficial interest in any Global Debenture held on
its behalf by a Depositary shall have any rights under this Indenture with
respect to such Global Debenture, and such Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner of
such Global Debenture for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by a Depositary or impair, as between a
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as holder of any Debenture.
Section 10.4 Certain Debentures Owned by Company Disregarded
In determining whether the holders of the requisite aggregate principal
amount of Debentures have concurred in any direction, consent or waiver under
this Indenture, the Debentures that are owned by the Company or any other
obligor on the Debentures or by any Person directly or indirectly controlling or
controlled by, or under common control with the Company or any other obligor on
the Debentures shall be disregarded and deemed not to be Outstanding for the
purpose of any such determination, except that for the purpose of determining
whether the Trustee shall
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be protected in relying on any such direction, consent or waiver, only
Debentures that the Trustee actually knows are so owned shall be so disregarded.
The Debentures so owned that have been pledged in good faith may be regarded as
Outstanding for the purposes of this Section 10.4, if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right so to act with
respect to such Debentures and that the pledgee is not a Person directly or
indirectly, controlling or controlled by, or under direct or indirect common
control with the Company or any such other obligor. In case of a dispute as to
such right, any decision by the Trustee taken upon the advice of counsel shall
be full protection to the Trustee.
Section 10.5 Actions Binding on Future Debentureholders
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 10.1, of the taking of any action by the holders of the
majority or percentage in aggregate principal amount of the Debentures specified
in this Indenture in connection with such action, any holder of a Debenture that
is shown by the evidence to be included in the Debentures the holders of which
have consented to such action may, by filing written notice with the Trustee,
and upon proof of holding as provided in Section 10.2, revoke such action so far
as concerns such Debenture. Except as aforesaid any such action taken by the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture, and of any Debenture
issued in exchange therefor, on registration of transfer thereof or in place
thereof, irrespective of whether or not any notation in regard thereto is made
upon such Debenture. Any action taken by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action shall be conclusively binding upon the
Company, the Trustee and the holders of all the Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures without the Consent of
Debentureholders
In addition to any supplemental indenture otherwise authorized by this
Indenture, the Company and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as then in effect), without the
consent of the Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or in
the Debentures;
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(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition to or in
place of certificated Debentures;
(d) to add to the covenants of the Company for the benefit of the
holders of all or any of the Debentures or to surrender any
right or power herein conferred upon the Company;
(e) to evidence the succession of another corporation to the
Company, and the assumption by any such successor of the
covenants of the Company herein and in the Debentures
contained;
(f) to convey, transfer, assign, mortgage or pledge to or with the
Trustee any property or assets which the Company may desire to
convey, transfer, assign, mortgage or pledge;
(g) to add to, delete from, or revise the conditions, limitations,
and restrictions on the authorized amount, terms, or purposes
of issue, authentication, and delivery of Debentures, as
herein set forth;
(h) to make any change that does not adversely affect the rights
of any Debentureholder in any material respect;
(i) to provide for the issuance of and establish the form and
terms and conditions of the Debentures, to establish the form
of any certifications required to be furnished pursuant to the
terms of this Indenture or of the Debentures, or to add to the
rights of the holders of the Debentures; or
(j) to qualify or maintain the qualification of this Indenture
under the Trust Indenture Act.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise. Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debentures at the time Outstanding, notwithstanding
any of the provisions of Section 11.2.
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Section 11.2 Supplemental Indentures with Consent of
Debentureholders
With the consent (evidenced as provided in Section 10.1) of the holders
of not less than a majority in aggregate principal amount of the Debentures at
the time Outstanding, the Company, when authorized by Board Resolutions, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of any supplemental indenture or of modifying in any manner not
covered by Section 11.1 the rights of the holders of the Debentures under this
Indenture; provided, however, that no such supplemental indenture shall without
the consent of the holders of each Debenture then Outstanding and affected
thereby, (i) extend the fixed maturity of any Debentures, reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon (other than the Company's right to defer interest pursuant to this
Indenture), without the consent of the holder of each Debenture so affected; or
(ii) reduce the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture; provided further, that
if the Debentures are held by the Trust or a trustee of the Trust, such
supplemental indenture shall not be effective until the holders of a majority in
liquidation preference of Trust Securities of the Trust shall have consented to
such supplemental indenture; provided further, that if the consent of the holder
of each Outstanding Debenture is required, such supplemental indenture shall not
be effective until each holder of the Trust Securities of the Trust shall have
consented to such supplemental indenture. It shall not be necessary for the
consent of the Debentureholders affected thereby under this Section 11.2 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof.
Section 11.3 Effect of Supplemental Indentures
Upon the execution of any supplemental indenture pursuant to the
provisions of this Article XI, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Debentures shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 11.4 Debentures Affected by Supplemental Indentures
Debentures affected by a supplemental indenture, authenticated and
delivered after the execution of such supplemental indenture pursuant to the
provisions of this Article XI, may bear a notation in form approved by the
Company, provided
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such form meets the requirements of any exchange upon which the Debentures may
be listed, as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Debentures so modified as to conform, in the
opinion of the Board of Directors of the Company, to any modification of this
Indenture contained in any such supplemental indenture may be prepared by the
Company, authenticated by the Trustee and delivered in exchange for the
Debentures then Outstanding.
Section 11.5 Execution of Supplemental Indentures
(a) Upon the request of the Company, accompanied by their Board
Resolutions authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of
the consent of Debentureholders required to consent thereto as
aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion but shall not be
obligated to enter into such supplemental indenture. The
Trustee, subject to the provisions of Section 9.1, may receive
an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article XI is
authorized or permitted by, and conforms to, the terms of this
Article XI and that it is proper for the Trustee under the
provisions of this Article XI to join in the execution
thereof.
(b) Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this
Section 11.5, the Trustee shall transmit by mail, first class
postage prepaid, a notice, setting forth in general terms the
substance of such supplemental indenture, to the
Debentureholders as their names and addresses appear upon the
Debenture Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental
indenture.
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ARTICLE XII
SUCCESSOR CORPORATION
Section 12.1 Company may Consolidate, etc.
Nothing contained in this Indenture or in any of the Debentures shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company, as the
case may be), or successive consolidations or mergers in which the Company, as
the case may be, or its successor or successors shall be a party or parties, or
shall prevent any sale, conveyance, transfer or other disposition of the
property of the Company, as the case may be, or its successor or successors as
an entirety, or substantially as an entirety, to any other corporation (whether
or not affiliated with the Company, as the case may be, or its successor or
successors) authorized to acquire and operate the same; provided, however, the
Company hereby covenants and agrees that, (i) upon any such consolidation,
merger, sale, conveyance, transfer or other disposition, the due and punctual
payment, in the case of the Company, of the principal of and interest on all of
the Debentures, according to their tenor and the due and punctual performance
and observance of all the covenants and conditions of this Indenture to be kept
or performed by the Company as the case may be, shall be expressly assumed, by
supplemental indenture (which shall conform to the provisions of the Trust
Indenture Act, as then in effect) satisfactory in form to the Trustee executed
and delivered to the Trustee by the entity formed by such consolidation, or into
which the Company, as the case may be, shall have been merged, or by the entity
which shall have acquired such property; (ii) in case the Company consolidates
with or merges into another Person or conveys or transfers its properties and
assets substantially then as an entirety to any Person, the successor Person is
organized under the laws of the United States or any state or the District of
Columbia; and (iii) immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing.
Section 12.2 Successor Corporation Substituted
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the
successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the
Trustee, of, in the case of the Company, the due and punctual
payment of the principal of and interest on all of the
Debentures Outstanding and the due and punctual performance of
all of the covenants and conditions of this Indenture to be
performed by the Company, as the case may be, such successor
corporation shall succeed to and be substituted for the
Company, with the same effect as if it had been named as the
Company herein, and
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thereupon the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the
Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and
form (but not in substance) may be made in the Debentures
thereafter to be issued as may be appropriate.
(c) Nothing contained in this Indenture or in any of the
Debentures shall prevent the Company from acquiring by
purchase or otherwise all or any part of the property of any
other Person (whether or not affiliated with the Company).
Section 12.3 Evidence of Consolidation, etc. to Trustee
The Trustee, subject to the provisions of Section 9.1 , may receive an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance, transfer or other disposition, and any such assumption, comply
with the provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE
Section 13.1 Satisfaction and Discharge of Indenture
If at any time: (a) the Company shall have delivered to the Trustee for
cancellation all Debentures theretofore authenticated (other than any Debentures
that shall have been destroyed, lost or stolen and that shall have been replaced
or paid as provided in Section 2.8) and Debentures for whose payment money or
Governmental Obligations have theretofore been deposited in trust or segregated
and held in trust by the Company (and thereupon repaid to the Company or
discharged from such trust, as provided in Section 13.5); or (b) all such
Debentures not theretofore delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit or cause to be deposited with the Trustee as trust funds
the entire amount in moneys or Governmental Obligations sufficient or a
combination thereof, sufficient in the opinion of a nationally recognized firm
of independent public accountants expressed in written certification thereof
delivered to the Trustee, to pay at maturity or upon redemption all Debentures
not theretofore delivered to the Trustee for cancellation, including principal
and interest due or to become due to such date of maturity or date fixed for
redemption, as the case may be, and if the Company shall also pay or
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cause to be paid all other sums payable hereunder by the Company; then this
Indenture shall thereupon cease to be of further effect except for the
provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3 and 9.10, that shall survive
until the date of maturity or redemption date, as the case may be, and Sections
9.6 and 13.5, that shall survive to such date and thereafter, and the Trustee,
on demand of the Company and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture.
Section 13.2 Discharge of Obligations
If at any time all Debentures not heretofore delivered to the Trustee
for cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Company by depositing irrevocably with the
Trustee as trust funds moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all Debentures not theretofore
delivered to the Trustee for cancellation, including principal and interest due
or to become due to such date of maturity or date fixed for redemption, as the
case may be, and if the Company shall also pay or cause to be paid all other
sums payable hereunder by the Company, then after the date such moneys or
Governmental Obligations, as the case may be, are deposited with the Trustee,
the obligations of the Company under this Indenture shall cease to be of further
effect except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3, 9.6,
9.10 and 13.5 hereof that shall survive until such Debentures shall mature and
be paid. Thereafter, Sections 9.6 and 13.5 shall survive.
Section 13.3 Deposited Moneys to be Held in Trust
All monies or Governmental Obligations deposited with the Trustee
pursuant to Sections 13.1 or 13.2 shall be held in trust and shall be available
for payment as due, either directly or through any paying agent (including the
Company acting as its own paying agent), to the holders of the Debentures for
the payment or redemption of which such moneys or Governmental Obligations have
been deposited with the Trustee.
Section 13.4 Payment of Monies Held by Paying Agents
In connection with the satisfaction and discharge of this Indenture,
all moneys or Governmental Obligations then held by any paying agent under the
provisions of this Indenture shall, upon demand of the Company, be paid to the
Trustee and thereupon such paying agent shall be released from all further
liability with respect to such moneys or Governmental Obligations.
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Section 13.5 Repayment to Company
Any monies or Governmental Obligations deposited with any paying agent
or the Trustee, or then held by the Company in trust, for payment of principal
of or interest on the Debentures that are not applied but remain unclaimed by
the holders of such Debentures for at least two years after the date upon which
the principal of or interest on such Debentures shall have respectively become
due and payable, shall be repaid to the Company, as the case may be, on May 31
of each year or (if then held by the Company) shall be discharged from such
trust; and thereupon the paying agent and the Trustee shall be released from all
further liability, with respect to such money's or Governmental Obligations, and
the holder of any of the Debentures entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Company for the
payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
Section 14.1 No Recourse
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of the Debentures, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, past, present or future as such, of the Company or of any predecessor
or successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or of
any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom, are hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this Indenture and
the issuance of such Debentures.
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ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1 Effect on Successors and Assigns
All the covenants, stipulations, promises and agreements in this
Indenture contained by or on behalf of the Company shall bind their respective
successors and assigns, whether so expressed or not.
Section 15.2 Actions by Successor
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
corresponding board, committee or officer of any corporation that shall at the
time be the lawful sole successor of the Company.
Section 15.3 Surrender of Company Powers
The Company by instrument in writing executed by appropriate authority
of its Board of Directors and delivered to the Trustee may surrender any of the
powers reserved to the Company, and thereupon such power so surrendered shall
terminate both as to the Company, as the case may be, and as to any successor
corporation.
Section 15.4 Notices
Except as otherwise expressly provided herein any notice or demand that
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Debentures to or on the Company may
be given or served by being deposited first class postage prepaid in a
post-office letter box addressed(until another address is filed in writing by
the Company with the Trustee), as follows: United Financial Holdings, Inc., 333
Third Avenue North, St. Petersburg, Florida 33701, Attention: Secretary. Any
notice, election, request or demand by the Company or any Debentureholder to or
upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
Section 15.5 Governing Law
This Indenture and each Debenture shall be deemed to be a contract made
under the internal laws of the State of Florida and for all purposes shall be
construed in accordance with the laws of said State.
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Section 15.6 Treatment of Debentures as Debt
It is intended that the Debentures shall be treated as indebtedness and
not as equity for federal income tax purposes. The provisions of this Indenture
shall be interpreted to further this intention.
Section 15.7 Compliance Certificates and Opinions
(a) Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the proposed action
have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent
have been complied with, except that in the case of any such
application or demand as to which the furnishing of such
documents is specifically required by any provision of this
Indenture relating to such particular application or demand,
no additional certificate or opinion need be furnished.
(b) Each certificate or opinion of the Company provided for in
this Indenture and delivered to the Trustee with respect to
compliance with a condition or covenant in this Indenture
shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as, in the opinion of
such Person, is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not,
in the opinion of such Person, such condition or covenant has
been complied with.
Section 15.8 Payments on Business Days
In any case where the date of maturity of interest or principal of any
Debenture or the date of redemption of any Debenture shall not be a Business
Day, then payment of interest or principal may (subject to Section 2.4) be made
on the next succeeding Business Day with the same force and effect as if made on
the nominal date of maturity or redemption, and no interest shall accrue for the
period after such nominal date.
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Section 15.9 Conflict with Trust Indenture Act
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
Section 15.10 Counterparts
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
Section 15.11 Separability
In case any one or more of the provisions contained in this Indenture
or in the Debentures shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Debentures,
but this Indenture and the Debentures shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
Section 15.12 Assignment
The Company shall have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Company, provided that, in the event of any such
assignment, the Company shall remain liable for all such obligations. Subject to
the foregoing, this Indenture is binding upon and inures to the benefit of the
parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties hereto.
Section 15.13 Acknowledgment of Rights
The Company acknowledges that, with respect to any Debentures held by
the Trust or a trustee of the Trust, if the Property Trustee fails to enforce
its rights under this Indenture as the holder of the Debentures held as the
assets of the Trust, any holder of Preferred Securities may institute legal
proceedings directly against the Company to enforce such Property Trustee's
rights under this Indenture without first instituting any legal proceedings
against such Property Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest or principal on
the Debentures on the date such interest or principal is otherwise payable (or
in the case of redemption, on the redemption date), the Company acknowledges
that a holder of Preferred Securities may directly
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institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Debentures having a principal amount equal to
the aggregate liquidation amount of the Preferred Securities of such holder on
or after the respective due date specified in the Debentures.
ARTICLE XVI
SUBORDINATION OF DEBENTURES
Section 16.1 Agreement to Subordinate
The Company covenants and agrees, and each holder of Debentures issued
hereunder by such holder's acceptance thereof likewise covenants and agrees,
that all Debentures shall be issued subject to the provisions of this Article
XVI; and each holder of a Debenture, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions. The payment by the Company of the principal of and interest on all
Debentures issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated and junior in right of payment to the prior payment
in full of all Senior Debt and Subordinated Debt (collectively, "Senior
Indebtedness") to the extent provided herein, whether outstanding at the date of
this Indenture or thereafter incurred. No provision of this Article XVI shall
prevent the occurrence of any default or Event of Default hereunder.
Section 16.2 Default on Senior Debt or Subordinated Debt
In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company, or in the event that the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default,
then, in either case, no payment shall be made by the Company with respect to
the principal (including redemption payments) of or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall be received
by the Trustee when such payment is prohibited by the preceding sentence of this
Section 16.2, such payment shall be held in trust for the benefit of, and shall
be paid over or delivered to, the holders of Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that the holders of the
Senior Indebtedness (or their representative or representatives or a trustee)
notify the Trustee in writing within 90 days of such payment of the amounts then
due and owing on the Senior Indebtedness and only the amounts specified in such
notice to the Trustee shall be paid to the holders of Senior Indebtedness.
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Section 16.3 Liquidation; Dissolution; Bankruptcy
(a) Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all
Senior Indebtedness of the Company shall first be paid in
full, or payment thereof provided for in money in accordance
with its terms, before any payment is made by the Company on
account of the principal or interest on the Debentures; and
upon any such dissolution or winding-up or liquidation or
reorganization, any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in
cash, property or securities, to which the holders of the
Debentures or the Trustee would be entitled to receive from
the Company, except for the provisions of this Article XVI,
shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making
such payment or distribution, or by the holders of the
Debentures or by the Trustee under this Indenture if received
by them or it, directly to the holders of Senior Indebtedness
of the Company (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such
holders, as calculated by the Company) or their representative
or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after
giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness, before any
payment or distribution is made to the holders of Debentures
or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, prohibited
by the foregoing, shall be received by the Trustee before all
Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the
holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for
application to the payment
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of all Senior Indebtedness of the Company, as the case may be,
remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full in money in accordance with its terms,
after giving effect to any concurrent payment or distribution
to or for the benefit of the holders of such Senior
Indebtedness.
(c) For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article
XVI with respect to the Debentures to the payment of all
Senior Indebtedness of the Company, as the case may be, that
may at the time be outstanding, provided that (i) such Senior
Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or readjustment; and
(ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the
Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in
Article XII shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section
16.3 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article XII. Nothing in Section 16.2 or
in this Section 16.3 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 9.7.
Section 16.4 Subrogation
(a) Subject to the payment in full of all Senior Indebtedness of
the Company, the rights of the holders of the Debentures shall
be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash,
property or securities of the Company, as the case may be,
applicable to such Senior Indebtedness until the principal of
and interest on the Debentures shall be paid in full; and for
the purposes of such subrogation, no payments or distributions
to the holders of such Senior Indebtedness of any cash,
property or securities to which the holders of the Debentures
or the Trustee would be entitled except for the provisions of
this Article XVI, and no payment over pursuant to the
provisions of this Article XVI to or for the benefit of the
holders of such Senior Indebtedness by holders
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of the Debentures or the Trustee, shall, as between the
Company, its creditors other than holders of Senior
Indebtedness of the Company, and the holders of the
Debentures, be deemed to be a payment by the Company to or on
account of such Senior Indebtedness. It is understood that the
provisions of this Article XVI are and are intended solely for
the purposes of defining the relative rights of the holders of
the Debentures, on the one hand, and the holders of such
Senior Indebtedness on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair,
as between the Company, its creditors (other than the holders
of Senior Indebtedness of the Company), and the holders of the
Debentures, the obligation of the Company, which is absolute
and unconditional, to pay to the holders of the Debentures the
principal of and interest on the Debentures as and when the
same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights
of the holders of the Debentures and creditors of the Company,
as the case may be, other than the holders of Senior
Indebtedness of the Company, nor shall anything herein or
therein prevent the Trustee or the holder of any Debenture
from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture, subject to the rights,
if any, under this Article XVI of the holders of such Senior
Indebtedness in respect of cash, property or securities of the
Company, as the case may be, received upon the exercise of any
such remedy.
(c) Upon any payment or distribution of assets of the Company
referred to in this Article XVI, the Trustee, subject to the
provisions of Article IX, and the holders of the Debentures
shall be entitled to conclusively rely upon any order or
decree made by any court of competent jurisdiction in which
such dissolution, winding-up, liquidation or reorganization
proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other
Person making such payment or distribution, delivered to the
Trustee or to the holders of the Debentures, for the purposes
of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, as the case may be, the amount
thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or
to this Article XVI.
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Section 16.5 Trustee to Effectuate Subordination
Each holder of Debentures by such holder's acceptance thereof
authorizes and directs the Trustee on such holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article XVI and appoints the Trustee such holder's attorney-in-fact for any
and all such purposes.
Section 16.6 Notice by the Company
(a) The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that
would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the
provisions of this Article XVI. Notwithstanding the provisions
of this Article XVI or any other provisions of this Indenture,
the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any
payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XVI,
unless and until a Responsible Office of the Trustee shall
have received written notice thereof from the Company or a
holder or holders of Senior Indebtedness or from any trustee
therefor, and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 9.1, shall
be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 16.6 at least
two Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal
of or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to
apply the same to the purposes for which they were received,
and shall not be affected by any notice to the contrary that
may be received by it within two Business Days prior to such
date.
(b) The Trustee, subject to the provisions of Section 9.1, shall
be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder
of Senior Indebtedness of the Company (or a trustee on behalf
of such holder) to establish that such notice has been given
by a holder of such Senior Indebtedness or a trustee on behalf
of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required
with respect to the right of any Person as a holder of such
Senior Indebtedness to participate in any payment or
distribution pursuant to
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this Article XVI, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee
as to the amount of such Senior Indebtedness held by such
Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this
Article XVI, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such
payment.
Section 16.7 Rights of the Trustee; Holders of Senior Indebtedness
(a) The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article XVI in respect of any
Senior Indebtedness at any time held by it, to the same extent
as any other holder of Senior Indebtedness, and nothing in
this Indenture shall deprive the Trustee of any of its rights
as such holder. The Trustee's right to compensation and
reimbursement of expenses as set forth in Section 9.7 shall
not be subject to the subordination provisions of the Article
XVI.
(b) With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only
such of its covenants and obligations as are specifically set
forth in this Article XVI, and no implied covenants or
obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to have any fiduciary
duty to the holders of such Senior Indebtedness and, subject
to the provisions of Section 9.1, the Trustee shall not be
liable to any holder of such Senior Indebtedness if it shall
in good faith mistakenly pay over or deliver to holders of
Debentures, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled
by virtue of this Article XVI or otherwise.
Section 16.8 Subordination may not be Impaired
(a) No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein
provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless
of any knowledge thereof that any such holder may have or
otherwise be charged with.
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<PAGE> 74
(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company
may, at any time and from time to time, without the consent of
or notice to the Trustee or the holders of the Debentures,
without incurring responsibility to the holders of the
Debentures and without impairing or releasing the
subordination provided in this Article XVI or the obligations
hereunder of the holders of the Debentures to the holders of
such Senior Indebtedness, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, such Senior
Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same
or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing
such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against
the Company and any other Person.
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<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
UNITED FINANCIAL HOLDINGS, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
Attest:___________________________
WILMINGTON TRUST COMPANY,
as trustee
By:_________________________________
Name:_______________________________
Title:______________________________
Attest:___________________________
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EXHIBIT A
(FORM OF FACE OF DEBENTURE)
No.______________________ $______________________
CUSIP No.______________________
REPUBLIC BANCSHARES, INC.
___ % JUNIOR SUBORDINATED DEBENTURE
DUE ____________, 2028
United Financial Holdings, Inc., a Florida corporation (the "Company,"
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to, __________ or
registered assigns, the principal sum of _____________________ Dollars
($__________) on _____________, 2028 (the "Stated Maturity"), and to pay
interest on said principal sum from ______________, 1998, or from the most
recent interest payment date (each such date, an "Interest Payment Date") to
which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 31, June 30, September 30 and
December 31 of each year commencing _______________, 1998, at the rate of ___%
per annum until the principal hereof shall have become due and payable, and on
any overdue principal and (without duplication) on any overdue installment of
interest at the same rate per annum compounded quarterly. The amount of interest
payable on any Interest Payment Date shall be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which interest is
payable on this Debenture is not a business day, then payment of interest
payable on such date shall be made on the next succeeding day that is a business
day (and without any interest or other payment in respect of any such delay),
except that, if such business day is in the next succeeding calendar year, such
payment shall be made on the preceding business day, in each case with the same
force and effect as if made on such date. The interest installment so payable,
and punctually, paid or duly provided for, on any Interest Payment Date shall,
as provided in the Indenture, be paid to the person in whose name this Debenture
(or one or more Predecessor Debentures, as defined in said Indenture) is
registered at the close of business on the regular record date for such interest
installment, which shall be the close of business on the business day next
preceding such Interest Payment Date unless otherwise provided in the Indenture.
Any such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered holders on such regular record
date and may be paid to the Person in whose name this Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a special
record date to be fixed by the Trustee
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for the payment of such defaulted interest, notice whereof shall be given to the
registered holders of the Debentures not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. The principal of and the
interest on this Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the registered holder at such address
as shall appear in the Debenture Register. Notwithstanding the foregoing, so
long as the holder of this Debenture is the Property Trustee, the payment of the
principal of and interest on this Debenture shall be made at such place and to
such account as may be designated by the Trustee.
The Stated Maturity may be shortened at any time by the Company to any
date not earlier than ____________________, 2003, subject to the Company having
received prior approval of the Federal Reserve if then required under applicable
capital guidelines or policies of the Federal Reserve.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided; and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
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<PAGE> 78
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
UNITED FINANCIAL HOLDINGS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest:
-----------------------------
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
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<PAGE> 79
EXHIBIT A-3
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned Indenture.
Dated:
-----------------------------
WILMINGTON TRUST COMPANY, ------------------------------------
as Trustee or Authentication Agent
By: By:
-------------------------------- ---------------------------------
Authorized Signatory
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<PAGE> 80
EXHIBIT A-4
[FORM OF REVERSE OF DEBENTURE]
_____% JUNIOR SUBORDINATED DEBENTURE
(CONTINUED)
This Debenture is one of the junior subordinated debentures of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued under and pursuant to an Indenture dated
as of _________, 1998 (the "Indenture") duly executed and delivered between the
Company and Wilmington Trust Company, as Trustee (the "Trustee"), to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
The Company has the right to redeem this Debenture at the option of the
Company, without premium or penalty (i) at any time on or after _____, 2003 in
whole or in part, or (ii) at any time in certain circumstances in whole (but not
in part) upon the occurrence of a Special Event, in each case at a Redemption
Price equal to 100% of the principal amount plus any accrued but unpaid
interest, to the date of such redemption (the "Redemption Price"). The
Redemption Price shall be paid prior to 12:00 noon, Eastern Standard Time, time,
on the date of such redemption or at such earlier time as the Company
determines. Any redemption pursuant to this paragraph shall be made upon not
less than 30 days nor more than 60 days notice, at the Redemption Price. If the
Debentures are only partially redeemed by the Company, the Debentures shall be
redeemed pro rata or by lot or by any other method utilized by the Trustee.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in the
name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, as defined
in the Indenture, to execute supplemental indentures for the purpose of adding
any provisions to or
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<PAGE> 81
changing in any manner or eliminating any of the provisions of the Indenture or
of any supplemental indenture or of modifying in any manner the rights of the
holders of the Debentures; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of the Debentures except as
provided in the Indenture, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon (except for deferrals of
interest as described below), without the consent of the holder of each
Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures,
the holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Debenture then outstanding and
affected thereby. The Indenture also contains provisions permitting the holders
of a majority in aggregate principal amount of the Debentures at the time
outstanding, on behalf of all of the holders of the Debentures, to waive any
past default in the performance of any of the covenants contained in the
Indenture, or established pursuant to the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any of the
Debentures. Any such consent or waiver by the registered holder of this
Debenture (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this
Debenture and of any Debenture issued in exchange herefor or in place hereof
(whether by registration of transfer or otherwise or whether any notation of
such consent or waiver is made upon this Debenture).
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal and interest on this
Debenture at the time and place and at the rate and in the money herein
prescribed.
The Company shall have the right at any time during the term of the
Debentures and from time to time to extend the interest payment period of such
Debentures for up to 20 consecutive quarters (each, an "Extended Interest
Payment Period"), at the end of which period the Company shall pay all interest
then accrued and unpaid (together with interest thereon at the rate specified
for the Debentures to the extent that payment of such interest is enforceable
under applicable law). Before the termination of any such Extended Interest
Payment Period, the Company may further extend such Extended Interest Payment
Period, provided that such Extended Interest Payment Period together with all
such further extensions thereof shall not exceed 20 consecutive quarters. At the
termination of any such Extended Interest Payment Period and upon the payment of
all accrued and unpaid interest and any additional amounts then due, the Company
may commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register of the Company, upon surrender of this Debenture for
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<PAGE> 82
registration of transfer at the office or agency of the Trustee accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount shall be
issued to the designated transferee or transferees. No service charge shall be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Debenture Registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect of the Indenture, against any incorporator, stockholder, officer or
director, past, present or future, as such, of the Company or any predecessor or
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issuance hereof, expressly waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $5 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
[Additional Provisions to be Included if a Global Debenture, substantially in
the following form:
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE
REFERRED TO HEREIN AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF
A DEPOSITARY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE
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<PAGE> 83
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
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<PAGE> 1
EXHIBIT 4.4
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of July 30, 1998 (this "Trust Agreement"), among
(i) United Financial Holdings, Inc., a Florida corporation (the "Depositor"),
(ii) Wilmington Trust Company, a Delaware banking corporation, as trustee, and
(iii) Neil W. Savage and C. Peter Bardin, each an individual, as trustees (each
of such trustees in (ii) and (iii) a "Trustee" and collectively, the
"Trustees"). The Depositor and the Trustees hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "UFH Capital
Trust I" in which name the Trustees, or the Depositor to the extent provided
herein, may engage in the transactions contemplated hereby, make and execute
contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to the
Trustees the sum of $10.00. The Trustees hereby acknowledge receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust Act"),
and that this document constitutes the governing instrument of the Trust. The
Trustees are hereby authorized and directed to execute and file a certificate of
trust with the Delaware Secretary of State in accordance with the provisions of
the Business Trust Act.
3. The Depositor and the Trustees will enter into an amended and restated
Trust Agreement, satisfactory to each such party and substantially in the form
included as an exhibit to the 1933 Act Registration Statement (as defined
below), to provide for the contemplated operation of the Trust created hereby
and the issuance of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and restated Trust
Agreement, the Trustees shall not have any duty or obligation hereunder or with
respect to the trust estate, except as otherwise required by applicable law or
as may be necessary to obtain, prior to such execution and delivery, any
licenses, consents or approvals required by applicable law or otherwise.
4. The Depositor and the Trustees hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form SB-2 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Preferred Securities of the
Trust and possibly certain other securities and (b) a Registration Statement on
Form 8-A (the "1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the registration of the
Preferred Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with The Nasdaq Stock Market or any national stock
exchange (each, an "Exchange") and execute on behalf of the Trust one or more
listing
<PAGE> 2
applications and all other applications, statements, certificates, agreements
and other instruments as shall be necessary or desirable to cause the Preferred
Securities to be listed on any of the Exchanges; (iii) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register the Preferred
Securities under the securities or blue sky laws of such jurisdictions as the
Depositor, on behalf of the Trust, may deem necessary or desirable; and (iv) to
execute on behalf of the Trust that certain Underwriting Agreement relating to
the Preferred Securities, among the Trust, the Depositor and the several
Underwriters named therein, substantially in the form included as an exhibit to
the 1933 Act Registration Statement. In the event that any filing referred to in
clauses (i), (ii) and (iii) above is required by the rules and regulations of
the Commission, an Exchange or state securities or blue sky laws, to be executed
on behalf of the Trust by one or more of the Trustees, each of the Trustees, in
its or his capacity as a Trustee of the Trust, is hereby authorized and, to the
extent so required, directed to join in any such filing and to execute on behalf
of the Trust any and all of the foregoing, it being understood that Wilmington
Trust Company in its capacity as a Trustee of the Trust shall not be required to
join in any such filing or execute on behalf of the Trust any such document
unless required by the rules and regulations of the Commission, the Exchange or
state securities or blue sky laws. In connection with the filings referred to
above, the Depositor, and Neil W. Savage and C. Peter Bardin, each as Trustees
and not in their individual capacities, hereby constitutes and appoints Neil W.
Savage and C. Peter Bardin, and each of them, as its true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the Depositor or such Trustees or in the Depositor's or such
Trustees' name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, the Exchange and administrators of the state securities or blue sky
laws, granting unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as the
Depositor or such Trustee might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
respective substitute or substitutes, shall do or cause to be done by virtue
hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be three (3) and thereafter the
number of Trustees shall be such number as shall be set forth in the amended and
restated Trust Agreement or as shall be fixed from time to time by a written
instrument signed by the Depositor which may increase or decrease the number of
Trustees; provided, however, that to the extent required by the Business Trust
Act, one Trustee shall either be a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal place
of business in the State of Delaware and
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<PAGE> 3
otherwise meets the requirements of applicable Delaware law. Subject to the
foregoing, the Depositor is entitled to appoint or remove without cause any
Trustee at any time. The Trustees may resign upon thirty (30) days' prior notice
to the Depositor.
7. This Trust Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (without regard to conflict of laws
principles).
[Signatures on Next Page]
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be
duly executed as of the day and year first above written.
UNITED FINANCIAL HOLDINGS, INC.
as Depositor
By:
--------------------------------
NEIL W. SAVAGE
Chairman of the Board
and Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Trustee
By:
--------------------------------
Name:
Title:
------------------------------------
NEIL W. SAVAGE,
as Trustee
------------------------------------
C. PETER BARDIN,
as Trustee
- 4 -
<PAGE> 1
EXHIBIT 4.5
UFH CAPITAL TRUST I
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
UNITED FINANCIAL HOLDINGS, INC., AS DEPOSITOR
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF ____________, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINED TERMS...................................................... 2
Section 101. Definitions............................................................. 2
ARTICLE II ESTABLISHMENT OF THE TRUST......................................... 9
Section 201. Name.................................................................... 9
Section 202. Office of the Property Trustee; Principal Place of Business............. 9
Section 203. Initial Contribution of Trust Property; Organizational Expenses......... 9
Section 204. Issuance of the Preferred Securities.................................... 9
Section 205. Issuance of the Common Securities; Subscription and Purchase of
Debentures.............................................................. 10
Section 206. Declaration of Trust.................................................... 10
Section 207. Authorization to Enter Into Certain Transactions........................ 10
Section 208. Assets of Trust......................................................... 13
Section 209. Title to Trust Property................................................. 14
ARTICLE III PAYMENT ACCOUNT.................................................... 14
Section 301. Payment Account......................................................... 14
ARTICLE IV DISTRIBUTIONS; REDEMPTION.......................................... 14
Section 401. Distributions........................................................... 14
Section 402. Redemption.............................................................. 15
Section 403. Subordination of Common Securities...................................... 17
Section 404. Payment Procedures...................................................... 17
Section 405. Tax Returns and Reports................................................. 17
Section 406. Payment of Taxes, Duties, etc. of the Trust............................. 18
Section 407. Payments Under Indenture................................................ 18
ARTICLE V TRUST SECURITIES CERTIFICATES...................................... 18
Section 501. Initial Ownership....................................................... 18
Section 502. The Trust Securities Certificates....................................... 18
Section 503. Execution and Delivery of Trust Securities Certificates................. 19
Section 504. Registration of Transfer and Exchange of Preferred Securities
Certificates............................................................ 19
Section 505. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates...... 20
Section 506. Persons Deemed Securityholders.......................................... 20
Section 507. Access to List of Securityholders' Names and Addresses.................. 20
Section 508. Maintenance of Office or Agency......................................... 21
Section 509. Appointment of Paying Agent............................................. 21
Section 510. Ownership of Common Securities by Depositor............................. 21
Section 511. Preferred Securities Certificates....................................... 22
Section 512. Global Preferred Security............................................... 22
Section 513. Notice to Clearing Agency............................................... 23
Section 514. Rights of Securityholders............................................... 23
ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING.......................... 24
Section 601. Limitations on Voting Rights............................................ 24
Section 602. Notice of Meetings...................................................... 25
Section 603. Meetings of Preferred Securityholders................................... 25
</TABLE>
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<TABLE>
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<S> <C> <C>
Section 604. Voting Rights........................................................... 25
Section 605. Proxies, etc............................................................ 25
Section 606. Securityholder Action by Written Consent................................ 26
Section 607. Record Date for Voting and Other Purposes............................... 26
Section 608. Acts of Securityholders................................................. 26
Section 609. Inspection of Records................................................... 27
ARTICLE VII REPRESENTATIONS AND WARRANTIES.............................................. 27
Section 701. Representations and Warranties of the Bank and the Property Trustee..... 27
Section 702. Representations and Warranties of Depositor............................. 28
ARTICLE VIII TRUSTEES.................................................................... 29
Section 801. Certain Duties and Responsibilities..................................... 29
Section 802. Certain Notices......................................................... 30
Section 803. Certain Rights of Property Trustee...................................... 30
Section 804. Not Responsible for Recitals or Issuance of Securities.................. 32
Section 805. May Hold Securities..................................................... 32
Section 806. Compensation; Indemnity; Fees........................................... 32
Section 808. Conflicting Interests................................................... 34
Section 809. Co-Trustees and Separate Trustee........................................ 34
Section 811. Acceptance of Appointment by Successor.................................. 36
Section 812. Merger, Conversion, Consolidation or Succession to Business............. 37
Section 813. Preferential Collection of Claims Against Depositor or Trust............ 37
Section 814. Reports by Property Trustee............................................. 37
Section 815. Reports to the Property Trustee......................................... 38
Section 816. Evidence of Compliance with Conditions Precedent........................ 38
Section 817. Number of Trustees...................................................... 38
Section 818. Delegation of Power..................................................... 38
Section 819. Voting.................................................................. 39
ARTICLE IX TERMINATION, LIQUIDATION AND MERGER................................ 39
Section 901. Termination upon Expiration Date........................................ 39
Section 902. Early Termination....................................................... 39
Section 903. Termination............................................................. 39
Section 904. Liquidation............................................................. 39
Section 905. Mergers, Consolidations, Amalgamations or Replacements of the Trust..... 41
ARTICLE X MISCELLANEOUS PROVISIONS.................................................... 42
Section 1001. Limitation of Rights of Securityholders................................ 42
Section 1002. Amendment.............................................................. 42
Section 1003. Separability........................................................... 43
Section 1004. Governing Law.......................................................... 43
Section 1005. Payments Due on Non-Business Day....................................... 43
Section 1006. Successors............................................................. 43
Section 1007. Headings............................................................... 44
Section 1008. Reports, Notices and Demands........................................... 44
</TABLE>
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<TABLE>
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<S> <C> <C>
Section 1009. Agreement not to Petition.............................................. 44
Section 1010. Trust Indenture Act; Conflict with Trust Indenture Act................. 45
Section 1011. Acceptance of Terms of Trust Agreement, Guarantee and Indenture........ 45
</TABLE>
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
iii
<PAGE> 5
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
------------------- -----------------
<S> <C>
310(a)(1) 807
310(a)(2) 807
310(a)(3) 807
310(a)(4) 207(a)(ii)
310(b) 808
311(a) 813
311(b) 813
312(a) 507
312(b) 507
312(c) 507
313(a) 814(a)
313(a)(4) 814(b)
313(b) 814(b)
313(c) 1008
313(d) 814(c)
314(a) 815
314(b) Not Applicable
314(c)(1) 816
314(c)(2) 816
314(c)(3) Not Applicable
314(d) Not Applicable
314(e) 101,816
315(a) 801(a), 803(a)
315(b) 802, 1008
315(c) 801(a)
315(d) 801, 803
316(a)(2) Not Applicable
316(b) Not Applicable
316(c) 607
317(a)(1) Not Applicable
317(a)(2) Not Applicable
317(b) 509
318(a) 1010
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Agreement
and shall not affect any interpretation of any of its terms or
provisions.
iv
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT
THIS AMENDED AND RESTATED TRUST AGREEMENT, dated as of ___________,
1998, is by and among (i) United Financial Holdings, Inc., a Florida corporation
(including any successors or assigns, the "Depositor"), (ii) Wilmington Trust
Company, a banking corporation duly organized and existing under the laws of the
State of Delaware, as property trustee (the "Property Trustee", the "Delaware
Trustee" and in its separate corporate capacity and not in its capacity as
Property Trustee, the "Bank") and, (iii) Neil W. Savage, an individual and C.
Peter Bardin, an individual, each of whose address is c/o United Financial
Holdings, Inc., 333 Third Avenue North, St. Petersburg, Florida 33733 (each an
"Administrative Trustee" and collectively the "Administrative Trustees") (the
Property Trustee, the Delaware Trustee and the Administrative Trustees referred
to collectively as the "Trustees"), and (v) the several Holders (as hereinafter
defined).
RECITALS
WHEREAS, the Depositor, the Delaware Trustee, and Neil W. Savage and C.
Peter Bardin, each as an Administrative Trustee, have heretofore duly declared
and established a business trust pursuant to the Delaware Business Trust Act by
the entering into of that certain Trust Agreement, dated as of July 30, 1998
(the "Original Trust Agreement"), and by the execution and filing by the
Delaware Trustee, the Depositor and the Administrative Trustees with the
Secretary of State of the State of Delaware of the Certificate of Trust, filed
on July 30, 1998, the form of which is attached as Exhibit A; and
WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and
the Administrative Trustees desire to amend and restate the Original Trust
Agreement in its entirety as set forth herein to provide for, among other
things, (i) the issuance of the Common Securities (as defined herein) by the
Trust (as defined herein) to the Depositor; (ii) the issuance and sale of the
Preferred Securities (as defined herein) by the Trust pursuant to the
Underwriting Agreement (as defined herein); (iii) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Debentures (as
defined herein); and (iv) the appointment of the Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party for the benefit of the
other parties and for the benefit of the Securityholders (as defined herein)
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows.
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<PAGE> 7
ARTICLE I
DEFINED TERMS
Section 101. Definitions. For all purposes of this Trust Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to
them in this Article I and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1 of the Indenture.
"Administrative Trustee" means each of Neil W. Savage and C. Peter Bardin,
solely in his capacity as Administrative Trustee of the Trust formed and
continued hereunder and not in his individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person directly
or indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities or other ownership interests of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities or
other ownership interests are directly or indirectly owned, controlled or held
with power to vote by the specified Person; (c) any Person directly or
indirectly controlling, controlled by, or under common control with the
specified Person; (d) a partnership in which the specified person is a general
partner; (e) any officer or director of the specified Person; and (f) if the
specified Person is an individual, any entity of which the specified Person is
an officer, director or general partner.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Preferred Security or beneficial interest therein, the rules
and procedures of the Depositary for such Preferred Security, in each case to
the extent applicable to such transaction and as in effect from time to time.
"Bank" has the meaning specified in the Preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
2
<PAGE> 8
(a) the entry of a decree or order by a court having jurisdiction in
the premises adjudging such Person a bankrupt or insolvent, or
approving as properly filed a petition seeking liquidation or
reorganization of or in respect of such Person under the United States
Bankruptcy Code of 1978, as amended, or any other similar applicable
federal or state law, and the continuance of any such decree or order
unvacated and unstayed for a period of 90 days; or the commencement of
an involuntary case under the United States Bankruptcy Code of 1978, as
amended, in respect of such Person, which shall continue undismissed
for a period of 90 days or entry of an order for relief in such case;
or the entry of a decree or order of a court having jurisdiction in the
premises for the appointment on the ground of insolvency or bankruptcy
of a receiver, custodian, liquidator, trustee or assignee in bankruptcy
or insolvency of such Person or of its property, or for the winding up
or liquidation of its affairs, and such decree or order shall have
remained in force unvacated and unstayed for a period of 90 days; or
(b) the institution by such Person of proceedings to be adjudicated a
voluntary bankrupt, or the consent by such Person to the filing of a
bankruptcy proceeding against it, or the filing by such Person of a
petition or answer or consent seeking liquidation or reorganization
under the United States Bankruptcy Code of 1978, as amended, or other
similar applicable Federal or State law, or the consent by such Person
to the filing of any such petition or to the appointment on the ground
of insolvency or bankruptcy of a receiver or custodian or liquidator or
trustee or assignee in bankruptcy or insolvency of such Person or of
its property, or shall make a general assignment for the benefit of
creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date of
such certification, and delivered to the appropriate Trustee.
"Business Day" means a day other than a Saturday or Sunday, a day on which
banking institutions in the City of New York are authorized or required by law,
executive order or regulation to remain closed, or a day on which the Property
Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Capital Treatment Event" has the meaning specified in Section 1.1 of the
Indenture.
"Certificate of Trust" means the certificate of trust filed with the Secretary
of State of the State of Delaware with respect to the Trust, as amended or
restated from time to time.
"Change in 1940 Act Law" shall have the meaning set forth in the definition of
"Investment Company Event."
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The
Depositary shall be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank or other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
3
<PAGE> 9
"Closing Date" means the date of execution and delivery of this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, or any successor statute, in
each case as amended from time to time.
"Commission" means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets of the
Trust, having a Liquidation Amount of $10 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means the office at which, at any particular time, the
corporate trust business of the Property Trustee or the Debenture Trustee, as
the case may be, shall be principally administered, which office at the date
hereof, in each such case, is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
"Depositary" means Depository Trust Company, as depositary.
"Debenture Event of Default" means an "Event of Default" as defined in Section
7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be redeemed
under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as specified in Section 1.1 of the
Indenture.
"Debenture Trustee" means Wilmington Trust Company, a banking corporation
company organized under the laws of the State of New York and any successor
thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's _____%
Junior Subordinated Debentures due __________, 2028, issued pursuant to the
Indenture.
"Definitive Preferred Securities Certificates" means the Preferred Securities
Certificates issued in certificated, fully registered form as provided in
Section 513.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Delaware Code Sections 3801 et seq. as it may be amended from time to time.
"Delaware Trustee" means the commercial bank or trust company identified as the
"Delaware Trustee," in the Preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust heretofore formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein provided.
4
<PAGE> 10
"Depositor" has the meaning specified in the Preamble to this Trust Agreement.
"Distribution Date" has the meaning specified in Section 401(a)
"Distributions" means amounts payable in respect of the Trust Securities as
provided in Section 401(a).
"Event of Default" means any one of the following events (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and payable;
or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Trust Agreement (other
than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (b) or (c), above) and
continuation of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the
defaulting Trustee or Trustees by the Holders of at least 25% in
aggregate liquidation preference of the Outstanding Preferred
Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor
property Trustee within 60 days thereof
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
statute, in each case as amended from time to time.
"Expense Agreement" means the Agreement as to Expenses and Liabilities between
the Depositor and the Trust, substantially in the form attached as Exhibit D, as
amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extended Interest Payment Period" has the meaning specified in Section 4.1 of
the Indenture.
"Global Preferred Securities Certificate" means a Preferred Securities
Certificate evidencing ownership of Global Preferred Securities.
"Global Preferred Security" means a Preferred Security, the ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 512.
"Guarantee" means the Preferred Securities Guarantee Agreement executed and
delivered by the Depositor and Wilmington Trust Company, as trustee,
contemporaneously with the execution and delivery
5
<PAGE> 11
of this Trust Agreement, for the benefit of the holders of the Preferred
Securities, as amended from time to time.
"Indenture" means the Indenture, dated as of _______, 1998, between the
Depositor and the Debenture Trustee, as trustee, as amended or supplemented from
time to time.
"Investment Company Act," means the Investment Company Act of 1940, or any
successor statute, in each case as amended from time to time.
"Investment Company Event" has the meaning specified in Section 1.1 of the
Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust,
adverse ownership interest, hypothecation, assignment, security interest or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust Securities, Trust
Securities having a Liquidation Amount equal to the principal amount of
Debentures to be contemporaneously redeemed in accordance with the Indenture and
the proceeds of which shall be used to pay the Redemption Price of such Trust
Securities; and (b) with respect to a distribution of Debentures to Holders of
Trust Securities in connection with a termination or liquidation of the Trust,
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the Holder to whom such Debentures are distributed. Each
Debenture distributed pursuant to clause (b) above shall carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Debentures.
"Liquidation Amount" means the stated amount of $5 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed to
Holders of Trust Securities in connection with a termination and liquidation of
the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Controller or an
Assistant Controller or the Secretary or an Assistant Secretary, of the
Depositor, and delivered to the appropriate Trustee. One of the officers signing
an Officers' Certificate given pursuant to Section 816 shall be the principal
executive, financial or accounting officer of the Depositor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
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(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who may be
counsel for the Trust, the Property Trustee, or the Depositor, but not an
employee of any thereof, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the Recitals to this
Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means, as of the
date of determination, all Preferred Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the Holders of such Preferred
Securities; provided that, if such Preferred Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or in
lieu of which other Preferred Securities have been executed and
delivered pursuant to Sections 504, 505 and 511; provided, however,
that in determining whether the Holders of the requisite Liquidation
Amount of the Outstanding Preferred Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Preferred Securities owned by the Depositor, any Trustee or any
Affiliate of the Depositor or any Trustee shall be disregarded and
deemed not to be Outstanding, except that (a) in determining whether
any Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Preferred Securities that such Trustee knows to be so owned shall be so
disregarded and (b) the foregoing shall not apply at any time when all
of the outstanding Preferred Securities are owned by the Depositor, one
or more of the Trustees and/or any such Affiliate. Preferred Securities
so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Administrative Trustees the pledgee's right so to act with respect to
such Preferred Securities and that the pledgee is not the Depositor or
any Affiliate of the Depositor.
"Paying Agent" means any paying agent or co-paying agent appointed pursuant to
Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust department
for the benefit of the Securityholders in which all amounts paid in respect of
the Debentures shall be held and from which the Property Trustee shall make
payments to the Securityholders in accordance with Sections 401 and 102.
"Person" means any individual, corporation, partnership, joint venture, trust,
limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the assets of the
Trust, having a Liquidation Amount of $5 and having the rights provided therefor
in this Trust Agreement, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
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"Preferred Securities Certificate", means a certificate evidencing ownership of
Preferred Securities, substantially in the form attached as Exhibit E.
"Property Trustee" means the commercial bank or trust company identified as the
"Property Trustee," in the Preamble to this Trust Agreement solely in its
capacity as Property Trustee of the Trust heretofore formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be redeemed, the
date fixed for such redemption by or pursuant to this Trust Agreement; provided
that each Debenture Redemption Date and the stated maturity of the Debentures
shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security, the Liquidation
Amount of such Trust Security, plus accumulated and unpaid Distributions to the
Redemption Date, paid by the Depositor upon the concurrent redemption of a Like
Amount of Debentures, allocated on a pro rata basis (based on Liquidation
Amounts) among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective meanings
specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust Security or
Securities is registered in the Securities Register; any such Person is a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means the Delaware business trust created and continued hereby and
identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the same
may be modified, amended or supplemented in accordance with the applicable
provisions hereof, including all exhibits hereto, including, for all purposes of
this Trust Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Trust Agreement and any such modification, amendment or supplement,
respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939, as amended, is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of the Property
Trustee under the Guarantee; (c) any cash on deposit in, or owing to, the
Payment Account; and (d) all proceeds and rights in respect of the foregoing and
any other property and assets for the time being held or deemed to be held by
the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
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"Trustees" means, collectively, the Property Trustee, the Delaware Trustee, and
the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
__________, 1998, among the Trust, the Depositor and the Underwriters named
therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
Section 201. Name. The Trust created and continued hereby shall be known as "RBI
Capital Trust I," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may engage in the
transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 202. Office of the Property Trustee; Principal Place of Business. The
address of the Property Trustee in the State of Delaware is c/o Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administrator, or such other address in
the State of Delaware as the Property Trustee may designate by written notice to
the Securityholders and the Depositor. The principal executive office of the
Trust is c/o United Financial Holdings, Inc., 333 Third Avenue North, St.
Petersburg, Florida 33733.
Section 203. Initial Contribution of Trust Property; Organizational Expenses.
The Trustees acknowledge receipt in trust from the Depositor in connection with
the Original Trust Agreement of the sum of $5, which constituted the initial
Trust Property. The Depositor shall pay organizational expenses of the Trust as
they arise or shall, upon request of any Trustee, promptly reimburse such
Trustee for any such expenses paid by such Trustee. The Depositor shall make no
claim upon the Trust Property for the payment of such expenses.
Section 204. Issuance of the Preferred Securities. On ___________, 1998, the
Depositor and an Administrative Trustee, on behalf of the Trust and pursuant to
the Original Trust Agreement, executed and delivered the Underwriting Agreement.
Contemporaneously with the execution and delivery of this Trust Agreement, an
Administrative Trustee, on behalf of the Trust, shall execute in accordance with
Section 502 and deliver in accordance with the Underwriting Agreement, Preferred
Securities Certificates, registered in the name of the Persons entitled thereto,
in an aggregate amount of 1,200,000 Preferred Securities having an aggregate
Liquidation Amount of $6,000,000 against receipt of the aggregate purchase price
of such Preferred Securities of $6,000,000, which amount such Administrative
Trustee shall promptly deliver to the Property Trustee. If the underwriters
exercise their Option and there is an Option Closing Date (as such terms are
defined in the Underwriting Agreement), then an Administrative Trustee, on
behalf of the Trust, shall execute in accordance with Section 502 and deliver in
accordance with the Underwriting Agreement, Preferred Securities Certificates,
registered in the name of the Persons entitled thereto, in an aggregate amount
of up to 180,000 Preferred Securities having an aggregate Liquidation Amount of
up to $900,000 against receipt of the aggregate purchase price of such Preferred
Securities of $900,000, which amount such Administrative Trustee shall promptly
deliver to the Property Trustee.
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Section 205. Issuance of the Common Securities; Subscription and Purchase of
Debentures.
(a) Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver to the Depositor, Common
Securities Certificates, registered in the name of the Depositor in an aggregate
amount of Common Securities having an aggregate Liquidation Amount of $_________
against payment by the Depositor of such amount. Contemporaneously therewith, an
Administrative Trustee on behalf of the Trust, shall subscribe to and purchase
from the Depositor Debentures, registered in the name of the Property Trustee on
behalf of the Trust and having an aggregate principal amount equal to
$______________, and, in satisfaction of the purchase price for such Debentures,
the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the
sum of $_______________.
(b) If the underwriters exercise the Option and there is an Option
Closing Date, then an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver to the Depositor, Common
Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of Common Securities having an aggregate Liquidation Amount of
up to $_____________ against payment by the Depositor of such amount.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor, Debentures, registered in
the name of the Trust and having an aggregate principal amount of up to
$______________ and, in satisfaction of the purchase price of such Debentures,
the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the
amount received from one of the Administrative Trustees pursuant to the last
sentence of Section 204 (being the sum of the amounts delivered to the Property
Trustee pursuant to (i) the third sentence of Section 204; and (ii) the first
sentence of this Section 205(b)).
Section 206. Declaration of Trust. The exclusive purposes and functions of the
Trust are (a) to issue and sell Trust Securities and use the proceeds from such
sale to acquire the Debentures; and (b) to engage in those activities necessary,
convenient or incidental thereto. The Depositor hereby appoints the Trustees as
trustees of the Trust, to have all the rights, powers and duties to the extent
set forth herein, and the Trustees hereby accept such appointment. The Property
Trustee hereby declares that it shall hold the Trust Property in trust upon and
subject to the conditions set forth herein for the benefit of the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust.
Section 207. Authorization to Enter Into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section 207 and Article VIII, and in
accordance with the following provisions (i) and (ii), the Administrative
Trustees shall have the authority to enter into all transactions and agreements
determined by the Administrative Trustees to be appropriate in exercising the
authority, express or implied, otherwise granted to the Administrative Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee,
acting singly or jointly, shall have the power and authority to act on behalf of
the Trust with respect to the following matters:
(A) the issuance and sale of the Trust Securities;
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(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense Agreement and such other
agreements or documents as may be necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as amended, and under state
securities or blue sky laws, and the qualification of this Trust Agreement as a
trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon The Nasdaq Stock Market's National Market or such securities
exchange or exchanges as shall be determined by the Depositor and the
registration of the Preferred Securities under the Exchange Act, and the
preparation and filing of all periodic and other reports and other documents
pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities and the Debentures
to the Securityholders in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with this Trust Agreement;
(G) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of cancellation with the
Secretary of State of the State of Delaware;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business trust under
the laws of the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of the
Preferred Securities or to enable the Trust to effect the purposes for which the
Trust was created; and
(I) the taking of any action incidental to the
foregoing as the Administrative Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this Trust Agreement for
the benefit of the Securityholders (without consideration of the effect of any
such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall
have the power, duty and authority to act on behalf of the Trust with respect to
the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in accordance with the terms
of this Trust Agreement;
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(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust;
(I) after an Event of Default, the taking of any
action incidental to the foregoing as the Property Trustee may from time to time
determine is necessary or advisable to give effect to the terms of this Trust
Agreement and protect and conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any such action on any
particular Securityholder);
(J) registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of the duties, liabilities,
powers or the authority of the Administrative Trustees set forth in Section
207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust
(or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this Trust Agreement;
(ii) sell, assign, transfer, exchange, mortgage, pledge, setoff or otherwise
dispose of any of the Trust Property or interests therein, including to
Securityholders, except as expressly provided herein; (iii) take any action that
would cause the Trust to fail or cease to qualify as a "grantor trust" for
United States federal income tax purposes; (iv) incur any indebtedness for
borrowed money or issue any other debt; or (v) take or consent to any action
that would result in the placement of a Lien on any of the Trust Property. The
Administrative Trustees shall defend all claims and demands of all Persons at
any time claiming any Lien on any of the Trust Property adverse to the interest
of the Trust or the Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration statement
on the appropriate form in relation to the Preferred Securities and the
Debentures, including any amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or, register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions which must be
taken by or on behalf of the Trust, and advise the Trustees of actions they must
take on behalf of the Trust, and prepare for execution and filing any documents
to be executed and filed by the
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Trust or on behalf of the Trust, as the Depositor deems necessary or advisable
in order to comply with the applicable laws of any such States;
(iii) the preparation for filing by the Trust and execution
on behalf of the Trust of an application to The Nasdaq Stock Market's National
Market or a national stock exchange or other organizations for listing upon
notice of issuance of any Preferred Securities and to file or cause an
Administrative Trustee to file thereafter with such exchange or organization
such notifications and documents as may be necessary from time to time;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration statement
on Form 8-A relating to the registration of the Preferred Securities under
Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution
and delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust shall not be deemed to be
an "investment company" required to be registered under the Investment Company
Act, shall be classified as a "grantor trust" and not as an association taxable
as a corporation for United States federal income tax purposes and so that the
Debentures shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section 1002, the
Depositor and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law or this Trust Agreement, that each of the
Depositor and the Administrative Trustees determines in their discretion to be
necessary or desirable for such purposes.
Section 208. Assets of Trust. The assets of the Trust shall consist of the Trust
Property.
Section 209. Title to Trust Property. Legal title to all Trust Property shall be
vested at all times in the Property Trustee (in its capacity as such) and shall
be held and administered by the Property Trustee for the benefit of the
Securityholders in accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
Section 301. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
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(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
Section 401. Distributions.
(a) Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accumulate from __________, 1998,
and, except during any Extended Interest Payment Period with respect to the
Debentures, shall be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing on ___________, 1998. If
any date on which a Distribution is otherwise payable on the Trust Securities is
not a Business Day, then the payment of such Distribution shall be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Distribution shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which distributions are payable in
accordance with this Section 401(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests
in the Trust Property and the Distributions on the Trust Securities shall be
payable at a rate of _____% per annum of the Liquidation Amount of the Trust
Securities. The amount of Distributions payable for any full period shall be
computed on the basis of a 360-day year of twelve 30-day months. The amount of
Distributions for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30 day months. During any
Extended Interest Payment Period with respect to the Debentures, Distributions
on the Preferred Securities shall be deferred for a period equal to the Extended
Interest Payment Period. The amount of Distributions payable for any period
shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the
Property Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available in the Payment Account for the payment of such
Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be 15th day of the month in which the Distribution is payable.
Section 402. Redemption.
(a) On each Debenture Redemption Date and on the stated maturity
of the Debentures the Trust shall be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of
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Trust Securities to be redeemed, at such Holder's address appearing in the
Securities Register. The Property Trustee shall have no responsibility for the
accuracy of any CUSIP number contained in such notice. All notices of redemption
shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are
to be redeemed, the identification and the aggregate Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that, on the Redemption Date, the Redemption Price
shall become due and payable upon each such Trust Security to be redeemed and
that Distributions thereon shall cease to accumulate on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has immediately available funds then on hand and available in the
Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, New York City time, on
the Redemption Date, subject to Section 402(c), the Property Trustee will, with
respect to Preferred Securities held in global form, irrevocably deposit with
the Clearing Agency for such Preferred Securities, to the extent available
therefor, funds sufficient to pay the applicable Redemption Price and will give
such Clearing Agency irrevocable instructions and authority to pay the
Redemption Price to the Holders of the Preferred Securities. With respect to
Preferred Securities that are not held in global form, the Property Trustee,
subject to Section 4.2(c), will irrevocably deposit with the Paying Agent, to
the extent available therefor, funds sufficient to pay the applicable Redemption
Price and shall give the Paying Agent irrevocable instructions and authority to
pay the Redemption Price to the Holders thereof upon surrender of their
Preferred Securities Certificates. Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date for any Trust Securities called for
redemption shall be payable to the Holders of such Trust Securities as they
appear on the Register for the Trust Securities on the relevant record dates for
the related Distribution Dates. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit, all rights
of Securityholders holding Trust Securities so called for redemption shall
cease, except the right of such Securityholders to receive the Redemption Price
and any Distribution payable on or prior to the Redemption Date, but without
interest, and such Securities shall cease to be Outstanding. In the event that
any date on which any Redemption Price is payable is not a Business Day, then
payment of the Redemption Price payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment shall be made on the immediately preceding
Business Day, in each case, with the same force and effect as if made on such
date. In the event that payment of the Redemption Price in respect of any Trust
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by the Depositor pursuant to the Guarantee, Distributions
on such Trust Securities shall continue to accumulate, at the then applicable
rate, from the
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Redemption Date originally established by the Trust for such Trust Securities to
the date such Redemption Price is actually paid, in which case the actual
payment date shall be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall
be made to the record holders thereof as they appear on the Securities Register
for the Trust Securities on the relevant record date, which shall be the date 15
days prior to the relevant Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Preferred Securities not previously called
for redemption, by such method (including, without limitation, by lot) as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $5 or an integral multiple of $5
in excess thereof) of the Liquidation Amount of Preferred Securities of a
denomination larger than $5. The Property Trustee shall promptly notify the
Securities Registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of Preferred Securities shall relate, in the case of
any Preferred Securities redeemed or to be redeemed only in part, to the portion
of the Liquidation Amount of Preferred Securities which has been or is to be
redeemed.
Section 403. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities, provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of, Preferred
Securities then due and payable.
(b) In the case of the occurrence of any Event of Default
resulting from a Debenture Event of Default, the Holder of Common Securities
shall be deemed to have waived any right to act with respect to any such Event
of Default under this Trust Agreement until the effect of all such Events of
Default with respect to the Preferred Securities shall have been cured, waived
or otherwise eliminated. Until any such Event of Default under this Trust
Agreement with respect to the Preferred Securities shall have been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on behalf
of the Holders of the Preferred Securities and not the Holder of the Common
Securities, and only the
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Holders of the Preferred Securities shall have the right to direct the Property
Trustee to act on their behalf.
Section 404. Payment Procedures. Payments of Distributions (including Additional
Amounts, if applicable) in respect of the Preferred Securities shall be made by
check mailed to the address of the Person entitled thereto as such address shall
appear on the Securities Register or, if the Preferred Securities are held by a
Clearing Agency, such Distributions shall be made to the Clearing Agency in
immediately available funds, which will credit the relevant accounts on the
applicable Distribution Date. Payments in respect of the Common Securities shall
be made in such manner as shall be mutually agreed between the Property Trustee
and the Common Securityholder.
Section 405. Tax Returns and Reports. The Administrative Trustees shall prepare
(or cause to be prepared), at the Depositor's expense, and file all United
States federal, state and local tax and information returns and reports required
to be filed by or in respect of the Trust. In this regard, the Administrative
Trustees shall (a) prepare and file (or cause to be prepared and filed) the
appropriate Internal Revenue Service Form required to be filed in respect of the
Trust in each taxable year of the Trust; and (b) prepare and furnish (or cause
to be prepared and furnished) to each Securityholder the appropriate Internal
Revenue Service form required to be furnished to such Securityholder or the
information required to be provided on such form. The Administrative Trustees
shall provide the Depositor with a copy of all such returns and reports promptly
after such filing or furnishing. The Property Trustee shall comply with United
States federal withholding and backup withholding tax laws and information
reporting requirements with respect to any payments to Securityholders under the
Trust Securities.
Section 406. Payment of Taxes, Duties, etc. of the Trust. Upon receipt under the
Debentures of Additional Interest (as defined in Section 1.1 of the Indenture),
the Property Trustee, at the direction of an Administrative Trustee or the
Depositor, shall promptly pay any taxes, duties or governmental charges of
whatsoever nature (other than withholding taxes) imposed on the Trust by the
United States or any other taxing authority.
Section 407. Payments Under Indenture. Any amount payable hereunder to any
Holder or Preferred Securities shall be reduced by the amount of any
corresponding payment such Holder has directly received under the Indenture
pursuant to Section 514(b) or (c) hereof
ARTICLE V
TRUST SECURITIES CERTIFICATES
Section 501. Initial Ownership. Upon the creation of the Trust and the
contribution by the Depositor pursuant to Section 203 and until the issuance of
the Trust Securities, and at any time during which no Trust Securities are
outstanding, the Depositor shall be the sole beneficial owner of the Trust.
Section 502. The Trust Securities Certificates. The Preferred Securities
Certificates shall be issued in minimum denominations of $5 Liquidation Amount
and integral multiples of $5 in excess thereof, and the Common Securities
Certificates shall be issued in denominations of $5 Liquidation Amount and
integral multiples thereof. The Trust Securities Certificates shall be executed
on behalf of the Trust by manual, facsimile or imprinted signature of at least
one Administrative Trustee. Trust Securities Certificates bearing the signatures
of individuals who were, at the time when such signatures shall have been
affixed, authorized to sign on behalf of the Trust, shall be validly issued and
entitled to the benefits
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of this Trust Agreement, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the delivery of such Trust
Securities Certificates or did not hold such offices at the date of delivery of
such Trust Securities Certificates. These signatures shall be conclusive
evidence that the Trust Security has been validly issued under the Trust
Agreement. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 504 and
511.
Section 503. Execution and Delivery of Trust Securities Certificates. On the
Closing Date and on the date on which the Underwriter exercises the option, as
applicable (the "Option Closing Date"), the Administrative Trustees shall cause
Trust Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 204 and 205, to be executed on behalf of the Trust by at least one of
the Administrative Trustees and delivered to the Property Trustee and upon such
delivery, the Property Trustee shall countersign and register such Trust
Securities Certificates and deliver such Trust Securities Certificates upon the
written order of the Depositor, executed by its Chief Executive Officer or
President or any Vice President and the Treasurer or an Assistant Treasurer or
Secretary or Assistant Secretary without further corporate action by the
Depositor, in authorized denominations.
Section 504. Registration of Transfer and Exchange of Preferred Securities
Certificates.
(a) The Property Trustee shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 508, a register or registers for
the purpose of registering Trust Securities Certificates and transfers and
exchanges of Preferred Securities Certificates (herein referred to as the
"Securities Register") in which the registrar and transfer agent (the
"Securities Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Preferred Securities
Certificates and Common Securities Certificates (subject to Section 510 in the
case of the Common Securities Certificates) and registration of transfers and
exchanges of Preferred Securities Certificates as herein provided. The Property
Trustee shall be the initial Securities Registrar.
(b) Upon surrender for registration of transfer of any Preferred
Securities Certificate at the office or agency maintained pursuant to Section
508, the Administrative Trustees or any one of them and the Property Trustee
shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Preferred Securities Certificates in authorized
denominations of a like aggregate Liquidation Amount dated the date of execution
by such Administrative Trustee or Trustees. The Securities Registrar shall not
be required to register the transfer of any Preferred Securities that have been
called for redemption. At the option of a Holder, Preferred Securities
Certificates may be exchanged for other Preferred Securities Certificates in
authorized denominations of the same class and of a like aggregate Liquidation
Amount upon surrender of the Preferred Securities Certificates to be exchanged
at the office or agency maintained pursuant to Section 508.
(c) Every Preferred Securities Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to the Property Trustee and
the Securities Registrar duly executed by the Holder or his attorney duly
authorized in writing. Each Preferred Securities Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently disposed
of by the Property Trustee in accordance with its customary practice. The Trust
shall not be required to (i) issue, register the transfer of, or exchange any
Preferred Securities during a period beginning at the opening of business 15
calendar days before the date of mailing of a notice of redemption of any
Preferred Securities called for redemption and ending at the close of business
on the day of such mailing; or (ii) register the transfer of or exchange any
Preferred
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Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
(d) No service charge shall be made for any registration of
transfer or exchange of Preferred Securities Certificates, but the Securities
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Preferred Securities Certificates.
Section 505. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates.
If (a) any mutilated Trust Securities certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate, and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute and make available for delivery, and the Property Trustee
shall countersign, in exchange for or in lieu of any such mutilated, destroyed,
lost or stolen Trust Securities Certificate, a new Trust Securities Certificate
of like class, tenor and denomination. In connection with the issuance of any
new Trust Securities Certificate under this Section 505, the Administrative
Trustees or the Securities Registrar may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Securities Certificate issued pursuant to this
Section 505 shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Securities Certificate shall be found at any
time.
Section 506. Persons Deemed Securityholders. The Trustees, the Paying Agent and
the Securities Registrar shall treat the Persons in whose name any Trust
Securities are issued as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Securities Registrar shall be bound by any notice
to the contrary.
Section 507. Access to List of Securityholders' Names and Addresses. At any time
when the Property Trustee is not also acting as the Securities Registrar, the
Administrative Trustees or the Depositor shall furnish or cause to be furnished
to the Property Trustee a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Securityholders as of the
most recent record date (a) semi-annually on or before January 15 and July 15 in
each year; and (b) promptly after receipt by any Administrative Trustee or the
Depositor of a request therefor from the Property Trustee in order to enable the
Property Trustee to discharge its obligations under this Trust Agreement, in
each case to the extent such information is in the possession or control of the
Administrative Trustees or the Depositor and is not identical to a previously
supplied list or has not otherwise been received by the Property Trustee in its
capacity as Securities Registrar. The rights of Securityholders to communicate
with other Securityholders with respect to their rights under this Trust
Agreement or under the Trust Securities, and the corresponding rights of the
Trustee shall be as provided in the Trust Indenture Act. Each Holder and each
owner shall be deemed to have agreed not to hold the Depositor, the Property
Trustee or the Administrative Trustees accountable by reason of the disclosure
of its name and address, regardless of the source from which such information
was derived.
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Section 508. Maintenance of Office or Agency. The Property Trustee shall
designate, with the consent of the Administrative Trustees, which consent shall
not be unreasonably withheld, an office or offices or agency or agencies where
Preferred Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustees in
respect of the Trust Securities Certificates may be served. The Property Trustee
initially designates its corporate trust office at Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, as the principal corporate
trust office for such purposes. The Property Trustee shall give prompt written
notice to the Depositor, the Administrative Trustees and to the Securityholders
of any change in the location of the Securities Register or any such office or
agency.
Section 509. Appointment of Paying Agent. The Paying Agent shall make
Distributions to Securityholders from the Payment Account and shall report the
amounts of such Distributions to the Property Trustee and the Administrative
Trustees. Any Paying Agent shall have the revocable power to withdraw funds from
the Payment Account for the purpose of making the Distributions referred to
above. The Property Trustee may revoke such power and remove the Paying Agent if
such Trustee determines in its sole discretion that the Paying Agent shall have
failed to perform its obligation under this Trust Agreement in any material
respect. The Paying Agent shall initially be the Property Trustee, and any
co-paying agent chosen by the Property Trustee, and acceptable to the
Administrative Trustees and the Depositor. Any Person acting as Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Administrative Trustee and the Property Trustee. In the event that the Property
Trustee shall no longer be the Paying Agent or a successor Paying Agent shall
resign or its authority to act be revoked, the Property Trustee shall appoint a
successor that is reasonably acceptable to the Administrative Trustees to act as
Paying Agent to execute and deliver to the Trustees an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Trustees
that as Paying Agent, such successor Paying Agent or additional Paying Agent
shall hold all sums, if any, held by it for payment to the Securityholders in
trust for the benefit of the Securityholders entitled thereto until such sums
shall be paid to such Securityholders. The Paying Agent shall return all
unclaimed funds to the Property Trustee and, upon removal of a Paying Agent,
such Paying Agent shall also return all funds in its possession to the Property
Trustee. The provisions of Sections 801, 803 and 806 shall apply to the Property
Trustee also in its role as Paying Agent, for so long as the Property Trustee
shall act as Paying Agent and, to the extent applicable, to any other paying
agent appointed hereunder. Any reference in this Agreement to the Paying Agent
shall include any co-paying agent unless the context requires otherwise.
Section 510. Ownership of Common Securities by Depositor. On the Closing Date,
the Depositor shall acquire and retain beneficial and record ownership of the
Common Securities. To the fullest extent permitted by law, any attempted
transfer of the Common Securities (other than a transfer in connection with a
merger or consolidation of the Depositor into another corporation pursuant to
Section 12.1 of the Indenture) shall be void. The Administrative Trustees shall
cause each Common Securities Certificate issued to the Depositor to contain a
legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR IN
INTEREST TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH
APPLICABLE LAW AND SECTION 510 OF THE TRUST AGREEMENT".
Section 511. Preferred Securities Certificates.
(a) Upon their original issuance, Preferred Securities
Certificates shall be issued in the form of one or more fully registered Global
Preferred Securities Certificates, which will be deposited with or on behalf of
the Depositary and registered in the name of the Depositary's nominee. Unless
and until it is exchangeable in whole or in part for the Preferred Securities in
definitive form, a global security may
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not be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
(b) A Single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
(c) A Trust Securities Certificate shall not be valid unless
signed by the manual signature of at least one Administrative Trustee or by the
facsimile or imprinted signature of at least one Administrative Trustee and
countersigned and registered by the manual signature of an authorized signatory
of the Property Trustee. These signatures shall be conclusive evidence that the
Trust Security has been validly issued under this Trust Agreement.
Section 512. Global Preferred Security.
(a) Any Global Preferred Security issued under this Trust
Agreement shall be registered in the name of the nominee of the Clearing Agency
and delivered to such custodian therefor, and such Global Preferred Security
shall constitute a single Preferred Security for all purposes of this Trust
Agreement.
(b) Notwithstanding any other provision in this Trust Agreement, a
Global Preferred Security may not be exchanged in whole or in part for Preferred
Securities registered, and no transfer of the Global Preferred Security in whole
or in part may be registered, in the name of any Person other than the Clearing
Agency for such Global Preferred Security, or its nominee thereof unless (i)
such Clearing Agency advises the Property Trustee in writing that such Clearing
Agency is no longer willing or able to properly discharge its responsibilities
as Clearing Agency with respect to such Global Preferred Security, and the
Depositor is unable to locate a qualified successor, (ii) the Trust at its
option advises the Depositary in writing that it elects to terminate the book
entry system through the Clearing Agency, or (iii) there shall have occurred and
be continuing an Event of Default.
(c) If a Preferred Security is to be exchanged in whole or in part
for a beneficial interest in a Global Preferred Security, then either (i) such
Global Preferred Security shall be so surrendered for exchange or cancellation
as provided in this Article V or (ii) the Liquidation Amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or cancelled, or equal to the Liquidation Amount of such other
Preferred Security to be so exchanged for a beneficial interest therein, as the
case may be, by means of an appropriate adjustment made on the records of the
Security Registrar, whereupon the Property Trustee, in accordance with the
Applicable Procedures, shall instruct the Clearing Agency or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Preferred Security by the Clearing Agency,
accompanied by registration instructions, the Administrative Trustees shall
execute and the Property Trustee shall, subject to Section 512(b) and as
otherwise provided in this Article V, countersign, register and deliver any
Preferred Securities issuable in exchange for such Global Preferred Security (or
any portion thereof) in accordance with the instructions of the Clearing Agency.
The Property Trustee shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions.
(d) Every Preferred Security countersigned, registered and
delivered upon registration or transfer of, or in exchange for or in lieu of, a
Global Preferred Security or any portion thereof, whether pursuant to this
Article V or Article IV or otherwise, shall be authenticated and delivered in
the form of, and shall
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be, a Global Preferred Security, unless such Global Preferred Security is
registered in the name of a Person other than the clearing Agency for such
Global Preferred Security or a nominee thereof.
(e) The Clearing Agency or its nominee, as the registered owner of
a Global Preferred Security, shall be considered the Holder of the Preferred
Securities represented by such Global Preferred Security for all purposes under
this Trust Agreement and the Preferred Securities, and owners of beneficial
interests in such Global Preferred Security shall hold such interests pursuant
to the Applicable Procedures and, except as otherwise provided herein, shall not
be entitled to receive physical delivery of any such Preferred Securities in
definitive form and shall not be considered the Holders thereof under this Trust
Agreement. Accordingly, any such owner's beneficial interest in the Global
Preferred Security shall be shown only on, and the transfer of such interest
shall be effected only through, records maintained by the Clearing Agency or its
nominee. Neither the Property Trustee, the Securities Registrar nor the
Depositor shall have any liability in respect of any transfers effected by the
Clearing Agency.
(f) The rights of owners of beneficial interests in a Global
Preferred Security shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such owners and
the Clearing Agency.
Section 513. Notice to Clearing Agency. To the extent that a notice or other
communication to the Holders is required under this Trust Agreement, for so long
as Preferred Securities are represented by a Global Preferred Securities
Certificate, the Administrative Trustees and the Property Trustee shall give all
such notices and communications specified herein to be given to the Clearing
Agency, and shall have no obligations to owners of beneficial interests in such
Global Preferred Securities.
Section 514. Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 209,
and the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights. When issued and delivered to Holders
of the Preferred Securities against payment of the purchase price therefor, the
Preferred Securities shall be fully paid and nonassessable interests in the
Trust. The Holders of the Preferred Securities, in their capacities as such,
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding,
if, upon a Debenture Event of Default, the Debenture Trustee fails or the
holders of not less than 25% in principal amount of the outstanding Debentures
fail to declare the principal of all of the Debentures to be immediately due and
payable, the Holders of at least 25% in Liquidation Amount of the Preferred
Securities then Outstanding shall have such right by a notice in writing to the
Depositor and the Debenture Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Debentures shall
become immediately due and payable, provided that the payment of principal and
interest on such Debentures shall remain subordinated to the extent provided in
the Indenture.
(c) For so long as any Preferred Securities remain outstanding,
if, upon a Debenture Event of Default arising from the failure to pay interest
or principal on the Debentures, the Holders of any
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Preferred Securities then Outstanding shall, to the fullest extent permitted by
law, have the right to directly institute proceedings for enforcement of payment
to such Holders of principal of or interest on the Debentures having a principal
amount equal to the Liquidation Amount of the Preferred Securities of such
Holders.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 601. Limitations on Voting Rights.
(a) Except as provided in this Section 601, in Sections 514, 810
and 1002 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association.
(b) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures; (ii) waive any past default which is waivable under Article VII of
the Indenture; (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each Holder of Outstanding Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior written consent of each holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote of the
Holders of the Outstanding Preferred Securities, except by a subsequent vote of
the Holders of the Outstanding Preferred Securities. The Property Trustee shall
notify each Holder of the Outstanding Preferred Securities of any notice of
default received from the Debenture Trustee with respect to the Debentures. In
addition to obtaining the foregoing approvals of the Holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Trustees shall, at
the expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust shall continue to be classified as a
grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for,
or the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise; or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class shall be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Preferred Securities. No amendment to this Trust
Agreement may be made if, as a result of such amendment, the Trust would cease
to be classified as a grantor trust or would be classified as an association
taxable as a corporation for United States federal income tax purposes.
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Section 602. Notice of Meetings. Notice of all meetings of the Preferred
Securityholders, stating the time, place and purpose of the meeting, shall be
given by the Property Trustee pursuant to Section 1008 to each Preferred
Securityholder of record, at his registered address, at least 15 days and not
more than 90 days before the meeting. At any such meeting, any business properly
before the meeting may be so considered whether or not stated in the notice of
the meeting. Any adjourned meeting may be held as adjourned without further
notice.
Section 603. Meetings of Preferred Securityholders.
(a) No annual meeting of Securityholders is required to be held.
The Administrative Trustees, however, shall call a meeting of Securityholders to
vote on any matter in respect of which Preferred Securityholders are entitled to
vote upon the written request of the Preferred Securityholders of 25% of the
Outstanding Preferred Securities (based upon their aggregate Liquidation Amount)
and the Administrative Trustees or the Property Trustee may, at any time in
their discretion, call a meeting of Preferred Securityholders to vote on any
matters as to which the Preferred Securityholders are entitled to vote.
(b) Preferred Securityholders of record of 50% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation Amount), present in
person or by proposal shall constitute a quorum at any meeting of
Securityholders
(c) If a quorum is present at a meeting, an affirmative vote by
the Preferred Securityholders of record present, in person or by proxy, holding
more than a majority of the Preferred Securities (based upon their aggregate
Liquidation Amount) held by the Preferred Securityholders of record present,
either in person or by proxy, at such meeting shall constitute the action of the
Securityholders unless this Trust Agreement requires a greater number of
affirmative votes.
Section 604. Voting Rights. Securityholders shall be entitled to one vote for
each $5 of Liquidation Amount represented by their Trust Securities in respect
of any matter as to which such Securityholders are entitled to vote.
Section 605. Proxies, etc. At any meeting of Securityholders, any Securityholder
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Administrative Trustees, or with such other officer or agent of the Trust as the
Administrative Trustees may direct, for verification prior to the time at which
such vote shall be taken. When Trust Securities are held jointly by several
persons, any one of them may vote at any meeting in person or by proxy in
respect of such Trust Securities, but if more than one of them shall be present
at such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such vote shall not be received in
respect of such Trust Securities. A proxy purporting to be executed by or on
behalf of a Securityholder shall be deemed valid unless challenged at or prior
to its exercise, and, the burden of proving invalidity shall rest on the
challenger. No proxy shall be valid more than three years after its date of
execution.
Section 606. Securityholder Action by Written Consent. Any action which may be
taken by Securityholders at a meeting may be taken without a meeting if
Securityholders holding more than a majority of all Outstanding Trust Securities
(based upon their aggregate Liquidation Amount) entitled to vote in respect of
such action (or such larger proportion thereof as shall be required by any
express provision of this Trust Agreement) shall consent to the action in
writing (based upon their aggregate Liquidation Amount).
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Section 607. Record Date for Voting and Other Purposes. For the purposes of
determining the Securityholders who are entitled to notice of and to vote at any
meeting or by written consent, or to participate in any Distribution on the
Trust Securities in respect of which a record date is not otherwise provided for
in this Trust Agreement, or for the purpose of any other action, the
Administrative Trustees may from time to time fix a date, not more than 90 days
prior to the date of any meeting of Securityholders or the payment of any
Distribution or other action as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
Section 608. Acts of Securityholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Trust Agreement to
be given, made or taken by Securityholders may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by such
Securityholders in person or by an agent duly appointed in writing, and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 801) conclusive in favor
of the Trustees, if made in the manner provided in this Section 608.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the
Securities Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Securityholder of any Trust Security shall
bind every future Securityholder of the same Trust Security and the
Securityholder of every Trust Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustees or the Trust in reliance thereon,
whether or not notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any particular Trust
Security may do so with regard to all or any part of the Liquidation Amount of
such Trust Security or by one or more duly appointed agents each of which may do
so pursuant to such appointment with regard to all or any part of such
liquidation amount.
(f) A Securityholder may institute a legal proceeding directly
against the Depositor under the Guarantee to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee (as defined in the Guarantee), the Trust or any Person.
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Section 609. Inspection of Records. Upon reasonable notice to the Administrative
Trustees and the Property Trustee, the records of the Trust shall be open to
inspection and copying by Securityholders and their authorized representatives
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 701. Representations and Warranties of the Bank and the Property
Trustee. The Bank and the Property Trustee, each severally on behalf of and as
to itself, as of the date hereof, and each Successor Property Trustee at the
time of the Successor Property Trustee's acceptance of its appointment as
Property Trustee hereunder the term "Bank" being used to refer to such Successor
Property Trustee in its separate corporate capacity hereby represents and
warrants (as applicable) for the benefit of the Depositor and the
Securityholders that:
(a) The Bank is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Bank has full corporate power, authority and legal right
to execute, deliver and perform its obligations under this Trust Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and constitutes the valid and legally binding
agreement of the Property Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Property
Trustee of this Trust Agreement has been duly authorized by all necessary
corporate or other action on the part of the Property Trustee and does not
require any approval of stockholders of the Bank and such execution, delivery
and performance shall not (i) violate the Bank's charter or by-laws; (ii)
violate any provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of, any Lien on
any properties included in the Trust Property pursuant to the provisions of any
indenture, mortgage, credit agreement, license or other agreement or instrument
to which the Property Trustee or the Bank is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the United States or
the State of Delaware, as the case may be, governing the banking or trust powers
of the Bank or the Property Trustee (as appropriate in context) or any order,
judgment or decree applicable to the Property Trustee or the Bank;
(e) neither the authorization, execution or delivery by the
Property Trustee of this Trust Agreement nor the consummation of any of the
transactions by the Property Trustee contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to any governmental authority or agency
under any existing federal law governing the banking or trust powers of the Bank
or the Property Trustee, as the case may be, under the laws of the United States
or the State of Delaware; and
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(f) there are no proceedings pending or, to the best of the
Property Trustee's knowledge, threatened against or affecting the Bank or the
Property Trustee in any court or before any governmental authority, agency or
arbitration board or tribunal which, individually or in the aggregate, would
materially and adversely affect the Trust or would question the right, power and
authority of the Property Trustee to enter into or perform its obligations as
one of the Trustees under this Trust Agreement.
Section 702. Representations and Warranties of Depositor. The Depositor hereby
represents and warrants for the benefit of the Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date
or the Option Closing Date, if applicable, on behalf of the Trust have been duly
authorized and, shall have been, duly and validly executed, issued and delivered
by the Administrative Trustees pursuant to the terms and provisions of, and in
accordance with the requirements of, this Trust Agreement and the
Securityholders shall be, as of such date, entitled to the benefits of this
Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable
by the Trust (or the Trustees on behalf of the Trust) under the laws of the
State of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank or the Property Trustee, as the
case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
Section 801. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. No Administrative Trustee shall be liable for its act or omissions hereunder
except as a result of its own gross negligence or willful misconduct. The
Property Trustee's liability shall be determined under the Trust Indenture Act.
Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Section
801. To the extent that, at law or in equity, an Administrative Trustee has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to the Securityholders, such Administrative Trustee shall not be liable
to the Trust or to any Securityholder for such Trustee's good faith reliance on
the provisions of this Trust Agreement. The provisions of this Trust Agreement,
to the extent that they restrict the duties and liabilities of the
Administrative Trustees otherwise existing at law or in equity, are agreed by
the Depositor and the Securityholders to replace such other duties and
liabilities of the Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. With respect
to the relationship of each Securityholder and the Trustee, each Securityholder,
by its acceptance of a Trust
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Security, agrees that it shall look solely to the revenue and proceeds from the
Trust Property to the extent legally available for distribution to it as herein
provided and that the Trustees are not personally liable to it for any amount
distributable in respect of any Trust Security or for any other liability in
respect of any Trust Security. This Section 801(b) does not limit the liability
of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the
case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) the property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in Liquidation
Amount of the Trust Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee under this
Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Payment Account shall be to deal with such Property in a similar manner as the
Property Trustee deals with similar property for its own account, subject to the
protections and limitations on liability afforded to the Property Trustee under
this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree with the
Depositor and money held by the Property Trustee need not be segregated from
other funds held by it except in relation to the Payment Account maintained by
the Property Trustee pursuant to Section 301 and except to the extent otherwise
required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Depositor with
their respective duties under this Trust Agreement, nor shall the Property
Trustee be liable for the negligence, default or misconduct of the
Administrative Trustees or the Depositor.
Section 802. Certain Notices.
(a) Within five Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 1008, notice of
such Event of Default to the Securityholders, the Administrative Trustees and
the Depositor, unless such Event of Default shall have been cured or waived. For
purposes of this Section 802 the term "Event of Default" means any event that
is, or after notice or lapse of time or both would become, an Event of Default.
(b) The Administrative Trustees shall transmit, to the
Securityholders in the manner and to the extent provided in Section 1008, notice
of the Depositor's election to begin or further extend an Extended Interest
Payment Period on the Debentures (unless such election shall have been revoked)
within
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the time specified for transmitting such notice to the holders of the Debentures
pursuant to the Indenture as originally executed.
Section 803. Certain Rights of Property Trustee. Subject to the provisions of
Section 801:
(a) the Property Trustee may rely and shall be protected in acting
or refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action; or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with other provisions contained
herein; or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor, provided, however, that if the
Property Trustee does not receive such instructions of the Depositor within 10
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not be less than two Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Trust Agreement as
it shall deem advisable and in the best interests of the Securityholders, in
which event the Property Trustee shall have no liability except for its own bad
faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officer's
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement) or any filing under tax or securities laws or any
rerecording, refiling, or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice
(which counsel may be counsel to the Depositor or any of its Affiliates) and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon and in accordance with such advice, the Property
Trustee shall have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent jurisdiction;
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(g) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Securityholders pursuant to this Trust Agreement,
unless such Securityholders shall have offered to the Property Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more
Securityholders, but the Property Trustee may make such further inquiry or
investigation into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust Securities in respect of such
remedy, right or action; (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received; and (iii) shall
be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Trust Agreement. No
provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section 804. Not Responsible for Recitals or Issuance of Securities. The
Recitals contained herein and in the Trust Securities Certificates shall be
taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees shall not be accountable for
the use or application by the Depositor of the proceeds of the Debentures.
Section 805. May Hold Securities. Any Trustee or any other agent of any Trustee
or the Trust, in its individual or any other capacity, may become the owner or
pledgee of Trust Securities and, subject to Sections 808 and 813 and except as
provided in the definition of the term "Outstanding" in Article I, may otherwise
deal with the Trust with the same rights it would have if it were not a Trustee
or such other agent.
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Section 806. Compensation; Indemnity; Fees. The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Trust Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees, any such
expense, disbursement or advance as may be attributable to its, his or her gross
negligence, bad faith or willful misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee
for, and to hold the Trustees harmless against, any loss, damage, claim,
liability, penalty or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this Trust Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder, except any such expense, disbursement or
advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees, any such
expense, disbursement or advance as may be attributable to its, his or her gross
negligence, bad faith or willful misconduct).
No Trustee may claim any Lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 806.
Section 807. Corporate Property Trustee Required; Eligibility Of Trustees.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
807, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 31 years of age or a
legal entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural person
who is at least 21 years of age and a resident of the State of Delaware; or (ii)
a legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
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Section 808. Conflicting Interests. If the Property Trustee has or shall acquire
a conflicting interest within the meaning of the Trust Indenture Act, the
Property Trust shall either eliminate such interest or resign, to the extent and
in the manner provided by, and subject to the provisions of, the Trust Indenture
Act and this Trust Agreement.
Section 809. Co-Trustees and Separate Trustee.
(a) Unless an Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property may at the time be located, the Depositor shall have power
to appoint, and upon the written request of the Property Trustee, the Depositor
shall for such purpose join with the Property Trustee in the execution, delivery
and performance of any instruments and agreements necessary or proper to
appoint, one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 809. If the Depositor does not
join in such appointment within 15 days after the receipt by it of a request so
to do, or in case a Debenture Event of Default has occurred and is continuing,
the Property Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section 809 shall
either be (i) a natural person who is at least 21 years of age and a resident of
the United States; or (ii) a legal entity with its principal place of business
in the United States that shall act through one or more persons authorized to
bind such entity.
(b) Should any written instrument from the Depositor be required
by any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right, or power, any
and all such instruments shall, on request, be executed, acknowledged, and
delivered by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms, namely:
(i) The Trust Securities shall be executed and delivered
and all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or required to
be deposited or pledged with, the Trustees specified hereunder, shall be
exercised, solely by such Trustees and not by such co-trustee or separate
trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property Trustee and such co-trustee
or separate trustee jointly, as shall be provided in the instrument appointing
such co-trustee or separate trustee, except to the extent that under any law of
any jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(iii) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor, may
accept the resignation of or remove any co-trustee or separate trustee appointed
under this Section 809, and, in case a Debenture Event of Default has occurred
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and is continuing, the Property Trustee shall have the power to accept the
resignation of, or remove, any such co-trustee or separate trustee without the
concurrence of the Depositor. Upon the written request of the Property Trustee,
the Depositor shall join with the Property Trustee in the execution, delivery
and performance of all instruments necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section 809.
(iv) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property Trustee or
any other trustee hereunder.
(v) The Property Trustee shall not be liable by reason of any act
of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
Section 810. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this Article
VIII shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant
Trustee may resign at any time with respect to the Trust Securities by giving
written notice thereof to the Securityholders. If the instrument of acceptance
by the successor Trustee required by Section 811 shall not have been delivered
to the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Depositor,
any court of competent jurisdiction for the appointment of a successor Relevant
Trustee with respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time.
(d) If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and the successor
Trustee shall comply with the applicable requirements of Section 811. If the
Property Trustee shall resign, be removed or become incapable of continuing to
act as the Property Trustee at a time when a Debenture Event of Default shall
have occurred and is continuing, the Preferred Securityholders, by Act of the
Securityholders of a majority in Liquidation Amount of the Preferred Securities
then Outstanding delivered to the retiring Relevant Trustee, shall promptly
appoint a successor Relevant Trustee or Trustees with respect to the Trust
Securities and the Trust, and such successor Trustee shall comply with the
applicable requirements of Section 811. If an Administrative Trustee shall
resign, be removed or become incapable of acting as Administrative Trustee, at a
time when a Debenture Event of Default shall have occurred and be
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continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to an Administrative Trustee, shall promptly appoint a successor
Administrative Trustee or Administrative Trustees with respect to the Trust
Securities and the Trust, and such successor Administrative Trustee or
Administrative Trustees shall comply with the applicable requirements of Section
811. If no successor Relevant Trustee with respect to the Trust Securities shall
have been so appointed by the Common Securityholder or the Preferred
Securityholders and accepted appointment in the manner required by Section 811,
any Securityholder who has been a Security holder of Trust Securities on behalf
of himself and all others similarly situated may petition a court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Trust Securities.
(e) The Property Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust office if it is the Property
Trustee.
(f) Notwithstanding the foregoing or any other provision of this
Trust Agreement, in the event any Administrative Trustee who is a natural person
dies or becomes, in the opinion of the Depositor, incompetent or incapacitated,
the vacancy created by such death, incompetence or incapacity may be filled by
(a) the unanimous act of the remaining Administrative Trustees if there are at
least two of them; or (b) otherwise by the Depositor (with the successor in each
case being a Person who satisfies the eligibility requirement for Administrative
Trustees set forth in Section 807).
Section 811. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Relevant
Trustee with respect to the Trust Securities and the Trust, the retiring
Relevant Trustee and each successor Relevant Trustee with respect to the Trust
Securities shall execute and deliver an instrument hereto wherein each successor
Relevant Trustee shall accept such appointment and which shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the Trust and, upon the execution and delivery of such instrument, the
resignation or removal of the retiring Relevant Trustee shall become effective
to the extent provided therein and each such successor Relevant Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust, but, on request of the Trust or any successor
Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and
deliver to such successor Relevant Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the Trust Securities and the Trust.
(b) Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the immediately preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment
unless at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article VIII.
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Section 812. Merger, Conversion, Consolidation or Succession to Business. Any
Person into which the Property Trustee or any Administrative Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such Person shall be
otherwise qualified and eligible under this Article VIII, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
Section 813. Preferential Collection of Claims Against Depositor or Trust. If
and when the Property Trustee shall be or become a creditor of the Depositor or
the Trust (or any other obliger upon the Debentures or the Trust Securities),
the Property Trustee shall be subject to and shall take all actions necessary in
order to comply with the provisions of the Trust Indenture Act regarding the
collection of claims against the Depositor or Trust (or any such other obliger).
Section 814. Reports by Property Trustee.
(a) Not later than July 15 of each year commencing with _______,
1998, the Property Trustee shall transmit to all Securityholders in accordance
with Section 1008, and to the Depositor, a brief report dated as of such
December 31 with respect to:
(i) its eligibility under Section 807 or, in lieu
thereof, if to the best of its knowledge it has continued to be eligible under
said Section, a written statement to such effect; and
(ii) any change in the property and funds in its
possession as Property Trustee since the date of its last report and any action
taken by the Property Trustee in the performance of its duties hereunder which
it has not previously reported and which in its opinion materially affects the
Trust Securities
(b) In addition the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with The Nasdaq stock
market's national Market, and each national securities exchange or other
organization upon which the Trust Securities are listed, and also with the
Commission and the Depositor.
Section 815. Reports to the Property Trustee. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
Section 816. Evidence of Compliance with Conditions Precedent. Each of the
Depositor and the Administrative Trustees on behalf of the Trust shall provide
to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Trust Agreement that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(l) of the Trust Indenture Act shall be given in the form of an Officers'
Certificate.
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Section 817. Number of Trustees.
(a) The number of Trustees shall be five, provided that the Holder
of all of the Common Securities by written instrument may increase or decrease
the number of Administrative Trustees. The Property Trustee and the Delaware
Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 817(a), or
if the number of Trustees is increased pursuant to Section 817(a), a vacancy
shall occur. The vacancy shall be filled with a Trustee appointed in accordance
with Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 810, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
Section 818. Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 207(a); and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
Section 819. Voting.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
TERMINATION, LIQUIDATION AND MERGER
Section 901. Termination upon Expiration Date. Unless earlier dissolved, the
Trust shall automatically dissolve on _________, 2028 (the "Expiration Date")
subject to distribution of the Trust Property in accordance with Section 904.
Section 902. Early Termination. The first to occur of any of the following
events is an "Early Termination Event:"
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
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(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Debentures
to Securityholders in exchange for the Preferred Securities in accordance with
Section 904;
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all of the Debentures; and
(d) an order for dissolution of the Trust shall have been entered
by a court of competent jurisdiction.
Section 903. Termination. The respective obligations and responsibilities of the
Trustees and the Trust created and continued hereby shall terminate upon the
latest to occur of the following: (a) the distribution by the Property Trustee
to Securityholders upon the liquidation of the Trust pursuant to Section 904, or
upon the redemption of all of the Trust Securities pursuant to Section 402, of
all amounts required to be distributed hereunder upon the final payment of the
Trust Securities; (b) the payment of any expenses owed by the Trust; (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders; and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Business Trust Act.
Section 904. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b), or
(d) of Section 902 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, to each Securityholder a Like Amount of
Debentures, subject to Section 904(d). Notice of liquidation shall be given by
the Property Trustee by first-class mail, postage prepaid, mailed not later than
30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust
Securities at such Holder's address appearing in the Securities Register. All
notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the
Trust Securities shall no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange shall be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 904(d) applies, receive a Liquidation Distribution,
as the Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to be
outstanding; (ii) the Clearing Agency for the Preferred
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Securities or its nominee, as the registered holder of the Global Referred
Securities Certificate, shall receive a registered global certificate or
certificate or certificates representing a Like Amount of Debentures with
respect to Preferred Securities held by the Clearing Agency or its nominee;
(iii) certificates representing a Like Amount of Debentures shall be issued to
holders of Trust Securities Certificates not held by the Clearing Agency for the
Preferred Securities or its nominee as specified in clause (ii) above upon
surrender of such certificates to the Administrative Trustees or their agent for
exchange; (iv) the Depositor shall use its reasonable efforts to have the
Debentures listed on The Nasdaq Stock Market's National Market or Small Cap
Market or on such other securities exchange or other organization as the
Preferred Securities are then listed or traded; (v) any Trust Securities
Certificates not so surrendered for exchange shall be deemed to represent a Like
Amount of Debentures, accruing interest at the rate provided for in the
Debentures from the last Distribution Date on which a Distribution was made on
such Trust Securities Certificates until such certificates are so surrendered
(and until such certificates are so surrendered, no payments of interest or
principal shall be made to holders of Trust Securities Certificates with respect
to such Debentures): and (vi) all rights of Securityholders holding Trust
Securities shall cease, except the right of such Securityholders to receive
Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 904, whether because of an order for dissolution entered by a court
of competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustees not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, would-up or terminated, by the Property Trustee in such manner as the
Property Trustee determines. In such event, on the date of the dissolution,
winding-up or other termination of the Trust, Securityholders shall be entitled
to receive out of the assets of the Trust available for distribution to
Securityholders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, an amount equal to the Liquidation Amount per Trust
Security plus accumulated and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If, upon any such
dissolution, winding-up or termination, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Trust on the Trust Securities shall be paid
on a pro rata basis (based upon Liquidation Amounts). The holder of the Common
Securities shall be entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as aforesaid) with
Holders of Preferred Securities, except that, if a Debenture Event of Default
has occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities.
Section 905. Mergers, Consolidations, Amalgamations or Replacements of the
Trust. The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Section 905. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any state; provided, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Preferred Securities; or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise; (ii) the
Depositor expressly appoints a trustee of such successor entity possessing
substantially the same powers and duties as the Property Trustee as the holder
of the Debentures; (iii) the Successor Securities are listed or traded, or
38
<PAGE> 44
any Successor Securities shall be listed or traded upon notification of
issuance, on any national securities exchange or other organization on which the
Preferred Securities are then listed, if any; (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect; (v)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Depositor has received an Opinion of Counsel to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect: and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity shall be required to register as an
"investment company" under the Investment Company Act, and (vi) the Depositor
owns all of the Common Securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in Liquidation Amount of
the Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 1001. Limitation of Rights of Securityholders. The death or incapacity
of any Person having an interest, beneficial or otherwise, in Trust Securities
shall not operate to terminate this Trust Agreement, nor entitle the legal
representatives or heirs of such person or any Securityholder for such Person,
to claim an accounting, take any action or bring any proceeding in any court for
a partition or winding-up of the arrangements contemplated hereby, nor otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them.
Section 1002. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a successor
Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein
or therein which may be inconsistent with any other provision herein or therein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement; or (iii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust shall be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust shall not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (ii), such action shall not adversely affect in any
material respect the interests of any Securityholder, and any amendments of this
Trust Agreement shall become effective when notice thereof is given to the
Securityholders.
(b) Except as provided in Section 601(c) or Section 1002(c)
hereof, any provision of this Trust Agreement may be amended by the Trustees and
the Depositor (i) with the consent of Trust Securityholders representing not
less than a majority (based upon Liquidation Amounts) of the Trust
39
<PAGE> 45
Securities then Outstanding; and (ii) upon receipt by the Trustees of an Opinion
of Counsel to the effect that such amendment or the exercise of any power
granted to the Trustees in accordance with such amendment shall not affect the
Trust's status as a grantor trust for United Status federal income tax purposes
or the Trust's exemption from status of an "investment company" under the
Investment Company Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 603 or 606 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date; or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 603 or 606 hereof), this
paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement,
no Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e) In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the Depositor a copy
of such amendment.
(f) The Property Trustee shall not be required to enter into any
amendment to this Trust Agreement which affects its own rights, duties or
immunities under this Trust Agreement. The Property Trustee shall be entitled to
receive an Opinion of Counsel and an Officers' Certificate stating that any
amendment to this Trust Agreement is in compliance with this Trust Agreement.
(g) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor and the Administrative Trustees,
this Trust Agreement may not be amended in a manner which imposes any additional
obligation on the Depositor and the Administrative Trustees.
Section 1003. Separability. In case any provision in this Trust Agreement or in
the Trust Securities Certificates shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 1004. Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS
TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES).
Section 1005. Payments Due on Non-Business Day. If the date fixed for any
payment on any Trust Security shall be a day that is not a Business Day, then
such payment need not be made on such date but may be made on the next
succeeding day which is a Business Day (except as otherwise provided in Sections
401(a) and 402(d)), with the same force and effect as though made on the date
fixed for such payment, and no distribution shall accumulate thereon for the
period after such date.
40
<PAGE> 46
Section 1006. Successors. This Trust Agreement shall be binding upon and shall
inure to the benefit of any successor to the Depositor, the Trust or the
Relevant Trustee(s), including any successor by operation of law. Except in
connection with a consolidation, merger or sale involving the Depositor that is
permitted under Article XII of the Indenture and pursuant to which the assignee
agrees in writing to perform the Depositor's obligations hereunder, the
Depositor shall not assign its obligations hereunder.
Section 1007. Headings. The Article and Section headings are for convenience
only and shall not affect the construction of this Trust Agreement.
Section 1008. Reports, Notices and Demands. Any report, notice, demand or other
communication which by any provision of this Trust Agreement is required or
permitted to be given or served to or upon any Securityholder or the Depositor
may be given or served in writing by deposit thereof, first-class postage
prepaid, in the United States mail, hand delivery or facsimile transmission, in
each case, addressed, (a) in the case of a Preferred Securityholder, to such
Preferred Securityholder as such Securityholder's name and address may appear on
the Securities Register; and (b) in the case of the Common Securityholder or the
Depositor, to United Financial Holdings, Inc., 333 Third Avenue North, St.
Petersburg, Florida 33733, Attention: Chief Executive Officer, facsimile no.:
(813) 821-3563. Any notice to Preferred Securityholders shall also be given to
such owners as have, within two years preceding the giving of such notice, filed
their names and addresses with the Property Trustee for that purpose. Such
notice, demand or other communication to or upon a Securityholder shall be
deemed to have been sufficiently given or made, for all purposes, upon hand
delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(a) with respect to the Property Trustee, Wilmington Trust Company, to Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration and (b) with respect to the
Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention: Administrative Trustees of UFH Capital Trust I."
Such notice, demand or other communication to or upon the Trust or the Property
Trustee shall be deemed to have been sufficiently given or made only upon actual
receipt of the writing by the Trust or the Property Trustee.
Section 1009. Agreement not to Petition. Each of the Trustees and the Depositor
agree for the benefit of the Securityholders that, until at least one year and 1
day after the Trust has been terminated in accordance with Article IX, they
shall not file, or join in the filing of, a petition against the Trust under any
bankruptcy, insolvency, reorganization or other similar law (including, without
limitation, the United States Bankruptcy Code of 1978, as amended)
(collectively, "Bankruptcy Laws") or otherwise join in the commencement of any
proceeding against the Trust under any Bankruptcy Law. In the event the
Depositor takes action in violation of this Section 1009, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the Depositor
(which expense shall be paid prior to the filing), it shall file an answer with
the bankruptcy court or otherwise properly contest the filing of such petition
by the Depositor against the Trust or the commencement of such action and raise
the defense that the Depositor has agreed in writing not to take such action and
should be stopped and precluded therefrom. The provisions of this Section 1009
shall survive the termination of this Trust Agreement.
41
<PAGE> 47
Section 1010. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Trust Agreement modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust Agreement
as so modified or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section 1011. Acceptance of Terms of Trust Agreement, Guarantee and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON
BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST
SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT
TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE
INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER
AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE
BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER
AND SUCH OTHERS.
42
<PAGE> 48
REPUBLIC BANCSHARES, INC.,
as Depositor
By:
-------------------------------------------
Name: Neil W. Savage
Title: Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Property Trustee and Delaware Trustee
By:
-------------------------------------------
Name:
Title:
-------------------------------------------
Neil W. Savage, as Administrative Trustee
-------------------------------------------
C. Peter Bardin, as Administrative Trustee
43
<PAGE> 49
EXHIBIT A
A-1
<PAGE> 50
EXHIBIT B
B-1
<PAGE> 51
EXHIBIT C
C-1
<PAGE> 52
EXHIBIT D
D-1
<PAGE> 53
EXHIBIT E
E-1
<PAGE> 1
EXHIBIT 4.7
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
UNITED FINANCIAL HOLDINGS, INC.
AND
WILMINGTON TRUST COMPANY
_____________, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION ............... 5
SECTION 1.1 DEFINITIONS AND INTERPRETATION ............... 5
ARTICLE II TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION ............. 9
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES ............... 9
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE ... 9
SECTION 2.4 PERIODIC REPORTS TO PREFERRED
GUARANTEE TRUSTEE........... .............. 9
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS
PRECEDENT ................................. 10
SECTION 2.6 EVENTS OF DEFAULT; WAIVER .................... 10
SECTION 2.7 EVENT OF DEFAULT; NOTICE ..................... 10
SECTION 2.8 CONFLICTING INTERESTS ........................ 10
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED
GUARANTEE TRUSTEE ......................... 11
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED
GUARANTEE TRUSTEE ......................... 11
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED
GUARANTEE TRUSTEE ......................... 12
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE
OF GUARANTEE .............................. 15
ARTICLE IV PREFERRED GUARANTEE TRUSTEE................... 15
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY ..... 15
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION
OF PREFERRED GUARANTEE TRUSTEES ........... 16
ARTICLE V GUARANTEE .................................... 17
SECTION 5.1 GUARANTEE .................................... 17
SECTION 5.2 WAIVER OF NOTICE AND DEMAND .................. 17
SECTION 5.3 OBLIGATIONS NOT AFFECTED ..................... 17
SECTION 5.4 RIGHTS OF HOLDERS ............................ 18
SECTION 5.5 GUARANTEE OF PAYMENT ......................... 18
SECTION 5.6 SUBROGATION .................................. 19
SECTION 5.7 INDEPENDENT OBLIGATIONS ...................... 19
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION .... 19
SECTION 6.1 LIMITATION OF TRANSACTIONS ................... 19
1
<PAGE> 3
SECTION 6.2 RANKING ...................................... 20
ARTICLE VII TERMINATION .................................. 20
SECTION 7.1 TERMINATION .................................. 20
ARTICLE VIII INDEMNIFICATION .............................. 20
SECTION 8.1 EXCULPATION .................................. 20
SECTION 8.2 INDEMNIFICATION .............................. 21
ARTICLE IX MISCELLANEOUS ................................ 21
SECTION 9.1 SUCCESSORS AND ASSIGNS ....................... 21
SECTION 9.2 AMENDMENTS ................................... 21
SECTION 9.3 NOTICES ...................................... 22
SECTION 9.4 BENEFIT ...................................... 22
SECTION 9.5 GOVERNING LAW ................................ 23
2
<PAGE> 4
CROSS REFERENCE TABLE
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
---------------- ---------
[S] [C]
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Not Applicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Not Applicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Not Applicable
314(c) 2.5
314(d) Not Applicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
317(a) 3.1
317(b) Not Applicable
318(a) 2.1(a)
318(b) 2.1
318(c) 2.1(b)
Note: This Cross-Reference table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions
3
<PAGE> 5
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of __________, 1998, is executed and delivered by UNITED
FINANCIAL HOLDINGS, INC., a Florida corporation (the "Guarantor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the
"Preferred Securities Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
UFH Capital Trust I, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of _______________, 1998, among the trustees of the Trust
named therein, the Guarantor, as depositor, and the holders from time to time
of undivided beneficial interests in the assets of the Trust, the Trust is
issuing on the date hereof 1,200,000 preferred securities, having an aggregate
liquidation amount of $6,000,000, designated the ____% Cumulative Trust
Preferred Securities (the "Preferred Securities") representing undivided
beneficial ownership interests in the assets of the Trust and having the terms
set forth in the Trust Agreement;
WHEREAS; the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities, will be used to purchase the Junior Subordinated Debentures
due _________ __, 2028 (the "Junior Subordinated Debentures") of the Guarantor,
which will be deposited with Wilmington Trust Company, as Property Trustee
under the Trust Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
4
<PAGE> 6
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) terms defined in the Trust Agreement in effect on the date of
execution of this Preferred Securities Guarantee have the same meaning when
used in this Preferred Securities Guarantee unless otherwise defined herein;
(c) a term defined anywhere in this Preferred Securities Guarantee has the
same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles and
Sections are to Articles and Sections of this Preferred Securities Guarantee,
unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which federal or state banking
institutions in New York, New York or the State of Florida are authorized or
required by law, executive order or regulation to close or a day on which the
Corporate Trust Office of the Preferred Securities Guarantee is closed for
business.
"Corporate Trust Office" means the office of the Preferred Securities Guarantee
at which the corporate trust business of the Preferred Guarantee Trustee shall,
at any particular time, be principally administered, which office at the date
of execution of this Agreement is located at Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
5
<PAGE> 7
"Covered Person" means any Holder or beneficial owner of Preferred Securities.
"Debentures" means the ___% Junior Subordinated Debentures due __________ __,
2028, of the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Event of Default" means a default by the Guarantor on any of its payment or
other obligations under this Preferred Securities Guarantee.
"Guarantor" means Republic Bancshares, Inc., a Florida corporation.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid
or made by the Trust: (i) any accrued and unpaid Distributions (as defined in
the Trust Agreement) that are required to be paid on such Preferred Securities,
to the extent the Trust shall have funds available therefor; (ii) the
redemption price, including all accrued and unpaid Distributions to the date of
redemption (the "Redemption Price"), to the extent the Trust has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Trust; and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Debentures to the Holders in exchange for
Preferred Securities as provided in the Trust Agreement or a redemption of all
of the Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Preferred
Securities to the date of payment, to the extent the Trust shall have funds
available therefore (the "Liquidation Distribution"); and (b) the amount of
assets of the Trust remaining available for distribution to Holders in
liquidation of the Trust.
"Holder" shall mean any holder, as registered on the books and records of the
Trust, of any Preferred Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of
the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents
of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of _______________, 1998, among the
Debenture Issuer and Wilmington Trust Company, as trustee, and any indenture
supplemental thereto pursuant to which certain subordinated debt securities of
the Debenture Issuer are to be issued to the Property Trustee of the Trust.
"Liquidation Distribution" has the meaning provided therefor in the definition
of Guarantee Payments.
6
<PAGE> 8
"Majority in liquidation amount of the Preferred Securities" means the holders
of more than 50% of the liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate signed
by two authorized officers of such Person. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means Wilmington Trust Company, until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Redemption Price" has the meaning provided therefor in the definition of
Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee Trustee,
any officer of the Preferred Guarantee Trustee, including any vice president,
any assistant vice president, any assistant secretary, the treasurer, any
assistant treasurer or other officer customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge and familiarity with the
particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee
Trustee possessing the qualifications to act as Preferred Guarantee Trustee
under Section 4.1.
7
<PAGE> 9
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
8
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ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by
such provisions.
(b) If and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably
require, of the names and addresses of the Holders of the Preferred
Securities ("List of Holders") as of such date; (i) within one Business
Day after January 1 and June 30 of each year; and (ii) at any other time
within 30 days of receipt by the Guarantor of a written request for a List
of Holders as of a date no more than 15 days before such List of Holders
is given to the Preferred Guarantee Trustee; provided, that the Guarantor
shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given
to the Preferred Guarantee Trustee by the Guarantor. The Preferred
Guarantee Trustee may destroy any List of Holders previously given to it
on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
On or before July 15 of each year, the Preferred Guarantee Trustee shall
provide to the Holders of the Preferred Securities such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the
manner provided by Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such documents,
reports and information as required by Section 314 (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
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SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this
Preferred Securities Guarantee that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c) may be given in the form
of an Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Preferred Securities may, by
vote, on behalf of the Holders of all of the Preferred Securities, waive any
past Event of Default and its consequences. Upon such waiver, any such Event of
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Preferred Securities
Guarantee, but no such waiver shall extend to any subsequent or other default
or Event of Default or impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events
of Default actually known to a Responsible Officer of the Preferred
Guarantee Trustee, unless such defaults have been cured before the giving
of such notice; provided, except in the case of a default in the payment
of a Guarantee Payment, that the Preferred Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible
Officer of the Preferred Guarantee Trustee in good faith determines that
the withholding of such notice is in the interest of the Holders of the
Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice, or of which a Responsible Officer of the
Preferred Guarantee Trustee charged with the administration of the Trust
Agreement shall have obtained actual knowledge.
SECTION 2.8 CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Preferred Guarantee Trustee on acceptance by such Successor
Preferred Guarantee Trustee or its appointment to act as Successor
Preferred Guarantee Trustee. The right, title and interest of the
Preferred Guarantee Trustee shall automatically vest in any Successor
Preferred Guarantee Trustee, and such vesting and cessation of title shall
be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred
Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for
the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants
shall be read into this Preferred Securities Guarantee against the
Preferred Guarantee Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Preferred Guarantee
Trustee, the Preferred Guarantee Trustee shall exercise such of the rights
and powers vested in it by this Preferred Securities Guarantee, and use
the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his
or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express provisions of
this Preferred Securities
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Guarantee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Preferred Securities
Guarantee and no implied covenants or obligations shall be read
into this Preferred Securities Guarantee against the Preferred
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the pst, the
Preferred Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Preferred Guarantee Trustee and conforming to the
requirements of this Preferred Securities Guarantee; but in the
case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee shall be under
a duty to examine the same to determine whether or not they
conform to the requirements of this Preferred Securities
Guarantee;
(ii) The Preferred Guarantee Trustee shall not be liable for any
effort of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Preferred Guarantee Trustee, or
exercising any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively rely, and shall
be fully protected in acting or refraining from acting upon, any
resolution, certificate,
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statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this
Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate;
(iii) whenever, in the administration of this Preferred Securities
Guarantee, the Preferred Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting any action hereunder, the Preferred Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and conclusively rely upon
an Officers' Certificate which, upon receipt of such request, shall
be promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any
rerecording, refiling or re-registration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel, and the
written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in accordance with such advice or opinion. Such
counsel may be counsel to the Guarantor or any of its Affiliates and
may include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court
of competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred
Securities Guarantee at the request or direction of any Holder,
unless such Holder shall have provided to the Preferred Guarantee
Trustee such security and indemnity, reasonably satisfactory to the
Preferred Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Preferred
Guarantee Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by
the Preferred Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Preferred Securities Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate,
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statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Preferred Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly
or by or through agents, nominees, custodians or attorneys, and the
Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(ix) any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders of the Preferred Securities,
and the signature of the Preferred Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action.
No third party shall be required to inquire as to the authority of
the Preferred Guarantee trustee to so act or as to its compliance
with any of the terms and provisions of this Preferred Securities
Guarantee, both of which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred Securities
Guarantee the Preferred Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Preferred Guarantee Trustee
(i) may request instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Preferred Guarantee Trustee shall be unqualified
or incompetent in accordance with applicable law, to perform any such act
or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Preferred Guarantee Trustee
shall be construed to be a duty.
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SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the statements of
the Guarantor, and the Preferred Guarantee Trustee does not assume any
responsibility for their correctness. The Preferred Guarantee Trustee makes no
representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of
the District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of this
Section 4.1(a)I99), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If any time the Preferred Guarantee Trustee shall cease to be eligible
to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferable Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
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SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(c), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee may be removed for cause at any time
by Act (within the meaning of Section 608 of the Trust Agreement) of the
Holders of at least a Majority in Liquidation Amount of the Preferred
Securities, delivered to the Preferred Guarantee Trustee.
(c) The Preferred Guarantee Trustee shall not be removed in accordance
with Sections 4.2(a) and 4.2(b) until a Successor Preferred Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor.
(d) The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or
until its removal or resignation. The Preferred Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until
a Successor Preferred Guarantee Trustee has been appointed by instrument
in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(e) If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointed as provided in this Section 4.2 within 60 days
after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Preferred Guarantee Trustee.
(f) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(g) Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section
4.2, the Guarantor shall pay to the Preferred Guarantee all amounts
accrued to the date of such termination, removal or resignation.
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ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Trust), as and when due, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred Securities
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Trust
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor under this
Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Preferred Securities or
the extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities (other
than an extension of time for payment of Distributions, Redemption Price,
Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Junior Subordinated
Debentures);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;
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(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust
or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) any failure or omission to receive any regulator approval or consent
required in connection with the Preferred Securities (or the common equity
securities issued by the Trust), including the failure to receive any
regulatory approval required in connection with the redemption of the
Preferred Securities.
(g) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(h) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Preferred
Securities Guarantee, without first instituting a legal proceeding against
the trust, the Preferred Guarantee Trustee or any other person.
SECTION 5.5 GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and not of
collection.
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SECTION 5.6 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are independent of
the obligations of the Trust with respect to the Preferred Securities, and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if there shall have
occurred an Event of Default under this Preferred Securities Guarantee, an
Event of Default under the Trust Agreement or during an Extended Interest
Payment Period (as defined in the Indenture), then (a) the Guarantor shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than (i) the reclassification of any class of the
Company's capital stock into another class of capital stock, (ii) dividends or
distributions payable in any class of the Company's common stock, (iii) any
declaration of a dividend in connection with the implementation of a
shareholder rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto and
(iv) purchases of the Company's common stock related to the rights under any of
the Company's benefit plans for its or its subsidiaries' directors, officers or
employees), and (b) the Guarantor shall not make any payment of interest or
principal on or repay, repurchase or redeem any debt securities issued by the
Guarantor which rank pari passu with or junior to the Junior Subordinated
Debentures.
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SECTION 6.2 RANKING.
This Preferred Securities Guarantee will constitute an unsecured obligation of
the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, (ii) pari passu with the most senior
preferred securities or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
in respect to any preferred securities or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION.
This Preferred Securities Guarantee shall terminate upon (i) full payment of
the Redemption Price of all Preferred Securities, (ii) upon full payment of the
amounts payable in accordance with the Trust Agreement upon liquidation of the
Trust, or (iii) upon distribution of the Junior Subordinated Debentures to the
Holders of the Preferred Securities. Notwithstanding the foregoing, this
Preferred Securities Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if any time any Holder of Preferred Securities
must restore payment of any sums paid under the Preferred Securities or under
this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified
Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Preferred Securities
Guarantee or by law, except that an Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Indemnified
Person's negligence or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information,
opinions, reports or statements
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presented to the Guarantor by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by or on
behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets
from which Distributions to Holders of Preferred Securities might properly
be paid.
SECTION 8.2 INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold each
Indemnified Person harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses (including reasonable legal fees and expenses)
of defending itself against, or investigating, any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article XII of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder, and any purported assignment that is not in accordance
with these provisions shall be void.
SECTION 9.2 AMENDMENTS.
Except with respect to any changes that do not materially adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may not only be amended with the prior approval
of the Holders of at least a Majority in liquidation amount of the Preferred
Securities. The provisions of Article VI of the Trust Agreement with respect to
meetings of Holders of the Preferred Securities apply to the giving of such
approval.
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SECTION 9.3 NOTICES.
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address
as the Preferred Guarantee Trustee may give notice of to the Holders of
the Preferred Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):
United Financial Holdings,Inc.
333 Third Avenue North
St. Petersburg, Florida 33733
Attention: Chief Financial Officer
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver.
SECTION 9.4 BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the Holders of
the Preferred Securities and, subject to Section 3.1(a), is not separately
transferable from the Preferred Securities.
22
<PAGE> 24
SECTION 9.5 GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA.
This Preferred Securities Guarantee is executed as of the day and year first
above written.
UNITED FINANCIAL HOLDINGS, INC.
as Guarantor
By: ________________________________
Name: ______________________________
Title:______________________________
WILMINGTON TRUST COMPANY, as
Preferred Guarantee Trustee
By: ________________________________
Name: ______________________________
Title:______________________________
23
<PAGE> 25
PREFERRED SECURITIES GUARANTEE AGREEMENT
THE PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of , 1998, is executed and delivered by UNITED
FINANCIAL HOLDINGS, INC., a Florida corporation (the "Guarantor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the
"Preferred Securities Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of UHF
Capital Trust I, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of , 1998, among the trustees of the Trust named
therein, the Guarantor, as depositor, and the holders for time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof 1,200,000 preferred securities, having an aggregate
liquidation amount of $6,000,000, designated the % Cumulative Trust Preferred
Securities (the "Preferred Securities") representing undivided beneficial
ownership interests in the assets of the Trust and having the terms set forth in
the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities, will be used to purchase the Junior Subordinated Debentures
due , 2028 (the "Junior Subordinated Debentures") of the Guarantor, which
will be deposited with the Wilmington Trust Company, as Property Trustee under
the Trust Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
24
<PAGE> 1
EXHIBIT 4.8
AGREEMENT AS TO EXPENSES AND LIABILITIES
This Agreement as to Expenses and Liabilities (this "Agreement") dated
as of ___________, 1997, is by and between United Financial Holdings, Inc., a
Florida corporation (the "Company"), and UFH Capital Trust I, a Delaware
business trust (the "Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the "Common
Securities") to, and receive the Company's _____% Junior Subordinated Debentures
due _________, 1998 (the "Debentures") from, the Company and to issue and sell
its _____% Cumulative Trust Preferred Securities (the "Preferred Securities")
with such powers, preferences and special rights and restrictions as are set
forth in the Amended and Restated Trust Agreement of the Trust dated as of
________, 1998, as the same may be amended from time to time (the "Trust
Agreement");
WHEREAS, the Company shall directly or indirectly own all of the Common
Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit the
Company and which purchase the Company acknowledges shall be made in reliance
upon the execution and delivery of this Agreement, the Company, including in its
capacity as holder of the Common Securities, and the Trust hereby agree as
follows:
ARTICLE I
Section 1.1 Guarantee by the Company. Subject to the terms and conditions of
this Agreement, the Company, including in its capacity as holder of the Common
Securities, hereby irrevocably and unconditionally guarantees to each person or
entity to whom the Trust is now or hereafter becomes indebted or liable (the
"Beneficiaries") the full payment when and as due, of any and all Obligations
(as defined herein) to such Beneficiaries. As used herein, "Obligations" means
any costs, expenses or liabilities of the Trust other than obligations of the
Trust to pay to holders of any Preferred Securities, Common Securities or other
similar interests in the Trust the amounts due such holders pursuant to the
terms of the Preferred Securities, Common Securities or such other similar
interests, as the case may be. This Agreement is intended to be for the benefit
of, and to be enforceable by, all such Beneficiaries, whether or not such
Beneficiaries have received notice hereof.
Section 1.2 Term of Agreement. This Agreement shall terminate and be of no
further force and effect upon the later of (a) the date on which full payment
has been made of all amounts payable to all holders of all the Preferred
Securities (whether upon redemption, liquidation, exchange or otherwise); and
(b) the date on which no
<PAGE> 2
Obligations remain outstanding; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any holder of Preferred Securities or any Beneficiary must restore payment
of any sums paid under the Preferred Securities, under any Obligation, under the
Preferred Securities Guarantee Agreement dated the date of this Agreement
between the Company and Wilmington Trust Company, as guarantee trustee, or under
this Agreement for any reason whatsoever. This Agreement is continuing,
irrevocable, unconditional and absolute.
Section 1.3 Waiver of Notice. The Company hereby waives notice of acceptance of
this Agreement and of any Obligation to which it applies or may apply, and the
Company hereby waives presentment, demand for payment, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
Section 1.4 No Impairment. The obligations, covenants, agreements and duties of
the Company under this Agreement shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the
Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Beneficiaries with respect to the
Obligations or any action on the part of the Trust granting indulgence
or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Company with respect to the happening of any of the
foregoing.
Section 1.5 Enforcement. A Beneficiary may enforce this Agreement directly
against the Company, and the Company waives any right or remedy to require that
any action be brought against the Trust or any other person or entity before
proceeding against the Company.
ARTICLE II
Section 2.1 Binding Effect. All guarantees and agreements contained in this
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the
Beneficiaries.
<PAGE> 3
Section 2.2 Amendment. So long as there remains any Beneficiary or any Preferred
Securities of any series are outstanding, this Agreement shall not be modified
or amended in any manner adverse to such Beneficiary or to the holders of the
Preferred Securities.
Section 2.3 Notices. Any notice, request or other communication required or
permitted to be given under this Agreement shall be given in writing by
delivering the same by facsimile transmission (confirmed by mail), telecopy, or
by registered or certified mail, addressed as follows (and if so given, shall be
deemed given when mailed or upon receipt of an answerback, if sent by telecopy):
UFH Capital Trust I
c/o United Financial Holdings, Inc.
333 Third Avenue, North
St. Petersburg, Florida 33733
Facsimile No.: (813) 821-3563
Attention: Chief Executive Officer
United Financial Holdings, Inc.
333 Third Avenue, North
St. Petersburg, Florida 33733
Facsimile No.: (813) 821-3563
Attention: Chief Executive Officer
Section 2.4 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Florida (without regard
to conflict of laws principles).
<PAGE> 4
Section 2.5 This Agreement is executed as of the day and year first above
written.
UNITED FINANCIAL HOLDINGS, INC.
By:
--------------------------------
Name: Neil W. Savage
Title: Chief Executive Officer
UFH CAPITAL TRUST I
By:
--------------------------------
Name: Neil W. Savage
Title: Administrative Trustee
<PAGE> 1
EXHIBIT 8.1
______________________, 1998
United Financial Holdings, Inc. UFH Capital Trust I
333 Third Avenue North 333 Third Avenue North
St. Petersburg, Florida 33733 St. Petersburg, Florida 33733
RE: Registration Statement on Form SB-2
Registration Nos. 333-60431 and 333-60431-01
Ladies and Gentlemen:
We have acted as special United States tax counsel for United Financial
Holdings, Inc., a Florida corporation (the "Company"), and UFH Capital Trust I,
a statutory business trust formed under the laws of the State of Delaware (the
"Trust"), in connection with the above-captioned registration statement on Form
SB-2 (the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission") for the purpose of registering (a) the guarantee
by the Company of _______ of the Trust's ________% cumulative trust preferred
pass-through securities, liquidation amount of $10.00 per preferred security
(the "Preferred Securities") with respect to distributions and payments upon
liquidation, redemption and otherwise, (b) ________ principal amount of
________% Junior Subordinated Debentures due ________, 2028, to be issued by the
Company and (c) an aggregate of ________ of the Trust's Preferred Securities.
We hereby confirm that, although the discussion set forth under the heading
"MATERIAL FEDERAL INCOME TAX CONSIDERATIONS" in the Registration Statement does
not purport to discuss all possible United States federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities, in our opinion, such discussion constitutes, in all material
respects, a fair and accurate summary of the United States federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities, based upon current law. It is possible that contrary positions may
be taken by the Internal Revenue Service and that a court may agree with such
contrary positions.
<PAGE> 2
This opinion is furnished to you solely for your benefit in connection with
the filing of the Registration Statement and, except as set forth below, is not
to be used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person for any purpose without our prior written
consent. We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Commission promulgated thereunder. This opinion is
expressed as of the date hereof unless otherwise expressly stated and applies
only to the disclosure under the heading "MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS" set forth in the Registration Statement files as of the date
hereof. We disclaim any undertaking to advise you of any subsequent changes of
the facts stated or assumed herein or any subsequent changes in applicable law.
Sincerely,
HOLLAND & KNIGHT LLP
By:
-----------------------------------
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 29, 1998 (except for Note S as to which
the date is July 23, 1998), accompanying the consolidated financial statements
of United Financial Holdings, Inc. contained in the Registration Statement on
Form SB-2 and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts".
GRANT THORNTON LLP
Tampa, Florida
September 14, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF SMITH, MACKINNON, GREELEY, BOWDOIN & EDWARDS, P.A.
CONSENT OF COUNSEL
United Financial Holdings, Inc.
We hereby consent to the use in this Pre-Effective Amendment No. 1 to
Form SB-2 Registration Statement of United Financial Holdings, Inc. and the UFH
Capital Trust I of our name in the Prospectus which is a part of such
Registration Statement, under the heading "Legal Matters."
/s/ Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
September 14, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001067206
<NAME> UNITED FINANCIAL HOLDING INC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,336,809
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,441,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,472,052
<INVESTMENTS-CARRYING> 10,097,258
<INVESTMENTS-MARKET> 10,212,426
<LOANS> 96,989,541
<ALLOWANCE> 1,647,355
<TOTAL-ASSETS> 147,318,684
<DEPOSITS> 130,219,104
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,823,337
<LONG-TERM> 3,308,152
0
233,500
<COMMON> 34,443
<OTHER-SE> 10,223,219
<TOTAL-LIABILITIES-AND-EQUITY> 147,318,684
<INTEREST-LOAN> 8,960,703
<INTEREST-INVEST> 1,384,905
<INTEREST-OTHER> 446,909
<INTEREST-TOTAL> 10,792,517
<INTEREST-DEPOSIT> 3,914,291
<INTEREST-EXPENSE> 4,101,086
<INTEREST-INCOME-NET> 6,691,431
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,571,995
<INCOME-PRETAX> 2,269,688
<INCOME-PRE-EXTRAORDINARY> 2,269,688
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,409,742
<EPS-PRIMARY> .41
<EPS-DILUTED> .38
<YIELD-ACTUAL> 5.96
<LOANS-NON> 400,000
<LOANS-PAST> 251,000
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 1,610,000
<CHARGE-OFFS> 91,000
<RECOVERIES> 39,000
<ALLOWANCE-CLOSE> 1,648,000
<ALLOWANCE-DOMESTIC> 1,648,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 244,000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001067206
<NAME> UNITED FINANCIAL HOLDING INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,820,439
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 26,767,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,180,997
<INVESTMENTS-CARRYING> 12,707,218
<INVESTMENTS-MARKET> 12,805,968
<LOANS> 99,447,726
<ALLOWANCE> 1,759,340
<TOTAL-ASSETS> 178,147,572
<DEPOSITS> 157,685,802
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,441,943
<LONG-TERM> 3,000,652
0
208,500
<COMMON> 35,138
<OTHER-SE> 11,207,959
<TOTAL-LIABILITIES-AND-EQUITY> 178,147,572
<INTEREST-LOAN> 4,870,947
<INTEREST-INVEST> 741,250
<INTEREST-OTHER> 395,013
<INTEREST-TOTAL> 6,007,210
<INTEREST-DEPOSIT> 2,354,145
<INTEREST-EXPENSE> 2,523,566
<INTEREST-INCOME-NET> 3,483,644
<LOAN-LOSSES> 250,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,844,607
<INCOME-PRETAX> 1,298,513
<INCOME-PRE-EXTRAORDINARY> 1,298,513
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 786,113
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
<YIELD-ACTUAL> 5.25
<LOANS-NON> 3,930,000
<LOANS-PAST> 42,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,648,000
<CHARGE-OFFS> 147,000
<RECOVERIES> 8,000
<ALLOWANCE-CLOSE> 1,759,000
<ALLOWANCE-DOMESTIC> 1,759,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 100,000
</TABLE>
